Chapter 12: MRP and ERP - Op Mgt - Stevenson 13th ed

what are some other aspects of MRP managers must be knowledgeable about?

-holding of safety stock -lot-sizing choices -Possible use of MRP for unfinished products

Inventory records include ____

-quantities on hand -quantities ordered -details of each items -changes due to stock receipts and withdraws -cancelled orders

what is a primary goal of inventory management for both independent and dependent demand systems?

-to minimize the sum of ordering cost and holding cost

Batches

some items are produced repetitively while others are produced in _____

One of three primary inputs in MRP; states which end items are to be produced, when these are needed, and in what quantities.

Master Schedule

The process begins with a ____

Master Schedule

___ is a methodology used for planning the production of assembled products such as smartphones, automobiles, kitchen tables and a whole host of other products that are assembled

Material Requirements Planning

___ is a methodology that translates master schedule requirements for end items into time-phased requirements for subassemblies, components, and raw materials

Materials Requirement Planning

Planned amount to order in each time period; equals planned-order receipts offset by lead time

planned-order releases

data useful for assessing future material requirements (purchase commitments)

planning reports

_____ are responsible for issuing work orders and maintaining production schedules

plant foreman

These are classified as ___ and ____

primary and secondary reports

______ are the main reports

primary reports

what are some exceptions to this ?

-bottleneck processes or one with varying scrap rates

what are the advantages and disadvantages of the net-change system ?

-Disadvantage: Costs involved in continuously updating the system -Advantage: Management can have more up to date info

what are the advantages and disadvantages of the regenerative system ?

-Disadvantage; Lag time between the time information -Advantage: processing cost are lower

What are the benefits of MRP ?

-Easily determine the quantities of every component for a given order size, to know when to release orders for each component and be alerted when items need attention

What are ways MRP systems deal with this issue ?

-Identify activities or operations that are subject to variability and determine the extent of that variability

MRP is designed to answer 3 questions

1. What is needed? 2. How much is needed? 3. When is it needed?

____ are a prerequisite for effective MRP

Accurate Records

____ is a procedure in which an end items BOM is periodically exploded to determine the quantities of the various components that were used to make the item, eliminating the need to collect detailed usage on the production floor

Back flushing

why is a product structure tree useful?

Because it illustrates how the BOM is used to determine the quantities of each ingredient (requirements) needed to obtain a desired number of end items

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.

Bill of Materials (BOM)

The master schedule separates the planning horizon into a series of time periods or _____, which are often expressed in weeks

Buckets

The process of determine short range capacity requirements

Capacity Requirements Planning

The parts and materials that go into production the production of cars are examples of _____ because the total quantity of parts and raw materials needed during any time period depends on the number of cars that will be produced

Dependent Demand

a method used for planning orders in a supply chain

Distribution Resource Planning (DRP)

Integration of financial, manufacturing, and human resources in a single database.

Enterprise Resource Planning (ERP)

This type of ordering provides coverage for some predetermined number of periods

Fixed Period Ordering

The total expected demand for an item or raw material during each time period without regard to the amount on hand. For end items, these quantities are shown in the master schedule; for components, these quantities are derived from the planned-order releases of their immediate "parents."

Gross Requirements

Department or work center reports that compare known and expected future capacity requirements with projected capacity availability.

Load Reports

Perhaps the simplest of all the methods is ----- the order or run size for each period is set equal to demand for that period

Lot for Lot ordering

____ takes the end item requirements specified by the master schedule and "explodes" them into time-phased requirements for assemblies, parts, raw materials using the BOM offset by lead times

MRP processing

Expanded approach to production resource planning, involving other areas of the firm in the planning process and enabling capacity requirements planning

Manufacturing Resource Planning (MRP II)

_____ belong to secondary reports

Performance control Planning Reports Exception Reports

Projected inventory on-hand for current period = ______

Planned receipts from previous period - Net requirements for previous period + scheduled receipts for current period

Material Requirements Planning then generates a ______ for the end item that indicates the quantities and timing of the subassemblies, component parts and raw materials required for assembly of that end item

Production Plan

____ are part of primary reports

Production and inventory planning/control

___ balance workloads across departments and make decisions about scheduling work

Production managers

____ includes scheduled receipts, which are executed orders for components that are scheduled to be completed in-house or received from suppliers

Projected on hand inventory

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.-

Stacked or cumulative lead time

what is one major advantage of inventory systems with dependent demand when it comes to holding safety stock?

That it should not require safety stock below the end item level, because the manager can project precise usage quantities once that master schedule has been developed because the demand is not variable

MRP have the ability to provide management with ____

a fairly broad range of outputs

Items at higher levels of the tree are often _____

assemblies or subassemblies

A regenerative system is essentially a ____, which compiles all changes that occur within a time interval and periodically updates the system

batch type system

why is it extremely important that the BOM accurately reflects the composition of a product?

because errors at one level become magnified by the multiplication process used to determine quantity requirements

Revisions of due dates or order quantities, or cancellations of orders

changes to planned orders

The items at each level are ____ of the next level up and as in a family tree are ____ of their respective components

components parents

At each stage moving down the tree are the _____ needed to make one unit of the next higher item in the tree

components (parts, materials)

The quantities in a master schedule come from a number of different sources including ____

customer orders, forecast, and orders from warehouses to build up seasonal inventories

demand for items that are subassemblies or component parts to be used in the production of finished goods

dependent demand

Pegging enables managers to ____

determine which products will be affected if orders are late due to late deliveries, quality problems or other problems

Thus, ____ has its own bill of materials

each finished product

Sometimes ___ are used, as they can lead to a minimum cost if usage is fairly uniform

economic order quantity model

For independent demand items, managers often use ____

economic order sizes and economic production quantities

Time buckets need not to be ____ in length, in fact a near term portion of a master schedule may be expressed in weeks but later portions in months or quarters

equal

Data on any major discrepancies encountered (late and overdue orders, excessive scrap rates, requirements for nonexistent parts)

exception reports

The gross requirements at one level of an MRP plan determine the gross requirements at the next lower level continuing on down to the lowest levels shown on the bill of material.

gross requirements

The quantities generated by exploding the BOM are _____, they do not take into account any inventory that is currently on hand or due to be received

gross requirements

This amount generates ____ at the next level in the assembly or production chain

gross requirements

Net requirements for current period = _______

gross requirements for current period - projected on hand inventory for current period

The listing of the bill of materials (BOM) is _____, as it shows the quantity of each item needed to complete one unit of its parent item

hierarchical

conversely, demand for the finished cars is ____ - a car is not a component of another item

independent

One of the three primary inputs in MRP; includes information on the status of each item by time period called time buckets.

inventory records

____ tells us how much inventory is on hand or on order

inventory records files

tells how much inventory is on hand or on order

inventory records files

Primary reports typically include _____

planned orders order releases changes to planned orders

what are the 2 drawback to lot for lot ordering ?

involves many different order sizes and requires a new set up for each run

what level is the most concern for suppliers ?

items at the lowest levels

when an MRP system calculates requirements, the computer scans the BOM by ____

level

Hence, a materials requirements plan is a ____ document

living

Hence, ____ minimizes investment in inventory

lot for lot ordering

Determining a lot size to order or to produce is an important issue in inventory management for both independent and dependent demand items, this is called ____

lot sizing

Under l_____, this quantity will equal net requirements

lot-for-lot ordering

Under ______, this quantity may exceed net requirements

lot-size ordering

restructuring the bill of materials so that multiple occurrences of a component all coincide with the lowest level at which the component occurs

low level coding

what is a master schedule also referred to as?

master production schedule

For end items, these quantities are shown in the ____, these quantities are derived from the planned-order releases of their immediate "parents"

master schedule

___ tells us how much finished product is desired and when

master schedule

Usually, plans for those _____ are more tentative than ____ requirements

more distant time periods near term

Note: Lead times include ____

move and wait times and setup and run times

Depending on the ordering policy, the planned order releases may be ____ or _____

multiples of a specified quantity or equal to the quantity needed at that time

The planner processes this information to determine the ____ requirements for each period of the planning horizon

net

Approach that updates MRP records continuously

net change system

____ is best suited for systems that have frequent changes

net change system

The materials that a firm must actually acquire to meet the demand generated by the master schedule are the ____

net material requirements

the actual amount needed in each time period

net requiremen

In a _____, the production plan is modified to reflect changes as they occur, only the changes are exploded through the system, level by level

net-change system

The determination of the net requirements (_____) is the core of the MRP processing

netting

authorization for the execution of planned orders

order release

The process of identifying the parent items that have generated a given set of material requirements for an item

pegging

evaluation of system operation, including deviations from plans (missed deliveries and stock outs) and cost information

performance-control reports

quantity expected to be received by the beginning of the period in which it is shown

planned order receipts

The timing and sizes of orders are determined by the _____

planned order releases

The timing of the receipts for these quantities is indicated by _____

planned order releases

when an order is executed, it is removed from _____ to ______

planned order releases to scheduled receipts

what are the outputs from the MRP process?

planned order schedules, order releases, changes, performance control reports, planning reports and exception report

schedule indicating the amount and timing of future orders

planned orders

A visual depiction of the requirements in a bill of materials, where all components are listed by levels

product structure tree

This nature of this aspect of the BOM is clear when you consider a _____

product structure tree

Development of a materials requirement plan is based on the _____

product structure tree diagram

Who are the users of MRP ?

production planners, production managers, plant foreman, customer service representatives, purchasing and inventory managers

expected amount of inventory that will be on hand at the beginning of each time period: scheduled receipts plus available inventory from last period

projected in hand

items at the lowest levels of the tree are often _____

raw materials or purchased parts

Approach that updates MRP records periodically

regenerative system

The 2 basic systems used to update MRP records are ___ and ____

regenerative system and net change system

____ is best suited for fairly stable systems

regenerative systems

In a sense schedules such as these have a ______, which means that plans are updated and revised so that they reflect a moving horizon over time

rolling horizon

when lead time is variable the concept of ____ instead of safety stock is used

safety time

open orders scheduled to arrive from vendors or elsewhere in the pipeline by the beginning of a period

scheduled receipts

______ are the optional reports

secondary reports

Because the number of components in even a realtivley simple product would make the width of the resulting spreadsheet far too wide to handle. Consequently the plans for the individual components are ____

stacked

It is important, though, that the master schedule cover the ____ necessary to produce the end items

stacked or cumulative lead times

The materials requirements plan is not ____

static

Note: The quantities of each item in the product structure tree refer only to ____

the amounts needed to complete the assembly at the next higher level

Series of time intervals during which order changes are allowed or restricted; the nearest fence is most restrictive to change, the farthest is least restrictive.

time fences

when is low level coding used ?

when a component appears on more than one level

when is the economic order quantity model not appropriate ?

when more lumpy the demand is because a mismatch of demand and supply results in leftover inventories