1 MRP and Related Concepts TLA (Three Letter Acronym) Definitions ATP: Available to Promise BOM: Bill of Materials DRP: Distribution Requirements Planning MPS: Master Production Schedule MRP: Materials Requirements Planning PAC: Production Activity Control SOP: Sales and Operations Planning
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1 MRP and Related Concepts TLA (Three Letter Acronym) Definitions ATP: Available to Promise BOM: Bill of Materials DRP: Distribution Requirements Planning.
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MRP and Related Concepts
TLA (Three Letter Acronym) Definitions
ATP: Available to PromiseBOM: Bill of MaterialsDRP: Distribution Requirements PlanningMPS: Master Production ScheduleMRP: Materials Requirements PlanningPAC: Production Activity ControlSOP: Sales and Operations Planning
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Where Does MRP Fit?
SOP
MPS
MRP
Vendor OrderManagmentPAC
Tactical Capacity Planning
Production, Order Fulfillment, Cushions
Material Quantities and Timing
Supply Chain Management and PDCA
Production Management and PDCA
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Master Scheduling I
• Controls the timing and quantity of production for products or product families
• Primary interface point for actual customer orders
• Coordinates forecasted demand and actual orders with production activity
• Serves as tool for agreement between marketing and operations (but at a different level than SOP)
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Master Scheduling II
• Feeds more detailed material planning
• Indicates the quantity and timing (i.e., delivery times) for a product or group of products
We cannot do this since the planned order would be in the past…. Thus the 250 crossbars will be delivered late one week to back assembly. What does this do to our chair schedule?
Leg AssemblyLT = 1 weekMinimum Order = 1000 1 2 3 4 5 6 7Gross Requirements 0 0 0 500 400 400 0Scheduled ReceiptsProjected On Hand 25 0 0 0 525 125 725 725Net Requirements 475 275Planned Receipts 1000 1000Planned Order 1000 1000
Back AssemblyLT = 2 weeksMinimum Order = 250 1 2 3 4 5 6 7Gross Requirements 0 0 0 500 400 400 0Scheduled Receipts 250Projected On Hand 0 0 250 0 0 100 200 200Net Requirements 250 400 300Planned Receipts 250 500 500Planned Order 250 500 500
• Anticipates downstream demand– Uses this information, not predetermined
reorder points or periodic reviews, to determine when to order
• Computer-based software systems needed to deal with the added complexity
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Suppose we forecast demand for Wholesaler A for the next 8 days (the best time horizon to use will depend on many factors)
Based on this, we anticipate that Wholesaler A will order on Day 3
DRP Example I
Wholesaler A
ROP = 50, Q = 200 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8Forecast Demand 20 20 20 20 20 20 20 20Ending Inventory 85 65 45 225 205 185 165 145 125Expected Order 200
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We extend the analysis to include Wholesaler B Combined, we expect to see orders on Days 3 and 4
Wholesaler A
ROP = 50, Q = 200 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8Forecast Demand 20 20 20 20 20 20 20 20Ending Inventory 85 65 45 225 205 185 165 145 125Expected Order 200
Wholesaler B
ROP = 75, Q = 200 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8Forecast Demand 14 14 14 14 14 14 14 14Ending Inventory 108 94 80 66 252 238 224 210 196Expected Order 200
Total Orders 200 200
DRP Example II
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The distributor then uses this information to plan its own orders. In this case, suppose it takes two days for the supplier to replenish; based on the information, the distributor would order on Day 1
Wholesaler A
ROP = 50, Q = 200 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8Forecast Demand 20 20 20 20 20 20 20 20Ending Inventory 85 65 45 225 205 185 165 145 125Expected Order 200
Wholesaler B
ROP = 75, Q = 200 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8Forecast Demand 14 14 14 14 14 14 14 14Ending Inventory 108 94 80 66 252 238 224 210 196Expected Order 200
Distributor
Q = 400 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8Total Expected Orders 200 200Ending Inventory 50 50 50 250 50 50 50 50 50Planned Receipts 400Planned Orders 400
DRP Example III
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DRP Benefits
Helps improve customer service Provides a better and faster understanding of
the impact of shortages and/or promotions
Helps reduce costs InventoryFreightProduction
Provides integration between the stages in the supply chain
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DRP Constraints
• Accurate forecasts and inventory levels– Necessary to anticipate correctly when orders will be
placed• Consistent and reliable lead times
– To ensure that orders can be placed and arrive by the time they are needed
• “Nervousness”– Even slight changes in demand for downstream partners
can have a significant impact on order volumes, especially when order sizes are relatively high