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15 Resource Planning PowerPoint Slides by Jeff Heyl For Operations Management, 9e by Krajewski/Ritzman/Malhotra 21 Pearson Education 15 1 Resource Planning At the heart of any

1 15 Resource Planning PowerPoint Slides by Jeff Heyl For Operations Management, 9e by Krajewski/Ritzman/Malhotra 21 Pearson Education 15 1 Resource Planning At the heart of any organization Starts t with sales and operations plans and plans the input A process relative to the firm s competitive priorities and an important part of managing supply chains

2 Enterprise Resource Planning What an ERP system does Integrating the firm s functional areas Used by many different types of organizations How ERP systems are designed Single comprehensive database Managers to monitor all of the company s products at all locations and at all times Information is automatically updated in the all applications when transactions occur Streamlines the data flows throughout the organization Requires a careful analysis of major processes Significant changes in ERP systems - interoperability 15 3 Enterprise Resource Planning Back-Office Processes Manufacturing Material planning Scheduling Human Resources Benefits Payroll Data Analysis Product costing Job costs ERP System Front-Office Processes Sales and Marketing Sales s Pricing system Accounting and Finance Accounts payable and receivable General ledgers Asset management Figure 15.1 ERP Application Modules Supply-Chain Management Forecasting Purchasing Distribution Customer Service Field service Quality

3 Materials Requirements Planning MRP is a computerized information system to manage dependent demand and schedule s Translates the master production schedule into for all subassemblies, components, and raw materials through the MRP explosion Dependent demand Quantity required varies with the production plans of other items Component Parent 15 5 MRP Inputs Authorized master production schedule Other sources of demand Inventory transactions Inventory records MRP explosion Bills of materials Engineering and process designs Material plan Figure 15.2 Material Requirements Plan Inputs

4 Demand Patterns Order 1 on day 3 Order 1 on day 8 15 Bicycles 1 Rims (a) Parent Re point Day Day (b) Component demand Figure 15.3 Lumpy Dependent Demand Resulting from Continuous Independent Demand 15 7 Bill of Materials A record of all components of an item Shows the parent-component relationship The usage quantities are derived from engineering and process design Five common terms End items Intermediate items Subassemblies Purchased items Part commonality (sometimes called standardization of parts or modularity)

4 BOM for a Ladder-Back Chair 15 9 Bill of Materials A Ladder-back chair B (1) Ladder-back subassembly C

5 Bill of Materials Back slats Seat cushion Leg supports Seat-frame boards Back legs Front legs A Ladder-back chair Figure 15.4 BOM for a Ladder-Back Chair 15 9 Bill of Materials A Ladder-back chair B (1) Ladder-back subassembly C (1) Seat subassembly D (2) Front legs E (4) Leg supports F (2) G (4) H (1) I (1) Back legs Back slats Seat frame Seat cushion Figure 15.4 BOM for a Ladder-Back Chair J (4) Seat-frame boards

6 Master Production Schedule (MPS) Details how many end items will be produced within specified periods of time It breaks the sales and operations plan into specific product schedules Create a prospective MPS and test whether it meets the schedule with available resources Sums of quantities must equal sales and operational plan Production must be allocated efficiently over time Capacity limitations and bottlenecks may be determined Master Production Schedule (MPS) April May Ladder-back chair Kitchen chair Desk chair Aggregate production plans for chair family Figure 15.5 MPS for a Family of Chairs

7 Master Production Schedule (MPS) Authorized production plan Prospective master production schedule Are resources available? No Yes Material planning Authorized master production schedule Figure 15.6 Master Production Scheduling Process Developing a MPS Step 1: Calculate projected on-hand inventories on-hand On-hand MPS quantity at end = at + due at start of this week end of last week of this week this week where: = max(forecast, Customer s booked) 55 chairs Inventory = currently + in stock MPS quantity ( for week 1) 38 chairs already promised for delivery in week 1 = 17 chairs

8 Developing a MPS Item: Ladder-back chair Quantity on Hand: 55 Forecast Customer s (booked) on-hand MPS quantity April Explanation: Forecast is less than booked s in week 1; projected on-hand balance = = 17. Explanation: Forecast exceeds booked s in week 2; projected on-hand balance = = 13. The shortage signals a need to schedule an MPS quantity for completion in week 2. MPS start Figure 15.7 Master Production Schedule for s 1 and Developing a MPS Step 2: Determine the timing and size of MPS quantities The goal is to maintain a nonnegative projected on-hand balance As shortages are detected, MPS quantities should be scheduled to cover them Inventory = 17 chairs in at the + end of week 1 MPS quantity of 15 chairs Forecast of 3 chairs = 137 chairs

9 Application 15.1 Determine the MPS for Product A that has a 5-unit policy and 5 units on hand. The demand forecast and booked s are shown in the partially completed plan given in the Student Notes. The lead time is one week. Here is the completed plan. You might want to ask a question or two on how they would respond to a customer request for a specific week and quantity Application 15.1 SOLUTION Item: Product A Order Policy: 5 units Time: 1 week Quantity on Hand Forecast Customer s (booked) on-hand MPS quantity MPS start Available-topromise (ATP)

10 Application 15.1 SOLUTION Item: Product A Order Policy: 5 units Time: 1 week Quantity on Hand Forecast Customer s (booked) on-hand MPS quantity MPS start Available-topromise (ATP) Master Production Schedule (MPS) Available-to-promise (ATP) The quantity of an end item that marketing can promise to deliver on specific dates It is the difference between customer s already booked and the quantity that operations is planning to produce Freezing the MPS Reconciling the MPS with sales and operations plans

11 Master Production Schedule (MPS) Item: Ladder-back chair Order Policy: 15 units Time: 1 week Quantity on Hand: 55 April May Forecast Customer s booked on-hand MPS quantity MPS start t Explanation: The time needed to assemble 15 chairs is 1 week. The assembly department must start assembling chairs in week 1 to have them ready by week 2. Explanation: On-hand balance = = 137. The MPS quantity is needed to avoid a shortage of 3 17 = 13 chairs in week 2. Figure 15.8 Master Production Schedule for s Master Production Schedule (MPS) Item: Ladder-back chair Order Policy: 15 units Time: 1 week Quantity on Hand: 55 April May Forecast Customer s booked on-hand MPS quantity MPS start t Available-topromise (ATP) Explanation: The total of customer s booked until the next MPS receipt is 38 units. The ATP = 55 (on-hand) + (MPS quantity) 38 = 17. Explanation: The total of customer s booked until the next MPS receipt is = 59 units. The ATP = 15 (MPS quantity) 59 = 91 units.. Figure 15.9 MPS Record with an ATP Row

12 Inventory Record Inventory transactions are the basic building blocks of up-to-date records Transactions include releasing new s, receiving scheduled, adjusting due dates for scheduled, withdrawing, canceling s, correcting errors, rejecting shipments, and verifying losses and stock returns Inventory records divide the future into time periods called time buckets Keep track of levels and component replenishment needs Inventory Record The time-phase information contained in the record consists of: on-hand on-hand balance at end of week t Inventory on or planned = hand at end of + in week t 1 week t in week t

13 Inventory Record The on-hand calculations for each week in Figure 15.1 are as follows 1: = 117 s 2 and 3: = 117 4: = 3 5: 3 + = 3 6: = 153 7: = 273 8: = Inventory Record Item: C Description: Seat subassembly on-hand 37 Lot Size: units Time: 2 weeks Explanation: are the total demand for the two chairs. on-hand in week 1 is = 117 units. Figure 15.1 MRP Record for the Seat Subassembly

14 Inventory Record Item: C Description: Seat subassembly on-hand 37 Figure Completed Inventory Record for the Seat Subassembly Lot Size: units Time: 2 weeks Without a planned receipt in week 4, a shortage of 3 units will occur: = 3 units. Adding the planned receipt brings the balance to = 227 units. Offsetting for a 2-week lead time puts the corresponding planned release back to week 2. The first planned receipt lasts until week 7, when projected would drop to = 43 units. Adding the second planned receipt brings the balance to = 187 units. The corresponding planned release is for week 5 (or week 7 minus 2 weeks) Planning Factors Planning lead time For purchased items planning lead time is the time allowed for receiving a shipment from the supplier For manufactured the planning lead time consists of estimates for Setup time Processing time Materials handling time between operations Waiting time

15 Planning Factors Lot-sizing rules Fixed quantity (FQO) rule maintains the same quantity each time an is issued Could be determined by quantity discounts, truckload capacity, minimum purchases, or EOQ Planning Factors Periodic quantity (POQ) rule allows a different quantity for each issue but tends to issue the at predetermined time intervals POQ lot size to arrive in week t Total gross = for P week, including week t on-hand balance at end of week t 1 Figure shows the application of the POQ rule for P =

16 Planning Factors The first using P = 3 is (POQ lot size) = for weeks 4, 5, and 6 Inventory at end of week 3 (POQ lot size) = ( ) 117 = 153 units Planning Factors Figure The POQ (P = 3) Rule for the Seat Subassembly

Planning Factors Lot-for-lot (L4L) rule where the lot size covers the gross of a single week L4L lot size to arrive in week t = for week t on-hand balance at end of week t 1 Figure 15.

17 Planning Factors Lot-for-lot (L4L) rule where the lot size covers the gross of a single week L4L lot size to arrive in week t = for week t on-hand balance at end of week t 1 Figure shows the application of the L4L (L4L lot size) Inventory balance = in week 4 at end of week 3 (L4L lot size) = = 3 units Planning Factors Figure The L4L Rule for the Seat Subassembly

18 Application 15.2 Item H1-A is a produced item (not purchased) with an quantity of 8 units. Complete the rest of its MRP record using the fixed quantity (FOQ) rule SOLUTION Item: H1-A Description: Chair seat assembly Lot Size: FOQ = 8 units Time: 4 weeks on-hand Application 15.2 Item H1-A is a produced item (not purchased) with an quantity of 8 units. Complete the rest of its MRP record using the fixed quantity (FOQ) rule SOLUTION Item: H1-A Description: Chair seat assembly Lot Size: FOQ = 8 units Time: 4 weeks on-hand

19 Application 15.3 Now complete the H1-A record using a POQ rule. The P should give an average lot size of 8 units. Assume the average weekly are 2 units. P = 8 2 = 4 weeks Application 15.3 SOLUTION Item: H1-A Lot Size: POQ = 4 Description: Chair seat assembly Time: 4 weeks on-hand

20 Application 15.3 SOLUTION Item: H1-A Lot Size: POQ = 4 Description: Chair seat assembly Time: 4 weeks on-hand Application 15.4 Revise the H1-A record using the lot-for-lot (L4L) Rule. (Complete the highlighted section) SOLUTION Item: H1-A Description: Chair seat assembly Lot Size: FOQ = 8 units Time: 4 weeks on-hand

21 Application 15.4 Revise the H1-A record using the lot-for-lot (L4L) Rule. (Complete the highlighted section) SOLUTION Item: H1-A Description: Chair seat assembly Lot Size: FOQ = 8 units Time: 4 weeks on-hand Planning Factors Comparing lot-sizing rules FOQ: = 181 units POQ: = 6 units L4L: = units

22 Planning Factors Lot sizes affect costs and setup and ing costs The FOQ rule generates a high level of average because it creates remnants The POQ rule reduces the amount of average onhand because it does a better job of matching quantity to The L4L rule minimizes investment, but it also maximizes the number of s placed Planning Factors Safety stock for dependent demand items with lumpy demand (gross ) is helpful only when future gross, the timing i or size of scheduled, and the amount of scrap that will be produced are certain Safety stock is used for end items and purchased items to protect against fluctuating customer s and unreliable suppliers

23 Planning Factors Figure Inventory Record for the Seat Subassembly Showing the Application of a Safety Stock Outputs from MRP MRP explosion Routings and time standards Action notices Releasing new s Adjusting due dates Material plan Priority reports Dispatch lists Supplier schedules Capacity reports Capacity planning Finite capacity scheduling Input-output control Figure MRP Outputs Manufacturing resources plan Performance reports Cost and price data

24 MRP Explosion Translates the MPS and other sources of demand into the needed for all of the subassemblies, components, and raw materials the firm needs to produce parent items An item s gross are derived from three sources The MPS for immediate parents that are end items The planned for parents below the MPS level Any other not originating in the MPS, such as the demand for replacement parts MRP Explosion C(1) Seat subassembly bl H(1) Seat frame I(1) Seat cushion J(4) Seat-frame boards Figure BOM for the Seat Subassembly

25 MRP Explosion Item: Seat subassembly Lot size: units time: 2 weeks on-hand Figure MRP Explosion of Seat Assembly Components MRP Explosion Item: Seat subassembly Lot size: units time: 2 weeks Figure MRP Explosion of Seat Assembly Components

26 MRP Explosion Item: Seat subassembly Lot size: units time: 2 weeks Item: Seat frames Lot size: 3 units Item: Seat cushion Lot size: L4L time: 1 week time: 1 week 3 on-hand 4 on-hand Figure MRP Explosion of Seat Assembly Components MRP Explosion Item: Seat subassembly Lot size: units time: 2 weeks Usage quantity: 1 Usage quantity: 1 Item: Seat frames Lot size: 3 units Item: Seat cushion Lot size: L4L time: 1 week time: 1 week 3 on-hand 4 on-hand Figure MRP Explosion of Seat Assembly Components

27 MRP Explosion Item: Seat subassembly Lot size: units time: 2 weeks Usage quantity: 1 Usage quantity: 1 Item: Seat frames Lot size: 3 units Item: Seat cushion Lot size: L4L time: 1 week time: 1 week 3 on-hand 4 on-hand Figure MRP Explosion of Seat Assembly Components MRP Explosion Item: Seat subassembly Lot size: units time: 2 weeks Item: Seat frames Lot size: 3 units Item: Seat cushion Lot size: L4L time: 1 week time: 1 week 3 on-hand on-hand Figure MRP Explosion of Seat Assembly Components

28 MRP Explosion Item: Seat frames Lot size: 3 units time: 1 week Item: Seat cushion Lot size: L4L time: 1 week 3 3 Item: Seat-frame boards Lot size: 15 units time: 1 week on-hand 2 Figure MRP Explosion of Seat Assembly Components MRP Explosion Item: Seat frames Lot size: 3 units time: 1 week Item: Seat cushion Lot size: L4L time: 1 week 3 3 Usage quantity: 4 Item: Seat-frame boards Lot size: 15 units time: 1 week 12 on-hand 2 Figure MRP Explosion of Seat Assembly Components

29 MRP Explosion Item: Seat frames Lot size: 3 units time: 1 week Item: Seat cushion Lot size: L4L time: 1 week 3 3 Item: Seat-frame boards Lot size: 15 units time: 1 week 12 on-hand Figure MRP Explosion of Seat Assembly Components Other Important Reports Action notice Capacity planning (CRP) Theory of constraints principles can be applied to keep bottleneck operations fed by adjusting some lot sizing rules or occasionally overriding planned Priority reports Manufacturing resource planning (MRP II)

30 MRP and the Environment Consumer and government concern about the deterioration of the natural environment has driven manufacturers to reengineer their processes to become more environmentally friendly Companies can modify their MRP systems to help track these waste and plans for their disposal Application 15.5 A firm makes a product (Item A) from three components (intermediate Items B and D, and purchased item C). The latest MPS for product A calls for completion of a 25-unit in week k8, and dits lead dtime is 2 weeks. The master schedule and bill of material for Product A are given below. Item: End Item A Time: 2 wks MPS quantity 25 MPS start

31 Application 15.5 Develop a material plan for items B, C, and D, given the following data. Blank MRP records are provided d in the Student Notes, and the completed records are shown on the next slide. A B(1) C(1) D(2) C(2) B(1) Item Data Category B C D Lot-sizing rule POQ (P = 5) FOQ = 1 L4L time 2 weeks 1 week 3 weeks None 1 (week 1) None Beginning 8 C(2) Application 15.5 SOLUTION An item s gross cannot be derived until all of its immediate parents are processed. Thus we must begin with Item D. Its only immediate parent is item A, and its planned production plan is shown by the MPS start row. Note the 2- for-1 usage quantity when deriving D s gross. Item: D Lot Size: L4L Description: Time: 3 weeks 5 on-hand

32 Application 15.5 We can do item B next, because the planned production quantities for its two immediate parents (A and D) are known. Item C cannot be done yet, because one of its parents is item B, and its PORs are still unknown. Item: B Lot Size: POQ = 5 Description: Time: 3 weeks on-hand Application 15.5 We can do item B next, because the planned production quantities for its two immediate parents (A and D) are known. Item C cannot be done yet, because one of its parents is item B, and its PORs are still unknown. Item: B Lot Size: POQ = 5 Description: Time: 3 weeks 5 25 on-hand

33 Application 15.5 Finally we can do Item C, because we now know the planned production quantities of both of its immediate parents (A and B). Note that the usage quantity for its parent B is 2-for-1. Item: C Lot Size: 1 Description: Time: 1 week on-hand Resource Planning for Service Providers Dependent demand for services Restaurants Airlines Hospitals Hotels Bill of resources (BOR)

34 Bill of Resources Level 1 Discharge Level 2 Intermediate care Level 6 Preoperative care (Angiogram) Level 3 Postoperative care (Step down) Level 4 Postoperative care (Intensive) Nurse (6 hr) MD (1 hr) Therapy (1 hr) Bed (24 hr) Lab (3 tests) Kitchen (1 meal) Pharmacy (1 medicines) Level 5 Surgery (b) Level 6 Preoperative care (Angiogram) Level 7 Preoperative care (Testing) Figure BOR for Treating an Aneurysm (a) Solved Problem 1 Refer to the bill of materials for product A shown in Figure If there is no existing and no scheduled, how many units of items G, E, and D must be purchased to produce 5 units of end item A? A LT = 1 B (3) C (1) LT = 2 LT = 3 D (1) E (2) F (1) D (1) LT = 3 LT = 6 LT = 1 LT = 3 Figure BOM for Product A G (1) LT =

35 Solved Problem 1 SOLUTION Five units of item G, 3 units of item E, and 2 units of item D must be purchased to make 5 units of A. The usage quantities shown in Figure indicate that 2 units of E are needed to make 1 unit of B and that 3 units of B are needed to make 1 unit of A; therefore, 5 units of A require 3 units of E(2 3 5 = 3). One unit of D is consumed to make 1 unit of B, and 3 units of B per unit of A result in 15 units of D(1 3 5 = 15); 1 unit of D in each unit of C and 1 unit of C per unit of A result in another 5 units of D(1 1 5 = 5). The total to make 5 units of A are 2 units of D(15 + 5). The calculation of for G is simply = 5 units Solved Problem 2 The policy is to produce end item A in lots of 5 units. Using the data shown in Figure 15.2 and the FOQ lot-sizing rule, complete the projected on-hand and MPS quantity rows. Then complete the MPS start t row by offsetting the MPS quantities for the final assembly lead time. Finally, compute the available-to-promise for item A. If in week 1 a customer requests a new for 3 units of item A, when is the earliest date the entire could be shipped?

36 Solved Problem 2 Item: A Order Policy: 5 units Time: 1 week 9 1 Forecast Customer s (booked) on-hand MPS quantity 5 MPS start Available-topromise (ATP) Figure 15.2 MPS Record for End Item A Solved Problem 2 SOLUTION The projected on-hand for the second week is on-hand at end of week 2 On-hand MPS quantity = in + due in week 2 week 1 Requirements in week 2 = = 5 units where are the larger of the forecast or actual customer s booked for shipment during this period. No MPS quantity is required. Without an MPS quantity in the third period, a shortage of item A will occur: = 35. Therefore, an MPS quantity equal to the lot size of 5 must be scheduled for completion in the third period. Then the projected on-hand for the third week will be =

37 Solved Problem 2 Figure shows the projected on-hand inventories and MPS quantities that would result from completing the MPS calculations. The MPS start row is completed by simply shifting a copy of the MPS quantity row to the left by one column to account for the 1-week final assembly lead time. Also shown are the available-to-promise quantities. In week 1, the ATP is Available-topromise in week 1 On-hand MPS quantity = quantity in + in week 1 week 1 Orders booked up to week 3 when the next MPS arrives = (3 + 2) = 5 units Solved Problem 2 The ATP for the MPS quantity in week 3 is Available-to- promise in week 3 MPS quantity = in week 3 Orders booked up to week 7 when the next MPS arrives = 5 ( ) = 35 units The other ATPs equal their respective MPS quantities because no s are booked for those weeks. As for the new for 3 units in week 1, the earliest it can be shipped is week 3 because the ATP for week 1 is insufficient. If the customer accepts the delivery date of week 3, the ATP for week 1 will stay at 5 units and the ATP for week 3 will be reduced to 5 units. This acceptance allows the firm the flexibility to immediately satisfy an for 5 units or less, if one comes in. When the MPS is updated next, the customer s booked for week 3 would be increased to 35 to reflect the new s shipping date

38 Solved Problem 2 Figure Completed MPS Record for End Item A Solved Problem 3 The MPS start quantities for product A calls for the assembly department to begin final assembly according to the following schedule: 1 units in week 2; 2 units in week 4; 12 units in week 6; 18 units in week 7; and 6 units in week 8. Develop a material plan for the next 8 weeks for items B, C, and D. The BOM for A is shown in Figure 15.22, and data from the records are shown in Table A LT = 2 B (1) C (2) LT = 1 LT = 2 D (1) LT = 3 Figure BOM for Product A

39 Solved Problem 3 TABLE 15.1 INVENTORY RECORD DATA Item Data Category B C D Lot-sizing rule POQ (P=3) L4L FOQ = 5 units time 1 week 2 weeks 3 weeks None 2 (week 1) None Beginning (on-hand) SOLUTION We begin with items B and C and develop their records, as shown in Figure The MPS for product A must be multiplied by 2 to derive the gross for item C because of the usage quantity. Once the planned for item C are found, the gross for item D can be calculated Solved Problem 3 Item: B Lot Size: POQ (P = 3) Time: 1 week on-hand Figure Inventory Records for Items B, C, and D

40 Solved Problem 3 Item: C Lot Size: L4L Time: 2 weeks on-hand Figure Inventory Records for Items B, C, and D Solved Problem 3 Item: D Lot Size: FOQ =5 units Time: 1 week on-hand Figure Inventory Records for Items B, C, and D

Resource Planning. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Resource Planning. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall. Resorce Planning 15 1 Resorce Planning At the heart of any organization Starts with sales and operations plans and plans the inpt reqirements A process relative to the firm s competitive priorities and