MGMT 3240 Chp 7 & 8
How many basic principles those MRP utilizes?
TWO
What is the goal of MS?
The goal is to plan production but allow some flexibility to change orders as demand or customer requirements change.
Guidelines for Developing an Aggregate Project Plan: STEP 8:
Work to improve development capabilities
An MRP system relies on three key inputs:
a bill of materials database, a master schedule, and an inventory records database.
Material requirements planning (MRP)
a computer-based system that develops plans for ordering and producing dependent demand items.
Lot for lot (L4L)
a lot size rule that is a special case of the periodic order quantity with the period equal to 1
Fixed order quantity (FOQ)
a lot size rule with a constant order size where the same quantity is ordered every time
Periodic order quantity (POQ)
a lot size rule with a variable lot size designed to order exactly the amount required for a specified period of time
Yield management
a management technique that offers customers incentives to shape their demand patterns
Activity on arrow (AOA) convention
a network diagram in which each activity is represented by an arrow, and the nodes are used to show the beginning and end points
Activity on node (AON) approach
a network diagram that shows each activity as a circle (or a node) and connects the activities with arrows
Action notice
a notice that is generated when an order needs to be released or placed or when the quantity or timing of an order needs to be changed
Project
a set of interrelated activities necessary to achieve established goals using a specified amount of time, budget, and resources
MRP nervousness
a situation in MRP planning where a change at one part level ripples down to affect lower- Level parts
Manufacturing resource planning (MRP II)
a system that links the basic MRP system to other company systems, including finance, accounting, purchasing, and logistics
Crashing
a way to identify the lowest-cost approach for reducing the project duration
The four parameters
(ES, EF; LS; and LF) for each project activity
The load report highlights where demand will exceed available capacity. Based on this report, the manager for this department might
(a) Schedule some over- time for the weeks where there is insufficient capacity, (b) Make a change to the MRP records to distribute demand more evenly, or (c) Change the routing of some items.
Three key factors contribute to success:
1) hardware and software. 2) employees trained. 3) data need to be close to 100 percent accurate because MRP will magnify any inconsistencies.
Guidelines for Developing an Aggregate Project Plan: STEP 3:
Estimate the average time and resources needed for each project type based on past experience
The process of developing the material requirements plan is called
MRP explosion.
What technique used for converting the requirements of final products into a material requirements plan?
MRP explosion.
What plan specifies the timing and size of new production orders?
Material requirements plan
What system is used to develop plans for ordering and producing dependent demand items?
Material requirements planning (MRP)
Twenty or thirty years ago, it was common to have _____________ because a large amount of computer power was necessary to perform the thousands of calculations necessary for a company with hundreds of products and parts.
Periodic updates
The master schedule seeks
to minimize total cost and provides a way of assessing the impact of new orders and providing delivery dates for accepted orders.
Two substantial problems with using separate stand-alone systems
were the duplication of data entry (the same data often had to be entered multiple times into multiple systems) and errors in communication caused by mistakes when reentering data.
Planned order release
when an order must be released in order to offset for the lead time so that the order will be received when planned
Critical Factors in Project Failure 2
• Change in overall time to completion • Change in user needs • Change in overall project resources (people, materials, funds) • Change in technical difficulties
How to Successfully FAIL in a Project 1
• Ignore the project environment (including stakeholders) • Push a new technology to market too quickly • Don't bother building a fallback option • When problems occur, shoot the one most visible
How to Successfully FAIL in a Project 3
• Never, never conduct postfailure analysis • Never bother to understand project tradeoffs • Allow political expediency and infighting to dictate crucial project decisions • Make sure the project is run by a weak leader
Example of dependent demand:
A refrigerator is an independent demand item, but the door, the motor, and each of the drawers that are required to produce it are dependent demand items.
Guidelines for Developing an Aggregate Project Plan: STEP 7:
Decide which specific projects to purse
Guidelines for Developing an Aggregate Project Plan: STEP 2:
Identify existing projects and classify by project type
Guidelines for Developing an Aggregate Project Plan: STEP 4:
Identify existing resource capacity
Pixar's animated movie projects typically go through four stages:
(1) The development stage, or creation of the story line; (2) The preproduction stage, which includes troubleshooting the technical aspects; (3) The production stage; which means the making of the actual movie; and (4) The postproduction stage, which includes final editing and touch-up of the completed movie.
Critical path
(also known as the bottleneck path or the binding constraint) dictates the project's duration.
What plan specifies adjustments to existing order quantities, and expediting or delay of late/ early orders?
Material requirements plan
A net change update makes changes as soon as they occur.
TRUE
A successful project means that all deliverables are completed on time, within budget, and at a level of quality that is acceptable to the project's sponsors and stakeholders.
TRUE
Because projects are finite endeavors with limited time, money, and other resources available, they must be kept moving toward completion.
TRUE
The project manager must focus on meeting the three constraints: scope, time, and budget.
TRUE
The project manager should also develop a potential upside for the project if the potential problem is avoided.
TRUE
The project manager should attempt to quantify the impact of each potential problem on a common basis, such as time delays or cost overruns.
TRUE
The project team should develop a contingency plan in case the identified problems do occur during the project execution. .
TRUE
The activities making up a critical path are known as
critical activities.
The MRP system
does not include capacity constraints when developing the production plan, instead assuming that whatever is needed can be produced.
Planned receipts
future orders that have not yet been released but are planned in order to avoid a shortage or backlog of inventory
The FOQ rule
has the highest average inventory because its fixed nature creates inventory remnants.
A resource breakdown structure (RBS)
is a standardized list of personnel required to complete various activities in a project. This technique is often used in combination with the work breakdown structure.
The third major input to an MRP system
is an inventory record of transactions
The goal of MRP
is to avoid such shortages or backorders
The goal of these systems (MRP)
is to make the processing of data and information simple and easy for the humans who use the system.
MRP record includes three planning factors:
lead time, lot size, and safety stock.
The phrase project management
was initially developed about fifty years ago (during the 1950s and early 1960s), when the size, scope, and duration of and the resources required for new government and commercial projects started becoming so large that these projects required more analysis and special attention.
The primary limitation of MRP II
was the manual linkage between operational activities and matching accounting transactions.
Leading pioneers of MRP include Joseph Orlicky, an engineer for IBM
who first coded an MRP system for the JI Case Company in Racine, Wisconsin;
There are three approaches for managing capacity and ensuring that the MRP plan is feasible:
• Capacity requirements planning • Finite capacity scheduling • Input/output reports
Critical Factors in Project Failure 3
• Change in funding source • Change in regulatory problems • Internal politics within the organization • External politics to the organization • Change in commitment by project champion
Critical Factors in Project Failure 1
• Change in initial project expectations • Change in the overall project importance to the organization • Change in the need for the project by the organization • Change in overall complexity
Time buckets
are the periods of time into which an MRP record is divided
Some companies still use periodic updates
because they provide greater stability, and it is easy to know when things are going to change.
The implementation of the CPM algorithm
begins by first identifying ES and EF for all activities.
Detailed planning
begins during the second phase (project planning).
A Gantt chart with different color codes
can also be used to track performance while the project is in Progress.
Project management
can be defined as the application of the knowledge, skills, tools, and techniques necessary to successfully complete a project.
Project management
includes planning, directing, scheduling, and controlling resources (people, equipment, and material) to meet the technical, cost, and time constraints of the project.
The inventory record
includes transactions both from manufacturing within an organization and from purchasing items from external suppliers.
An increased scope typically means
increased time and increased cost, a short time constraint could mean increased costs and reduced scope, and a limited budget could mean increased time and reduced scope.
The direction of an arrow
indicates the project direction.
According to the Project Management Institute (www.pmi.org), the body of knowledge of project management can be divided into five categories:
initiation planning, execution, control, and closure.
Low-level coding
involves assigning a part to the lowest level at which it appears anywhere in the BOM
PERT
is a technique for addressing the impact of uncertainties in activity time estimates on the duration of the entire project duration.
MRP explosion
is a technique for converting the requirements of final products into a material requirements plan that specifies the production/order quantities and timing for all subassemblies, components, and raw materials needed by final products.
A systematic algorithm
is also necessary to implement the CPM approach on a computer for very big projects because they contain a large number of paths and activities.
The critical path method (CPM)
is an algorithm for scheduling the activities within a project to achieve the fastest and most efficient execution of that project.
The difference between the LS and the ES or the difference between the LF and the EF
is known as slack because it represents the potential flexibility in starting an activity without affecting the project duration.
However, the calculation of the late start time (LS) and late finish time (LF)
is necessary to calculate slack and to identify the critical path.
The AOA convention
is opposite to AON:
The algorithm,
originally developed by DuPont and Remington Rand Corporation in the 1950s, is an essential project management technique.
Project control
requires time, cost, quality, resource, risk, and change management skills.
Any delay in the execution of a critical activity
results in delaying the entire project.
The activity on node (AON) approach
shows each activity as a circle (or a node) and connects the activities with arrows.
The load report
shows the planned hours of work, estimated from the MRP system for all future orders that will need to be routed through that grinding machine.
Project scope
the activities that must be completed to achieve a project's end goal
Slack
the amount of flexibility in scheduling an activity within a project
Most likely time (tm):
the best estimate of the time required to accomplish a task, assuming that everything proceeds normally.
Guidelines for Developing an Aggregate Project Plan: STEP 1:
Define project types as either breakthrough, platform, derivative, R&D, or partnered projects
What demand are considered to be parts of another item?
Dependent demand
Guidelines for Developing an Aggregate Project Plan: STEP 5:
Determine the desired mix of projects
Guidelines for Developing an Aggregate Project Plan: STEP 6:
Estimate the number of projects that existing resources can support
What demand are considered end items that go directly to a customer?
Independent demand
Which demand is influenced by market conditions and not related to inventory decisions for any other item?
Independent demand
Example of Independent demand.
Items such as toothpaste, books, televisions, and refrigerators are independent demand items for which we must forecast the sales.
Who first coded an MRP SYSTEM?
Joseph Orlicky, an engineer for IBM
Slack =
LS - ES = LF - EF
What technique gained prominence in the mid-1970s with the development of more powerful computers, which have become irreplaceable operating tools in many companies?
MRP
What technique used to specifies the production/order quantities and timing for all subassemblies, components, and raw materials needed by final products?
MRP explosion.
What breaks a higher-level aggregate plan into smaller time buckets for specific products (time buckets can be months, weeks, days, or hours?
Master schedule (MS)
What is frozen or unchangeable in the near term (the next few days or weeks)?
Master schedule (MS)
What is liquid or very changeable in the long term?
Master schedule (MS)
What is slushy or slightly changeable in the middle term?
Master schedule (MS)
While it was originally developed for a government project,
PERT has found many applications in a variety of commercial projects across a wide range of industries.
MRP utilizes two basic principles:
Requirements for dependent demand items are derived from the production schedule for their parents (the items that are assembled from component parts), and the production order is offset to account for the lead time.
How many key inputs those MRP system relies on?
THREE
Once the risks are presented on the same scale, a prioritization scheme can developed to minimize the probability that a particular problem will occur. .
TRUE
Successful execution of a project requires a strong project leadership.
TRUE
Advantages/Disadvantages of Lot Size Rules:
The choice of lot size rule has a large impact on the efficacy of the MRP system. Lot size choice affects inventory and setup/order costs and also has an impact on capacity availability.
Pixar's animated movie projects typically go through four stages:
The development stage, The preproduction stage, The production stage, and The postproduction stage
(Project planning). This involves the creation of a number of planning documents such as those described here:
The project plan, The resource plan, The financial plan, Quality plans, The communications plan, The risk plan
MRP II employed
a common database and an integrated platform where sales, inventory, and purchasing trans- actions were updated in both inventory and accounting applications
On the other hand, if additional resources are assigned to speed up the project schedule,
a cost and time tradeoff analysis (also known as crashing) is conducted.
Network diagram
a diagram with arrows and nodes (circles) created to display a sequence of activities within a project
Master schedule (MS)
a document that details the quantity of end items to be produced within a specified period of time
Bill of materials (BOM)
a document that specifies all assemblies, subassemblies,' parts, and raw materials that are required to produce one unit of the finished product
Inventory record
a document that specifies order/lot size policy and lead time and records all transactions made for parts, assemblies, and components
Material requirements plan
a plan that specifies the timing and size of new production orders, adjustments to existing order quantities, and expediting or delay of late/ early orders
Load report
a report for a department or work center that projects already scheduled and expected future capacity requirements against capacity availability
MRP systems provide
a wealth of data, including reports, schedules, and notices, to help managers control the flow of inventory and ensure efficient and accurate operations.
A bill of materials database, a master schedule, and an inventory records database are three key inputs to what system?
An MRP system
There are two conventions for building a network diagram:
activity on node (AON) approach and activity on arrow (AOA) convention
The L4L rule
always has the lowest average inventory because of the ability to order exactly what is needed for a single period, but this comes at the cost of more frequent orders.
The L4L rule
always minimizes inventory, but also requires more frequent setups/orders. This rule works well for expensive items and for items with low setup/ordering costs.
Critical path method
an algorithm for scheduling activities within a project for the fastest and most efficient execution
Work breakdown structure (WBS)
an approach that defines a project in terms of its sub- projects, tasks, and activities
MRP II provided
an integrated system that reduced data entry and provided relatively quick access to data.
Precedence relationship
analysis identification of the relationships and the sequence of activities within a project
Inventory transaction
any change in the quantity of a specific part or material
The activities with zero slack
are critical activities because there is no fit flexibility with regard to their beginning and ending schedule.
The planning factors for an MRP record
are fairly constant—they are entered into the system once and then may not be updated or changed for months or years.
Lot size rules
are important because they determine the frequency of setups and the inventory holding costs for an item.
In contrast, net change updates
are much more responsive to changes but may be disruptive in some cases.
Both the POQ and L4L rules
are prone to instability—if the gross requirements for a parent item change, then the lot size may change.
MRP records
are updated using one of two approaches: periodic update and net change update
Master schedule and the MRP plan
are usually generated primarily by looking at what is needed to support sales, rather than what is possible.
The project deliverables
can be sequenced in series so that neither the project team nor the recipient is overburdened by them.
Changing production schedules
can become very challenging because one change may have unintended consequences in another area of the plant.
Independent demand:
demand for items that are considered end items that go directly to a customer, and for which demand is influenced by market conditions and not related to inventory decisions for any other item
Dependent demand:
demand for items that are used to make another item or are considered to be parts of another item
During the 1990s, MRP II evolved to become
enterprise resource planning (ERP), which integrates all functional areas of a business.
The CPM algorithm
estimates the time necessary to complete each part of the project.
Safety stock
excess inventory that a company holds to guard against uncertainty in demand, lead time, and Supply
Analytical CRM
facilitates the analysis of customer data to maximize marketing effectiveness; to support product and service design and to improve customer acquisition, cross-selling, and retention.
The MS is usually
frozen or unchangeable in the near term (the next few days or weeks), slushy or slightly changeable in the middle term, and liquid or very changeable in the long term.
Short range
generally refers to the next one to three months.
A periodic update
involves collecting all new or updated information and processing it once a week or once a day.
The project execution phase
involves the actual completion of all activities that are part of the projects.
Recording inventory transactions accurately and promptly
is a critical component of an effective MRP system.
MRP
is a dynamic system—as orders are received, forecast or the master schedule is updated, and so on; the MRP records are also changed.
A Gantt chart (named after Henry Gantt, who originally developed the chart in the 1910s)
is a special type of horizontal bar chart that displays the schedule for the entire project.
Customer relationship management (CRN)
is a system of planning and control activities and information systems that link an organization with its down- stream customers.
The project manager
is responsible for successfully meeting three inter-related project constraints: time, cost, and scope.
Slack
is the estimate of the maximum amount of time that a noncritical activity can be delayed without affecting the entire project Schedule
For purchased items, the lead time
is the estimated time for the supplier to prepare or produce the order plus shipping time.
The work breakdown structure (WBS)
is the most fundamental technique defining and organizing the total scope of a project.
A critical role for managers
is to evaluate the production plan developed by the MRP system and assess where capacity constraints might pose problems.
One of the primary purposes of an MRP system
is to update, calculate, and track several other pieces of information on a more frequent or daily basis.
A systematic algorithm
is used to calculate the critical path and identify slack for each activity.
A network diagram
is used to show the precedence relationship among different activities.
PERT analysis
is very similar to CPM analysis with respect to several concepts
Every MRP record includes three planning factors,
lot size, lead time, and safety stock, which are parameters that are chosen by managers utilizing the MRP system.
A net change update
makes changes as soon as they occur.
ERP allows
manufacturing to see new orders as soon as marketing or sales enters them into the system.
CRM consists
of three components that can be implemented independently of each other or in an integrated fashion.
Common parts:
parts that are used in more than one place in a single product or in more than one product
The calculation of ES and EF for each activity
provides the information about the earliest time a project can be completed.
Project control means
real-time assessment of the execution of a planned project.
Transactions include
receipt of new orders, shipment of complete orders, scrapping of defective parts, release of new orders, adjustment of due dates for scheduled receipts, cancellation of orders, and confirmation of scrap losses and returns.
The POQ rule
reduces the amount of OH inventory by matching gross requirements with planned receipts.
The calculation of LS and LF
starts from the very last activity in a project.
Collaborative CRM
supports direct interaction with customers using a variety of contact channels, including the Internet, email and automated phone. Often this type of CRM is employed to allow self-service by customers and to reduce cost.
Operational CRM
supports front-office business processes such as sales, marketing, and service. Soft
Maintenance, repair, and operating supplies (MRO) items
that a store or business requires to run the business
MRP is a technique
that has been employed since the 1940s and 1950s.
Scheduled receipts orders
that have been placed but not yet received or completed
MRP systems typically have a planning horizon
that is as long as or longer than the longest lead time for all parts in the BOM.
Beginning inventory
the amount of inventory that was physically in stock at the end of the most recent time bucket
Project time
the amount of time available to complete a project
Expected time (te):
the best estimate of the time required to accomplish an activity, considering the potential impact of tm, and tp.
Project cost
the budgeted amount available for the project
The path that takes the longest time to complete is known as
the critical path.
Early start time (ES):
the earliest time at which an activity can start, considering the beginning and ending times for each of the preceding activities.
Projected on-hand inventory
the estimated inventory that will be available after the gross requirements have been satisfied, plus any planned or scheduled receipts for that time bucket
Late start time (LS):
the latest time at which an activity can start, considering all the precedence relationships, without delaying the completion time for the project.
Pessimistic time (tp):
the maximum possible time required to complete an activity, assuming that everything proceeds at the slowest possible pace.
Optimistic time (to):
the minimum possible time required to complete an activity, assuming that everything proceeds better than is normally expected.
Critical path
the path within a project that takes the longest time to complete
Project manager
the person responsible for delivering the goals of a project
Capacity requirements planning
the process of determining short-range capacity requirements based on a tentative MRP plan
MRP explosion
the process of translating MRP inputs into a plan that specifies required quantities and timing of all subassemblies, components, and raw materials required to produce parent items
Critical activities
the project activities making up a critical path
Lot size
the quantity of a part to be produced or ordered when additional inventory is required
Activity
the smallest work package that can be assigned to a single worker or a team
Early finish time (EF):
the sum of the early start time (ES) and the time re- quired to complete the activity.
Late finish time (LF):
the sum of the late start time and the time required to complete the activity.
Lead time
the time between when an order is placed and when it is expected to arrive or be finished
Planning horizon
the time period in the future that the MRP system Plans for
Gross requirements
the total number of units of a part or material derived from all parent production plans
Once an MRP plan without major capacity problems is developed,
then the first few periods of the MRP plan may be frozen, meaning that no changes can then be made to that portion of the schedule.
Resource leveling is an approach
to reduce the amount of fluctuations in day- to-day resource requirements within an organization.
Resource leveling is especially
useful when employees in an organization work on multiple projects simultaneously.
The program evaluation and review technique (PERT)
was developed jointly by the U.S. Department of Defense and Booz Allen Hamilton during the development of the Polaris ballistic missile project in the late 1950s.
The primary characteristics of a project can be listed as
• A well-defined goal or objective • Composed of a set of interrelated activities • A specified beginning and ending time • Specified resource and personnel requirements • A specified budget • Uniqueness (i.e., something that has not been done before)
The risks associated with projects can be divided into four broad categories
• Financial resource risk, such as cash overruns, budget shortfalls, and cash flow problems • Human resource risk, such as changes in project personnel • Supply risk, such as suppliers not providing the required materials on time • Quality risk, or the possibility that the quality of individual tasks gets com- promised when trying to keep up with the project schedule
How to Successfully FAIL in a Project 2
• Let new ideas starve to death from inertia • Don't bother conducting feasibility studies • Never admit that a project is a failure • Overmanage project managers and their teams
Supplementary characteristics for projects can be identified as the following:
• Projects typically include prespecified deliverables after completion. • Because projects are defined to have specific objectives, they also have pre-established limits and exclusions. • Projects generally have specific intermediate goals or performance milestones. • Because a project contains some unique element, it also includes an element of risk. • Project teams are generally made up of several individuals who come from different departments or functional areas or who have unique skills. • Project team members often work on multiple projects at the same time— with each project having unique goals, deadlines, and requirements.
The identified problems can be classified according to the following criteria:
• Severity: What percentage of the project's scope will be affected by a problem? • Probability: What are the chances that a specific problem will occur? • Timing: At what point in the project is the specific problem likely to appear? • Dynamic risk: As the project proceeds, will the probability of the problem occurrence increase, decrease, or stay constant?
The gross requirements for an item are derived from three sources:
• The MS for immediate parents that are end items • The planned order releases for parents that are below the MS level • Any other requirements, typically for spare parts
Some examples of operations management projects include
• The development of new product and service offerings • Quality improvement projects such as implementation of Six Sigma projects at a large service organization like American Express. • The opening of a new production or customer service facility • Projects to comply with new government or industry regulations • Preparation for ISO 9000 or ISO 14000 certifications. I • New equipment installation at a production or health-care facility. • Selection of suppliers for essential raw materials or components or selection of supply chain partners. • Implementation of new technology or software such as enterprise resource planning (ERP) systems. • Community service activities undertaken by organizations.
(Project planning). This involves the creation of a number of planning documents such as those described here:
• The project plan outlines the activities, their interdependencies, and time estimates. • The resource plan lists the labor, equipment, other resources, components, and raw materials required to complete the project activities. • The financial plan reports estimated costs and cash flow requirements at different project stages. • Quality plans provide details on quality targets, control, and potential improvement measures. • The communications plan often includes updates on project status relative to schedule, which needs to be communicated to key stakeholders. • The risk plan provides an assessment of potential risks and uncertainties, and actions that might be necessary to overcome the challenges.
The master schedule several key aspects of master scheduling:
• The sums of the quantities in the MS must equal those in the aggregate production plan. • Aggregate production quantities should be planned efficiently over time in order to minimize setup, production, and inventory costs. • Capacity limitations must be considered before finalizing the MS, including labor and machine capacity, storage space, transportation equipment, and other such factors. 3rs. The MS should be checked against the available re- sources and often must be changed in order to ensure that sufficient capacity is available.
The master schedule can be changed
• by moving order quantities forward or backward in time, • by changing the size of orders, by changing the routing of parts, • by changing safety stock requirements.