Operations Management MRP Lecture 22 (Chapter 14)

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Operations ManagementMRPLecture 22 (Chapter 14)
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Dependent versus Independent Demand
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Plans and their relationship
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MRP

• Dependent demand technique that uses MPS, BOM,
  inventory, expected receipts and lead times to
  determine materials requirements
• Basis for ERP
• More preferable to EOQ models if relationship is
  known between items i.e. dependency occurs for
  the items under consideration
• Precisely determines feasibility of a schedule
  within capacity constraints

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Dependent Inventory Model (MRP) Requirements

• MPS (what is to be made and when)
• Specifications or Bill of Materials (BOM)
• Inventory availability (what is in stock)
• POs outstanding (what is on order)
• Lead times (how long it takes to get various
  components)

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Master Production Schedule (MPS)

• Timetable that specifies what is to be made and
  when
• Result of Aggregate/Production Planning process
• Disaggregates the AP (expressed in gross terms)
  into specific terms
• AP sets upper and lower bounds on the MPS

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Aggregate Production Plan MPS
February
January
Months
1,200
1,500
Aggregate Production Plan shows the total
quantity of bicycles
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7
6
5
4
3
2
1
Weeks
Master Production Schedule Shows the specific
type and quantity of bike to be produced
100
100
100
100
Road bike
450
450
500
500
Hybrid bike
100
300
Mountain bike
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Typical Focus of the Master Production Schedule
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Bill of Materials (BOM)

• Listing of components, their description and qty
  of each, required to make one unit of a product
• Due to rush to get product into market, BOM may
  be incomplete or non-existent
• Adequate to provide product structure and explode
  it to reveal requirements
• Low level coding done for items occurring at
  several levels

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Bill Of Material Product Structure Tree
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Purchase Orders Outstanding

• By-product of well managed purchasing and
  inventory control depts
• Prodn personnel should be well-informed about the
  orders placed and their scheduled deliveries

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Lead times

• Time reqd to acquire (purchase, produce or
  assemble) an item
• For manufactured item, lead time move time
  setup time assembly/run time
• For purchased item lead time time between order
  placement and order receipt

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Time-Phased Product Structure
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Example
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MRP Inventory Record
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MRP Planned Orders
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MRP Inventory Record
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MRP Planned Orders
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Structure of the MRP System
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Lot-Sizing Techniques

• Techniques used in determining order qtys or lot
  sizes
• Lot-for-lot
• Economic Order Quantity
• Part Period Balancing

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Lot-for-lot

• Lot sizing technique that generates exactly what
  is needed
• No safety stock or anticipation of further orders
• Works most efficiently when
• Frequent orders are economical (low set-up or
  ordering costs)
• JIT inventory techniques has been implemented

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EOQ

• Preferable when demand is relatively constant and
  independent
• Not preferable for dependent demand
• Operations managers should take advantage of
  demand info when it is available rather than
  assuming constant demand

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PPB

• Dynamic approach that balances setup / ordering
  and holding costs by changing the lot size to
  reflect requirements of next lot size in the
  future
• Develops an EPP ratio of setup to holding cost
• Adds requirements until the part periods/holding
  costs approximate EPP

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MRP in Services

• Can be used when demand for service or service
  items is directly related to or derived from
  demand for other services
• restaurant demand for vegetables is dependent
  on demand for meals
• hospitals equipment, materials and supply
  dependent on demand for surgeries

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MRP in services
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