MGT 124-Chapter 12

What do these MRP records mean? ** Gross requirements; scheduled receipts; projected on hand; net requirements; planned order receipt; planned order release

-Gross requirements: total expected demand regardless of on hand -Schedule receipts: open orders scheduled to arrive -Projected available on hand: expected inventory on hand at the beginning of each time period -Net requirements: actual amount needed in each time period after closing on hand -Planned order receipts: quantity expect to be received at the beginning of the period offset by the time -Planned order releases: plant amount to order in each time period

What is dependent vs independent demand? Which does MRP consider?

-Independent items for finished goods [FG] -Demand for FG comes from forecast and firm orders -Dependent items are required to build FG, so they demand depends on FG -Ron material > WIP > FG MRP considerations: -MRP is material requirements planning -A computer-based information system that for ordering and scheduling dependent demand items -Translate master schedule requirements for end items into time faced requirements for subassemblies, components, and raw materials Three questions MRP is designed to answer: 1) What is needed? 2) How much is needed? 3) When is it needed?

What does "parent and child " mean?

-MRP is based on the product structure tree diagram -Requirements are determined level by level, beginning with the end item, working down the tree -The timing and quantity of each parent comes to basis for determining the timing and quantity of the children items directly below it -The children items then become the parent items for the next level, and so on

If MRP reduces inventory, why would we consider having safety stock?

-MRP system should not require safety stock -Variability may necessitate the strategic use of safety stock -A bottleneck process, or one with varying scrap rates, may cause shortages in downstream operations -Shortages may occur if orders are late, or fabrication or assembly times are longer than expected

The MRP is designed to answer what three questions:

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

What are two visual ways to depict bill of materials [BOM] information?

Assembly diagram Product structure tree

What does a bill of materials [BOM]Tell us? Who makes this and where do we find it?

-Bill of materials [BOM]: A listing of all of the assemblies, subassemblies, parts, and raw materials needed to produce one unit of a product -Product structure tree: a visual depiction of the requirements in a bill of materials, where all components are listed by levels

Material requirements planning (MRP)

A methodology that translates master schedule requirements for end items into time-phased requirements for subassemblies, components, and raw materials.

Projected Available

Expected inventory on hand at the beginning of each time period

Pegging

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

product tree structure

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

dependent demand

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

inventory records in MRP

includes information on the status of each item by time period , called time bucket Information about: gross requirements, scheduled receipts, expected amount on hand, supplier, lead time, lot size policy, changes due to stock receipts and withdrawals, canceled orders and similar events.

What is lot-for-lot ordering? Why can't we do this all the time?

Lot for lot ordering (L4L) -The order or run size is that equal to the demand for that period -Minimizes investment in inventory -it results in variable order quantities -A new set up is required for each run Economic order quantity (EOQ) -Can lead to minimum cost if usage of item is fairly uniform -This may be the case for some lower level items that are common to different parents, less appropriate for lumpy demand items because inventory remnants often results Minimum quantity; other models

What are the three major inputs for MRP? Two major outputs? Some other outputs or reports?

MRP input: 1) Master schedule: -One of three primary inputs and MRP states which end items are to be produced, when these are needed, add in what quantities -Managers like to plan far enough into the future so they have reasonable estimates of upcoming demands -The master schedule should cover a period That is at least equivalent to the cumulative lead time 2) Bill of materials: A listing of all of the assemblies, subassemblies, parts, and raw materials needed to produce one unit of a product 3) Product structure tree: a visual depiction of the requirements in a bill of materials, we're all components are listed by levels MRP outputs: primary -Planned orders: a schedule indicating the amount and timing of future orders -Order releases: authorizes execution of planned orders -changes: revision of the dates or quantities, or the cancellation of orders MRP outputs: secondary -Performance control reports: evaluation of system operation, including deviations from plans and cost information * example: missed deliveries and stock outs -Planning reports: data useful for assessing future material requirements * Example: purchase commitments -Exception reports: data on any major discrepancies encountered * Example: late and overdue orders, excessive scrap rates, requirements for non-existing parts

What are some of the inventory inputs needed for MRP? Some policy details?

MRP input: inventory records -And inventory records: includes information on the status of each item by time period, Called time buckets * information about: -Gross requirements, schedule receipts, expected amount on hand * Other details for each item such as: -Supplier, leadtime, lot size policy, changes due to stock receipts and withdrawals, canceled orders and similar events MRP processing: takes the end item requirements specified by the master schedule and explodes them into time face requirements for assemblies, parts, and raw materials, offset by lead times

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.

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.

MRP Secondary Outputs/Reports

Performance-control reports Planning reports Exception reports

MRP Primary Outputs/Reports

Planned orders: schedule indicating the amount and timing of future orders Order releases: authorized execution of planned orders Changes: revisions of the dates or quantities or the cancellation of orders

What is low level coding an MRP?

Restructuring the bill of materials so that multiple occurrences of a component all can side with the lowest level I wish the component occurs

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.

MRP Requirements

To implement an effective MRP system requires: -A computer and the necessary software to handle computations and maintain records -Accurate and up-to-date --Master schedules --Bills of materials --Inventory records -Integrity of data files

A bill of materials contains a listing of all the assemblies, parts, and materials needed to produce one unit of an end item.

True

Lot-for-lot ordering in MRP eliminates the holding costs for parts that are carried over to other periods.

True

MRP works best if the inventory items have dependent demand.

True

One reason that accurate bills of material are important is that errors at one level become magnified at lower levels because of the multiplication process used by MRP.

True

The inventory records contain information on the status of each item by time period.

True

The master production schedule states which end items are to be produced, in addition to when and how many.

True

The master schedule needs to be for a period long enough to cover the stacked or cumulative lead time necessary to produce the end items.

True

The term pegging refers to identifying the parent items that have generated a given set of material requirements for a part or subassembly

True

independent demand

independent items get their demand from forecasts and firm orders.

MRP Inputs

master schedule, bill of materials, inventory records

scheduled receipts

open orders scheduled to arrive from vendors or elsewhere in the pipeline

planned order releases

planned amount to order in each time period

MRP outputs

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

planed order receipts

quantity expected to be received at the beginning of the period offset by lead time.

Low-level coding

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

other MRP considerations

satefy stock, lot-for-lot ordering, economic order quantity

MRP processing

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

net requirements

the minimum amount needed in the period

gross requirements

total expected demand for an item or raw material in a time period

What does the MRP system tell us?

what is needed? how much is needed? when is it needed?

The bill of materials indicates how much material will be needed to produce the quantities on a given master production schedule.

False

MRP Difficulties

Consequence of Inaccurate Data: -Missing parts -Ordering incorrect numbers of items -Inability to stay on schedule Other problems: -Assumptions of constant lead times -Products being produced differently from the BOM -Failure to alter a BOM when customizing a product -Inaccurate forecasts

What is cumulative lead time? How would you find this information?

Cumulative lead time: the sum of the lead times that sequential faces of a process require, from ordering parts or raw materials, to completing the final assembly