In this chapter, the following content will be discussed: ABC controls, ABC analysis, records accuracy, cycle counting, independent vs. dependent demand, managing inventory in the face of uncertainity.
LECTURE 22 LSM733-PRODUCTION OPERATIONS MANAGEMENT By: OSMAN BIN SAIF Summary of last Session Chapter: Aggregate Planning ỵ Case Study Frito Lays ỵ Methods for Aggregate Planning ỵ ỵ ỵ Graphical Methods Mathematical Approaches Comparison of Aggregate Planning Methods þ Summary of last Session (Contd.) Aggregate Planning in Services þ þ þ þ þ þ Restaurants Hospitals National Chains of Small Service Firms Miscellaneous Services Airline Industry Yield Management Agenda for this Session CHAPTER : MATERIAL REQUIREMENT PLANNING þ Global Company Profile: Wheeled Coach þ Dependent Demand þ Dependent Inventory Model Requirements ỵ Master Production Schedule ỵ Bills of Material ỵ Accurate Inventory Records ỵ Purchase Orders Outstanding þ Lead Times for Components Agenda for this Session (Contd.) ỵ ỵ MRP Structure MRP Management ỵ ỵ MRP Dynamics MRP and JIT CHAPTER : MATERIAL REQUIREMENT PLANNING Wheeled Coach ỵ ỵ ỵ Largest manufacturer of ambulances in the world International competitor 12 major ambulance designs ỵ þ þ 18,000 different inventory items 6,000 manufactured parts 12,000 purchased parts Wheeled Coach ỵ Four Key Tasks ỵ þ þ þ Material plan must meet both the requirements of the master schedule and the capabilities of the production facility Plan must be executed as designed Minimize inventory investment Maintain excellent record integrity Benefits of MRP Better response to customer orders Faster response to market changes Improved utilization of facilities and labor Reduced inventory levels Dependent Demand ỵ ỵ ỵ ỵ The demand for one item is related to the demand for another item Given a quantity for the end item, the demand for all parts and components can be calculated In general, used whenever a schedule can be established for an item MRP is the common technique 10 Gross Requirements Plan Week Required date Order release date 50 Required date Order release date 150 Required date Order release date 200 Required date Order release date 300 200 600 300 600 50 200 Lead Time week weeks 150 week 300 weeks 300 300 Required date Order release date 100 100 Required date Order release date Required date Order release date weeks 200 week 300 weeks 33 Table 14.3 Net Requirements Plan 34 Net Requirements Plan 35 Determining Net Requirements ỵ ỵ ỵ Starts with a production schedule for the end item – 50 units of Item A in week Because there are 10 Item As on hand, only 40 are actually required – (net requirement) = (gross requirement - on- hand inventory) The planned order receipt for Item A in week is 40 units – 40 = 50 - 10 36 Determining Net Requirements ỵ ỵ þ þ Following the lead time offset procedure, the planned order release for Item A is now 40 units in week The gross requirement for Item B is now 80 units in week There are 15 units of Item B on hand, so the net requirement is 65 units in week A planned order receipt of 65 units in week generates a planned order release of 65 units in week 37 Determining Net Requirements ỵ þ þ A planned order receipt of 65 units in week generates a planned order release of 65 units in week The on-hand inventory record for Item B is updated to reflect the use of the 15 items in inventory and shows no on-hand inventory in week This is referred to as the Gross-to-Net calculation and is the third basic function of the MRP process 38 Net Requirements Plan The logic of net requirements Gross requirements + Allocations Total requirements – On Scheduled + hand receipts Available inventory = Net requirements 39 Gross Requirements Schedule Figure 14.6 S A B B C Lead time = for A Master schedule for A Periods 40 Periods Gross requirements: B 10 11 50 15 10 40+10 =50 Master schedule for B sold directly Lead time = for S Master schedule for S C 40 10 11 12 13 40 50 20 20 15+30 =45 30 10 10 Therefore, these are the gross requirements for B 40 MRP Planning Sheet Figure 14.7 41 Safety Stock ỵ ỵ ỵ ỵ BOMs, inventory records, purchase and production quantities may not be perfect Consideration of safety stock may be prudent Should be minimized and ultimately eliminated Typically built into projected on-hand inventory 42 MRP Management ỵ ỵ ỵ ỵ ỵ MRP is a dynamic system Facilitates replanning when changes occur System nervousness can result from too many changes Time fences put limits on replanning Pegging links each item to its parent allowing effective analysis of changes 43 MRP and JIT ỵ ỵ ỵ MRP is a planning system that does not detailed scheduling MRP requires fixed lead times which might actually vary with batch size JIT excels at rapidly moving small batches of material through the system 44 Summary of this Session CHAPTER : MATERIAL REQUIREMENT PLANNING ỵ Global Company Profile: Wheeled Coach þ Dependent Demand þ Dependent Inventory Model Requirements þ Master Production Schedule ỵ Bills of Material ỵ Accurate Inventory Records þ Purchase Orders Outstanding þ Lead Times for Components 45 Summary of this Session (Contd.) ỵ ỵ MRP Structure MRP Management ỵ ỵ MRP Dynamics MRP and JIT 46 THANK YOU 47 ... Manpower planning Aggregate production plan Master production schedule Engineering Design completion Change production plan? 14 Figure 14.1 The Planning Process Master production schedule Change... amplifier to be produced 240-watt amplifier 150-watt amplifier 75-watt amplifier January 1,500 100 February 1,200 100 500 100 500 100 450 300 450 100 Figure 14.2 16 Master Production Schedule (MPS)... in week The on-hand inventory record for Item B is updated to reflect the use of the 15 items in inventory and shows no on-hand inventory in week This is referred to as the Gross-to-Net calculation