MGT 302 Chapter 9
Bill of Materials (BOM)
-Contains the complete product description, listing the materials, parts, and components along with the sequence in which the product is created -Often called the product structure file or product tree because it shows how a product is put together -Shows how the product is put together
Economic Order Quantity
-In an EOQ model, either fairly constant demand must exist or safety stock must be kept to provide for demand variability. -The EOQ model uses an estimate of total annual demand, the setup or order cost, and the annual holding cost. -EOQ was not designed for a system with discrete time periods such as MRP
Lot Sizing Strategies
-Lot for Lot (L4L) -Economic Order Quantity (EOQ)\ -Least Total Cost (LTC) -Least Unit Cost (LUC)
Least Unit Cost
-The least unit cost method is a dynamic lot-sizing technique that adds the ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost.
Master Production Scheduling
-The master schedule deals with end items and is a major input to MRP process -All production systems have limited capacity and limited resources -The aggregate plan provides the general range of operation, the master scheduler must specify exactly what is to be produced. -To determine an acceptable feasible schedule to be released to the shop, trial master production schedules are tested using the MRP program
MRP Explosion Process
-The requirements for end items are retrieved from the master schedule: these items are referred to as "gross requirements" by the MRP program -The process of calculating the exact requirements for each item managed by the system is often referred to as the "explosion" process. -on hand balance and schedule of orders are used to calculate "net requirements" -net requirements data is used to calculate when orders should be received to meet these requirements -planned order releases are generated by offsetting to allow for lead time -typically, the explosion calculations are performed each week or whenever changes have been made to the master schedule. (this is for the level 0 items=end items) then we move to level 1 -Gross requirements for each level 1 item are calculated from the planned order release schedule for the parents of each level 1 item -net requirements, planned order receipts, and planned order releases are calculated as described in steps 2-4 -repeat for all items in bill of materials
Modular Bill of Materials
-a buildable item that can be produced and stacked as a subassembly
Materials Requirement Planning (MRP)
-backbone of ERP, a software package which is historical ancestor of MRP
When would you use MRP?
-biggest issue is complexity -complexity gets big as the number of products increases -products, customers, parts, options -you use MRP when things are more complex -it is in the businesses best interest to be less complex -simplify, streamline and integrate process to become less complex -unnecessary complexity is bad
Super bill of materials
-includes items with fractional options -A super bill can specify, for example, 0.3 of a part. What that means is that 30 percent of the units produced contain that part and 70 percent do not.) -Modular and super bills-of-materials are often referred to as planning bills-of-materials since they simplify the planning process.
Inventory Status Records
-keeps track of all of the things used in the production process, where we get them from -shows the variety of information contained in the inventory records. the MRP program accesses the status segment of the record according to specific time periods (called time buckets in MRP slang). -these records are accessed as needed during the program run. -item master data segment: basic information describing the item -inventory status segment: information about part availability -subsidiary data segment: additional information that may be useful (look at the diagram)
What is MRP?
-the logic that ties production functions together from a material planning and control view -a logical, easily understood approach to the problem of managing the parts, components, and materials needed to produce end items ~~~How much of each part to obtain? ~~~When to order or produce the parts? -Dependent demand is driven by the MRP system
Lot Sizes
-the quantity of parts for a product that is issued in the planned order receipt and planned order release sections of an MRP schedule -determining lot sizes is a complicated and difficult problem in an MRP system
Product Demand Sources
Customers: specific orders placed by either external or internal customers Aggregate production plan: the firm's strategy for meeting demand in the future, implemented through the master production schedule
MRP VS ERP
MRP: a means for determining the number of parts, components, and materials needed to produce a product ERP: a computer system that integrates application programs in accounting, sales, manufacturing and the other functions of a firm assumes everyone is working off of the same data and blueprints
MRP System Inputs
Master Production Schedule: states the number of items to be produced during certain time periods Bill of Materials File:identifies the specific materials used to make each item and the correct quantities of each. Inventory Records File:contains data such as the number of units on-hand and on-order.
MRP System Outputs
Primary Reports : Planned order releases for inventory and production control Secondary Reports: Exception Reports, Planning Reports, Reports for Performance control
Lot for Lot
Sets planned orders to exactly match the net requirements. Produces exactly what is needed each week with none carried over into future periods. Minimizes carrying cost. Does not take into account setup costs or capacity limitations.
Least Total Cost
is a dynamic lot-sizing technique that calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal
