DAVIS

F O U R T H E D I T I O N

AQUILANO CHASE

chapter 17

Inventory Systems for Dependent Demand

PowerPoint Presentation by Charlie Cook

The McGraw-Hill Companies, Inc., 2003

Chapter Objectives
Explain the changing role of materials requirements planning (MRP) within a manufacturing organization. Discuss the role of MRP within an enterprise resource planning (ERP) system. Introduce the fundamental concepts and calculations that drive an MRP system. Define the various elements that make up an MRP system.

Demonstrate how MRP-related systems are used in service operations.

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Chapter Objectives (contd)

Recognize that MRP and JIT can be used together within an organization.

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Master Production Schedule

Master Production Schedule (MPS)
A time-phased production plan that specifies how many of, and when to build, each end item.

Material Requirements Planning

Determines the number of subassemblies, components, and raw materials required and their build dates to complete a given number of end products by a specific date.

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The Role of MRP within the Manufacturing Function

Exhibit 17.1
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The Role of MRP within an ERP System

Exhibit 17.2
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Master Production Schedule

Time Fences
Periods of time with each period having some specified level of opportunity for the customer to make changes. Frozen
Make no or only insignificant changes to products.

Moderately firm
Allow some changes in specific products.

Flexible
Allow almost any variation in products.

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Integrating MRP and JIT into the Supply Chain

Exhibit 17.3
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Master Production Schedule Time Fences

Exhibit 17.4
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Material Requirements Planning (MRP) Systems

Materials Requirements Planning System
Creates requirements and schedules identifying the parts, components, and materials necessary to produce the end products specified in the MPS. Links inventory and scheduling systems.

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Purposes, Objectives, and Philosophy of MRP

Inventory Control
Order the right part in the right quantity at the right time.

Assign Operating Priorities

Order with the right due date and keep the due date valid.

Capacity
Plan for a complete and accurate load. Plan for an adequate time to view future load.
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Inventory Management Under MRP

Theme
Getting the right materials to the right place at the right time.

Objectives
Improve customer service. Minimize inventory investment. Maximize production operating efficiency.

Philosophy
Expedite materials if overall production. schedule will be delayed. De-expedite materials if schedule falls behind.
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Benefits of an MRP System

More competitive pricing Lower selling price Lower inventory levels Improved customer service Faster response to market demands Increased flexibility to change the master schedule Reduced setup and tear-down costs Reduced idle time
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Industry Application and Expected Results

Exhibit 17.5
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MRP System Structure

Demand for Products
Available-to-promise Demand for spare parts and supplies

Bill of Material (BOM) File

A list of subassemblies, components, and raw materials, and their respective quantities required to produce specific end items Also, product structure or product tree file

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MRP System Structure

Inventory Records File
Computerized record-keeping system for the inventory status of all subassemblies, components, and raw materials. Peg record file (also where-used file) Inventory transaction file

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Overall View of the Inputs to a Standard MRP Program and the Reports Generated by the Program

Exhibit 17.6
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Product Structure Tree for Product A

Exhibit 17.7
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Subassemblies and Parts List in an Indented Format and in a Single-Level List

Exhibit 17.8
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Part L Hierarchy in (a) Expanded to the Lowest Level of Each Item in (b)

Exhibit 17.9
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The Inventory Status Record for an Item in Inventory

Exhibit 17.10
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MRP Computer Program

Output Reports
Primary reports
Planned orders Order release notices Changes in due dates Cancellations or suspensions of open orders Inventory status data

Secondary reports
Planning reports Performance reports Exceptions reports
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Product Structure Tree for Product T

Exhibit 17.11
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Materials Requirements Plan for Completing 100 units of Product T in Period 8

Exhibit 17.12
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The Environment of the Master Scheduler

Source: Romeyn C. Everdell and Woodrow W. Chamberlain, Master Scheduling in a Multi-Plant Environment, Proceedings of the American Production and Inventory Control Society (1980), p. 421.

Exhibit 17.13
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Fundamentals of Operations Management 4e

The Aggregate Plan and the Master Production Schedule for Mattresses

Exhibit 17.14
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CRP: Workload for Work Center

Exhibit 17.15
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Scheduled Workload for Work Center A

Exhibit 17.16
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Manufacturing Resource Planning (MRP II)

MRP II
Advanced MRP system that takes into consideration the equipment capacities and other resources associated with a manufacturing facility.

Sales and Operations Planning (S&OP)

Extends MRP by aligning customer demand with both in-house and supplier resources.

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Lot Sizing in MRP Systems

Lot Sizing
Lot sizes are the part quantities issued in the planned order receipt and the planned order release sections of an MRP schedule.

Lot-Sizing Techniques
Lot-for-lot Economic order quantity (EOQ) Least total costs Least unit cost

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Lot-for-Lot Method of Determining Production Quantities

Exhibit 17.17
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