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Chapter 14

Chapter 14 BU395.docx

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Department
Business
Course
BU395
Professor
Maryam Hafezi
Semester
Winter

Description
BU395 Chapter 14 – Material Requirements Planning and Enterprise Resource Planning Week 7 Introduction -Material requirements planning (MRP) is a planning and scheduling technique primarily used for batch production of the components of assembled items -Enterprise resource planning (ERP) is used to manage and coordinate all the resources, information, and functions of an organization from a shared database Dependent Demand -Dependent demand – demand for subassemblies, parts, or raw materials that are derived from the plan for production of finished goods -Ex. The parts that go into making an automobile Overview of MRP -MRP – the activity that determines the plans for purchasing and production of dependent- demand components -The production plan for a specified number of each product is converted into the requirements for its sub-assemblies, parts, and raw materials, working backward from the due date of the product, using lead times and inventories on hand -This determines when and how much to order of each component -Requirements for end items generate requirements for lower-level components MRP Inputs -An MRP system has three major sources of information: the master production schedule; bills of material; and inventory levels, lead times, and open orders Master Production Schedule -Master production schedule – the anticipated build schedule stating which end items are to be produced, when, and in what quantities for the next 12 weeks or so -Separates the planning horizon into a series of time periods or time bucket, which are expressed in weeks or days -Time buckets need not be of equal length -Cumulative lead time – the sum of the lead times that sequential phases of a process require, form ordering of components to completion of final assembly Bills of Material -Bills of material (BOM) – a listing of all of the raw material, parts, and subassemblies needed to produce one unit of a product -Each finished product has its own bill of material -Product structure tree – a hierarchical diagram of the components needed to assemble a product -The end item is showed on the top -For the assembly diagram or product structure tree, just beneath the end item are the back and front subassemblies that must be put together with the two cross bars and a seat to make up the end item; beneath each subassembly are the parts for it -The amount on hand for each component is netted out (ex. Subtracted from the requirement) before determining the requirements of its children -The issue of timing is essential (when the components be purchased or made) and must be included in the analysis Special Types of BOM -Planning bill – a combination of several BOMs -Used to reduce the number of BOMs necessary for planning when the products have various options -Modular bill – a BOM for a module BU395 Chapter 14 – Material Requirements Planning and Enterprise Resource Planning Week 7 -Used to reduce the number of BOMs when a product consists of various modules, each with a few options -Phantom bill – an item that is usually not kept in inventory -Has zero lead time and special stock code so that it will not be regularly ordered -Makes planning easier Inventory Levels, Lead Times, and Open Orders -Each item in stock should have a separate description file that contains information about the item and, if purchased, the purchase lead time -The quantity on hand of each item should be updated continuously -Each manufactured or assembled item will have a configuration file that shows the operations necessary and the components used -Each open shop order and open purchase order has a quantity and due date and will be considered projected on-hand inventory on its due date MRP Processing, Updating, and Outputs MRP Processing -Takes the end items’ requirements specified by the MPS and “explodes” them into time-phased requirements for fabrication or assembly of subassemblies and fabricated parts, and purchase of purchased parts and raw material using the bills of material, offset by the lead times and netted for any inventory on hand or scheduled receipts -You can see the time-phasing requirements in the assembly time chart -The length of horizontal lines represents the lead times -The quantities that are generated by exploding the bills of material are gross requirements; they do not take into account any inventory that is currently on hand or is due to be received -The materials that a company must actually acquire to meet the demand generated by the MPS are the net requirements -Gross requirement – the demand for an item during a time period -Scheduled receipt – open order scheduled to arrive from a vendor or shop floor -Projected on-hand – expected amount of inventory that will be on hand at the beginning of a time period -Net requirement – the actual amount needed in a time period -Planned-order receipt – quantity planned to be received in the beginning of a period -Planned-order release – quantity planned to be released in the beginning of a period; that is, planned-order receipt offset by lead time Net requirements in period t = Gross requirements in period t – Projected inventory at the start of period t – Scheduled receipts + Safety stock -Pegging – identifying the parent items that have generated a given set of requirements for an item -The importance of the computer becomes evident when you consider that a typical company would have hundreds of end items for which it needs to develop material requirement plans,, each with its own set of components -Inventories on hand and on order, planned order releases, and so on must all be updated as changes and rescheduling occur Updating the System -A materials requirement plan is a document that changes over time -Requirements plans have a rolling horizon which means that plans are updated and revised so that they reflect the next set of periods -Regenerative MRP – recalculates all the MRP quantities periodically -Net-change MRP – immediately updates only MRP tables affected by a change -Regenerative MRP is best suited for fairly stable situations, whereas net-change MRP is best BU395 Chapter 14 – Material Requiremen
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