90 drawer subassemblies are currently in hand for requirement in first 3 week.
Ending balance on hand = beginning BOH + scheduled receipt – gross requirement.
In week 4 negative inventory balance indicates a net requirement for drawer subassemblies.
The net requirements will trigger planned-order releases for more drawer subassemblies in earlier period.
Lot for lot method – generating the planned quantities in each period value by value directly from the net requirements in subsequent period, with no economic batching of orders, is called “the lot for lot method.
Time phasing – the process of subtracting an item's lead time from its due date to determine when an order should be released. Time-phasing coordinates the quantity of parts and components held in inventory with assemble or final production needs as determined by the MPS.
Planned order releases at higher levels generate gross requirements at lower levels.
Inventories of higher level subassemblies already include the necessary lower level components, and this fact is automatically allowed for by the net requirements calculation.
Regeneration vs. net change
Complete replanning of requirements and update of inventory status for all items
High data processing efficiency
Usually initiated by weekly update of master schedule
Daily update based on inventory transactions
More responsive to changing conditions
Requires more discipline in file maintenance
Manufacturing Resource Planning ( MRP II )
Manufacturing Resource Planning ( MRP II ) is defined as a method for the effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units, financial planning in dollars, and has a simulation capability to answer "what-if" questions and extension of closed-loop MRP.
Business Planning Sales Planning Production Planning Resources OK? Master Scheduling Material Planning Capacity Planning Planning OK? Performance Measurement Shop Floor Control Purchasing Objectives Demands Routing Inventory Status Bills of Material Products Materials Capacity Parts Hours Accountability Objectives Top Management Planning OMP Operations Management Execution Yes No No Yes F E E D B A C K
A highly coordinated processing system in which goods
move through the system, and services are performed,
just as they are needed.
In short, the just-in-time inventory system is all about
having “the right material, at the right time, at the right
place, and in the right quantity ” without the safety net of
Inventory, the implications of which are broad for the
History of JIT
The technique was first used by the Ford Motor company as described explicitly by Henry Ford’s My Life and Work (1922)
The technique was subsequently adopted and publicised by Toyota Motor Corporation of Japan as part of its Toyota Production System (TPS).
Benefits of JIT
The benefits of JIT are listed below.
Lower stock holding means a reduction in storage space which saves rent and insurance costs
As stock is only obtained when it is needed, less working capital is tied up in stock
There is less likelihood of stock perishing, becoming obsolete or out of date
Avoids the build-up of unsold finished product that can occur with sudden changes in demand
Less time is spent on checking and re-working the product of others as the emphasis is on getting the work right first time
Problems of JIT
There is little room for mistakes as minimal stock is kept for re-working faulty product.
Production is very reliant on suppliers and if stock is not delivered on time, the whole production schedule can be delayed .
There is no spare finished product available to meet unexpected orders, because all product is made to meet actual orders – however, JIT is a very responsive method of production.
MRP vs. JIT
For a company which is small and just starting up I feel an MRP ordering system would be better suited – if you implemented JIT then as a small company you would be trying to break into a market, if the JIT system goes wrong (as I am sure we all agree this is very risky) then you’ll be un-able to get your product on the shelves for customers to buy and if this happened on a regular occasion then your reputation from consumers won’t be good – which is critical from a new companies point of view.
On the other hand – being a large reputable company with a solid reputation and brand image maybe the JIT system should be implemented as this type of company will be able to invest at making this system a success, as JIT dramatically reduces cost and waste these savings will influence the price of the product in order to compete with other competitors.
In the era of computer and IT, it is necessary to use new technologies for fester growing organization. Any company wants to lead in the competetitive market by introducing qualitative product with in a short period of time. Like that in manufacturing organization MRP system helps to reduce the manufacturing time of a product by insuring the availability of materials for product assembly in the necessary quantities at the required time. It also help to reduce raw material purchasing ,purchases parts & working process inventory. So MRP uses reducing inventory cost, reducing completion time of manufacturing with maintaining quality. It provides customer, a greater return value of their money.