F O U R T H E D I T I O N Inventory Systems for Dependent Demand © The McGraw-Hill Companies, Inc., 2003 chapter 17 DAVIS AQUILANO CHASE PowerPoint Presentation.

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

Inventory Systems forDependent Demand

© The McGraw-Hill Companies, Inc., 2003

chapter 17

DAVIS

AQUILANO

CHASE

PowerPointPresentation

byCharlieCook

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–2

Chapter ObjectivesChapter ObjectivesChapter ObjectivesChapter 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.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–3

Chapter Objectives (cont’d)Chapter Objectives (cont’d)Chapter Objectives (cont’d)Chapter Objectives (cont’d)

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

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–4

Master Production ScheduleMaster Production ScheduleMaster Production ScheduleMaster 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.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–5

The Role of MRP withinThe Role of MRP withinthe Manufacturing Functionthe Manufacturing Function

The Role of MRP withinThe Role of MRP withinthe Manufacturing Functionthe Manufacturing Function

Exhibit 17.1Exhibit 17.1

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–6

The Role of MRP within an ERP SystemThe Role of MRP within an ERP SystemThe Role of MRP within an ERP SystemThe Role of MRP within an ERP System

Exhibit 17.2Exhibit 17.2

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–7

Master Production ScheduleMaster Production ScheduleMaster Production ScheduleMaster 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.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–8

Integrating MRP and JIT into the Supply Integrating MRP and JIT into the Supply ChainChain

Integrating MRP and JIT into the Supply Integrating MRP and JIT into the Supply ChainChain

Exhibit 17.3Exhibit 17.3

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–9

Master Production Schedule Time FencesMaster Production Schedule Time FencesMaster Production Schedule Time FencesMaster Production Schedule Time Fences

Exhibit 17.4Exhibit 17.4

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–10

Material Requirements Planning Material Requirements Planning (MRP) Systems(MRP) Systems

Material Requirements Planning Material Requirements Planning (MRP) Systems(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.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–11

Purposes, Objectives, and Purposes, Objectives, and Philosophy Philosophy

of MRPof MRP

Purposes, Objectives, and Purposes, Objectives, and Philosophy Philosophy

of MRPof 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.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–12

Inventory Management Under MRPInventory Management Under MRPInventory Management Under MRPInventory 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.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–13

Benefits of an MRP SystemBenefits of an MRP SystemBenefits of an MRP SystemBenefits 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

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–14

Industry Application and Expected ResultsIndustry Application and Expected ResultsIndustry Application and Expected ResultsIndustry Application and Expected Results

Exhibit 17.5Exhibit 17.5

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–15

MRP System StructureMRP System StructureMRP System StructureMRP 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

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–16

MRP System StructureMRP System StructureMRP System StructureMRP 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

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–17

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

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

Exhibit 17.6Exhibit 17.6

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–18

Product Structure Tree for Product AProduct Structure Tree for Product AProduct Structure Tree for Product AProduct Structure Tree for Product A

Exhibit 17.7Exhibit 17.7

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–19

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

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

Exhibit 17.8Exhibit 17.8

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–20

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

Exhibit 17.9Exhibit 17.9

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–21

The Inventory Status RecordThe Inventory Status Recordfor an Item in Inventoryfor an Item in Inventory

The Inventory Status RecordThe Inventory Status Recordfor an Item in Inventoryfor an Item in Inventory

Exhibit 17.10Exhibit 17.10

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–22

MRP Computer ProgramMRP Computer ProgramMRP Computer ProgramMRP 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

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–23

Product Structure Tree for Product TProduct Structure Tree for Product TProduct Structure Tree for Product TProduct Structure Tree for Product T

Exhibit 17.11Exhibit 17.11

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–24

Materials Materials Requirements Requirements

Plan for Plan for CompletingCompleting100 units of 100 units of Product T in Product T in

Period 8Period 8

Materials Materials Requirements Requirements

Plan for Plan for CompletingCompleting100 units of 100 units of Product T in Product T in

Period 8Period 8

Exhibit 17.12Exhibit 17.12

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–25

The Environment of the Master SchedulerThe Environment of the Master SchedulerThe Environment of the Master SchedulerThe Environment of the Master Scheduler

Exhibit 17.13Exhibit 17.13

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.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–26

The Aggregate Plan and the MasterThe Aggregate Plan and the MasterProduction Schedule for MattressesProduction Schedule for MattressesThe Aggregate Plan and the MasterThe Aggregate Plan and the MasterProduction Schedule for MattressesProduction Schedule for Mattresses

Exhibit 17.14Exhibit 17.14

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–27

CRP: Workload for Work CenterCRP: Workload for Work CenterCRP: Workload for Work CenterCRP: Workload for Work Center

Exhibit 17.15Exhibit 17.15

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–28

Scheduled Workload for Work Center AScheduled Workload for Work Center AScheduled Workload for Work Center AScheduled Workload for Work Center A

Exhibit 17.16Exhibit 17.16

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–29

Manufacturing Resource Planning Manufacturing Resource Planning (MRP II)(MRP II)

Manufacturing Resource Planning Manufacturing Resource Planning (MRP II)(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.

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–30

Lot Sizing in MRP SystemsLot Sizing in MRP SystemsLot Sizing in MRP SystemsLot 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

Fundamentals of Operations Management 4e © The McGraw-Hill Companies, Inc., 2003 17–31

Lot-for-Lot Method of Determining Lot-for-Lot Method of Determining Production QuantitiesProduction Quantities

Lot-for-Lot Method of Determining Lot-for-Lot Method of Determining Production QuantitiesProduction Quantities

Exhibit 17.17Exhibit 17.17