Materials Management Systems

Materials Management Systems Materials Requirements Planning Chapter 4 MGMT 3750

Ch.4: Material Requirements PlanningMaterial Requirements Planning • Material Requirements Planning is a system to calculate requirements for dependent demand items • It establishes a schedule (priority plan) showing the components required at each level of the assembly and, based on lead times, calculates the time when these components will be needed • It is a system to avoid missing parts for the end item MGMT 3750

Ch.4: Material Requirements PlanningMaterial Requirements Planning Process • We need to determine • What to order • How much to order • When to order • This will involve • Lead times • Bills of material • Inventory Status • Planning data MGMT 3750

Ch.4: Material Requirements PlanningNature of Demand • Two Types of Demand • Independent • Is not related to the demand for any other product and must be forecast • Master production schedule (MPS) items are independent demand items • Dependent • Is directly related to other items or end items • Such demand should be calculated and need not and should not be forecast MGMT 3750

Table Legs (4) Ends (2) Sides (2) Top (1) Hardware Kit (1) Item #206 Item #433 Item #711 Item #025 Item #822 Ch.4: Material Requirements PlanningNature of Demand Independent Demand (Forecast) Dependent Demand (Calculated) If you have an order for 23 Tables, what components would you need to produce them? MGMT 3750

Ch.4: Material Requirements PlanningObjectives ofMRP • Two Major Objectives • Determine Requirements • What to order • How much to order • When to order • When to schedule delivery • Keep Priorities Current • It must be able to add and delete, expedite, delay, and change orders based upon present priorities MGMT 3750

Business Plan Production Plan Planning MPS MRP PC and Purchasing Execution Ch.4: Material Requirements PlanningLinkages with Other Manufacturing Planning and Control Functions • The MRP is driven by • the MPS; it is concerned • with the components • needed to make the • end items. • The MRP in turn drives, • or is input to, production • control (PC) and purchasing MGMT 3750

Ch.4: Material Requirements PlanningInputs to theMRP System • Four Major Inputs: • Master Production Schedule • Inventory Records • Planning Data • Bills of Material MPS Inventory Status Bill of Material MRP Planning Data MGMT 3750

Ch.4: Material Requirements PlanningInputs to theMRP System • Master Production Schedule (MPS) • The MPS provides information on planned and scheduled orders for end items (how much is wanted and when) • Inventory Status • Inventory status provides information on what is already available. Inventory records include the status of each item, including amounts on order and on hand and the location MGMT 3750

Ch.4: Material Requirements PlanningInputs to theMRP System • Bills of Material • Bills of material describe components and the quantity of each needed to make one unit • Planning Data • Planning data include lot size, lead time, scrap factors, yield factors, and safety stock • The Computer • Computers are needed because they are fast , accurate, and have the ability to store and manipulate data and produce information rapidly MGMT 3750

Ch.4: Material Requirements PlanningBills of Material Bill of Material “a listing of all the subassemblies, intermediates, parts, and raw materials that go into making the parent assembly showing the quantities of each required to make an assembly” APICS Dictionary, 8th edition, 1995 • The bill of material shows all the parts required to make one of the item • Each part or item has only one part number MGMT 3750

Ch.4: Material Requirements PlanningBills of Material • Parent–Component Relationship • An assembly is considered a parent, and the items that comprise it are called its component items. Parent Table Legs (4) Ends (2) Sides (2) Top (1) Hardware Kit (1) Component Item #206 Item #433 Item #711 Item #025 Item #822 MGMT 3750

Ch.4: Material Requirements PlanningBills of Material • The multilevel bill is made up of subassemblies. The subassemblies reflect the way manufacturing plans to build the product. • The lowest items on the bill are usually purchased parts. • All parts and subassemblies have unique numbers. • By convention, the final assembly is considered level zero. Levels down the bill are numbered consecutively. MGMT 3750

Ch.4: Material Requirements PlanningBills of Material • The multilevel bill is a collection of single-level bills. Each single-level bill shows the parts to make one parent. • To reduce storage space and to make maintenance easier, the computer stores single-level bills only. • Items can be both parents of components and components of other parents. MGMT 3750

Ch.4: Material Requirements PlanningBills of Material • Low-Level Coding and Netting - A component may reside on more than one level in a bill of material • The low-level code is the lowest level on which a part resides in all bills of material. Every part has only one low-level code. • Low-level are determined by starting at the lowest level of a bill of material and, working up, recording the level against the part. If a part occurs on a higher level, its existence on the lower level has already been recorded. • Once the low-level codes are obtained, the net requirements for each part can be calculated. MGMT 3750

Ch.4: Material Requirements PlanningBills of Material • Uses for Bills of Material • Product Definition • Engineering Change Control • Service Parts • Planning • Order Entry • Manufacturing • Costing • Etc. • Maintaining bills of material and their accuracy is extremely important MGMT 3750

A B C E D Ch.4: Material Requirements PlanningLead Times, Exploding, and Offsetting LT: 1 wk • Lead time: The time from when an order is placed until the part is ready for use. • Exploding: Multiplying the parent requirements by the usage quantity through the product tree • Offsetting: Placing the requirements in their proper time periods based on lead times LT: 2 wk LT: 1 wk LT: 1 wk LT: 1 wk MGMT 3750

Ch.4: Material Requirements PlanningPlanned Orders • Planned Order Receipt • That quantity planned to be received at a future date as a result of a planned order release. • Planned Order Release • Planned order releases are just planned; they have not been released. Orders for material should not be released until the planned order release date arrives. • The planned order release of the parent becomes the gross requirement of the component. MGMT 3750

Ch.4: Material Requirements PlanningReleasing Planned Orders • Releasing Planned Orders • Check availability of components • Create shop packet or purchase requisition • Allocate components to that order • Release planned order, creating a scheduled receipt MGMT 3750

Ch.4: Material Requirements PlanningBasic MRP Record • The current time is the beginning of the first period. • The top row shows time periods, called time buckets. • The number of periods in the record is called the planning horizon. • An item is considered available at the beginning of the time bucket in which it is required. MGMT 3750

Ch.4: Material Requirements PlanningBasic MRP Record • The quantity shown in the projected available row is the projected available balance at the end of the period; all other quantities are for the beginning of the period. • The immediate or most current period is called the action bucket. MGMT 3750

Ch.4: Material Requirements PlanningExample from Pg. 88 (85 3rd. Ed.) MGMT 3750

Ch.4: Material Requirements PlanningExample from Pg. 88 MGMT 3750

Ch.4: Material Requirements PlanningExample from Pg. 90 (87 3rd Ed.) MGMT 3750

Ch.4: Material Requirements PlanningExample from Pg. 90 MGMT 3750

Ch.4: Material Requirements PlanningExample from Pg. 90 Release the order for 200 units. MGMT 3750

Ch.4: Material Requirements PlanningUsing the Material Requirements Plan • The computer can perform all calculations and create planned order releases, but it does not (usually) issue purchase or manufacturing orders or reschedule open orders. Computer software can create exception messages and suggest types of action. MGMT 3750

Ch.4: Material Requirements PlanningUsing the Material Requirements Plan • On the basis of action and exception messages, the planner can release planned orders, reschedule existing orders in or out, or change quantities. In addition, the planner works with other planners, master production schedulers, production activity control, and purchasing to solve problems as they arise. MGMT 3750

Ch.4: Material Requirements PlanningThe Basic Responsibilities of a Planner • Launch (release) orders to purchasing or manufacturing • Reschedule due dates of open (existing) orders as required • Reconcile errors and try to find their cause MGMT 3750

Ch.4: Material Requirements PlanningThe Basic Responsibilities of a Planner • Address critical material shortages by expediting or re-planning • Coordinate with other planners, master production schedulers, production activity control, and purchasing to resolve problems MGMT 3750

Ch.4: Material Requirements PlanningMaterial Planner’s 3 Types of Orders • Planned orders - calculated and controlled by the software • Released orders - scheduled receipts; releasing is the responsibility of the planner MGMT 3750

Ch.4: Material Requirements PlanningMaterial Planner’s 3 Types of Orders • Firm planned orders - the planner tells the computer that the order is not to be changed; the planner uses firm planned orders to override the software in terms of quantity, time, or both. When re-planning, the software will not change the planner’s decision. MGMT 3750

Ch.4: Material Requirements PlanningManaging the Material Requirements Plan The planner must consider three important factors when managing the MRP: • Priority - refers to maintaining the correct due dates by constantly evaluating the true due-date need for released orders and, if necessary, expediting or de-expediting. • Bottom-up Re-planning - Action to correct for changed conditions should occur as low in the product structure as possible MGMT 3750

Ch.4: Material Requirements PlanningManaging the Material Requirements Plan The planner must consider three important factors when managing the MRP: • Reducing System Nervousness - Requirements can change rapidly and by small amounts. The planner must judge whether the changes are important enough to react to and whether an order should be released. MGMT 3750

Ch.4: Material Requirements PlanningQuestions Questions: 2, 3, 5, 6, 9, 18, 19, 21, 23 MGMT 3750

Materials Management Systems