Material Requirements Planning
Lecture 11: MRP & JIT


MRP provides a schedule: when each part or
component should be ordered or produced
produced.

MRP is driven by dependent demand.

MRP is a software system.
Just in time and lean systems
Just-in-time
– Pull vs. Push systems
– JIT requirements
– JIT in services

MRP (materials requirements planning ) is the logic
for determining how many units of each part and
component are needed and when they are needed.
M t i l requirements
Material
i
t planning
l
i
– Product structure tree, BOM
– MRP logic & Time fence


Readings: Chapters 18 & 13
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Product Structure Tree & MRP Logic
Given the product structure tree and the lead time and demand
information, provide a materials requirements plan that defines
how many units of each component will be needed and when.
Product Structure Tree for Assembly A
A
B(4)
D(2)
C(2)
E(1)
D(3)
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F(2)
Dr. Shenghao ZHANG
First, units of “A” are scheduled backwards to allow for the lead
time. So,, in the materials requirement
q
plan,
p , we p
place an order for
50 units of “A” on day 9 so as to “receive” them on day 10.
Lead Times
A
1 day
B
2 days
C
1 dayy
D
3 days
E
4 days
F
1 day
Day:
A Required
Order Placement
1
2
3
4
5
6
7
8
9
10
50
50
LT = 1 day
Demand
Day 10 50 A
Day 8 20 B (Spares)
Day 6 15 D (Spares)
3
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Repeating the process for all components, we have the
final materials requirements plan:
Next, we schedule the components of “A”. E.g., we need 4 B’s for
each A
A, so for 50 A’s
A s, we need 200 B’s
B s. The lead time is 2 days
days.
Day :
R e q u ire d
O rd e r P la c e m e n t
R e q u ire d
O rd e r P la c e m e n t
A
B
1
2
3
4
5
6
20
LT = 2
7
9
20
50
200
10
50
200
Spares
A
4x50=200
B(4)
D(2)
8
A
LT=1
B
LT=2
C
LT=1
D
LT=3
E
LT=4
F
LT=1
Day:
Required
Order Placement
R
Required
i d
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
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D(3)
F(2)
Dr. Shenghao ZHANG
D(2)
5

MRP programs are usually run every week for a planning
horizon that is 8 to 12 weeks long
long.

MRP is a cost effective formal planning & control system
but it requires commitment at all organization levels.

MRP is data intensive.
intensive Input data includes
– Master Production Schedule (MPS): the quantity and timing of
requirement for end items.
– Bill of Materials (BOM): the quantities of components required to
make each item (product structure trees).
– Inventory Status: inventory on hand, scheduled receipts, order
lead time, lot size, etc.
Dr. Shenghao ZHANG
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
B(4)
7
Part D:: Dayy 6
40 + 15 = 55
C(2)
E(1) D(3)
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Firm orders
from known
customers
MRP: a computerized
p
planning
p
g system
y
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2
A
C(2)
E(1)
1
F(2)
Dr. Shenghao ZHANG
Aggregate
product
p
plan
6
Forecasts
of demand
f
from
random
d
customers
Engineering
design
changes
Master
p
production
schedule
(MPS)
Inventory
y
transactions
Bill of
material
file
Material
p
planning
g
(MRP)
Inventory
record
file
Secondary
Seco
d y reports
epo s
Pi
Primary
reports
Exception reports
Planning reports
R
Reports
t ffor performance
f
control
t l
Planned order schedule for
inventory and production control
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Closed Loop MRP
Master Production Schedule (MPS)
Time-phased
Time
phased plan specifying how many units of each
end item the firm plans to build and when to build them.

Aggregate Production Planning
Master Production Scheduling
Material Requirements Planning
C
Capacity
it R
Requirements
i
t Pl
Planning
i
Aggregate Plan
(Product Groups)
No
Realistic?
Feedback
Feedback
Yes
MPS
(Specific End Items)
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Execute:
Capacity Plans
Material Plans
9
Types
yp of Time Fences

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Master Production
d i Schedule
S h d l Time
i Fences
Frozen
– No schedule changes allowed within this window

Moderately
Fi
Firm
Frozen
Moderatel Firm
Moderately
Flexible
Capacity
– Specific
p
changes
g allowed within p
product g
groups
p as
long as parts are available

10
Forecast and available
capacity
Firm Customer Orders
Flexible
– Significant
g
variation allowed as long
g as overall capacity
p
y
requirements remain at the same levels
8
15
26
Weeks
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The Demand-Pull Logic
g of JIT
Just-In-Timee (JIT)
Jus
(J )







An integrated set of activities designed to achieve highvolume production using minimal inventories (raw materials
materials,
work in process, and finished goods).
Production is Just-In-Time
Just In Time ((“pull”)
pull ), not Just-In-Case
Just In Case (“push”)
( push ).
Elimination of waste in production effort.
Th timing
The
ti i off production
d ti resources ((e.g., parts
t arrive
i att th
the
next workstation “just in time”).
Ultimate goal: smooth and rapid flow
f
through the system.
“Big JIT” and “little JIT”
Invented in Japan, used in various forms in other cultures.
Fab
Vendor
Fab
Vendor
Fab
Vendor
Fab
Vendor
Sub
Customers
Finall
Fi
Assembly
Sub
Nothing
ot g gets produced
p oduced until
u t needed.
eeded
Need is created by actual demand.
A firm may have both “pull” and “push”.
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
Specific product areas

Imported technologies

Efforts concentrated on shop floor

Focus on quality and reliability
Two central philosophies

Cooperative employee unions

Subcontractor networks
– Two bonuses a year in good times
– Respect
R
ffor people
l
– Elimination of waste
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Quality circles
– Small group improvement activities (SGIA)
– Solution shared with management
– High productivity and low unit costs

Bottom-round management style
– Decision
D i i making
ki att llowestt llevell possible
ibl
– Avoid major R & D expenditures and risks

Level payrolls and secure employment
– No pay cut or layoff when business conditions deteriorate
– Workers as assets, not as human machines
– Automotive assembly and consumer electronics
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Respect for People
The Japanese
p
Approach
pp
to Productivityy

Dr. Shenghao ZHANG
– Long term relationship; suppliers as part of the family
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Minimizing Waste (I): Uniform Plant Loading
Waste in Operations
p
Waste is anything other than the minimum amount
which
hi h iis absolutely
b l t l essential
ti l to
t production.
d ti
Suppose we operate a production plant that produces a single
product.
d t The
Th production
d ti could
ld b
be accomplished
li h d using
i either
ith off th
the
two plant loading schedules below.
((1)) Waste from overproduction
p
Not uniform
(2) Waste of waiting time
(3) Transportation waste
Jan. Units
Feb. Units
Mar. Units
Total
1 200
1,200
3,500
3
500
or
4 300
4,300
9 000
9,000
Jan Units
Jan.
Feb Units
Feb.
Mar Units
Mar.
Total
3,000
3,000
3,000
9,000
(4) Inventory waste
Uniform
(5) Processing waste
(6) Waste of motion
(7) Waste from product defects
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How does the uniform loading help save costs?
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Minimizing Waste (II): JIT Production
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Minimizing
g Waste (III):
( ) Inventoryy Reduction
Produce what is needed when needed and no more.
WHAT IT IS
• A management philosophy
• “Pull” system through the plant
WHAT IT DOES
• Attack waste
• Expose problems and bottlenecks
• Achieve streamlined production
WHAT IT REQUIRES
•
•
•
•
•
Employee participation
Industrial engineering/basics
Continuous improvement
Total quality control
Small lot sizes
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M hi
Machine
downtime
Scrap
Work in
process
queues
(banks)
WHAT IT ASSUMES
Paperwork
backlog
• Typically repetitive manufacturing
• Stable environment
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Vendor
delinquencies
Engineering design
redundancies
Inspection
backlogs
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Change
orders
Design
backlogs
Decision
backlogs
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JIT Requirements
q
(A):
( ) Design
g of Flow Process

Linked operations

Balanced workstation capacities

Reduced lot sizes

Reduced setup/changeover time

Preventive maintenance
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Level scheduling

Underutilization of capacityy

Freeze windows
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Build quality into the process

Worker responsibility

SQC (Statistical Quality Control) methods

Fail-safe methods
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JIT Requirements (D): Work with Vendors
JIT Requirements (C): Stable Schedule

JIT Requirements (B): Total Quality Control
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
Sharing of requirements schedule

Vendor representatives on the factory floor

Lead time reduction

Frequent deliveries

Quality expectations
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JIT Requirements (E): Improve Product Design

Standard product configuration

Reduced number of parts

Process design with product design
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JIT in Services

Problem-solving
gg
groups
p

Good housekeeping

Clarification of flows

Leveling of facility load

Demand-pull scheduling

Elimination of unnecessary
y activities

Quality at source and reliable process capabilities

Long term
term, cooperation with suppliers for mutual benefit

Etc.
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