MPR and Operations Scheduling
10
Chapter
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Copyright 2007, Upendra Kachru
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Excel Books
Production And Operations Management Text and cases, Upendra Kachru
Copyright 2007, Upendra Kachru
10-2
What is Material Requirements Planning (MRP)?
To achieve competitive advantage companies differentiate themselves from other
players in the market. There are various ways by which a company can do so.
The products that are going to be produced should conform to the requirements of
the market and the design should be such that it should forecast and
accommodate customers future needs.
The marketing department, which keeps an eye on the trends and needs of the
market, should give relevant information to the production department so that they
would make periodic and relevant changes to the products.
The demand-supply factor in the market should be analyzed for proper production
planning and there should be some system that can assist management to take
strategic decisions.
Competitive advantage starts from sourcing the right raw material at the right time.
For this, the organization should have a good system of managing its vendors,
which includes parameters of organization should have a good system of
managing its vendors, which includes parameters of quality, price and delivery
schedules.
Manufacturing inventory system should be optimum, which is essential in
achieving the first stage of the cost reducing process.
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Production And Operations Management Text and cases, Upendra Kachru
Copyright 2007, Upendra Kachru
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From the point of view of quantity and timing of related production
systems, four categories of systems are possible to manage and control
inventories.
1. Statistical Order Point
2. Lot Requirement Planning
3. Time Phased Order Point
4. Material Requirements Planning
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Production And Operations Management Text and cases, Upendra Kachru
Copyright 2007, Upendra Kachru
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Materials Requirements Planning (MRP)
A materials requirement planning system, narrowly defined, consists of a
set of logically related procedures, decision rules and records designed to
translate a master production schedule into net requirements and the
planned coverage of such requirements, for each component inventory
item needed to implement this schedule.
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Production And Operations Management Text and cases, Upendra Kachru
Copyright 2007, Upendra Kachru
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Assumptions and Prerequisites
Assumptions: The MRP system makes certain assumptions regarding
inventories. The models assume that:
Lead times for all inventory items are known and can be supplied to the
system, at least as estimates.
Every inventory item under item control goes into and out of stock, i.e., there
will be reportable receipts, following which the item will be in an on-hand-
state and will eventually be disbursed to support an order for an item into
which it is merged.
All components of an assembly must be available at the time an order for
that assembly is to be released to the factory.
Components and materials are discretely disbursed and used. In the case of
materials that come in continuous form (e.g., rolls of sheet metal), the
standard planning procedures are modified and the system adapted to
handle such inventory items properly.
The process is independent, i.e., a manufacturing order for any given
inventory item can be started and completed on its won and not be
contingent on the existence or progress of some other order for completing
the process. Thus, mating part relationships and set up dependencies do
not fit the scheme of MRP.
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Production And Operations Management Text and cases, Upendra Kachru
Copyright 2007, Upendra Kachru
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The Principles prerequisites for a standard MRP system
are as follow:
1. A Master Production Schedule existed and can be stated in bill of materials
form;
2. All inventory items are uniquely identified;
3. A bill of material exists at the time of planning
4. Inventory records contain data on the status of every item;
5. There is integrity of file data.
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Production And Operations Management Text and cases, Upendra Kachru
Copyright 2007, Upendra Kachru
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In addition, other prerequisites in building MRP models
are;
1. Individual item lead times are known;
2. Every inventory item goes into and out of stock
3. All of the components of an assembly are needed at the time of release of
assembly orders;
4. There is discrete disbursement and usage of component materials
5. Process independence of manufactured items is ensured.
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Production And Operations Management Text and cases, Upendra Kachru
Copyright 2007, Upendra Kachru
10-8
MASTER PRODUCTION SCHEDULE (MPS)
The MPS is an authoritative statement translating the aggregate plan into
how many (and how), items are to be produced, and when. The MPS
process deals with more detailed information than the aggregate plan.
The MPS represents the most important plan in the resource-management
system.
A trial MPS scheduled is developed. This is called rough-cut capacity
planning.
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Production And Operations Management Text and cases, Upendra Kachru
Copyright 2007, Upendra Kachru
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Master Schedule
The master schedule provides details about the quantities and delivery
timings of a product, but not the production plan.
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Copyright 2007, Upendra Kachru
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Available-to-promise Inventory
Available-to-promise Inventory is the difference between the inventory
available from the previous period and the customer orders booked; the
maximum commitment to customers in a given time period.
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Copyright 2007, Upendra Kachru
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Bill of Materials
Planning or Modular Bill of Materials
It is an artificial grouping of items in bill of materials format, which expresses
the relationship of multiple product features, variants and options, where
inventory items are arranged in terms of product modules each of which can
be planned as a group.
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Copyright 2007, Upendra Kachru
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The bill of materials is a materials list that provides information useful to
reconstruct the manufacturing process. It is the master product definition
that contains as-designed information.
Bill of Materials
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A typical Engineering Bill of Materials
Level Part- Revision Quantity Unit Description Make/buy
1 16844-23003 B 1 Ea Adapter Make
16844-23003 J 1 Ea Control Unit Buy
16844-23003 C 3 Ea Moisture Tester Make
16844-23003 B 2 Ea Enclosure Buy
16844-23003 B 1 Ea Enclosure Buy
16844-23003 D 2 Ea Machine Screw Buy
16844-23003 F 3 Ea Cover Buy
16844-23003 AA 4 Ea Precipitatory Assy. Make
16844-23003 E 5 Ea Element Buy
16844-23003 E 6 Ea Housing Buy
16844-23003 D 4 Ea Machine Buy
16844-23003 G 3 Ea Precipitator Buy
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Pseudo Bill of Materials
A pseudo bill of materials is a grouping of end products and assigning and
artificial parent with a number to it to simplify the planning process. This
can be exploded to reflect the component requirements.
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Inventory Records
1. Raw materials in stock
2. Semi finished component parts in stock
3. Finished component parts in stock
4. Sub-assemblies in stock
5. Component parts in process
6. Sub-assemblies in process
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The MRP System
The basis for MRP design is based on a concept of dependent demand
and a time phasing approach. The approach combines three principles:
1. The inventory system deals with dependent demand.
2. Component demand can be precisely determined from the master schedule.
3. The optimum levels of inventory can be determined by time phasing, i.e.,
segmenting inventory status data by time.
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Inputs from Master Production Schedule
Product Structure
In determining net requirements for a low-level inventory item, the quantity
that exists under its own identity, as well as any quantities existing as
(consumed) components of parent items must be accounted for.
Net requirements are developed by allocating (reallocating) quantities in
inventory to the quantities of gross requirements, in a level-by-level
process. The downward progression from one product level to another is
called an explosion.
The bill of material file guides the explosion process.
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Production And Operations Management Text and cases, Upendra Kachru
Copyright 2007, Upendra Kachru
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Lot Sizing
Lot sizing techniques can be categorized into those that generate fixed,
repetitively ordered quantities and those that generate varying order
quantities.
The factors that are generally considered in the design of such techniques
include:
1. Variability of demand
2. Length of the planning horizon
3. Size of the planning period
4. Ratio of set up and unit costs
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Copyright 2007, Upendra Kachru
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Commonly used procedures
Fixed Order Quantity (FOQ)
Economic Order Quantity (EOQ)
Fixed Period Requirements (FPR)
Period Order Quantity (POQ)
Lot for Lot Ordering (L4L)
Least Unit Cost
Least Total Cost (LTC)
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Outputs- The Materials Requirement Plan
The common objective of all MRP systems is to determine (gross and net)
requirements, i.e., discrete period demand for each item of inventory, so as
to be able to generate information needed for correct action in ordering
inventory, i.e., relating to procurement and production.
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Conti.
1. Item Identity (part number)
2. Order Quantity
3. Date of Order Release
4. Date of Order Completion (due date)
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Once the order has been placed, the types of order action that are
required when revising an action taken previously, are limited to the
following:
1. Increase in Order Quantity
2. Decrease in Order Quantity
3. Order cancellation
4. Advancement of Order Due Date
5. Deferment of Order Due Date
6. Order suspension (indefinite deferment)
Conti.
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The primary outputs of an MRP system are
1. Order release notices
2. Rescheduling notices
3. Cancellation notices
4. Item status analysis
5. Planned orders
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Cont.
The system is also capable of providing to provide a number of secondary
outputs. Apart from the primary outputs an MRP System can be used for:
A. Inventory order action,
B. Re-planning order quantities
C. Safeguarding priority integrity
D. Performance control
E. Reporting errors, incongruities and out-of-bounds situations in the
system.
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Some of the secondary outputs that can be provided by the MRP system
are:
1. Exception notices reporting errors, incongruities, and out-of-bound situations.
2. Inventory level projections
3. Purchase commitment reports
4. Tracing demand sources.
5. Performance reports.
Cont.
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Copyright 2007, Upendra Kachru
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An MRP system that is properly designed, implemented and used will also
contain valid and timely information that can assist in the functioning of the
organization on three separate levels:
1. Planning and control of inventories
2. Planning of open order priorities
3. Inputs to the capacity requirements planning system.
Cont.
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Scheduling
The objective of scheduling is to create a system specifying when each
task is to begin and what resources it will use that satisfies all the
constraints while taking as little overall time as possible.
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Loading
Machine Loading
The assignment of specific jobs to each operational facility during a planning
period is known as loading.
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Sequencing
Detailed Scheduling
Cont.
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Sequencing
The decision regarding the order in which job-in-waiting are processed on
an operational facility or work-center is called sequencing.
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Detailed Scheduling
Detailed Scheduling encompasses the formation of starting and finishing
time of all jobs at each operational facility.
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Expediting
A jobs progress needs monitoring. The job has to keep moving through
the facility on time to avoid a deviation from the schedule.
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Copyright 2007, Upendra Kachru
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Scheduling in Services
There are some basic distinction between manufacturing and services.
These differences effect scheduling. Service operations cannot create
inventories to buffer demand uncertainties.
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Copyright 2007, Upendra Kachru
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Scheduling Customer Demand
Backlogs:
For example, your tailor shop will not tell you exactly when service will
commence. You give your measurements (service request) to a tailor (order
taker), who adds it to the waiting line of orders already in the system and he
gives you a date for trying out the outfit.
Reservations: In many industries like in the hospitality and travel trades,
reservations have become a norm. Reservations systems, although quite
similar to appointment systems, are used when the customer actually
occupies or use facilities associated with the service.
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Appointments: an appointment system assign specific times for service to
customers. The advantages of this method are:
Timely customer service
High utilization of servers
Hospitals are examples of service providers that use appointment systems
Cont.
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Copyright 2007, Upendra Kachru
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Managing Planning and Scheduling
It requires specifying:
What results are to be produced,
Deciding who should perform the necessary activities
Where they should be performed
And when
Determining under which circumstances (whether) each of the activities
should or should not be performed
What information should be available to the performers
How thoroughly or intensively each activity needs to be performed
