Chapter 16
Inventory Systems for Dependent Demand
 Master
production schedule
 Material
–
–
Requirements Planning (MRP)
System structure
Example
 MRP II
 MRP/JIT
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Material Requirements Planning
 How
much of an item is needed?
 When
–
–
is an item needed to complete
a specified number of units...
in a specified period of time?
 Dependent
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demand drives MRP
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Introductory Example - Dependent Demand
Product Structure Tree for Assembly A
A
B(4)
D(2)
A
B
C
D
E
F
C(2)
E(1)
D(3)
Lead Times
F(2)
1 day
2 days
1 day
3 days
4 days
1 day
Demand
Day 10 50 A
Day 8
20 B (Spares)
Day 6 15 D (Spares)
Create a schedule to satisfy demand.
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Day:
1
2
3
4
5
6
7
8
A Required
Order Placement
9
10
50
50
LT = 1 day
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Day:
A
1
2
3
4
5
6
7
8
R e q u ire d
10
50
O rd e r P la c e m e n t
B
9
50
R e q u ire d
20
O rd e r P la c e m e n t
20
LT = 2
200
200
Spares
A
B(4)
D(2)
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C(2)
E(1)
D(3)
F(2)
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Day:
A
LT=1
B
LT=2
C
LT=1
D
LT=3
E
LT=4
F
LT=1
1
2
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
3
4
5
6
20
7
8
9
20
50
200
10
50
200
100
55
20
400
55
400
20
200
100
300
300
200
200
200
A
Part D: Day 6
B(4)
D(2)
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C(2)
E(1)
D(3)
40 + 15 spares
F(2)
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Master Production Schedule (MPS)
 Time-phased
plan specifying how many and
when the firm plans to build each end item
Aggregate Plan
(Product Groups)
MPS
(Specific End Items)
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Time Fences
 Frozen
–
No schedule changes allowed within this window
 Moderately
–
Firm
Specific changes allowed within product groups as
long as parts are available
 Flexible
–
Significant variation allowed as long as overall
capacity requirements remain at the same levels
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Time Fences
Moderately
Firm
Frozen
Flexible
Capacity
Forecast and available
capacity
Firm Customer Orders
8
15
26
Weeks
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Material Requirements Planning
 Based
on a master production schedule,
a material requirements planning
system:
–
Creates schedules identifying the specific
parts and materials required to produce end
items
–
Determines exact numbers needed
–
Determines the dates when orders for those
materials should be released, based on lead
times
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Firm orders
from known
customers
Aggregate
product
plan
Forecasts
of demand
from random
customers
Engineering
design
changes
Master
production
schedule
(MPS)
Inventory
transactions
Bill of
material
file
Material
planning
(MRP)
Inventory
record
file
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Reports
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Bill of Materials (BOM) File
A Complete Product Description
 Materials
 Parts
 Components
 Production
sequence
 Modular BOM
–
Subassemblies
 Planning
–
BOM
Fractional options
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Inventory Records File
 Each
–
–
inventory item carried as a separate file
See, for example, Exhibit 16.15
Status according to “time buckets”
 Pegging
–
Identify each parent item that created demand
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Primary MRP Reports
 Planned
–
to be released at a future time
 Order
–
orders
release notices
to execute the planned orders
 Changes
in due dates of open orders due to
rescheduling
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Primary MRP Reports
 Cancellations
–
or suspensions of open orders
due to cancellation or suspension of orders on the
master production schedule.
 Inventory
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status data
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Net Change System
 Activity
driven
 Net change schedules
 Potential for system nervousness
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Another MRP Example
Item
X
A
B
C
D
X
A(2)
C(3)
B(1)
C(2)
On-Hand Lead Time (Weeks)
50
2
75
3
25
1
10
2
20
2
D(5)
Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10
plus the following spares:
Spares
1
A
B
C
D
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2
3
4
5
6
7
8
9
12
10
7
10
15
18
Adding some more terminology
 Gross
Requirements
 On-hand
 Net
requirements
 Planned
order receipt
 Planned
order release
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C Gross Requirements
LT=2 On-Hand=10
Net Requirements
Planned Order Receipt
Planner Order Release
D Gross Requirements
LT=2 On-Hand=20
Net Requirements
Planned Order Receipt
Planner Order Release
45
10
35
35
35
36
36
64
36
36
64
15
15
64
64
135
5
130
130
130
X
A(2)
C(3)
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B(1)
C(2)
D(5)
20
X
LT=2
A
LT=3
B
LT=1
C
LT=2
D
LT=2
Day:
Gross Requirements
On-Hand=50
Net Requirements
Planned Order Receipt
Planner Order Release
Gross Requirements
On-Hand=75
Net Requirements
Planned Order Receipt
Planner Order Release
Gross Requirements
On-Hand=25
Net Requirements
Planned Order Receipt
Planner Order Release
Gross Requirements
On-Hand=10
Net Requirements
Planned Order Receipt
Planner Order Release
Gross Requirements
On-Hand=20
Net Requirements
Planned Order Receipt
Planner Order Release
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1
2
3
4
5
6
7
8
45
90
75
15
15
15
35
36
10
95
50
45
45
12
12
12
12
7
7
45
10
35
35
54
9
36
36
36
10
15
15
45
18
27
27
27
54
10
54
54
10
10
135
5
130
130
130
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Manufacturing Resource Planning (MRP II)
 Goal:
Plan and monitor all resources of a
manufacturing firm (closed loop):
–
–
–
–
manufacturing
marketing
finance
engineering
 Simulate
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the manufacturing system
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