Companies need to control the types and quantities of materials they purchase, plan which products are to be produced and in what quantities and ensure that they are able to meet current and future customer demand, all at the lowest possible cost.
*Computerized Inventory Control*Production Planning System*Management Information System*Manufacturing Control System *
*This is the most comprehensive approach to manufacturing inventory and other dependents which demand an efficient inventory management system. *
*The MRP system determines item-by-item, what is to be processed and when, as well as what is to be manufactured when.*This is based on order priorities and available capacities.
An MRP system is intended to simultaneouslymeet three objectives:* Ensure materials and products are available for production and delivery to customers.*Maintain the lowest possible level of inventory.*Plan manufacturing activities, delivery schedules and purchasing activities
*Forecasting*Order, Planning and Control*Priority Planning and Control*Planning Capacity Requirement and Development of Broad Business Plans *
* Manufacturing organizations, whatever their products, face the same daily practicalproblem - that customers want products to be available in a shorter time than it takes to make them. This means that some level of planning is required.
Making a bad decision in any of these areas will make thecompany lose money. A few examples are given below:* If a company purchases insufficient quantities of an item used in manufacturing, or the wrong item, they may be unable to meet contracts to supply products by the agreed date.* If a company purchases excessive quantities of an item, money is being wasted - the excess quantity ties up cash while it remains as stock and may never even be used at all. This is a particularly severe problem for food manufacturers and companies with very short product life cycles. However, some purchased items will have a minimum quantity that must be met, therefore, purchasing excess is necessary.* Beginning production of an order at the wrong time can cause customer deadlines to be missed.
Independent demand: Demand for final products. Dependent demand: Demand fort items that are subassemblies or component parts to be used in production of finished goods. A Independent Demand B(4) C(2) Dependent Demand D(2) E(1) D(3) F(2) *Independent demand is uncertain.Dependent demand is certain.
** Reduce Inventory Levels * Reduce Purchasing Cost* Reduce Component * Improve Production Shortages Schedules* Improve Shipping * Reduce Manufacturing Cost Performance * Reduce Lead Times* Improve Customer Service * Less Scrap and Rework* Improve Productivity * Higher Production Quality* Simplified and Accurate Scheduling
** Improve Communication * Reduce Overtime* Improve Plant Efficiency * Improve Supply Schedules* Reduce Freight Cost * Improve Calculation of* Reduction in Excess Material Requirements Inventory * Improve Competitive Position
*Identifying Requirements*Running MRP – Creating theSuggestions*Firming the Suggestions *
**Quantity on Hand*Quantity on Open Purchase Order*Quantity in/or Planned for Manufacturing*Quantity Committed to Existing Orders*Quantity Forecasted
* Master Product Inventory Production Structure File Master File Schedule Material Requirements Planning Manufacturing Purchase Various Reports Orders Orders
**Product Structure File*Master Production Schedule*Inventory Master File 18
*Bill of Materials: * It is a materials list that provides information useful to reconstruct the manufacturing process. It is the master product definition that contains “as designed” information. * 19
*Schedule of Finished Products*Represents Production, not Demand*Combination of Customer Orders and Demand Forecasts*What Needs to be Produced * 21
** Schedules the Production of all items using an MRP Matrix MRP Matrix Item: Low-Level Code: Lot Size: Lead Time: PD 1 2 3 4 5 Gross Requirements Scheduled Receipts Projected on Hand Net Requirements Planned Order Receipts Planned Order Releases
**Item – name or number for the item being scheduled*Low-Level Code – the lowest level of the item on the product structure file*Lot Size – order multiples of quantity*Lead Time – the time from when an order is placed to when it is received*PD – Past Due Time Bucket, orders behind schedule
**Gross Requirements – demand for an item by time period*Scheduled Receipts – material already ordered*Projected on Hand – expected ending inventory*Net Requirements – number of items to be provided and when*Planned Order Receipts – net requirements adjusted for lot size*Planned Order Releases – planned order receipts offset for lead times
**Gross requirements: (Forecasted)Demand period by period*Net requirements(t) =Gross requirements(t)-Projected inventory(t-1) -Scheduled receipt(t)*If Net requirement(t) > 0 set Planned order receipts(t)>=Net requirement(t) 26
*Planned-order receipts is the production planned*Projected inventory(t) =Projected inventory(t-1)+Scheduled receipt(t) +Planned order receipts(t)-Gross requirements(t)*Planned order release(t-LT)=Planned-order receipts(t)
*Periods 0 1 2 3Gross requirements 6 11 7 InputsScheduled receipts 2 3 0Projected on hand 10 6 0 0Net requirements 0 2 7 OutputsPlanned order receipts 2 7Planned order releases 2 7
**Improved Business Results*Improved Manufacturing Results*More Accurate And Timely Information*Less Inventory*Less Materials Obsolescence*Time Phased Ordering Of Materials*Higher Reliability*More Responsiveness To Market Demand*Reduced Production Cost
* Increase In Material Acquisition Cost* Higher Transportation Costs And Higher Unit Cost* Potential Hazard Of A Production Slowdown Or Shutdown* Use Of Standardized Software Packages* Does not Take Into Account Plant Capacity And Distribution Capacity* High Stock-Out Costs. *
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