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VIDEO CASE: MRP AT WHEELED COACH AMBULANCES

This video looks at the benefits of MRP at Wheeled Coach, the world’s largest
manufacturer of ambulances. We suggest you follow these four steps:

1. Read the case study that follows.

2. View the video tour of Wheeled Coach that addresses its MRP issues, then view the
video clip containing the authors’ observations.

3. If you wish to have further background, reread the material on MRP in Chapter 14.

4. Answer the questions about the case, and if your instructor wishes, e-mail your
answers to him or her.

Chapter 14 deals with material requirements planning (MRP) systems. MRP systems
are the preferred method for managing dependent inventories. This means that when
demand is known, firms, including Wheeled Coach, use MRP. Wheeled Coach builds
thousands of different and constantly changing configurations of its products. The
custom nature of the business means lots of options and special designs — and a
potential scheduling and inventory nightmare. With IBM’s MRP software, called
MAPICS, on an IBM AS/400 computer, Wheeled Coach addressed such problems and
succeeded in solving many of them.

MRP also has application in many other businesses including restaurants, hospitals,
and floral wholesalers — provided the following 5 pieces of information are
assembled.

   1. Master production schedule. The master production schedule shows what is to
      be produced and when. It is not a forecast; it is a schedule to be met. Master
      production schedules are often presented in terms of what is to be produced
      each week, but they can be done in terms of months or days.
   2. Bill-of-material (BOM). Bill-of-materials, which may take the form of formulas
      or menus, state the quantities of what is needed to produce the product.
   3. MRP Inventory availability. Accurate inventory is necessary so existing
      inventory is not duplicated and potential shortages are known.
   4. Purchase orders outstanding (what is on order and when it will arrive).
      Purchase orders outstanding tell the system what material is expected and
      when.
   5. Lead time (how long will it take to make each item). Lead-time for each phase
      of production or assembly is necessary to make the schedule for component
      parts.

All five elements of the input information are critical to make an MRP system a
success. Many MRP systems are not a success because one or more data sources are
not reliable and accurate.
The flow of information for an MRP system looks like the figure shown below.
The experience of Wheeled Coach is not unusual. Once computerized bills-of-material
were implemented, a ‘where used’ report determined the inventory items that should
be in inventory. Many items in inventory were not listed on any of the BOMs. This led
to a double-checking of the BOMs. With renewed BOM accuracy, effort returned to
assuring inventory accuracy. Some items were in inventory because of customer
changes in specifications after orders were placed. This inventory excess occurs
because many items have a longer lead-time than the 17 days required for ambulance
production at Wheeled Coach. Plans were made for eliminating the excess inventory.
ABC analysis and cycle counting were implemented to increase inventory accuracy.

With added emphasis on BOM accuracy, the frequency of Engineering Change Notices
(ECNs) at Wheeled Coach was reduced. Then the focus moved to the purchasing
system and improvement in order quantities and part number accuracy. Some of the
excess inventory items were the result of the rapid changes in ambulance technology.
Discussion Questions
1. Why is accurate inventory such an important issue at Wheeled Coach?

2. What kind of plan would you suggest for dealing with excess inventory at Wheeled
Coach?

3. Be specific in your suggestions for reducing inventory and how to implement them

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Video Case 6 2

  • 1. VIDEO CASE: MRP AT WHEELED COACH AMBULANCES This video looks at the benefits of MRP at Wheeled Coach, the world’s largest manufacturer of ambulances. We suggest you follow these four steps: 1. Read the case study that follows. 2. View the video tour of Wheeled Coach that addresses its MRP issues, then view the video clip containing the authors’ observations. 3. If you wish to have further background, reread the material on MRP in Chapter 14. 4. Answer the questions about the case, and if your instructor wishes, e-mail your answers to him or her. Chapter 14 deals with material requirements planning (MRP) systems. MRP systems are the preferred method for managing dependent inventories. This means that when demand is known, firms, including Wheeled Coach, use MRP. Wheeled Coach builds thousands of different and constantly changing configurations of its products. The custom nature of the business means lots of options and special designs — and a potential scheduling and inventory nightmare. With IBM’s MRP software, called MAPICS, on an IBM AS/400 computer, Wheeled Coach addressed such problems and succeeded in solving many of them. MRP also has application in many other businesses including restaurants, hospitals, and floral wholesalers — provided the following 5 pieces of information are assembled. 1. Master production schedule. The master production schedule shows what is to be produced and when. It is not a forecast; it is a schedule to be met. Master production schedules are often presented in terms of what is to be produced each week, but they can be done in terms of months or days. 2. Bill-of-material (BOM). Bill-of-materials, which may take the form of formulas or menus, state the quantities of what is needed to produce the product. 3. MRP Inventory availability. Accurate inventory is necessary so existing inventory is not duplicated and potential shortages are known. 4. Purchase orders outstanding (what is on order and when it will arrive). Purchase orders outstanding tell the system what material is expected and when. 5. Lead time (how long will it take to make each item). Lead-time for each phase of production or assembly is necessary to make the schedule for component parts. All five elements of the input information are critical to make an MRP system a success. Many MRP systems are not a success because one or more data sources are not reliable and accurate. The flow of information for an MRP system looks like the figure shown below.
  • 2. The experience of Wheeled Coach is not unusual. Once computerized bills-of-material were implemented, a ‘where used’ report determined the inventory items that should be in inventory. Many items in inventory were not listed on any of the BOMs. This led to a double-checking of the BOMs. With renewed BOM accuracy, effort returned to assuring inventory accuracy. Some items were in inventory because of customer changes in specifications after orders were placed. This inventory excess occurs because many items have a longer lead-time than the 17 days required for ambulance production at Wheeled Coach. Plans were made for eliminating the excess inventory. ABC analysis and cycle counting were implemented to increase inventory accuracy. With added emphasis on BOM accuracy, the frequency of Engineering Change Notices (ECNs) at Wheeled Coach was reduced. Then the focus moved to the purchasing system and improvement in order quantities and part number accuracy. Some of the excess inventory items were the result of the rapid changes in ambulance technology.
  • 3. Discussion Questions 1. Why is accurate inventory such an important issue at Wheeled Coach? 2. What kind of plan would you suggest for dealing with excess inventory at Wheeled Coach? 3. Be specific in your suggestions for reducing inventory and how to implement them