Operations
Management
Material Requirements
Planning (MRP)
Chapter 14
Review of the
Production Planning
Process
SAP R/3 Approach to Production
Planning
Production Process for the T-W101
Ore Wagon:
1) Two wheels are attached to an axle to make an axle
assembly.
2) Two axle assemblies are attached to a wagon bed to
make the ore wagon.
Bill of Material
T-W101(AB&C) Ore Wagon
Three General Approaches to Production
• Make-to-stock: Items produced in anticipation of
orders, often from a sales forecast (DiGiorno frozen
pizza, Miller Lite beer)
• Make-to-order: Items produced to meet specific
customer orders (Boeing 737s for Southwest Airlines)
• Assemble to order: Final product assembled from
make-to-stock items (Dell desk top computer)
• IDES Manufacturing uses a “Make-to-stock”
approach. Production of ore wagons will be driven
by a sales forecast.
Sales and Operations Planning
The “Rough-Cut” Plan screen for the SAP
R/3 system.
Sales and Operations Planning
1) Sales Forecast
2) Production Plan
3) Stock Level
4) Working Days
5) Capacity
6) Utilization
7) T-W101 (units) 50%
8) T-W102 (units) 30%
9) T-W103 (units) 20%
Jan
240
240
0
22
440
55%
120
72
48
Feb
280
280
0
20
400
70%
140
84
56
Mar
320
320
0
22
440
73%
160
96
64
Apr
400
400
0
21
420
91%
200
120
80
May
360
360
0
23
460
78%
180
108
72
SAP R/3 Approach to Production
Planning
MPS/MRP
Independent versus
Dependent Demand
• Independent demand - demand for item is
independent of demand for any other item
• The TW101A is an example of an independent
demand item. It is scheduled for production as a
result of a sales forecast.
• Dependent demand - demand for item is
dependent upon the demand for some other item
• The TWB101A is an example of a dependent
demand item. It is scheduled to be purchased
because of the demand for its parent, the
TW101A ore wagon.
Structure of the MRP System
BOM
(Bill-of-Material)
Master Production
Schedule
Lead Times
(Item Master File)
MRP by period report
MRP by date report
MRP
Programs
Planned orders report
Inventory Data
Purchase requirements
Purchasing data
Exception reports
Lead Times and Lot Sizing
•
The BOM is used to determine how many of each component is
required to produce a “parent”. For example, one wagon bed and
two axle assemblies are required to produce on ore wagon
(parent). Two wheels and one axle are required to produce one
axle assembly (parent).
• To determine the timing and quantity for the purchase orders for
the components requires information about lead-times and lotsizing. This is found in the Material Master File (Item Master):
Material Master File for T-W101A (Ore Wagon)
Component Description
Vendor
Lot Size Lead Time
T-W101A Ore Wagon
Internal Fabrication LFL
5 Days
T-WB101A Wagon Bed
Minnesota Mfg
200
10 Days
T-AA101 Axle Assembly Internal Fabrication 100 5 Days
T-AX101 Axle
Sooner Milling
100
5 Days
T-WH101 Wheel
Minnesota Mfg
400
5 Days
Master Production Schedule
The production plan starts with the Sales Forecast for
the month of April. This is broken down into a
Detailed Production Schedule for each week. Earlier,
we determined that the total demand in April for model
T101A is 200. IDES Marketing Department wants
these to be available for shipment at the end of each
week as shown below.
Model
T-W101A
Week 14
50
Week 15
25
Week 16
75
Week 17
50
Once this has been agreed to, it becomes the Master
Production Schedule (MPS).
Information from the Material Master File
• T-W101A IDES Mfg has determined that the
cost effective way to fabricate the ore wagon is to
make exactly the number that are required. If 50
are needed, then make 50; If 38 are needed, then
make 38. This is called “lot-for-lot” sizing (“Lot
Size” = LFL). It takes 5 days to make ore wagons
(“Lead-Time” = 5 days).
• T-WB101A IDES Mfg has determined that the
cost effective way to purchase the wagon bed is
to order in quantities of 200 (“Lot Size = 200). It
takes 10 days to receive an order after it has been
placed (“Lead Time = 10 days).
The “MRP Record” for T-W101A
•
Week 14:
•
Week 15:
Independent Requirements
50
Scheduled Receipts
0
Projected on Hand (BI)
0
Net Requirements
50
Planned Order Receipts
50 (LFL)
Planned Order Release
?
To fabricate wagons in Week 14, a Planned Order Release must be
made at the beginning of Week 14 (Lead Time = 5 days)
Independent Requirements
Scheduled Receipts
Projected on Hand (BI)
Net Requirements
Planned Order Receipts
Planned Order Release
25
0
0
25
25 (LFL)
?
The “MRP Record” for T-WB101A (Wagon Bed)
•
Week 14:
•
Week 15:
Dependent Requirements
50
Scheduled Receipts
0
Projected on Hand (BI)
0
Net Requirements
50
Planned Order Receipts
200 (Lot Size)
Planned Order Release
?
To receive 200 wagon beds at the beginning of Week 14, a “Planned
Order Release” must be made at the beginning of Week 12 (Lead Time =
10 days)
Dependent Requirements
25
Scheduled Receipts
0
Projected on Hand (BI)
150
Net Requirements
0
Planned Order Receipts
0
Planned Order Release
?
There are zero (0) net requirements in Week 15. No wagon beds must be
received in Week 15. No Planned Order Release is necessary.
Homework Assignment
• Based on the Master Production Schedule
for April 2003, complete the Material
Requirements Planning for all materials.
• Have this assignment ready to turn in at
the beginning of class on Thursday
March 13th.