Part IV Methods for Dependent Demand

Transcription

1 Part IV Methods for Dependent Demand Chapter 9 Material Requirements Planning 1

2 Aims of the Chapter After reading this chapter you should be able to do the following: Understand the limitations of independent demand methods. Describe the characteristic approach of MRP. Use MRP to timetable orders and operations. Outline the benefits and problems of using MRP. Adjust MRP schedules with batching rules. Add feedback to check for capacity and other problems. Discuss some extensions to MRP, including MRPII, DRP and ERP. Independent Demand Independent Demand: The demand for an item that is unrelated to the demand for other items. Examples of Independent Demand Demand for Finished Goods (FG), parts required for destructive testing, service parts requirements or other slow moving items. The best policy in these cases where the historical demand is close to cero is to order a replacement unit whenever one is used 2

3 Limitations of Independent Demand Assumption that demands for items are independent. In reality there are some linking demands from production plans or some other sources. Assumption that demand is stable and that historical data can be used for forecast, even when future demand can be found from production plans or other sources. That stock should always be available even if there is no expected demand. Assumption that variables (lead time, demand and costs) are outside the organization s control. In reality, they can be varied by negotiation, using different suppliers, expediting, emergency procedures, etc. Limitations of Independent Demand Assumption that costs are fixed even though they can vary according to the supplier, distance to travel (i.e. reorder cost), etc. Costs rely on accounting conventions and estimates. Shortage costs? Assumption that variables follow known distributions, but these can be difficult to identify. Even if a high service level is set, a product using many parts is unlikely to find all of them in stock at the same time. The models accept the status quo and give no incentive or mechanism to find improvements. 3

4 Limitations of Independent Demand Independent demand methods are very good at dealing with any problems of inventory control, but they do have weaknesses. One of the most widely used is material requirements planning (MRP). This is a dependent demand method that is useful when demands for materials are related through a production plan. Approach of Material Requirements Planning Material Requirements Planning (MRP) takes a master schedule to design a detailed timetable for ordering materials. The timetable shows: Number of units of an item made (per day, week, month) A list of the materials needed for each unit The supply for materials The objective of the timetables is: To show when materials are needed To show when bought in materials should be ordered To schedule internal production The MRP looks at the requirements for each day to calculate the volume and mix needed for production and meet the delivery date of the finished goods with the customer. 4

5 Stock Level without MRP Stock level Normal Stock Level Production Time Stock Level with MRP Stock level Normal Stock Level Production Time 5

6 MRP Procedure Three main sources: Master Schedule, BOM and Inventory Records. a) Master Schedule: number of units of a product to be made in each period. (Product = Finished Good) Example: We have 2 types of shampoo, Apple Blossom and Fragrant Lemon, and each comes in 3 sizes 100ml, 250ml and 500ml. Our product range is: MRP Procedure B) Bill of Materials (BOM): Is a list where all the materials needed to make a product are shown according to the order in which materials are used. Example: There is one base shampoo, two fragrances, three bottle sizes and six labels. The 100ml and 250ml bottles are fitted with a flip top cap, and the 500ml bottle has a screw cap. The 100ml bottles are packed 48 to a small carton, the 250ml is packed 48 in a large carton and the 500ml uses the same carton but 24 to a carton. Two of the bottle labels are pasted on the carton, one on each end. 6

7 MRP Procedure Item master list for the BOM BOM This is a typical structure of a single level bill of materials, describing the relationship between products and components 7

8 MRP Procedure The quantities to order and when the orders should arrive The MRP can explode the master schedule using the bill of materials to give details of the materials needed. These are the gross requirements, which doesn t consider the materials that may be already on stock or in transit. Gross Requirements: (number of units made) x (amount of material for each unit) Net Requirements: Gross requirements Inventory OH Transit To find the time to place the orders. Need to know the lead time and the transit time of each supplier. And relevant information such as: minimum order sizes, set up costs, discounts, packaging information, and so on. 8

9 MRP Procedure Summary Material Requirement Planning uses a bill of material to explode a master schedule and find the gross requirements for materials needed to support production. Information about current stocks, orders outstanding, reserved stocks, etc. are then used to find order quantities. Lead times are used to time phase these orders so that materials arrive in time for use. The resulting stocks are matched directly to production plans. Benefits & Problems with MRP MRP Benefits The wealth of information that it collects, analyses and distributes. Main inputs: master schedule, BOM, inventory records and any other relevant information. Main outputs: a timetable for material orders, for operations, changes to previous orders, performance reports, planning reports, records of inventory records 9

10 Timetable for Material Orders MRP Benefits It relates stocks to planned operations (link between demand for products and the supply of materials): Materials supply is linked directly to known demand. Lower stock levels, with savings in capital, space, etc. Higher stock turn-over. Better customer service with no delays caused by shortages of materials. Higher utilization of facilities as materials are always available when needed. Less time spent on expediting and emergency orders. MRP schedules can be used for short term planning. Assigns priorities for jobs supplying materials. Encourages better planning. 10

11 MRP Problems Reduced flexibility to deal with changes. Needs a lot of detailed and reliable information. Involves a lot of data manipulation. Systems can become very complex. Assumes that lead times are constant and independent of the quantities ordered. Ignores the order in which materials are really made and assumes that they are made in the order specified by the BOM. Using MRP to schedule the production of parts can give poor results. The lot sizes suggested by MRP can be inefficient. MRP may not recognize capacity and other constraints. Can be expensive and time consuming to implement. Adjusting MRP Schedules Batching orders In order to save costs when ordering the materials to cover the net requirements, it is convenient to combine the small orders into larger batches. There are four approaches of batching or lot sizing: A) Lot for lot B) Fixed order quantity C) Periodic Orders D) Batching rules 11

12 Adjusting MRP Schedules A. Lot for lot: where you order exactly the net requirement suggested by MRP for each period. B. Fixed order quantity: where you find an order size that is convenient, and always order this same amount. (i.e., truckload, container load, and economic order quantity, or some other convenient size). C. Periodic Orders: where you combine the net requirements over some fixed number of periods, and place regular orders for different quantities. D. Batching Rules: use some specific procedure to calculate the best pattern of orders. Typically they look for the combination of orders that gives the minimum overall cost. Manufacturing Resource Planning Material Requirement Planning (MRP) gives schedules for the arrival of materials needed by operations, and closed loop MRP makes sure that there is enough capacity to supply these materials. But materials are only one resource. Organizations have to schedule people, equipment, facilities, finances, logistics and other resources. Eventually we would have a completely integrated system that would use the master schedule as the basis for planning all the activities within an organization. This is the aim of manufacturing resource planning or MRPII. MRP II gives an integrated system for synchronizing all functions within an organization. It connects schedules for all activities back to the master schedule. The most serious problem with MRP II is the difficulty of getting complete integration of all functions and systems. 12