1) Ans

MRP Input and outputs

1)The Master Schedule

The master schedule is one of three primary inputs in MRP stating which end-items are to be
produced, when these are needed, and in what quantities. Normally, the master schedule is
formed after disaggregating the aggregate planning which consists of demand for groups of end-
items. Based on the customer orders, forecasts, and orders fromLearning from Manufacturing:
JIT and MRPinBuiltEnvironment Education

2)The Bill of Materials A bill of materials contains a listing of all of the assemblies,
subassemblies, parts, and raw materials that are needed to produce one unit of a finished product.
A product structure tree is useful in illustrating how the bill of materials is used to determine the
quantities of each oftheingredients (requirements) needed to obtain a desired number of end
items:

3) The Inventory Records

Inventory records include information on the status of each item by time period or time buckets.
This contains gross requirements, scheduled receipts, and expected amount onhand. It also
includes other details for each item, such as supplier, lead time, and lot sizepolicy. Changes due
to stock receipts and withdrawals, cancelled orders, and similar events are also recorded in this
file. MRP Output
The MRP system has the ability to provide management with a fairly broad range of outputs.
These are often classified as primary reports, which are the main reports, and secondary reports,
which are optional outputs.

Primary reports
1) Planned orders: indicating the amount and timing of future orders.
2) Order releases: authorising the execution of planned orders.
3) Changes: Revising planned orders, including changes of due dates or orderquantities and
cancellations of orders.

Secondary reports
1) Performance-control reports: evaluating the system operation by measuringdeviations from
plans, including missed deliveries and stockouts, and by providinginformation that can be used
to assess cost performance.
2) Planning reports: including purchase commitments and other data that can be usedto assess
future material requirements.
3) Exception reports: calling attention to major discrepancies such as late or overdueorders,
excessive scrap rates, reporting errors, and requirements for nonexistentparts.
2)Ans

MRP Processing
MRP processing takes the end-item requirements specified by the master schedule and
"explodes" them into time-phased requirements for assemblies, parts and raw materials using the
bill of materials offset by lead times. The determination of the net requirements is the core of
MRP processing.
Gross requirements are the total expected demands for an item or raw material during
each time period. These quantities are derived from the master production schedule or the
planned-order releases of their immediate "parents". Scheduled receipts are open orders (orders
that have been placed) and are scheduled to arrive from vendors or elsewhere in the pipeline by
the beginning of a period. Projected on hand are the expected amounts of inventory that will be
on hand at the beginning of each time period: scheduled receipts plus available inventory from
last period. Net requirements are the actual amount needed in each time period. In addition to
subtracting projected inventory on hand from gross requirements, net requirements are
sometimes adjusted to include safety stock and an allowance for waste. Planned-order receipts
are the quantities expected to be received by the beginning of the period. Under lot-for-lot
ordering (lot size = 1), this quantity will equal net requirements. Under lot-size ordering, the
order size must be in multiples of the lot size, thus this may exceed net requirements. Any excess
is added to available inventory in the next time period. Planned-order releases are the planned
amount to order in each time period; equal planned-order receipts offset by lead times. This
amount generates gross requirements at the next level in the assembly or production chain. When
an order is executed, it is removed from "planned-order releases" and entered under "scheduled
receipts". As time passes, the plans need to be updated and revised to reflect the moving horizon
over
time since old orders will have been completed while new orders enter; also there may have been
some changes in quantities, delays, missed deliveries, and so on. Orlicky (1975) suggested that
MRP records could be updated using either the regenerative system (approach that updates MRP
records periodically) or net-change system (approach that updates MRP records continuously).

3)Ans

Benifits

Reduction in inventory. MRP mainly affects raw materials, purchased components, and work-
in-process inventories. Users claim a 30 to 50% reduction in work-in-process.

Improved customer service. Some MRP proponents claim that late orders are reduced 90%.
Quicker response to changes in demand and in the master schedule.

Greater productivity. Claims are that productivity can be increased by 5 to 30% through MRP.
Labor requirements are reduced correspondingly.

Reduced setup and product changeover costs.

Better machine utilization.

Increased sales and reductions in sales price. These are also claimed as MRP benefits by some
users.

Limitations

This means that other systems in the enterprise need to work properly both before implementing
an MRP system, and into the future. For example systems like variety reduction and engineering
which makes sure that product comes out right first time (without defects) must be in place. A
blinds manufacturing company need to manufacture vertical blinds and roman shades in time
without any defects other with it be wastage of money.

Production may be in progress for some part, whose design gets changed, with customer orders
in the system for both the old design, and the new one, concurrently. The overall ERP system
needs to have a system of coding parts such that the MRP will correctly calculate needs and
tracking for both versions. Parts must be booked into and out of stores more regularly than the
MRP calculations take place. Note, these other systems can well be manual systems, but must
interface to the MRP. For example, a ‘walk around’ stocktake done just prior to the MRP
calculations can be a practical solution for a small inventory (especially if it is an “open store”).
The other major drawback of MRP is that takes no account of capacity in its calculations. This
means it will give results that are impossible to implement due to manpower or machine or
supplier capacity constraints.

4) Ans

Refer page no 33.1 to 33.10

Production and operation management by S N Chary

5)Ans

AGGREGATE PLANNING STRATEGIES

Options for coping with fluctuating demand are categorized as either capacity oriented options
(operations oriented strategies) or demand oriented options (marketing oriented strategies).
Operations oriented strategies can be further classified as either a leveling strategy or a chase
strategy. Marketing tactics for dealing with demand seasonality include inducing demand shifts,
utilizing back orders, or offering counter seasonal products

Aggregate Planning Strategies

Capacity Oriented Options Demand Oriented Options

Leveling strategy Influencing demand

- Changing inventory levels - Sales, discounts, rebates,

Chase strategy promotions, etc.

- Hire or layoff Back ordering

- Overtime or idle time
- Subcontracting - Take orders, ship later
- Part-time workers Counter seasonal products
Leveling strategy: Maintain output at a constant (level) rate throughout the planning horizon.
Accommodate seasonal variations in demand through the accumulation and depletion of
inventories.

Chase strategy: Vary the output rate to match the seasonal variations in demand. Output rate
can be varied by (1) hiring and firing workers, (2) utilizing overtime and idle time, (3)
subcontracting, (4) using part time workers.

Mixed strategy: A cost effective aggregate plan may require the use of a combination of the
various strategies listed above. Such a plan is referred to as a mixed strategy.

6) Ans

Informal Tools

The aggregate planning process, which compares market demand projections against existing
and potential inventory capacity, uses basic tables, charts and other graphics aligned to data
processing systems. These tools are used in aggregate planning to compare an assortment of
alternative ways of achieving a company's supply management goals. When using these types of
informal methodologies alone, one disadvantage identified is that they might not provide the
most optimum aggregate plan, according to Lin Pan and Brian H. Kleiner in their essay
"Aggregate Planning Today."

Mathematical Techniques

Mathematical techniques are used in the aggregate planning process. For example, production
rates and human resource requirements might be evaluated as linear program problems. This
involves choosing and expressing values for known and unknown variables, quantities to be
minimized or maximized and constraints. One of the disadvantages with using mathematical
techniques, such as the linear programming method, in aggregate planning is the assumption of
determinism generally factored into its application.

Heuristic Methods

Heuristic methods can accelerate the aggregate planning process based on the experience and
knowledge of the planning team. Examples of heuristic techniques include making judgments
based on past experience or using known industry best practices. It is used in aggregate planning
because the process is driven by the organization's decision-makers who draw upon their
knowledge and experience. For example, the framework used for planning production might
involve heuristic techniques to, in part, establish production ratios based on production
management's experience with specific inventory areas at varying production levels.

Budget Considerations

A firm's budget significantly shapes estimates for production capacity. Generally, budgets are
developed using factors that are also used in the aggregate planning process -- for example,
existing inventory levels and valuations, historical purchasing patterns and human resource
production capabilities. Additionally, aggregate plans must operate within the constraints
imposed by the revenue allocations earmarked for production of various products or services. In
this sense, aggregate planning and preparing budgets are closely related business functions.

7) Ans

EOQ=75 WEEK
LT=3 WEEKS
1 2 3 4 5 6 7 8 9 10 11
Requirement 40 - 30 40 - 20 - 50 - 30 20

Scheduled 75 75 75
receipts
On hand at the 10 10 55 15 15 70 70 20 20 65 45
end of the
period
50
Planned order 75 75
release

Explanation Refer Page No 23.18 in Production and management By S.N. Chary