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EPT 432 Operation Management PPK Pembuatan Lab 5 Material
Requirements Planning (MRP) 2008/2009
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Lab 5 Material Requirements Planning (MRP)
Objectives of this laboratory: 1. Student is able to define and
construct a gross material requirements plan. 2. Student is able to
define and construct net material requirements plan. 3. Student is
able to defined and construct lot-for-lot table. 4. Student is able
to define and construct part period balancing table.
Before we start this laboratory exercise, let familiarize our
self with several terms that are commonly used in MRP realm.
What is Material Requirements Planning (MRP)? A dependent demand
technique that uses a bill-of-material, inventory,
expected receipts, and a master production schedule to determine
material requirements.
What is dependent demand? Dependent demand means that the demand
for one item is related to the
demand for another item.
What is bill of material (BOM)? A listing of the components,
their description, and the quantity of each
required to make one of a product.
So now you already know that is Material Requirements Planning
(MRP) in general. How about we go deeper in one of several MRP
realms? Lets begin with how the create a gross material requirement
plan.
What is gross material requirements plan? A schedule that shows
the total demand for an item (prior to subtraction of
on-hand inventory and scheduled receipts) and (1) when it must
be ordered from suppliers, or (2) when production must be started
to meet its demand by a particular date.
Before we can start constructing the gross material requirements
plan we need a case study. How about constructing a gross material
requirements plan for 50 units of Awesome Speaker Kit?
First step we must identify all the components and its quantity
to produce a single Awesome Speaker Kit. (Refer to figure 5.1
below)
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EPT 432 Operation Management PPK Pembuatan Lab 5 Material
Requirements Planning (MRP) 2008/2009
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Figure 5.1: Product structures for Awesome Speaker Kit
To produce a single Awesome Speaker Kit (A) required:-
2 standard 12-inch speaker kits (B) and 3 speaker kits with
amp-boosters (C).
Each of (B) consists of 2 12-inch speakers (D) and 2 shipping
boxes of an installation kit (E).
Each of (C) consists of 2 booster speaker assembly (F) and 2
shipping boxes of an installation kit (E).
Each booster speaker assembly (F) includes 2 12-inch speaker (D)
and 1 amp-booster circuitry (G).
Second steps are to determine the quantity for all items
required to produce 50 units of Awesome Speaker Kit. Refer table
5.1 below:
Table 5.1: Total quantity for all items required to produce 50
units of Awesome Speaker Kit (A) Part B 2 x number of A (2)(50) =
100 Part C 3 number of A (3)(50) = 150 Part D 2 x number of B + 2 x
number of F (2)(100) + (2)(300) = 800
Part E 2 x number of B + 2 x number of C (2)(100) + (2)(150) =
500 Part F 2 x number of C (2)(150) = 300 Part G 1 x number of F
(1)(300) = 300
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EPT 432 Operation Management PPK Pembuatan Lab 5 Material
Requirements Planning (MRP) 2008/2009
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Third step is to determine all the lead time for all the items
required to produce the Awesome Speaker Kit (A). Refer to table 5.2
below.
Table 5.2:
Than, create a time-phase product structure like shown in figure
5.2 below.
Figure 5.2: Time-phase product structure.
Once all the required information is completed, we can now
proceed with constructing the gross material requirements plan for
the Awesome Speaker Kit (A).
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EPT 432 Operation Management PPK Pembuatan Lab 5 Material
Requirements Planning (MRP) 2008/2009
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To construct the material requirements plan for the Awesome
Speaker Kit (A), we just need to transfer all the information such
as lead time and quantity for all the items into a table.
The gross material requirements plan for the Awesome Speaker Kit
(A) is shown in figure 5.3 below. The table must have the following
information such as:
Required date Order release date Week Item quantity Lead
Time
Figure 5.3: Material requirements plan for the Awesome Speaker
Kit (A).
Now we can start constructing the net material requirement plan
for 50 units of Awesome Speaker Kit
What is net material requirements plan? The net material
requirements plan is the result of adjusting gross
requirements for inventory on hand and schedule receipts.
Before we can start, we need to know how the quantity for each
tem that we currently have on hand. Refer to figure 5.4 below.
Figure 5.4: Quantity of item on hand
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EPT 432 Operation Management PPK Pembuatan Lab 5 Material
Requirements Planning (MRP) 2008/2009
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The net material requirements plan for the Awesome Speaker Kit
(A) is shown in figure 5.5 below. The table must have the following
information such as:
On hand quantity Gross requirements Schedule Receipts Projected
on hand Net requirement Planned Order Receipts Planned Order
Release Lead Time
Figure 5.4: Net material requirements plan for the Awesome
Speaker Kit (A)
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EPT 432 Operation Management PPK Pembuatan Lab 5 Material
Requirements Planning (MRP) 2008/2009
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Now we move on to Lot Sizing Techniques. Lot sizing techniques
is a process or a techniques used in determining the order lot
size.
If the lot size is too big, the inventory will be charged a
holding cost for each item per week. For each time production runs,
there will be a setup cost. The lot sizing techniques try to
minimize the total operation cost by determine the order lot
size.
There are two lot sizing techniques that we will learn in the
laboratory exercise. First is Lot-for-lot technique and the other
is part period balancing (PPB) technique.
What is Lot-for-lot technique? A lot-sizing technique that
generates exactly what is required to meet the
plan.
Let say the company that produce the Awesome Speaker Kit (A)
received orders from distributors that required the company to
produce a certain quantity of Awesome Speaker Kit per week as shown
in figure 5.5 below:
Figure 5.5: Total quantity of Awesome Speaker Kit to produce
The lot-for-lot sizing technique fixed the order lot size
exactly the same quantity required to meet the plan as shown in
figure 5.6 below.
Figure 5.5: Lot Size Order based on lot-for-lot technique
The total operation cost is only for setup cost where seven
separate setups needed associated with each order (7)(100) =
$700.
The next lot sizing technique is the part period balancing (PPB)
technique.
What is Part period balancing (PPB)? An inventory ordering
technique that balances setup and holding costs by
changing the lot size to reflect requirement of the next lot
size in the future.
Week
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EPT 432 Operation Management PPK Pembuatan Lab 5 Material
Requirements Planning (MRP) 2008/2009
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Before we can start, we need to understand how to calculate the
lot size using the part period balancing technique.
First we need to combine the net requirements for several
periods and calculate the ratio between holding cost and setup
cost. The optimum lot size is then the ratio between holding cost
and setup cost is around 1. Refer to figure 5.6 below.
Figure 5.6: Determining the ordering lot size based on part
period balancing technique
Now we know that the company need to place an order only three
times during 10 week of operation, 80 units in 2nd week and 80
units in 5th week and 55 units in 9th week. Refer to figure 5.7
below.
Figure 5.7: Ordering lot size and the week of placing order
The total operation cost using this technique is Setup cost
where three separate setups needed associated with each order
(3)(100) = $300. Holding cost (70) + (120) = $190
So, the total operation cost for part period balancing technique
is $490 whereby the total operation cost for lot-for-lot technique
is $700. This mean that the part period balancing technique is
better compared to lot-for-lot technique for this case study.
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EPT 432 Operation Management PPK Pembuatan Lab 5 Material
Requirements Planning (MRP) 2008/2009
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Exercises:
1) The demand for subassembly S is 95 units in week 7. Each unit
of S requires 1 unit of T and 2 units of U. Each unit of T requires
1 unit of V, 2 units of W, and 1 unit of X. Finally, each unit of U
requires 2 units of Y and 3 units of Z. One firm manufactures all
items. It takes 2 weeks to make S, 1 week to make T, 2 weeks to
make U, 2 weeks to make V, 3 week to make W, 1 week to make X, 2
week to make Y, and 1 week to make Z.
Item On-Hand Inventory Item On-Hand Inventory Item
On-Hand Inventory
S 20 W 30
T 20 X 25
U 40 Y 240
V 30 Z 40
Using the information above, a) Construct a gross material
requirements plan. [5 marks] b) Construct a net material
requirements plan using the on-hand inventory. [5 marks]
Note: All the plans must be constructed using Microsoft Excel
program.
2) Gross Requirement Period for item X
Period 1 2 3 4 5 6 7 8 9 10 11 12 Gross
requirements 30 - 40 - 30 70 20 - 10 80 - 50
*Holding cost = $2.50/unit/week; setup cost = $150; lead time =
1 week; beginning inventory = 40
Using the information above, a) Develop a lot-for-lot solution
and calculate total relevant cost for the data
above. [5 marks] b) Develop a part period balancing (PPB)
solution and calculate total relevant
cost for the data above. [5 marks] Note: All the solutions must
be constructed using Microsoft Excel program.
Total marks = _______ / 20 marks
GOOD LUCK