Manufacturing Planning and Control

1. Manufacturing Planning and Control MPC 6th Edition Chapter 6

2. Material Requirements Planning (MRP) Material Requirements Planning (MRP) has the managerial objective of providing “the right part at the right time” to meet the schedules for completed products. MRP provides a formal plan for each part number–raw materials, components, and finished products.

3. Agenda

4. Manufacturing Planning and Control System Resource planning Sales and operations planning Demand management Enterprise Resource Planning (ERP) System Master production scheduling Front End Detailed material planning Inventory status data Routing file Bills of material Time-phased requirement (MRP) records Detailed capacity planning Engine Material and capacity plans Shop-floor systems Supplier systems Back End

5. Basic MRP Record

6. Basic MRP Record A previously released order due in period 1 Requirements from all sources A unreleased order due in period 5

7. Bill of Materials The BOM shows the components and sub-assemblies required to produce a product

8. Product Structure Diagram Finished product is located at the top, components below Sub-assemblies are represented by separate levels

9. Indented Bill of Materials Finished item is not indented Level 2 sub-assemblies Level 1 sub-assemblies Level 1 components Components and sub-assemblies are indented relative to their order of usage

10. Explosion • Explosion–the process of translating product requirements into component part requirements • Considers existing inventories and scheduled receipts • Calculating the quantities of all components needed to satisfy requirements for any given part. • Continued until all parts have been considered, leading to exact requirements for all purchased and/or raw material parts

11. Gross and Net Requirements • Gross requirements represent the total planned usage for the part • Net requirements account for existing inventory and/or scheduled receipts 100 req’d – 25 inventory = 75 net req’d Net req’d for assembly becomes gross req’d for component 75 req’d – 22 inventory – 25 sched. rec. = 28 net req’d

12. Demand Types in MRP • Dependent–component or sub-assembly demand driven by net requirements from the next higher level (e.g. scoop demand caused by net requirements for scoop assemblies) • Independent–demand driven by requirements from outside the firm (e.g. customer orders)

13. Lead Time Offsetting • Gross to net explosion shows how much of each part is required, but not when • Timing requires consideration of two factors • Lead times–how long does it take to obtain the component or sub-assembly • Precedent relationships–the order in which parts must be assembled • MRP considers both factors when developing the plan

14. Scheduling Logic • Two common approaches to scheduling exist • Front schedule–schedule each step as early as possible • Back schedule–schedule each step as late as possible • MRP combines back scheduling and gross to net explosion • Reduced inventories • Minimized storage time

15. Back Scheduling Top handle assembly has the longest duration of any sub-assembly Scoop assembly must be complete before final assembly can begin Only when all sub-assemblies and components are available can final assembly begin

16. MRP Records Planned order release for top handle assembly becomes gross requirement for top handle component and nail (note 2 nails required per assembly) Lot-for-lot order policy exactly matches supply to net requirements Fixed lot size order policy requires orders in multiples of lot size

17. MRP Technical Issues • Processing frequency–recalculating all records and requirements is called regeneration • This is a computationally intensive process so it is often run in the background and during periods of low system demand • Net change approach only recalculates those records that have experienced changes • Less frequent processing results in an out-of-date picture • More frequent processing increases computer costs and may lead to system nervousness

18. Safety Stock and Safety Lead Time • Safety stock is buffer stock over and above the quantity needed to satisfy gross requirements • Used when quantity uncertainty is the issue • Safety lead time changes both the release and due date of shop and/or purchase orders to provide a margin for error • Used when timing of orders is the issue • Safety lead time is not just an inflated lead time

19. Pegging • Pegging provides a link between demand (order releases, customer orders, etc.) and the gross requirements for parts • Pegging records include the specific part numbers associated with a gross requirement • Pegging information can track the impact of a problem (e.g. material shortage) back to the order(s) it will affect

20. Firm Planned Orders • Regeneration of the MRP records can lead to large numbers of planned order changes • To avoid this, a planned order can be converted to a firm planned order (FPO) • An FPO is not the same as a scheduled delivery, but can’t be changed by the MRP system • Temporarily overrides the MRP system to provide stability or to solve problems

21. Planning Horizon • Total amount of time included in MRP calculations • Longer planning horizon increases computational requirements • Shorter planning horizon may result in less-effective plans if significant future demand is not visible • At a minimum, should cover the cumulative lead time for all finished goods items

22. Scheduled Receipts vs. Planned Order Releases • Scheduled receipts represent an actual commitment (purchase order, production order, etc.) • Planned orders are only the current plan and can be changed more easily • Scheduled receipts for production orders already have component materials assigned • Scheduled receipts do not impact gross requirements • Planned order releases do not have component materials assigned • Planned order releases do impact gross requirements

23. Using the MRP System

24. MRP Planner Tasks

25. Exception Codes

26. Bottom-Up Replanning • Using pegging data to guide efforts to solve material shortages • Pegging data allows the planner to take action only when actual customer orders are impacted

27. MRP System Output Part number and description MRP system data MRP planning data Exception messages

28. MRP System Dynamics

29. Principles • Effective use of an MRP system allows development of a forward-looking approach to managing material flows. • The MRP system provides a coordinated set of linked product relationships, which permits decentralized decision making for individual part numbers. • All decisions made to solve problems must be implemented within the system, and transactions must be processed to reflect the resultant changes. • Effective use of exception messages allows attention to be focused on the “vital few” rather than the “trivial many.”

30. Quiz – Chapter 6 • Material Requirements Planning (MRP) takes place in the front end systems of the manufacturing planning and control system? (True/False) • In a Material Requirements Planning (MRP) system, what does time-phasing of gross requirements mean? • Front scheduling logic starts each step of the process as late as possible? (True/False) • A lot-for-lot order policy generates orders for a fixed quantity, independent of actual requirements? (True/False) • Processing all Material Requirements Planning (MRP) records in a single computer run is called ___________? • Safety lead time involves inflating lead times to ensure stock availability? (True/False)