Dr' Grsel A' Ser

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ISE 542Production Planning ControlClass
Notes-Chapter 2 Part A

• Dr. Gürsel A. Süer
• IMSE Dept
• Ohio University
• Winter 2003

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Materials Requirements Planning (MRP)

• Many manufacturing companies currently use
• MRP/ERP systems
• Although especially Just-in-Time and less
• significantly Optimized Manufacturing
• Technology (OPT) led to changes in the
• manufacturing world, MRP/ERP maintains its
• central role.

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Inputs to MRP

• Master Production Schedule (MPS)
• Bills of Materials (BOM)
• Inventory Status
• Leadtime (LT)

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Materials Requirements Planning (MRP)
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Inputs to MRP (Contd)

• Master Production Schedule (MPS)
• Time-phased production schedule for finished
  products
• Usually defined in weeks

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Inputs to MRP (Contd)

• 2. Bill of Material (BOM)
• Shows what components and how many are required
  to build a part

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Inputs to MRP (Contd)

• 3. Inventory Status
• On Hand (OH) Quantity
• What is physically available in the warehouse
• On Order or Scheduled Receipt (SR)
• What has been ordered but not received yet
• Allocated (AL)
• What is in the warehouse but reserved for
  existing orders (i.e., not available to be used
  for incoming orders)

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Inputs to MRP (Contd)

• On Order or Scheduled Receipt (SR)
• Manufactured Part ? Order placed to the shop
• - parts waiting to be processed in shop
• - parts being manufactured in shop

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Inputs to MRP (Contd)

• On Order or Scheduled Receipt (SR)
• Purchased Part ? Order sent to vendor
• - order being processed by vendor
• - parts waiting to be processed by vendor
• - parts being manufactured by vendor
• - parts in transit

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Inputs to MRP (Contd)

• 4. Leadtime
• Time between placing an order and receiving the
  parts
• Purchased Part ? Supplied by vendors
• Manufactured Part ? Determined by
• process/planning engineers

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Outputs of MRP

• Time-phased (period by period) requirements
• for parts/ subassemblies/ components/ raw
• materials in the form of
• new orders
• revised orders (timing/quantity)

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MRP Process

• Generate Gross Requirements
• Calculate Net Requirements
• Find Order Sizes by Using Lot Sizing procedures
• Offset Orders by Leadtime
• These four steps are applied level by level until
  all parts are ordered

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MRP Process

• Generate Gross Requirements
• What is needed to meet the requirements (demand)
• GRt Gross requirements in period t

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MRP Process

• 2. Calculate Net Requirements
• What needs to be purchased/manufactured
• NRt Max 0, GRt - PABt-1 - SRt
• NRt Net Requirements in period t
• PABt Projected on Hand Quantity at the end of
  period t
• SRt Scheduled Receipt in period t

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MRP Process

• 3. Find Order Sizes
• Group Net Requirements
• LSt f (NRj / j t, t1, t2, )
• NRt Net Requirements in period t
• LSt Lot Size needed in period t

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MRP Process

• 4. Offset Orders by Leadtime
• Determine Start Time for Each Order
• POt LS tL
• POt Planned Order to be released in period t
• L Leadtime

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Independent Demand

• Before MRP, planners forecasted the demand for
  each item independently. For example, the
  planners would forecast
• the demand for items C, A, B, D, E and F
  independently in the following product structure.
  

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Dependent Demand

• MRP developers claimed that it is not necessary
  to forecast the demand for each item
  independently.
• Instead, forecast the demand for finished
  products only. Then calculate the requirements
  for lower level items (subassemblies, parts,
  components) using the product structure (bill of
  materials).
• The requirements for lower level items become
  dependent on the demand for finished products

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Dependent Demand

• MRP is referred as a dependent demand system.
  Forecast demand for finished product C. Then use
  the product structure to determine the
  requirements for items A,B,D,E and F with MRP

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Development of MRP

• Material Requirements Planning (MRP)
• Replaced statistical inventory control
  techniques
• 2. MRP with rescheduling capability
• Rescheduling capability added to handle frequent
  changes
• Closed-Loop MRP
• Capacity check added to generate executable
  plans
• Manufacturing Resources Planning (MRP II)
• Finance, Accounting, Sales, Marketing features
  added

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Development of MRP

• Schedule-Based MRP
• Detailed scheduling decisions are incorporated
  into the makeup of Master Production Schedule
• Enterprise Resources Planning (ERP)
• More features added
• MRP started as an inventory system and showed a
  significant improvement over the last decades and
  became a complete manufacturing planning and
  control system

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Single-Level Bill of Material
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Single-Level Bill of Material
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Single-Level Bill of Material
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Multi-Level Bill of Material
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Multi-Level Bill of Material

• Note Usage information given in multi-level BOM
  and indented BOM denotes only the quantity needed
  for the next higher level (not for the finished
  product)
• However, summary BOM includes the total usage for
  lowest level items

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Multi-Level Bill of Material
Usage for X ?10 2 (X/A)2 (A/C)2(X/B)3 (B/C)
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Product Structures and Parts
(finished product)
(two or more parts joined)
Usually one component- raw material underneath
(no component underneath)
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Low Level Codes

• The lowest level that an item is being used
  considering all the finished products, i.e., only
  one low level code for each item
• It shows the order by which MRP software will
  process the records (MRP processes from lowest
  code toward highest code)

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Low Level Codes

• LLC MRP Process Order
• D?
• X? Z? B? Y? A?
  C?

A
D
C
X
X
B
B
Z
Y
Z
Y
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MRP Record

• GR GROSS REQUIREMENTS
• SR SCHEDULED RECEIPTS
• NR NET REQUIREMENTS
• PAB PROJECTED AVAILABLE BALANCE
• PO PLANNED ORDERS
• TIME BUCKET PERIOD
• PLANNING HORIZON PERIODS INCLUDED
• ACTION BUCKET CURRENT (1ST) BUCKET

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MRP Record
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Timing Convention

• Planned Orders
• due at the beginning of the period
• Scheduled Receipts
• due at the beginning of the period
• Gross Requirements
• over the period
• Projected Available Balance
• at the end of period

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Timing Convention

• Scheduled Gross Requirements
• Receipt Projected Available
• Planned Balance
• Order Releases

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PO vs. SR

• Step 1. Planned orders are determined (they are
  just plans)
• Step 2. Planned orders in action bucket are
  released (they are no longer POs, they are
  committed orders)
• Step 3. Released POs become SRs
• (open shop orders, purchased orders)
• Step 4. Once SRs arrive, OH quantity is adjusted
  (increased) (they are no longer SRs, close orders)

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PO vs. SR
LT1
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Leadtime Offsetting

• Front Schedule Approach
• Schedule as early as possible
• Advantage Minimize risk of shortage
• Disadvantage Higher Inventory Levels
• Back Schedule Approach
• Schedule as late as possible
• Advantage Minimize Inventory
• Disadvantage Higher Risk of Shortage
• Heart of MRP

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Leadtime Offsetting

• LT3
• LT1 LT2 LT4
  

A
X
Y
Z
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Linking Items

• Gross Requirements for a component is calculated
  by multiplying the planned orders of its parents
  by respective usage quantities.
• nx
• GRx,t ? POp,t ux,p
• p1
• POp,t Planned Order for Parent Item p in Period
  t
• nx Number of Parents for Component x
• Ux,p Number of Units of x required to build one
  unit of
• parent item p
• GRx,t Gross Requirements for Component x in
  period t

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Linking Items
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An Example
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Technical Issues Lot Sizing

• Lot-for-Lot
• Order Exact Quantity needed.

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Technical Issues Lot Sizing

• 2. Fixed Period
• Group the net requirements in every X period
  (X2, X3, X4.)

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Technical Issues Lot Sizing FP
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Technical Issues Lot Sizing

• 3. Fixed Quantity
• Order fixed amount whenever there is a need.

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Technical Issues-Safety Stock

• Maintain a minimum of quantity on hand all the
  time against uncertainties in requirements,
  scrap, spare part, etc.
• Make necessary adjustments in POs so that PABt ?
  SS for all t
• It is good for uncertainties in quantity. The
  presence of SS can only be justified by its
  consumption

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Technical Issues-Safety Stock
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An Example