Introduction to Materials Management

1. Introduction to Materials Management Chapter 4 – Material Requirements Planning

2. Independent versus Dependent Demand • Independent Demand • Not related to demand for other assemblies or products, instead from outside sources • Generally forecasted demand • Dependent Demand • Generally related to production of an end product (as defined on the MPS) • Can be calculated instead of forecasted

3. Dependent Demand Approach – Materials Requirement Planning (MRP) • Major Objectives of MRP • Determine Requirements – Calculated to meet product requirements defined in the MPS • What to order • How much to order • When to order • When to schedule delivery • Keep Priorities Current

4. Links To Other MPC Functions Figure 4.2 Manufacturing planning and control systems

5. Major Inputs to MRP • Master Production Schedule quantities and times • Inventory records of all items to be planned • Planning factors such as lead times, order quantities, and safety stock • Current status of each item • Bills of material for MPS items

6. Sample Bill of Materials Figure 4.3 Simplified bill of material

7. Bill of Material Points • The BOM shows all parts to make one of the item • Each part has one, and only one, part number • A part is defined by form, fit, and function – any change requires a new part number

8. Sample Product Tree for the BOM Figure 4.4 Product tree

9. Breaking Down the BOM into More Detail – the Multilevel Bill Figure 4.5 Multilevel bill

10. Indented BOM – Use Indentation to Show Parent-Component Relationships Figure 4.8 Indented bill of material

11. Planning Bills of Material • Artificial grouping of components for Planning Purposes • Used to simplify • Forecasting • Planning • Master Scheduling • Represent an average, not buildable product

12. Sample Planning BOM Figure 4.9 Planning bill

13. Major Uses for Bills of Material • Defines the product • Provides method for design change control • Planning – What is needed and when • Order entry – order configuration and pricing • Production – Parts needed to assemble a product • Costing – material cost of goods sold

14. Basic MRP Record Figure 4.15 Basic MRP record

15. Some Key Terms • Lead time – span of time for a process • Exploding – process of multiplying requirements by usage to get BOM requirements • Offsetting – Placing requirements in the proper period based on lead time • Planned orders – Orders planned during the explosion, but not yet released for processing • Low-level code – lowest level on which a part resides on the Bill of Materials

16. Some Key Terms, Continued • Scheduled receipts – Open orders released for processing (production or purchase) scheduled to be received at a defined time. • Gross Requirements – Total of a component needed to meet requirements not taking any existing inventory into account • Net Requirements – Actual amount of a component needed to meet requirement after existing requirements taken into account

17. Sample Material Requirements Plan Figure 4.19 Completed material requirements plan

18. Sample Multiproduct MRP Explosion Figure 4.20 Multiproduct MRP explosion

19. Points About the MRP Record • Current time – beginning of first period (often called time buckets) • Items considered available at beginning of period • Quantity in Projected Available row considered at end of period • Current period often called action bucket – action should be taken to avoid a future problem

20. Planner Responsibilities for MRP • Launch Orders – Production or Purchasing • Reschedule orders as required • Reconcile errors and search for causes • Solve critical material shortages • Replan • Expedite • Coordinate with other functions to resolve problems

21. Other Key Terms • Firm Planned orders – Orders not yet released, but “frozen” in quantity and time to reduce system “nervousness” • Exception messages – messages generated by the computer signaling planner action needed • Bottom-up replanning – actions to correct for changed conditions made as low as possible in the product structure