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Production and Operations Management

The document discusses material requirements planning (MRP) and its role in production and operations management. It defines key MRP concepts like master schedules, bills of materials, inventory records, and dependent vs independent demand. It also explains how MRP processing works to determine net requirements, planned order receipts and releases. The document outlines the primary and secondary reports generated by MRP systems and requirements for successful MRP implementation. It discusses how MRP has evolved into enterprise resource planning (ERP) systems that integrate additional business functions.

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muhammadTz
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15 views

Production and Operations Management

The document discusses material requirements planning (MRP) and its role in production and operations management. It defines key MRP concepts like master schedules, bills of materials, inventory records, and dependent vs independent demand. It also explains how MRP processing works to determine net requirements, planned order receipts and releases. The document outlines the primary and secondary reports generated by MRP systems and requirements for successful MRP implementation. It discusses how MRP has evolved into enterprise resource planning (ERP) systems that integrate additional business functions.

Uploaded by

muhammadTz
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Lecture 10

PRODUCTION AND OPERATIONS


MANAGEMENT
MRP

• Material requirements planning (MRP):


Computer-based information system that
translates master schedule requirements for
end items into time-phased requirements
for subassemblies, components, and raw
materials.

2
Independent and Dependent Demand
Independent Demand

A Dependent Demand

B(4) C(2)

D(2) E(1) D(3) F(2)

Independent demand is uncertain.


Dependent demand is certain. 3
Dependant Demand

• Dependent demand: Demand for items


that are subassemblies or component
parts to be used in production of finished
goods.
• Once the independent demand is known,
the dependent demand can be
determined.

4
Overview of MRP
Figure 14.2
MRP Inputs MRP Processing MRP Outputs

Changes
Order releases
Master
schedule Planned-order
schedules
Primary
reports Exception reports
Bill of Planning reports
materials MRP computer Secondary
Performance-
programs reports control
reports

Inventory
records Inventory
transaction
5
Master Schedule

Master schedule: One of three primary


inputs in MRP; states which end items
are to be produced, when these are
needed, and in what quantities.
Cumulative lead time: The sum of the lead
times that sequential phases of a
process require, from ordering of parts
or raw materials to completion of final
assembly.

6
Bill-of-Materials

Bill of materials (BOM): One of the three primary


inputs of MRP; a listing of all of the raw materials,
parts, subassemblies, and assemblies needed to
produce one unit of a product.
Product structure tree: Visual depiction of the
requirements in a bill of materials, where all
components are listed by levels.
Low-level coding: Restructuring the bill of materials
so that multiple occurrences of a component all
coincide with the lowest level the component occurs

7
Product Structure Tree
Figure 14.5

Level Chair
0

1 Leg Back
Assembly Seat Assembly

Cross Side Cross Back


2 Legs (2)
bar Rails (2) bar Supports (3)

8
Inventory Records
• One of the three primary inputs in MRP
• Includes information on the status of each
item by time period
– Gross requirements
– Scheduled receipts
– Amount on hand
– Lead times
– Lot sizes
– And more …

9
Inventory Requirements
• Net requirements:
Net Requirements =
Gross Requirements
– Available Inventory

• Available Inventory:
Available Inventory =
Projected on hand
– Safety stock
– Inventory allocated to other items
10
Assembly Time Chart
Figure 14.7

Procurement of
raw material D Fabrication
of part E
Subassembly A
Procurement of Final assembly
raw material F and inspection
Procurement of
part C

Procurement of
part H
Subassembly B

Procurement of Fabrication
raw material I of part G

1 2 3 4 5 6 7 8 9 10 11

11
MRP Processing

• Gross requirements
• Schedule receipts
• Projected on hand
• Net requirements
• Planned-order receipts
• Planned-order releases

12
MPR Processing
• Gross requirements
– Total expected demand
• Scheduled receipts
– Open orders scheduled to arrive
• Planned on hand
– Expected inventory on hand at the beginning
of each time period

13
MPR Processing
• Net requirements
– Actual amount needed in each time period
• Planned-order receipts
– Quantity expected to received at the beginning
of the period
– Offset by lead time
• Planned-order releases
– Planned amount to order in each time period
14
Updating the System
• Regenerative system
– Updates MRP records periodically
• Net-change system
– Updates MPR records continuously

15
MRP Primary Reports

• Planned orders - schedule indicating the


amount and timing of future orders.
• Order releases - Authorization for the
execution of planned orders.
• Changes - revisions of due dates or order
quantities, or cancellations of orders.

16
MRP Secondary Reports

• Performance-control reports
• Planning reports
• Exception reports

17
Other Considerations

• Safety Stock
• Lot sizing
– Lot-for-lot ordering
– Economic order quantity
– Fixed-period ordering

18
MRP in Services

• Food catering service


– End item => catered food
– Dependent demand => ingredients for each
recipe, i.e. bill of materials
• Hotel renovation
– Activities and materials “exploded” into
component parts for cost estimation and
scheduling

19
Benefits of MRP

• Low levels of in-process inventories


• Ability to track material requirements
• Ability to evaluate capacity requirements
• Means of allocating production time
• Ability to easily determine inventory usage by
backflushing
• Backflushing: Exploding an end item’s bill of
materials to determine the quantities of the
components that were used to make the item.
20
Requirements of MRP

• Computer and necessary software


• Accurate and up-to-date
– Master schedules
– Bills of materials
– Inventory records
• Integrity of data

21
ERP

• Enterprise resource planning (ERP):


– Next step in an evolution that began with MPR
and evolved into MRPII
– Integration of financial, manufacturing, and
human resources on a single computer system.

22
ERP Software
– ERP software provides a system to capture and
make data available in real time to decision
makers and other users in the organization
– Provides tools for planning and monitoring various
business processes
– Includes
• Production planning and scheduling
• Inventory management
• Product costing
• Distribution

23
MRP in Services
• Service applications such as:
– Professional services
– Postal services
– Retail
– Banking
– Healthcare
– Higher education
– Engineering
– Logistical services
– Real estate

24
ERP Strategy Considerations
• High initial cost
• High cost to maintain
• Future upgrades
• Training

25

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