One thought to be remembered from Collins is the emphasis on maintenance of record integrity. Error rates as low as 2 - 4 percent may lead to instability in an MRP system.
We start this chapter by linking Dependent Demand Inventory back to Independent Demand Inventory. You might note to students that independent demand is created external to the company, dependent demand, internally.
You might add to this list that the operations manager must know that inventory records, bill-of-materials, etc., are accurate.
It is probably best to walk the students through each step of this process. For most products we can create a master production schedule. And, once we have a master production schedule, MRP is the next logical step.
Students should be asked to explain why the focus of the Master Production Schedule changes depending upon the nature of the production process.
A bicycle provides a good example for deriving a bill-of-material. Most students remember enough of the parts of a bicycle to develop several levels.
The bicycle is simple, yet complex enough to be used for a special bills example also. Modules - pair of wheels; gearshift & cables; multiple sprockets; etc. Etc. The following slide outlines such an example.
This slide has been animated to demonstrate backward scheduling - item A is scheduled first, then the remaining items are scheduled so as to produce A at the proper time.
A point to stress here is that while MRP is heavily computer-based, it is more than simply a computer program.
It is important to emphasize the need for accurate records - both bill-of-material and inventory.
While MRP certainly can produce these benefits, it is useful to discuss the problems faced in establishing an MRP system. A number of companies have given up on the task - the necessary transformation of old processes has simply proven too difficult.
Emphasize that this slide illustrates the overall technological structure of MRP - people and process are also extremely important in its actual success.
This slide illustrates the fit of MRP into the overall production planning process. It would be helpful to walk through the actual relationship with your students.
It is helpful here to briefly review the “contents” of each of the boxes - i.e., what is contained in an Item Master file, what purchasing data is expected, etc.
This slide is also animated in an attempt to demonstrate the “building” of the master schedule.
This slide does merit discussion - especially the items about system nervousness and the manager’s reaction to change.
What does one gain by implementing one of the extensions of MRP?
It usually seems to be helpful to discuss the overall concept of load leveling before tackling load leveling and MRP.
Have the students consider what modifications may be necessary for MRP to be valuable in services.
Material plan must meet both the requirements of the master schedule and the capabilities of the production facility
Plan must be executed as designed
Effective “time-phased” deliveries, consignments, and constant review of purchase methods
Maintenance of record integrity
Inventory Process stage Demand Type Number & Value Other Raw Material WIP Finished Goods Independent Dependent A Items B Items C Items Maintenance Dependent Operating
Item Materials With Independent Demand Materials With Dependent Demand Demand Source Company Customers Parent Items Material Type Finished Goods WIP & Raw Materials Method of Estimating Demand Forecast & Booked Customer Orders Calculated Planning Method EOQ & ROP MRP
Aggregate Production Plan Marketing Customer Demand Engineering Design Completion Management Return on Investment Capital Human Resources Manpower Planning Procurement Supplier Performance Finance Cash Flow Production Capacity Inventory
Effective use of dependent demand inventory models requires that the operations manager know the:
master production schedule
specifications or bills-of-material
purchase orders outstanding
Production Plan Execute Material Plans Master Production Schedule Material Requirements Plan Capacity Requirements Plan Execute Capacity Plans Realistic?? No Yes
Make to Order (Process Focus) Assemble to Order or Forecast (Repetitive) Stock to Forecast (Product Focus) Schedule finished product Steel, Beer, Bread Light bulbs, Paper Print shop Machine shop Fine dining restaurant Examples: Number of end items Number of inputs Typical focus of the master production schedule Schedule orders Schedule modules Motorcycles, autos, TVs, fast-food restaurant
Increased customer satisfaction due to meeting delivery schedules
Faster response to market changes
Improved labor & equipment utilization
Better inventory planning & scheduling
Reduced inventory levels without reduced customer service
MRP by period report MRP by date report Planned orders report Purchase requirements Exception reports MRP Programs Master Production Schedule BOM Lead Times (Item Master File) (Bill-of-Material) Inventory Data Purchasing data
Example Item/Week Oct 3 Oct 10 Oct 17 Oct 24 Drills 300 200 310 300 Saws 300 450 310 330
Therefore, these are the gross requirements for B 10 40+10 = 50 40 50 20 15+30 = 45 1 2 3 4 5 6 7 8 Periods Gross requirements: B Periods 10 10 1 2 3 Master schedule for S sold directly 40 50 15 A C B 5 6 7 8 9 10 11 Lead time = 4 for A Master schedule for A 40 20 30 S B C 8 9 10 12 11 13 Lead time = 6 for S Master schedule for S