Managing Dependent Demand

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Managing Dependent Demand

• Week 5

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What is Wrong with EOQ?

• Nothing
• Just it assumes that demand is independent
• It is assumed that the next item demanded is not
  in anyway influenced by the last item demanded.

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Main Aspect of Dependent Demand

• Consider the production of a chair or sofa
• require
• wood end wood
• cross piece fabric
• metal frame foam
• seat cushion fastener
• back cushion steel tube

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Parts Explosion

• Levels
• Level 0 finished products
• Level 1 sub-assemblies
• Level 2 raw materials
• For our example what are the various levels

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Stock Status 1
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Stock Status 2
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Current Orders

• 200 sofas week 8
• 350 chairs week 9
• 100 replacement seat cushions week 7

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Standard terms

• Gross requirement (GR)
• Net requirement (NR)
• On hand stock (OH)
• Orders Due (OD)
• Planned Orders (PO)
• Safety Stock (SS)
• NR GR -OH-OD SS

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Level 1

• Chairs
• GR 350 (week 9)
• NR 350 - 25 20 345 (week 9) so,
• PO 345 (week 8)
• Sofa
• GR 200 (week 8)
• NR 200 -30 20 190 (week 8) so,
• PO 190 (week 7)

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Level 2

• Back Cushion
• GR 190x2 380 (week 7)
• NR 380 - 45 335 (week 7)
• PO 335 (week 5)
• GR 345 (week 8)
• NR 345 (week 8)
• PO 345 (week 6)
• Seat Cushions?

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Materials Requirement Planning(MRP1)

• Consists of assemblies and sub assemblies
• Planning done on regular basis
• Involves decisions on what, how many when
• Master schedule
• Explosion
• Accuracy of reports

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Key Reports

• Bill of Materials
• Where used listing
• Stock Reports
• Purchasing records
• Work in Progress
• Scrap and Rework reports

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Manufacturing Resource Planning MRP2

• Whole capability and limitations of the entire
  plant considered

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Just in Time (JIT) Manufacture

• MRP 1 is often just in case
• JIT assume parts arrive from suppliers as needed
• Value of JIT
• lead times reduced
• space saved
• Right first time

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Exam Question

• Why is dependent demand different from EOQ
• Give an example of what you understand by
  explosion in MRP1
• What is the difference between MRP1, MRPII and JIT