Inputs and Outputs to Aggregate Production Planning Capacity

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Inputs and Outputs to Aggregate Production Planning Capacity Constraints Demand Forecasts Size of Workforce

Inputs and Outputs to Aggregate Production Planning Capacity Constraints Demand Forecasts Size of Workforce OMGT 6743 Strategic Objectives Aggregate Production Planning Production per month (in units or $) Inventory Levels Company Policies Financial Constraints Units or dollars subcontracted, backordered, or lost 1

Material Requirements Planning (MRP) • A computerized inventory control & production planning system •

Material Requirements Planning (MRP) • A computerized inventory control & production planning system • Schedules component items when they are needed - no earlier and no later OMGT 6743 2

When to Use MRP • Dependent and discrete items • Complex products • Job

When to Use MRP • Dependent and discrete items • Complex products • Job shop production • Assemble-to-order environments OMGT 6743 3

Demand Types Two Types of Demand: Independent • Not related to the demand for

Demand Types Two Types of Demand: Independent • Not related to the demand for any other product & must be forecast • MPS items are independent demand items Dependent • Directly related to other items or end items • Such demand should be calculated should not be forecast OMGT 6743 4

MRP Inputs & Outputs Master Production Schedule Product Structure File Material Requirements Planning Inventory

MRP Inputs & Outputs Master Production Schedule Product Structure File Material Requirements Planning Inventory Master File Planned Order Releases Work Orders OMGT 6743 Purchase Orders Rescheduling Notices 5

MRP Inputs • Master production schedule • Product structure file • Inventory master file

MRP Inputs • Master production schedule • Product structure file • Inventory master file OMGT 6743 6

Master Production Schedule • Drives MRP process with a schedule of finished products •

Master Production Schedule • Drives MRP process with a schedule of finished products • Quantities represent production not demand • Quantities may consist of a combination of customer orders & demand forecasts • Quantities represent what needs to be produced, not what can be produced OMGT 6743 7

Product Structure Tree Clipboard Clip Assembly (10) Rivet (2) Top Clip (1) Bottom Clip

Product Structure Tree Clipboard Clip Assembly (10) Rivet (2) Top Clip (1) Bottom Clip (1) Pivot (1) Spring (1) Sheet Metal (8 in 2) Spring Steel (10 in. ) Iron Rod (3 in. ) OMGT 6743 Level 0 Board (1) Pressboard (1) Level 1 Finish Level 2 (2 oz. ) Level 3 8

Indented Bill of Material LEVEL 0 ----1 ----2 ----3 --2 ----3 -1 ----2 -OMGT

Indented Bill of Material LEVEL 0 ----1 ----2 ----3 --2 ----3 -1 ----2 -OMGT 6743 ITEM Clipboard Clip Assembly Top Clip Sheet Metal Bottom Clip Sheet Metal Pivot Iron Rod Spring Steel Rivet Board Press Board Finish Unit of Measure Ea Ea Ea In 2 Ea In Ea Ea Ea Oz Quantity 1 1 1 8 1 3 1 10 2 1 1 2 9

Specialized BOMS • Phantom bills • transient subassemblies • never stocked • immediately consumed

Specialized BOMS • Phantom bills • transient subassemblies • never stocked • immediately consumed in next stage • K-bills • group small, loose parts under pseudoitem # • reduces paperwork OMGT 6743 10

Specialized BOMS • Modular bills • product assembled from major subassemblies & customer options

Specialized BOMS • Modular bills • product assembled from major subassemblies & customer options • modular bill kept for each major subassembly • simplifies forecasting & planning • automobile example - 3 x 8 x 4 = 2, 304 configurations - 3 + 8 + 4 = 26 modular bills OMGT 6743 11

Inventory Master File Description Item no. Item type Prod/sales Value class Buyer/planner Vendor Phantom

Inventory Master File Description Item no. Item type Prod/sales Value class Buyer/planner Vendor Phantom code Unit price/cost Pegging OMGT 6743 Board 7341 Manuf. Ass’y B RSR 07142 N 1. 25 Y Inventory Policy Lead time Annual demand Holding cost Ordering/setup cost Safety stock Reorder point EOQ Minimum order qty Maximum order qty Multiple order qty 2 5, 000 1 50 25 39 316 100 500 12

Inventory Master File, Con’t. Physical Inventory On hand 100 Location W 142 On order

Inventory Master File, Con’t. Physical Inventory On hand 100 Location W 142 On order 50 Allocated 75 Cycle 3 Difference -2 OMGT 6743 YTD usage/sales MTD usage/sales YTD receipts MTD receipts Last receipt Last issue Codes Cost acct. Routing Engr Usage/Sales 1, 100 75 1, 200 0 8/25 10/5 00754 00326 07142 13

Inventory Accuracy 1. Maintain orderly stockrooms 2. Control access to stockrooms 3. Establish &

Inventory Accuracy 1. Maintain orderly stockrooms 2. Control access to stockrooms 3. Establish & enforce procedures for inventory withdrawal 4. Ensure prompt and accurate entry of inventory transactions 5. Take physical inventory count on a regular basis 6. Reconcile inventory discrepancies in a timely manner (use cycle counting) OMGT 6743 14

The MRP Matrix ITEM: Lot Size: LLC: LT: PD 1 2 3 4 5

The MRP Matrix ITEM: Lot Size: LLC: LT: PD 1 2 3 4 5 6 7 8 9 Gross Requirements Scheduled Receipts Projected On Hand Net Requirements Planned Order Receipts Planned Order Releases OMGT 6743 15

Parts Of MRP Matrix • Item name or number identifying scheduled item • LLC

Parts Of MRP Matrix • Item name or number identifying scheduled item • LLC low-level-code; lowest level at which item appears in a product structure • Lot size order multiples of this qty; can be min/max qty • LT (lead time)-time from order placement to receipt • PD (past-due)-orders behind schedule • Gross requirements-demand for item by time period OMGT 6743 16

Parts Of MRP Matrix • Scheduled receipts - quantity already on order & receipt

Parts Of MRP Matrix • Scheduled receipts - quantity already on order & receipt date - released orders become scheduled receipts • Projected on hand - expected on-hand inventory at end of period • Net requirements - net amount needed after on-hand adjustments • Planned order receipts - net requirements adjusted for lot-sizing • Planned order releases - planned order receipts offset by lead time OMGT 6743 17

MRP Example A LT=3 B (3) LT=4 C (2) LT=2 Item On Hand Scheduled

MRP Example A LT=3 B (3) LT=4 C (2) LT=2 Item On Hand Scheduled Receipts Lot Size MPS A 10 B C 5 140 OMGT 6743 0 1 100, period 8 0 1 --- 0 150 --- 18

MRP Matrices For A & B OMGT 6743 19

MRP Matrices For A & B OMGT 6743 19

MRP Matrices For C OMGT 6743 20

MRP Matrices For C OMGT 6743 20

Manufacturing Resource Planning (MRP II) • Extension of MRP • Plans all resources needed

Manufacturing Resource Planning (MRP II) • Extension of MRP • Plans all resources needed for running a business • Usually includes capacity planning, but • Has many different modules OMGT 6743 21

MRP II Modules Forecasting Customer order entry Production planning / master production scheduling Product

MRP II Modules Forecasting Customer order entry Production planning / master production scheduling Product structure / billof-material processor Inventory control OMGT 6743 Material requirements planning Capacity planning Shop floor control Purchasing Accounting Financial analysis 22

Capacity Requirements Planning (CRP) • Computerized system that projects loads from the planned order

Capacity Requirements Planning (CRP) • Computerized system that projects loads from the planned order releases of MRP • Creates load profile • Identifies underloads and overloads OMGT 6743 23

MRP II Diagram Business Plan Marketing Plan Financial Plan Production Plan No Feasible? Yes

MRP II Diagram Business Plan Marketing Plan Financial Plan Production Plan No Feasible? Yes OMGT 6743 more 24

Master production schedule Material requirements planning Feedback Capacity requirements planning No Feasible? Yes Purchase

Master production schedule Material requirements planning Feedback Capacity requirements planning No Feasible? Yes Purchase orders Work orders Inventory Shop floor control Manufacture OMGT 6743 MRP II Diagram 25

Problems with MRP • Material requirements plan is first; capacity is an afterthought •

Problems with MRP • Material requirements plan is first; capacity is an afterthought • MRP assumes fixed lead times • Excessive reporting requirements OMGT 6743 26

Using the Material Requirements Plan • Computer performs all calculations & creates planned order

Using the Material Requirements Plan • Computer performs all calculations & creates planned order releases, • Computer software can create exception messages & suggest types of action • Computer does not (usually) issue purchase or manufacturing orders or reschedule open orders • Therefore, a Planner is needed OMGT 6743 27

The Basic Responsibilities of a Planner • Launch (release) orders to purchasing or shop

The Basic Responsibilities of a Planner • Launch (release) orders to purchasing or shop floor • Reschedule due dates of open (existing) orders as required • Reconcile errors & try to find their cause • Address critical material shortages by expediting or re-planning • Coordinate w/other planners, master production schedulers, production activity control, & purchasing OMGT 6743 28

Prospects for MRP/MRP II • Coordinates strategy among different functional areas • Responds quickly

Prospects for MRP/MRP II • Coordinates strategy among different functional areas • Responds quickly to what-if? questions at various levels • BOM processors, purchase modules, & customer order entry are standard requirements for Manufacturing Information Systems • Monitors design & vendor quality, & customer service • Builds trust, teamwork, & better decisions • Cash-flow planning & profit/cost projections OMGT 6743 29

Advanced Planning & Control Systems • Enterprise Resource Planning (ERP) • updates MRP II

Advanced Planning & Control Systems • Enterprise Resource Planning (ERP) • updates MRP II with relational DBMS, GUI & client/server architecture; covers entire enterprise • Customer Resource Management (CRM) • links business planning & mgmt control systems • Customer-Oriented Manufacturing Management Systems (COMMS) • unites departments & suppliers around customer • multi-plant planning, multiple languages & currencies OMGT 6743 30

Hierarchical Planning Process Items Product lines or families Production Planning Capacity Planning Resource level

Hierarchical Planning Process Items Product lines or families Production Planning Capacity Planning Resource level Aggregate Production Plan Resource Requirements Plan Individual products Master Production Schedule Rough-Cut Capacity Plan Components Material Requirements Plan Capacity Requirements Plan All work centers Shop Floor Schedule Input/Output Control Individual machines Manufacturing operations OMGT 6743 Plants Critical work centers 31

The Alpha Beta Company A LT=3 C (3) LT=4 B LT=2 D (2) LT=2

The Alpha Beta Company A LT=3 C (3) LT=4 B LT=2 D (2) LT=2 D (3) LT=2 Item On Hand Scheduled Receipts Lot Size MPS A 10 B 5 0 1 100, period 8 0 1 200, period 6 C 140 0 150 --- D 200 0 250 --- OMGT 6743 32

MRP Matrices For A & B OMGT 6743 33

MRP Matrices For A & B OMGT 6743 33

MRP Matrices For C & D OMGT 6743 34

MRP Matrices For C & D OMGT 6743 34

Alpha Beta Planned Order Report Period 1 2 3 4 5 OMGT 6743 Item

Alpha Beta Planned Order Report Period 1 2 3 4 5 OMGT 6743 Item C D D B A Quantity 150 250 195 90 35