SCM352-9
Material Requirements Planning
Uses the MPS, Bill of Material and inventory status to compute planned order releases
Available-to-Promise (ATP) Quantities
Uses to decides whether additional orders can be accepted, based on the difference between confirmed customer orders & the quantity the firm planned to produce (i.e., the MPS)
system nervousness
We try to increase the production. Frequent changes to the MPS may create system nervousness • Situation where a small change in the quantities required, causes a major change in the lower-level components required
. Resource Requirement Planning (RRP)
a long-range capacity planning module, checks whether aggregate resources are capable of satisfying the aggregate production. Resources considered include gross labor hours & machine hours
Service firms vs producing firms
Most service firms do not require as many levels of planning as goods producing firms. An MPS in the form of a calendar is generally sufficient.
mixed production strategy
Maintains stable core workforce while using other short-term means, such as overtime, subcontracting & part time helpers to manage short-term fluctuation in demand pattern
Hierarchical planning
process that translates annual business & marketing plans, and demand forecasts into a production plan for all products in a plant or facility. Hence, it is called Aggregate Production Plan
Capacity Requirements Planning (CRP)
the process of determining the amount of labor and machine resources required to accomplish the tasks of production on a more detailed level, taking into account all components and end items in the materials plan. • Capacity planning information is provided in a work center load report. • Basic MRP does not consider capacity limitations (assumes infinite capacity so no rescheduling, etc.), so CRP addresses this issue.
The Legacy MRP Systems (including MRP II)
used in many forms for nearly 40 years, many versions have lasted beyond their originally intended life span • utilizes multiple software packages and databases for different functional areas • communication between legacy systems is limited • visibility across functional areas is restricted
Enterprise Resource Planning
utilizes a centralized & shared database system to tie the entire organization together in which information is entered once at the source & made available to all users, including some suppliers and customers (in contrast to multiple legacy systems that may not be compatible) • ERP provides means for supply chain members to share information so that scarce resources can be fully utilized to meet demand, while minimizing supply chain inventories
Typical resource management for manufacturing firms
1. Aggregate production plan (APP) 2. Master production schedule (MPS) 3. Materials requirement planning (MRP)
Aggregate Planning Decisions and Strategies
1. Demand Management • Cooperation between marketing and manufacturing to create feasible aggregate demands. 2. Production-Rate Changes • Utilizing overtime/under-time, subcontracting during peak months. 3. Workforce Changes • Hiring and firing employees—often not a feasible alternative. 4. Inventory Changes • Building inventories or carrying back orders (backlogs). 5. Facilities, Equipment, and Transportation • Typically a long-term investment, although firms can rent equipment for peak seasons.
MRP Terms
1. Parent: item generating the demand for the lower-level components 2. Components: parts demanded by a parent in the BOM 3. Gross requirement: a time-phased requirement prior to netting out on-hand inventory & the lead-time consideration 4. Net requirement: the unsatisfied item requirement for a specific time period 5. Scheduled receipt: a committed order awaiting delivery at a specific time 6. Projected on-hand inventory: projected closing inventory at the end of the period 7. Planned order release: specific order to be released to the shop or to the supplier 8. Time bucket: time period used on the MRP, usually in days or weeks 9. Explosion: the process of converting a parent item's planned order releases into component gross requirements 10. Planning factor: # of components needed to produce a unit of the parent item 11. Firmed planned order: Planned order that the MRP computer logic system does not automatically change when conditions change to prevent system nervousness 12. Pegging: relates gross requirements for a part to the planned order releases 13. Low-level coding: assigns the lowest level on the BOM to all common components to avoid duplicate MRP computations 14. Lot size: the order size for MRP logic 15. Safety Stock: protects against uncertainties in demand supply, quality, & lead time
3 basic APP strategies
1. chase strategy 2. level strategy 3. mixed production strategy
intermediate
6 to 18 months. Master production schedule (MPS) shows the quantity & timing of end items
Material Requirements Planning (MRP)
A computer-based system that calculates the exact quantities, need dates, & planned order releases for subassemblies & materials required to manufacture the final products on the MPS.
chase strategy
Adjusts capacity to match demand. Firm hires & lays off workers to match demand. Finished goods inventory remains constant. Works well for make-toorder firms
time fence system
Reduce system nervousness. Using a time fence to separates the planning horizon into two segments is an effective way to deal with system nervousness • Firm Segment (AKA as a demand time fence), from current period to several weeks into future. Quantities can only be altered by senior management. • Tentative Segment (AKA planning time fence), from end of the firmed segment to several weeks farther into the future; changes allowed during this time.
level strategy
Relies on a constant output rate while varying inventory & backlog according to fluctuating demand. Firm relies on fluctuating finished goods & backlogs to meet demand. Works well for make-to-stock firms.
Independent Demand
The demand for final products (finished goods) & service parts. It has a demand pattern affected by trends, seasonal patterns, & general market conditions. • It's usually forecasted.
Dependent Demand
The demand of component parts for assemblies. Describes the internal demand for parts based on the demand of the final product in which the parts are used. Subassemblies, components, & raw materials are examples. It's usually calculated.
Capacity Requirement Planning (CRP)
a short-range capacity planning technique that is used to check the feasibility of the material requirements plan
Planning horizon of APP
at least one year & is usually rolled forward by three months every quarter
Short-range
days/week. Materials requirement planning (MRP) shows detailed planning process for components & parts to support the MPS
Resource Management
deals with the planning, execution, and control of all the resources that are used to produce goods or provide services. • Resources include materials, equipment, facilities, information, technical knowledge and skills, and people.
Distribution requirement planning (DRP)
describes the time-phased net requirements from warehouses & distribution centers customer demand minus any on hand in-transit inventories
Inventory management models
generally classified as independent demand and dependent demand models.
Closed-loop MRP
incorporates the APP, MPS, MRP, & capacity requirements plan
Costs relevant to the aggregate planning decision
inventory, setup, machine operations, hiring, firing, training, & overtime costs
detailed disaggregation of the APP
listing the exact end items to be produced by a specific period.
. Rough-Cut Capacity Plan (RCCP)
medium-range capacity plan, used to check the feasibility of MPS. Converts MPS from production needed to capacity required, then compares it to capacity available.
long range
more than 1 year. Aggregate Production Plan (APP) involves the construction of facilities & major equipment purchase
aggregate planning
most challenging in the face of fluctuating demand. Managers have a variety of options in developing aggregate plans in this situation.
planning horizon
operations planning is usually hierarchical
Single Integrator Solution
pick all the desired applications from a single vendor
Best-of-Breed Solution
pick the best application for each individual function
Master Production Schedule
• A detailed disaggregation of the APP, listing the exact end items to be produced by a specific period. • More detailed than APP & easier to plan under stable demand. • Planning horizon is shorter than APP, but longer than the lead time to produce the item. • For the service industry, the MPS may just be the appointment book or calendar, which ensures that capacity (e.g., skilled labor or professional service) is balance with demand.
Bill of Materials (BOM)
• An engineering document that shows an inclusive listing of all component parts & assemblies making up the final product. • Shows the parent-component relationships & the specific units of components known as the planning factor. • Enables the firm to compute (not forecast) the time-phased, net requirements of the components (planned order releases) • Other forms of BOM Indented BOM Super BOM • AKA planning BOM, pseudo BOM, phantom BOM, or family BOM • enables the firm to forecast the total demand of end products • option overplanning (A + B + C > 100%)
Capacity Strategies
• Lead capacity strategy (proactive approach) • Lag capacity strategy (reactive approach) • Match or tracking capacity strategy (moderate approach)
MRP
• The demand information of the end item (MPS). • Parent-component relationships from the bill of materials. • Inventory status of the final product & all of the components. • Lead times for all purchased and manufactured component/parts. • Advantage • provides planning information & visibility • Disadvantage • loss of visibility, especially acute for products with a deep BOM • ignores capacity & shop floor conditions
Manufacturing resource planning (MRP-II)
• incorporates the business plan, sales plan, closed-loop MRP, & simulation capabilities to answer "what-if" analysis
Enterprise requirements planning (ERP)
• is an extension of MRP-II
