What is Stocked?

1
Materials Requirements Planning (MRP
I) Manufacturing Resources Planning (MRP II)
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Manufacturing Systems History

• 1950s Stock Replenishment using EBQ, ROL, ROQ,
  etc.
• 1960s MRP - Forward planning of dependent
  demands.
• 1970s MRP - Rescheduling to keep order dates
  valid.
• JIT - Manufacturing in Japan.
• 1975s Closed loop MRP with feedback.
• OPT scheduling of bottlenecks.
• 1980s MRP2/RDBMS JIT linkages.
• 1985s Simulation and Factory Management's
  Systems.
• 1990s Computer Integrated Manufacturing
  Enterprise Integration
• 2000 ERP, Extended Enterprise Supply Chain
  Integration

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Dependent Demand

• When it is directly related to, or derives from,
  the demand for another inventory item or product
• For example Demand for a TV component is
  dependent upon the demands for TV sets
• OR where demand is derived
• For example The demand for TV sets at the
  factory is determined by demand from the retailer
  which is derived from ultimate demand in the
  market place

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Independent Demand

• When demand is unrelated to demand for other
  items.
• Or When it is not a function of demand for other
  items.
• In these cases we use Re-order point system OR
  Re-order cycle system

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MRP Structure
Master Production Schedule
MRP Analysis
Stock Status
Bill of Materials
Reports
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MPS - Purposes

• Links production plans to day to day operations
• Forms basis for managerial control
• Basis for integration of activities
• Demand management functions

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Master Schedule for Product X
Output per week
Weeks into Future
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Spare Parts Demand for Assembly A
Assembly A
Firm Orders
Forecast Orders
Order Quantity
1 2 3 4 5 6 7 8 9 10
11 121
Weeks into Future
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Inputs into the MPS
Known Orders
Forecast Deamnd
Key Capacity Constraints
Sister Plant Demand
Master Production Schedule
Inventory Levels
RD Demand
Spares Demand
Exhibition/ promotion Requirements
Safety Stock Requirements
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Master Schedule with Variable Length Time Periods
Today
Future
MASTER SCHEDULE
Days
Weeks
Months
Quarters
1 2 3 4 5
2 3 4
2 3 4 5 6
3 4 5 6
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Product Structure for chair
Chair
Level 0 Finished Product
4
1
2
2
1
1
Level 1 Sub- assembly
Frame
Back Cushion
Seat Cushion
Wood End
Cross-piece (Chair)
0.45
1.4
0.6
0.5
3
3
0.7
2.2
0.55
Level 2 Raw Material
Webbing
Tube
Fabric
Foam
Wood
Fastener
Notes Indicates common item with settee. The
number to the left of each link shows the
number/quantity of the lower -level item needed
in the manufacture of the higher-level item.
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Bill Of Material - BOM

• Maintains Parts and Structures used for Product
  definition in a manufacturing company
• Parts in a BOM, include Assemblies,
  Sub-assemblies, parts, bought out items, and
  materials
• Each part needs a unique identification - number,
  brief description, and other reference codes
• The structure shows the relationships of one part
  with another
• The BOM is not a parts list, but defines how a
  product is made
• BOM is usually the first module to be installed

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BOM Outputs

• SINGLE LEVEL BOM
• Shows the structure of a BOM one level down.
• MULTI LEVEL BOM
• Shows the structure of a BOM through all
  levels.
• INDENTED BOM
• Where the part number within a multi level BOM
  is displaced by one digit for each level.
• 0.23456 Assembly
• 0.13247 Sub Assembly
• 0.33457 Part
• 0.13248 Sub Assembly
• 0.33468 Part

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Uses of BOM

• Product Definition
• Manufacturing Instructions
• Engineering Change Control
• Services Parts Support
• Materials Procurement
• Production Scheduling
• Parts Kitting
• Costing

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Inventory Analysis

• Inventory classification by part or material type
• Annual usage by quantity and value
• Balance on hand by quantity and value
• Turnover ratio
• Active inventory value (balance on hand not
  exceeding gross usage unit cost)
• Percent active inventory
• Inactive inventory amount value
• Inventory valuations

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Stock condition route for a part
On Order
Goods receiving uninspected
Goods receiving inspected
Raw Material Store
Work in Progress
Finished Parts Store Free
Final Assembly
Finished Parts Store Allocated
Dispatched
Kitting Dept
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Work in Progress Stock Condition
Raw Material Store
Op 1 Cast
Op 2 Mill
Op 3 Grind
Finished Parts Store
Op 4 Inspect
Op 6 Inspect
Op 5 Paint
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MRP LOGIC

• Master Production Schedule
• MRP explosion using BOM
• Lower level gross requirements
• Net requirements - netting out Inventory
  scheduled receipts
• Applying order policies
• Order release dates obtained by off setting lead
  times
• Planned / confirmed orders
• Rescheduling

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Definition of MRP
Master Production Schedule (MPS)
MRP Analysis
Inventory Status Data
Bill of Materials (BOM)
Release Orders
Planned Orders
Reschedule Orders
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MRP

• Basic MRP handles material aspects of production
  control
• Simple MRP systems based on MPS, BOM, inventory
  records and material requirements
• A number of software companies have developed
  inter-related files to provide a more complete
  picture
• MRP I assumes that resources available are
  constant

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MRP II

• called a closed loop system
• a push system
• Forecasts are generated at the outset and
  manufacturing plan developed to meet these
  demands
• The plan then drives the manufacture through the
  issue of work orders

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MRP II

• Essentially a computerized database of parts,
  components, finished goods, WIP and requirements
• Lead time and relationships between parts are
  held in a database
• The computer then calculates the best way to meet
  the MPS (which is based on forecasts firm
  orders etc.)

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MRP2 - Manufacturing Modules
Production Planning
Forecasts
Resource Requirement Planning
Rough Cut Capacity Planning
Master Production Scheduling
Customer Orders
Material Requirement Planning
Capacity Requirement Planning
Production Activity Control
Purchasing
Dispatching
Input/Output Control
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MRP

• best suited to companies making discrete
  multi-component items
• it provides mgt with an accurate record of
  inventory related activities
• it enables mgt to make accurate predications and
  highlight problems
• it enables optimisation of resources
• inventory levels or lead times generally reduced
• mgt commitment essential to make a positive impact

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MRP II system works as follows

• MPS is drawn up (based on forecasts, orders etc.)
• MPS is checked for feasibility in gross capacity
  terms (rough cut capacity planning).Once a
  feasible plan is agreed it is input into the
  materials requirements planning module
• Material requirements are calculated and schedule
  of quantity and time determined
• These requirements are then exploded in the BOM
  file (which provides a breakdown of a product
  into its constituent parts)

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MRP II system works as follows contd..

• Net requirements are then calculated by deducting
  available inventory from gross requirements.
• In a closed loop system their capacity
  requirements would be checked against resource
  availability. (estimated capacity planning) with
  user able to decide on different variables such
  as lot sizes and start dates.
• Finally works orders are fed into the live system
  where a schedule is calculated to take account of
  the day-to-day situation on the shop floor.

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Materials Requirement Planning (MRP)

• Assume currently week 1
• Orders are
• Wk 8 200 settees
• Wk 9 350 chairs
• Wk 7 100 replacement seat cushions
• GR Gross requirements
• NR Net requirements
• OH On-hand stock
• OD Orders Due
• SS Safety Stock
• PO Planned Orders/start

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MRP example

• For chair
• GR 350 (wk 9)
• NR GR - OH - OD SS
• 350 - 25 - 0 20 345 (wk 9)
• Since lead time 1 wk, PO 345 (wk 8)
• For settees
• GR 200 (wk 8)
• NR GR - OH - OD SS
• 200 - 30 -0 20 190 (wk 8)
• Since lead time 1 wk, PO 190 (wk 7)

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MRP example

• Cascading down to level 1 items, all items should
  be considered, but for the purposes of this
  illustration only cushions will be considered.
• For back Cushions
• GR 190 x 2 380 (wk 7)
• (PO for 190 settees in wk 7, 2 back
  cushions/settee)
• NR 380 - 45 - 0 0 335 (wk 7)
• Since lead time 2 weeks, PO 335 (wk 5)
• GR 345 (wk 8)
• (PO for 345 chairs in wk 8)
• NR 345 - 0 - 0 0 345 (wk 8)
• Since Lead Time 2 wks, PO 345 (wk 6)

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MRP example

• For seat cushions
• GR 190 x 2 100 (wk 7)
• (PO for 190 settees in wk 7, 2 seat
  cushions/settee
• 100 replacement cushions)
• NR 480 - 45 - 0 0 435 (wk 7)
• Since lead time 2 weeks, PO 435 (wk 5)
• GR 345 (wk 8)
• (PO for 345 chairs in wk 8)
• NR 345 - 0 - 0 0 345 (wk 8)
• Since Lead Time 2 wks, PO 345 (wk 6)

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MRP 2 Modules

• MANUFACTURING
• Bill of Materials - BOM
• Master Production Scheduling - MPS
• Inventory - INV
• Material Requirements Planning - MRP
• Capacity Requirements Planning - CRP
• Production Activity Control - PAC
• Purchasing - PUR
• System Control - SYS

• BUSINESS/FINANCE
• Order Processing - ORD
• Costing Cost Control - COST
• Sales Ledger - SL
• Purchase Ledger - PL
• General/Nominal Ledger - NL
• Financial Statements -FIN
• Asset Management - AM
• Payroll/Salaries- PAY

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Advantages of MRP2

• Reduced lead times
• Inventory turnover increased, value of inventory
  reduced
• Improved scheduling of purchased made in items
• On time deliveries improved
• Greater throughput
• Costs reduced

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Summary

• A tool enables managers to plan control a
  manufacturing business
• A formal system for scheduling the needs of
  marketing, production and materials
• A means of integrating management functions and
  their goals
• The integrated planning tool for more advanced
  manufacturing technologies and CIM
• A means of getting better results in business