part iv methods for dependent demandweb.eng.fiu.edu/leet/ein6345inventory/chap9_2013.pdf ·...
TRANSCRIPT
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Part IV
Methods for Dependent
Demand
Chapter 9
Material Requirements
Planning
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Aims of the Chapter
After reading this chapter you should be able to do the following:
• Understand the limitations of independent demand methods.
• Describe the characteristic approach of MRP.
• Use MRP to timetable orders and operations.
• Outline the benefits and problems of using MRP.
• Adjust MRP schedules with batching rules.
• Add feedback to check for capacity and other problems.
• Discuss some extensions to MRP, including MRPII, DRP and
ERP.
Independent Demand
• Independent Demand: The demand for an item that is
unrelated to the demand for other items.
• Examples of Independent Demand
Demand for Finished Goods (FG), parts required for
destructive testing, service parts requirements or other
slow moving items.
• The best policy in these cases where the historical demand
is close to cero is to “order a replacement unit whenever one
is used”
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Limitations of Independent Demand
• Assumption that demands for items are independent. In reality
there are some linking demands from production plans or some
other sources.
• Assumption that demand is stable and that historical data can be
used for forecast, even when future demand can be found from
production plans or other sources.
• That stock should always be available even if there is no expected
demand.
• Assumption that variables (lead time, demand and costs) are
outside the organization’s control. In reality, they can be varied by
negotiation, using different suppliers, expediting, emergency
procedures, etc.
Limitations of Independent Demand
• Assumption that costs are fixed even though they can vary
according to the supplier, distance to travel (i.e. reorder cost), etc.
• Costs rely on accounting conventions and estimates. Shortage
costs?
• Assumption that variables follow known distributions, but these
can be difficult to identify.
• Even if a high service level is set, a product using many parts is
unlikely to find all of them in stock at the same time.
• The models accept the status quo and give no incentive or
mechanism to find improvements.
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Limitations of Independent Demand
• Independent demand methods are very good at dealing
with any problems of inventory control, but they do have
weaknesses.
• One of the most widely used is material requirements
planning (MRP).
• This is a dependent demand method that is useful when
demands for materials are related through a production
plan.
Approach of Material Requirements
Planning
• Material Requirements Planning (MRP) takes a master schedule
to design a detailed timetable for ordering materials.
• The timetable shows:
– Number of units of an item made (per day, week, month)
– A list of the materials needed for each unit
– The supply for materials
• The objective of the timetables is:
– To show when materials are needed
– To show when bought in materials should be ordered
– To schedule internal production
• The MRP looks at the requirements for each day to calculate the
volume and mix needed for production and meet the delivery date
of the finished goods with the customer.
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Stock Level without MRP
Time
Stock
level
Normal
Stock
Level
Production
Stock Level with MRP
Time
Stock
level
Normal
Stock
Level
Production
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MRP Procedure
• Three main sources: Master Schedule, BOM and
Inventory Records.
a) Master Schedule: number of units of a product to be
made in each period. (Product = Finished Good)
Example: We have 2 types of shampoo, Apple Blossom and Fragrant
Lemon, and each comes in 3 sizes 100ml, 250ml and 500ml. Our product
range is:
MRP Procedure
• B) Bill of Materials (BOM): Is a list where all the materials
needed to make a product are shown according to the
order in which materials are used.
• Example:
There is one base shampoo, two fragrances, three bottle sizes and six
labels. The 100ml and 250ml bottles are fitted with a flip top cap, and
the 500ml bottle has a screw cap. The 100ml bottles are packed 48 to a
small carton, the 250ml is packed 48 in a large carton and the 500ml
uses the same carton but 24 to a carton. Two of the bottle labels are
pasted on the carton, one on each end.
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MRP Procedure
Item master list for the BOM
This is a typical structure of a
single level bill of materials,
describing the relationship
between products and
components
• BOM
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MRP Procedure
• The quantities to order and when the orders should arrive– The MRP can explode the master schedule using the bill of materials
to give details of the materials needed. These are the gross
requirements, which doesn’t consider the materials that may be
already on stock or in transit.
• Gross Requirements: (number of units made) x (amount of
material for each unit)
• Net Requirements: Gross requirements – Inventory OH – Transit
• To find the time to place the orders.
– Need to know the lead time and the transit time of each supplier.
– And relevant information such as: minimum order sizes, set up costs,
discounts, packaging information, and so on.
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MRP Procedure Summary
• Material Requirement Planning uses a bill of material to explode a
master schedule and find the gross requirements for materials
needed to support production.
• Information about current stocks, orders outstanding, reserved
stocks, etc. are then used to find order quantities.
• Lead times are used to time phase these orders so that materials
arrive in time for use.
• The resulting stocks are matched directly to production plans.
Benefits & Problems with MRP
• MRP Benefits
– The wealth of information that it collects, analyses
and distributes.
– Main inputs: master schedule, BOM, inventory
records and any other relevant information.
– Main outputs: a timetable for material orders, for
operations, changes to previous orders, performance
reports, planning reports, records of inventory records
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Timetable for Material Orders
MRP Benefits
It relates stocks to planned operations (link between demand for
products and the supply of materials):
• Materials supply is linked directly to known demand.
• Lower stock levels, with savings in capital, space, etc.
• Higher stock turn-over.
• Better customer service – with no delays caused by shortages
of materials.
• Higher utilization of facilities – as materials are always
available when needed.
• Less time spent on expediting and emergency orders.
• MRP schedules can be used for short term planning.
• Assigns priorities for jobs supplying materials.
• Encourages better planning.
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MRP Problems
• Reduced flexibility to deal with changes.
• Needs a lot of detailed and reliable information.
• Involves a lot of data manipulation.
• Systems can become very complex.
• Assumes that lead times are constant and independent of the
quantities ordered.
• Ignores the order in which materials are really made and
assumes that they are made in the order specified by the BOM.
• Using MRP to schedule the production of parts can give poor
results.
• The lot sizes suggested by MRP can be inefficient.
• MRP may not recognize capacity and other constraints.
• Can be expensive and time consuming to implement.
Adjusting MRP Schedules
• Batching orders
– In order to save costs when ordering the materials to
cover the net requirements, it is convenient to
combine the small orders into larger batches.
– There are four approaches of batching or lot sizing:
A) Lot for lot
B) Fixed order quantity
C) Periodic Orders
D) Batching rules
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Adjusting MRP Schedules
A. Lot for lot: where you order exactly the net requirement
suggested by MRP for each period.
B. Fixed order quantity: where you find an order size that is
convenient, and always order this same amount. (i.e.,
truckload, container load, and economic order quantity, or
some other convenient size).
C. Periodic Orders: where you combine the net requirements over
some fixed number of periods, and place regular orders for
different quantities.
D. Batching Rules: use some specific procedure to calculate the
best pattern of orders. Typically they look for the combination
of orders that gives the minimum overall cost.
Manufacturing Resource
Planning• Material Requirement Planning (MRP) gives schedules for the arrival
of materials needed by operations, and closed loop MRP makes sure
that there is enough capacity to supply these materials. But materials
are only one resource. Organizations have to schedule people,
equipment, facilities, finances, logistics and other resources.
• Eventually we would have a completely integrated system that would
use the master schedule as the basis for planning all the activities
within an organization. This is the aim of manufacturing resource
planning or MRPII.
• MRP II gives an integrated system for synchronizing all functions
within an organization.
• It connects schedules for all activities back to the master schedule.
• The most serious problem with MRP II is the difficulty of getting
complete integration of all functions and systems.