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
