Department of Industrial Engineering - الصفحات الشخصية ...site.iugaza.edu.ps/aschokry/files/2010/02/Dr._Abed...1 Islamic University, Gaza - Palestine Department of Industrial

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Islamic University, Gaza - Palestine

Department of Industrial Engineering

Introduction to Principles of Production Management

WS 2009/2010

Presented by

Dr. Eng. Abed Schokry


Materials and Requirements Planning(Manufacturing Resource Planning)

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Production Planning and Control

Demand forecasting

Sales and order entry

Customer

Production

Inventory vendors

Aggregate planning

Inventory management

Shipping and

receiving

Materials requirement

planning

Shop-floor scheduling and control


Learning Objectives

• Describe the conditions under which MRP is most appropriate.

• Describe the inputs, outputs, and nature of MRP processing.

• Explain how requirements in a master production schedule are translated into material requirements for lower-level items.

• Discuss the benefits and requirements of MRP.

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• Explain how an MRP system is useful in capacity requirements planning.

• Outline the potential benefits and some of the difficulties users have encountered with MRP.

• Describe MRP and its benefits.

Learning Objectives


• How much of an item is needed to meet demand? When?

• What parts and components are required? When?

• When to order parts and components?

Materials Requirements Planning (MRP)

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• Material requirements planning (MRP):

Computer-based information system that translates master schedule requirements for end items into time-phased requirements for subassemblies, components, and raw materials.

(Computer-based information system for ordering and scheduling of dependent demand inventories)

MRP


MRP (in other words):

• MRP means for determining the number of parts, components, and materials needed to produce a product

• MRP provides time scheduling information specifying when each of the materials, parts, and components should be ordered or produced

• Dependent demand drives MRP

• MRP is a software system

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MRP Core Concepts

• Dependent Demand

• Production (or procurement) of parts and materials is directly linked to demand for the final product.

• (Demand for items that are subassemblies or component parts to be used in production of finished goods).

• Time-phased Scheduling

• Parts and components must be ordered in advance to accommodate lead times between order placement and receipt


Types of MRP Systems

• MRP

• Closed Loop MRP

• MRP II

• Distribution Requirements Planning

• DRP II

• Enterprise Requirement Planning

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MRP Inputs MRP Processing MRP Outputs

Masterschedule

Bill ofmaterials

Inventoryrecords

MRP computerprograms

Changes

Order releases

Planned-orderschedules

Exception reports

Planning reports

Performance-controlreports

Inventorytransaction

Primaryreports

Secondaryreports

Overview of MRP


MarketMarketDemandDemand

ProductionProductionplanplan

Problems?Problems?

RoughRough--cutcutcapacity planningcapacity planning

YesYes NoNo YesYesNoNo

FinanceFinance

MarketingMarketing

ManufacturingManufacturing

AdjustAdjustproduction planproduction plan

MasterMasterproduction scheduleproduction schedule

MRPMRP

CapacityCapacityplanningplanning

Problems?Problems?RequirementsRequirements

schedulesschedules

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MRP II

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JIT / MRP

JIT (Demand Flow)

• As needed …

• “Pull”

• Low variability

• High predictability(by definition)

• Kanban

MRP

• In anticipation …

• “Push”

• High variability

• High predictability (Inventory bufferslow predictability)

• Computer-intensive


• Master Production Schedule

• Time-phased plan specifying timing and quantity of production for each end item.

• Material Requirement Planning Process

MRP Inputs

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Master Schedule

Master schedule:

One of three primary inputs in MRP; states which end items are to be produced, when these are needed, and in what quantities.

Cumulative lead time:

The sum of the lead times that sequential phases of a process require, from ordering of parts or raw materials to completion of final assembly.


Planning Horizon

1 2 3 4 5 6 7 8 9 10

Procurement

Fabrication

Subassembly

Assembly

Time Period (weeks)

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Bill-of-Materials

Bill of materials (BOM): One of the three primary inputs of MRP; a listing of all of the raw

materials, parts, subassemblies, and assemblies needed to produce one unit of a product.

Product structure tree: Visual depiction of the requirements in a bill of materials, where all

components are listed by levels.

Low-level coding:

Restructuring the bill of materials so that multiple occurrences of a component all coincide with the lowest level the component occurs


Product Structure Tree

Chair

Seat

Legs (2) Crossbar

SideRails (2)

Crossbar

BackSupports (3)

LegAssembly

BackAssembly

Level 0

1

2

3

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Inventory Records

• One of the three primary inputs in MRP• Includes information on the status of each item by time

period– Gross requirements– Scheduled receipts– Amount on hand– Lead times– Lot sizes– And more …


Inventory Requirements

• Net requirements:

• Available Inventory:

Net Requirements = Gross Requirements – Available Inventory

Available Inventory = Projected on hand– Safety stock – Inventory allocated to other items

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Assembly Time Chart

1 2 3 4 5 6 7 8 9 10 11

Procurement ofraw material D

Procurement ofraw material F

Procurement ofpart C

Procurement ofpart H

Procurement ofraw material I

Fabricationof part G

Fabricationof part E Subassembly A

Subassembly B

Final assemblyand inspection


MRP Processing

• Gross requirements

• Schedule receipts

• Projected on hand

• Net requirements

• Planned-order receipts

• Planned-order releases

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MPR Processing

• Gross requirements

– Total expected demand

• Scheduled receipts

– Open orders scheduled to arrive

• Planned on hand

– Expected inventory on hand at the beginning of each time period


MPR Processing


– Actual amount needed in each time period

• Planned-order receipts

– Quantity expected to received at the beginning of the period

– Offset by lead time

• Planned-order releases

– Planned amount to order in each time period

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Updating the System

• Regenerative system

– Updates MRP records periodically

• Net-change system

– Updates MRP records continuously


MRP Primary Reports

• Planned orders - schedule indicating the amount and timing of future orders.

• Order releases - Authorization for the execution of planned orders.

• Changes - revisions of due dates or order quantities, or cancellations of orders.

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MRP Secondary Reports

• Performance-control reports

• Planning reports

• Exception reports


Other Considerations

• Safety Stock

• Lot sizing– Lot-for-lot ordering

– Economic order quantity

– Fixed-period ordering

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Lot Sizing in MRP Programs

• Lot-for-lot (L4L)

• Economic order quantity (EOQ)

• Least total cost (LTC)

• Least unit cost (LUC)

• Which one to use?

– The one that is least costly!


Other Considerations

Benefits of having Safety Stock:

• Supplier may deliver their product late or not at all• The warehouse may be on strike• A number of items at the warehouse may be of poor quality

and replacements are still on order• A competitor may be sold out on a product, which is

increasing the demand for your products• Random demand (in reality, random events occur)• Machinery Breakdown• Unexpected increase in demand

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MRP in Services

• Service applications such as:– Professional services

– Postal services

– Trade

– Banking

– Healthcare

– Higher education

– Engineering

– Logistical services


• Food catering service

– End item => catered food

– Dependent demand => ingredients for each recipe, i.e. bill of materials

• Hotel renovation

– Activities and materials “exploded” into component parts for cost estimation and scheduling

MRP in Services

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Benefits of MRP

• Low levels of in-process inventories

• Ability to track material requirements

• Ability to evaluate capacity requirements

• Means of allocating production time

• Useful simulator

• Provides valid, credible priorities

– priorities reflect actual needs, not implied needs.

• Provides mangers with control over the execution system

• Ability to easily determine inventory usage by back flushing

• Back flushing: Exploding an end item’s bill of materials to determine the quantities of the components that were used to make the item.


Limitations of MRP

• only looks at materials, ignores capacity, shop floor conditions

• requires user discipline

• requires accurate information/data

• requires valid MPS

• not appropriate for all areas

– high volume production

– projects

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Requirements of MRP

• Computer and necessary software

• Accurate and up-to-date– Master schedules

– Bills of materials

– Inventory records

• Integrity of data


• Expanded MRP with emphasis placed on integration

– Financial planning

– Marketing

– Engineering

– Purchasing

– Manufacturing

MRP II

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MarketMarketDemandDemand

ProductionProductionplanplan

Problems?Problems?

RoughRough--cutcutcapacity planningcapacity planning

YesYes NoNo YesYesNoNo

FinanceFinance

MarketingMarketing

ManufacturingManufacturing

AdjustAdjustproduction planproduction plan

MasterMasterproduction scheduleproduction schedule

MRPMRP

CapacityCapacityplanningplanning

Problems?Problems?RequirementsRequirements

schedulesschedules

Ad

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t m

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MRP II


Capacity Planning

Capacity requirements planning: The process of determining short-range capacity requirements.

Load reports: Department or work center reports that compare known and expected future capacity requirements with projected capacity availability.

Time fences: Series of time intervals during which order changes are allowed or restricted.

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Capacity Planning (MPS: Master Production Scheduling)

Develop a tentativemaster production

schedule

Use MRP tosimulate material

requirements

Convert materialrequirements to

resource requirements

Firm up a portionof the MPS

Is shopcapacity

adequate?

Cancapacity be

changed to meetrequirements

Revise tentativemaster production

schedule

Changecapacity

Yes

No

Yes

No


• Enterprise resource planning (ERP):

– Next step in an evolution that began with MPR and evolved into MRPII

– Integration of financial, manufacturing, and human resources on a single computer system.

ERP

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ERP Software

– ERP software provides a system to capture and make data available in real time to decision makers and other users in the organization

– Provides tools for planning and monitoring various business processes

– Includes• Production planning and scheduling

• Inventory management

• Product costing

• Distribution


ERP Strategy Considerations

• High initial cost

• High cost to maintain

• Future upgrades

• Training

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Master Production Schedule (MPS)

• Time-phased plan specifying how many and whenthe firm plans to build each end item

Aggregate Plan(Product Groups)

MPS(Specific End Items)


Types of Time Fences

• Frozen

• No schedule changes allowed within this window

• Moderately Firm– Specific changes allowed within product groups as long as parts

are available

• Flexible– Significant variation allowed as long as overall capacity

requirements remain at the same levels

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Inventory Records File

• Each inventory item carried as a separate file– Status according to “time buckets”

• Pegging (Attaching)– Identify each parent item that created demand


Primary MRP Reports

• Planned orders to be released at a future time

• Order release notices to execute the planned orders

• Changes in due dates of open orders due to rescheduling

• Cancellations or suspensions of open orders due to cancellation or suspension of orders on the master production schedule

• Inventory status data

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Secondary MRP Reports

• Planning reports, for example, forecasting inventory requirements over a period of time

• Performance reports used to determine agreement between actual and programmed usage and costs

• Exception reports used to point out serious discrepancies, such as late or overdue orders


Additional MRP Scheduling Terminology

• Gross Requirements

• On-Hand Inventory– Allocations

• Scheduled Receipts

• Time-phasing

• Parent/Component

• Projected available balance


• Planned order receipt

• Planned order release

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Additional MRP Scheduling Terminology

• Planning factors

• System nervousness

• Firm planning

• Explosion

• Time buckets– Action bucket

• Rolling the Schedule

• Net Change vs. Regenerative MRP


MRP Works Best When...

• End Products are Standardized

• Batch Production

• End product is moderately complex

• The end product is assembled from a set of components and raw materials

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Example of MRP Logic and Product Structure Tree

B(4)

E(1)

C(2)

F(2)D(3)

AProduct Structure Tree for Assembly A Lead Times

A 1 dayB 2 daysC 1 dayD 3 daysE 4 daysF 1 day

Total Unit DemandDay 10 50 ADay 8 20 B (Spares)Day 6 15 D (Spares)

Given the product structure tree for “A” and the lead time and demand information below, provide a materials requirements plan that defines the number of units of each component and when they will be needed


LT = 1 day

Day: 1 2 3 4 5 6 7 8 9 10A Required 50

Order Placement 50

First, the number of units of “A” are scheduled backwards to allow for their lead time. So, in the materials requirement plan below, we have to place an order for 50 units of “A” on the 9th day to receive them on day 10.

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Next, we need to start scheduling the components that make up “A”. In the case of component “B” we need 4 B’s for each A. Since we need 50 A’s, that means 200 B’s. And again, we back the schedule up for the necessary 2 days of lead time.

D ay : 1 2 3 4 5 6 7 8 9 10

A R equ ired 50

O rder P lac em ent 50

B R equ ired 20 200

O rder P lac em ent 20 200

SparesLT = 2

4x50=200

B(4)

E(1)

C(2)

F(2)D(3)

A


Day: 1 2 3 4 5 6 7 8 9 10A Required 50

LT=1 Order Placement 50B Required 20 200

LT=2 Order Placement 20 200C Required 100

LT=1 Order Placement 100D Required 55 400 300

LT=3 Order Placement 55 400 300E Required 20 200

LT=4 Order Placement 20 200F Required 200

LT=1 Order Placement 200

40 + 15 spares

Part D: Day 6

the final materials requirements plan:

B(4)

E(1)

C(2)

F(2)D(3)

A

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MRP other Example

A(2) B(1)

D(5)C(2)

X

C(3)

Item On-Hand Lead Time (Weeks)X 50 2A 75 3B 25 1C 10 2D 20 2

Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10


A(2)

X

Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95

LT=2 Scheduled receiptsProj. avail. balance 50 50 50 50 50 50 50 50 50 50

On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90

LT=3 Scheduled receiptsProj. avail. balance 75 75 75 75 75 75 75 75

On- Net requirements 15hand Planned order receipt 1575 Planner order release 15B Gross requirements 45


On- Net requirements 20hand Planned order receipt 2025 Planner order release 20C Gross requirements 45 40

LT=2 Scheduled receiptsProj. avail. balance 10 10 10 10 10

On- Net requirements 35 40hand Planned order receipt 35 4010 Planner order release 35 40D Gross requirements 100

LT=2 Scheduled receiptsProj. avail. balance 20 20 20 20 20 20 20

On- Net requirements 80hand Planned order receipt 8020 Planner order release 80

It takes 2A’s for each X

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Islamic University, Gaza - PalestineDay: 1 2 3 4 5 6 7 8 9 10

X Gross requirements 95LT=2 Scheduled receipts

Proj. avail. balance 50 50 50 50 50 50 50 50 50 50On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90









B(1)

A(2)

X

It takes 1B for each X


A(2) B(1)

X

C(3)












It takes 3C’s for each A

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A(2) B(1)

C(2)

X

C(3)












It takes 2C’s for each B


A(2) B(1)

D(5)C(2)

X

C(3)












It takes 5D’s for each B

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Closed Loop MRP

Production PlanningMaster Production SchedulingMaterial Requirements PlanningCapacity Requirements Planning

Realistic?No

Feedback

Execute:Capacity PlansMaterial Plans

Yes


End of Chapter 3-1

Documents

Department of Industrial Engineering - الصفحات الشخصية ...site.iugaza.edu.ps/aschokry/files/2010/02/Dr._Abed...1 Islamic University, Gaza - Palestine Department of Industrial