MATERIAL REQUIREMENTS PLANNING (MRP)

  • Nature of demand: independent demand – must be forecasted, and dependent demand which should be calculated based on BOM and the independent demand forecast
  • MRP: a system to calculate requirements for dependent demand items. MRP is driven by the MPS. It is concerned with the component needed to make the end items. MRP drive PAC (production activity control) and purchasing. Two major objectives of MRP are (1) to determine the materials required and (2) to establish and maintain priorities
  • Input to the MRP process (1) MPS (2) Inventory status (3) BOM (4) planning data (5) computer
  • BOM lists all the components needed to make one assembly. Each part has a unique number.
  • Where-used lists all the parents in which a component is used, whether there is a demand for the parent or not. It may be single level or full level.
  • Pegging shows the parents creating the demand for the components, the quantities needed, and when needed. It uses where-used logic to identify current resources of demand.
  • Material planner works with 3 types of orders (1) planned order (2) released order (3) firm planned orders

 

CAPACITY MANAGEMENT AND PRODUCTION ACTIVITIY CONTROL

  • Capacity management is planning and controlling resources needed to meet production objectives.
  • Planning determines resources needed to meet priority plan, selecting methods to make that capacity available, while controlling is monitoring output, comparing it with the plan, and take corrective action.
  • Available capacity can be calculated by identifying (1) available time (2) utilization (3) efficiency
  • Available time depends on the number of machines, the number of workers, and operation hour
  • Utilization is the % of time that the work centre is actually active
  • Efficiency is a measure (as %) of the actual output compared with standard expected output
  • Rated capacity is a measure of output that can be expected for a work centre
  • Demonstrated capacity is proven capacity calculated from actual performance data.
  • The first step in capacity requirement planning is to determine when orders should be started and completed in each work centre

Need to know

Take information from

Open shop orders

Planned order released

Where work is done

Time needed (Standard hours)

Lead times

Work centre capacity

Open order file

MRP

Routing file

Routing file

Routing file or work centre file

Work centre file
  • Manufacturing lead time includes
  • Queue   Time waiting before operation begins
  • Setup    Time getting ready for operation
  • Run        Time performing operation
  • Wait       Time waiting after operation ends
  • Move     Time physically moving between operations
    • Operation time = set up time + run time
    • Load profile shows the capacity requirement based on planned and released orders for each time period in the plan.
    • Production Activity Control (PAC) has 4 objectives (1) execute MPR and MRP (2) Optimize use of resources (3) minimize WIP (4) maintain customer services
    • PAC functions include plan, execute and control.
    • Scheduling and loading techniques include (1) forward scheduling (2) backward scheduling (3) infinite loading (4) finite loading
    • Bottlenecks are defined as a facility, function, department, or resource whose capacity is less than the demand placed on it.
    • Dispatching rules includes (1) FCFS (2) EDD- Earliest job Due date (3) ODD – Earliest operation due date (4) SPT – shortest process time (5) CR – critical ratio

 

INVENTORY FUNDAMENTAL

  • Inventory is those stock or items used to support production (raw materials and WIP process items), supporting activities (maintenance, repair and operating supplies), and customer service (FG and spare parts)
  • Reason for carrying inventory beyond current needs is when it costs less to carry it than not carry it.
  • Decouples: demand from supply, customer demand from FG, FG from component availability, Output of one operation from output of preceding operation, materials to begin production from suppliers of material
  • Functions of inventory includes (1) anticipate inventory (2) fluctuation inventory – SS (3) lot-size inventory (4) transportation inventory or pipeline inventory (5) hedge inventory
  • Inventory objectives include (1) best customer service (2) low-cost plant operation (3) minimum inventory investment
  • Inventory costs include
  • items cost                               product, transportation, custom duties, insurance, direct resources 
  • carrying cost          capital cost, storage cost, risk costs
  • ordering cost          production control cost, setup and teardown cost, lost capacity cost
  • stock-out cost        BO cost, lost sales costs, lost customer cost
  • capacity-related cost             overtime, hiring, layoff, training, shift premiums
    • Accounting systems classify activities of a company into five types of accounts
    • Asset, liabilities, equity          à balance sheet accounts
    • Revenue, expense                à income statement accounts