To Accompany Ritzman & Krajewski Foundations of Operations Management, © 2003 Prentice Hall, Inc. All rights reserved. Chapter 15 Resource Planning

To Accompany Ritzman & Krajewski Foundations of Operations Management, © 2003 Prentice Hall, Inc. All rights reserved.

Chapter 15 Chapter 15

Resource Resource PlanningPlanning


Material Requirements Planning

• Materials requirements planning (MRP) is a means for determining the number of parts, components, and materials needed to produce a product

• MRP provides time scheduling information specifying when each of the materials, parts, and components should be ordered or produced

• Dependent demand drives MRP• It is most valuable in industries where a number of

products are made in batches using the same productive equipment.

• The theme of MRP is “getting the right materials to the right place at the right time”.


Demand PatternsDemand Patterns

| | | | | | | | | |1 5 10

Day

2000 —

1500 —

1000 —

500 —

0

Bic

ycle

s

Rim

sR

ims

2000 —

1500 —

1000 —

500 —

0

| | | | | | | | | |1 5 10

Day

Figure 15.2(a) (b)



| | | | | | | | | |1 5 10

Day

2000 —

1500 —

1000 —

500 —

0

Bic

ycle

s

Reorder point

Figure 15.2

Rim

sR

ims

2000 —

1500 —

1000 —

500 —

0

| | | | | | | | | |1 5 10

Day(a) (b)


Demand PatternsDemand Patterns2000 —

1500 —

1000 —

500 —

0

Rim

sR

ims

2000 —

1500 —

1000 —

500 —

0

| | | | | | | | | |1 5 10

Day

| | | | | | | | | |1 5 10

Day

Order1000 onday 3

Bic

ycle

s

Reorder point

(a) (b)



1500 —

1000 —

500 —

0

| | | | | | | | | |1 5 10

Day

Order1000 onday 3

Bic

ycle

s

Reorder point

(a) (b)

Rim

sR

ims

2000 —

1500 —

1000 —

500 —

0

| | | | | | | | | |1 5 10

Day



(a) (b)

2000 —

1500 —

1000 —

500 —

0

| | | | | | | | | |1 5 10

Day

Order1000 onday 3

Order1000 onday 8

Bic

ycle

s

Reorder point

2000 —

1500 —

1000 —

500 —

0

Rim

sR

ims

| | | | | | | | | |1 5 10

Day



(a) (b)

2000 —

1500 —

1000 —

500 —

0

| | | | | | | | | |1 5 10

Day

Order1000 onday 3

Order1000 onday 8

Bic

ycle

s

Reorder point

2000 —

1500 —

1000 —

500 —

0

Rim

sR

ims

| | | | | | | | | |1 5 10

Day



1500 —

1000 —

500 —

0

Rim

sR

ims

2000 —

1500 —

1000 —

500 —

0

| | | | | | | | | |1 5 10

Day(a) (b)

| | | | | | | | | |1 5 10

Day

Order1000 onday 3

Order1000 onday 8

Bic

ycle

s

Reorder point


Material Requirements Material Requirements Plan InputsPlan Inputs

Figure 15.4

Bills ofmaterials

Engineeringand process

designs



Bills ofmaterials


designs

Othersources

of demand

Authorizedmaster production

schedule



Inventorytransactions

Inventoryrecords

Bills ofmaterials


designs

Othersources

of demand


schedule


Material Requirements Material Requirements Plan ExplosionPlan Explosion


Inventoryrecords

Bills ofmaterials


designs

MRPMRPexplosionexplosion

Othersources

of demand


schedule


Material Requirements Material Requirements Plan OutputPlan Output


Inventoryrecords

Bills ofmaterials


designs

Materialrequirements

plan

MRPMRPexplosionexplosion

Othersources

of demand


schedule


Bill of Materials (BOM)

• Indicates all the raw materials, components, subassemblies, and assemblies required to produce an item

• A structured list of all components, parts, and materials of an item

• Shows way a finished product or parent item is put together from individual components


Bill of MaterialsBill of Materials

Figure 15.5

Seat cushion

Seat-frame boards

Front legs A

Ladder-back chair

Back legs

Leg supports

Back slats


Bill of MaterialsBill of Materials

Figure 15.5

Back slats Seat cushion

Seat-frame boards

Leg supports

Front legs

Back legs A

Ladder-back chairJ (4)

Seat-frameboards

C (1)Seat

subassembly

D (2)Frontlegs

B (1)Ladder-backsubassembly

E (4)Leg

supports

AALadder-backLadder-back

chairchair

I (1)Seat

cushion

H (1)Seat

frame

G (4)Backslats

F (2)Backlegs


Master Production Schedule

• Based on actual customer orders and predicted demand

• Indicates when each ordered item will be produced

• Time-phased plan specifying how many and when the firm plans to build each end item


Master Production ScheduleMaster Production Schedule

200

Ladder-back chair

Kitchen chair

Desk chair

1 2

April May

670670

3 4 5 6 7 8

200

150

120

200

150

200

120

Aggregate production plan for chair family

670670

Figure 15.6


Inventory Record• Detailed information regarding the quantity of

each item, on hand, on order committed to use in various time periods

• MRP system using inventory master file to determine the quantity available for use in a given period

• If sufficient items are not available, the system includes the item on the planned order release report


Inventory RecordInventory Record Figure 15.11

Item: CDescription: Seat subassembly

Lot Size: 230 unitsLead Time: 2 weeks

Gross requirements 150150

1

230230

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8

00Scheduled receipts

Projected on-hand inventory

Planned receipts

Planned order releases

37

Week

0000


Inventory RecordInventory RecordItem: CDescription: Seat subassembly



1

230230

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

Explanation:Gross requirements are the total demand for the two chairs. Projected on-hand inventory in week 1 is 37 + 230 – 150





1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

Explanation:Gross requirements are the total demand for the two chairs. Projected on-hand inventory in week 1 is 37 + 230 – 150 = 117 units.





1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000





1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

Projected on-hand inventory balance at end of week t

Inventory on hand at end of week t - 1

Gross requirements

in week t

Scheduled or planned receipts in

week t

= + –





1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 – – 33 – – 33 ––153153 ––273273 ––273273

Projected on-hand inventory balance at end of week t

Inventory on hand at end of week t - 1

Gross requirements

in week t

Scheduled or planned receipts in

week t

= + –





1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 ––33 – – 33 ––153153 – – 273273 – – 273273

Planned OrdersPlanned OrdersExplanation:Without a new order in week 4, there will be a shortage of three units: 117 + 0 + 0 – 120 = – 3 units.





1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117

Planned OrdersPlanned Orders





1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 227227

230230

Planned OrdersPlanned OrdersExplanation:Adding the planned receipt brings the balance to 117 + 0 + 230230 – 120 = 227 units.





1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 227227

230230

Planned OrdersPlanned OrdersExplanation:Adding the planned receipt brings the balance to 117 + 0 + 230230 – 120 = 227 units.





1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 227227

230230

230230

Planned OrdersPlanned OrdersExplanation:Offsetting for a two-week lead time puts the corresponding planned order release back to week 2.





1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 227227

230230

230230

Planned OrdersPlanned OrdersExplanation:Offsetting for a two-week lead time puts the corresponding planned order release back to week 2.





1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 227227

230230

230230

227227 7777 ––4343

Planned OrdersPlanned OrdersExplanation:The first planned order lasts until week 7, when projected inventory would drop to – 43.





1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 227227

230230

230230

227227 7777

230230

Planned OrdersPlanned OrdersExplanation:Adding the second planned receipt brings the balance to 77 + 0 + 230230 – 120 = 187.





1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 227227

230230

230230

227227 7777

230230

Planned OrdersPlanned OrdersExplanation:Adding the second planned receipt brings the balance to 77 + 0 + 230230 – 120 = 187.

187187





1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 227227

230230

230230

227227 7777

230230

187187

230230

Planned OrdersPlanned OrdersExplanation:The corresponding planned order release is for week 5.


Planned OrdersPlanned OrdersItem: CDescription: Seat subassembly



1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 227227

230230

230230

227227 7777

230230

187187

230230

187187


Additional MRP Scheduling Terminology

• Gross Requirements-total requirements for a component or end product

• Scheduled receipts-when a purchase or product order that has already been placed will be available

• Planned order release-how many and when to produce to meet gross requirements


Lot Sizing in MRP Programs

• Lot-for-lot (L4L) (producing as much as required)

• Fixed order quantity (ordering same quantity each time an order is issued)

• Periodic order quantity (allows a different order quantity for each order issued, but tends to issue the order at predetermined time intervals such as every two weeks)

• Economic order quantity (EOQ)


Lot-Sizing Rule ComparisonLot-Sizing Rule Comparison The FOQ rule generates high average The FOQ rule generates high average

inventory because it creates remnants.inventory because it creates remnants.

The POQ rule reduces The POQ rule reduces average on-hand inventory average on-hand inventory because it does a better because it does a better job of matching order job of matching order quantity to requirements.quantity to requirements.

The L4L rule minimizes The L4L rule minimizes inventory investment inventory investment but maximizes the number of orders placed.but maximizes the number of orders placed.


MRP OutputsMRP Outputs

Figure 15.16

MRP MRP explosionexplosion



Material requirements plan

Action notices Releasing new orders Adjusting due dates

Priority reports Dispatch lists Supplier schedules

Capacity reports Capacity requirements planning Finite capacity scheduling Input-output control









Routings and time

standards








Manufacturing resources plan

Performance reports

Routings and time

standards








Manufacturing resources plan

Performance reportsCost and price data

Routings and time

standards


MRP ExplosionMRP ExplosionItem: Seat subassemblyLot size: 230 units

Lead time: 2 weeks


1

230230

117117

2 3

120120

4 5

150150

6

120120

7 8

Scheduled receipts


Planned receipts


37

Week

117117 117117

0 00 0

00 00 000 00 0

227 227 77 187 187

230230

230230

Figure 15.18


Item: Seat subassemblyLot size: 230 units

Lead time: 2 weeks


1 2 3

120120

4 5

150150

6

120120

7 8

Planned receipts


Week

0 00 0

230

230

230

230

MRP ExplosionMRP Explosion



Lead time: 2 weeks


1 2 3

120120

4 5

150150

6

120120

7 8

Planned receipts


Week

0 00 0

230

230

230

230


Item: Seat framesLot size: 300 units

Lead time: 1 week

Gross requirements

1

00

2 3 4 5 6 7 8

Scheduled receipts


Planned receipts


40

Week

00 00 00300 00 0

Item: Seat cushionLot size: L4L

Lead time: 1 week

Gross requirements

1

00

2 3 4 5 6 7 8

Scheduled receipts


Planned receipts


0

Week

00 00 000 00 0



Lead time: 2 weeks


1 2 3

120120

4 5

150150

6

120120

7 8

Planned receipts


Week

0 00 0

230

230

230

230


Lead time: 1 week


1

00

2 3 4 5 6 7 8

Scheduled receipts


Planned receipts


40

Week

230

00 00 00300 00 0


Lead time: 1 week


1

00

2 3 4 5 6 7 8

Scheduled receipts


Planned receipts


0

Week

230

00 00 000 00 0

Usage quantity: 1 Usage quantity: 1




Lead time: 2 weeks


1 2 3

120120

4 5

150150

6

120120

7 8

Planned receipts


Week

0 00 0

230

230

230

230


Lead time: 1 week


1

00

2 3

00

4 5 6 7 8

Scheduled receipts


Planned receipts


40

Week

230 2300

00 00 00300 00 0


Lead time: 1 week


1

00

2 3

00

4 5 6 7 8

Scheduled receipts


Planned receipts


0

Week

230 2300

00 00 000 00 0

Usage quantity: 1 Usage quantity: 1




Lead time: 2 weeks


1 2 3

120120

4 5

150150

6

120120

7 8

Planned receipts


Week

0 00 0

230

230

230

230


Lead time: 1 week


1

00

4040

2 3

00

4 5

00

6

00

7 8

Scheduled receipts


Planned receipts


40

Week

110110 110110

230 2300 0

00 00 00300 00 0

110 180 180 180 180

300

300


Lead time: 1 week


1

00

00

2 3

00

4 5

00

6

00

7 8

Scheduled receipts


Planned receipts


0

Week

00 00

230 2300 0

00 00 000 00 0

0 0 0 0 0

230

230

230

230




Lead time: 1 week

Gross requirements

1 2 3 4 5 6 7 8

Planned receipts


Week

300

300


Lead time: 1 week

Gross requirements

1 2 3 4 5 6 7 8

Planned receipts


Week

230

230

230

230

00 00 00 00230 2300 000 00 00 00230 2300 0




Lead time: 1 week

Gross requirements

1 2 3 4 5 6 7 8

Planned receipts


Week

300

300


Lead time: 1 week

Gross requirements

1 2 3 4 5 6 7 8

Planned receipts


Week

230

230

230

230

00 00 00 00230 2300 000 00 00 00230 2300 0

Gross requirements

1

00

2 3 4 5 6 7 8

Scheduled receipts

Planned receipts


200

Week

00 00 000 00 0


Item: Seat-frame boardsLot size: 1500 units

Lead time: 1 week




Lead time: 1 week

Gross requirements

1 2 3 4 5 6 7 8

Planned receipts


Week

300

300


Lead time: 1 week

Gross requirements

1 2 3 4 5 6 7 8

Planned receipts


Week

230

230

230

230

00 00 00 00230 2300 000 00 00 00230 2300 0


1

00

2 3

12001200

4 5

00

6

00

7 8

Scheduled receipts

Planned receipts


200

Week

0 00 0

00 00 000 00 0



Lead time: 1 week

Usage quantity: 4




Lead time: 1 week

Gross requirements

1 2 3 4 5 6 7 8

Planned receipts


Week

300

300


Lead time: 1 week

Gross requirements

1 2 3 4 5 6 7 8

Planned receipts


Week

230

230

230

230

00 00 00 00230 2300 000 00 00 00230 2300 0


1

00

200200

2 3

12001200

4 5

00

6

00

7 8

Scheduled receipts

Planned receipts


200

Week

200200 200200

0 00 0

00 00 000 00 0

500 500 500 500 500

1500

1500



Lead time: 1 week



Solved Problem 1Solved Problem 1

Figure 15.21

LT = 2 LT = 3

LT = 3

A

B (3) C (1)

LT = 1

G (1)

LT = 3 LT = 6

LT = 3

LT = 1

D (1)D (1) E (2) F (1)


Solved Problem 2Solved Problem 2

Figure 15.22

A

B (1) C (2)

D (1)

LT = 2

LT = 1 LT = 2

LT = 3

Inventory Record Data

ITEMDATA CATEGORY B C D

Lot-sizing rule POQ (P=3) L4L FOQ = 500 unitsLead time 1 week 2 weeks 3 weeksScheduled receipts None 200 (week 1) NoneBeginning (on-hand) 20 0 425 inventory

Table 12.1


Solved Problem 2Solved Problem 2Item: B Lot size: POQ (P = 3)Description: Lead time: 1 week


1

2020

2 3 4 5 6 7 8

Scheduled receipts


Planned receipts


20

Week

200200 200200

200

0 0 240 60 0

280

9 10

120 180 60

0 0

360

280 360


Solved Problem 2Solved Problem 2Item: C Lot size: L4LDescription: Lead time: 2 weeks


1

200200

2 3 4 5 6 7 8

Scheduled receipts


Planned receipts


0

Week

00 00

400

200

0 0 0 0 0

400

9 10

240 360 120

0 0

240 360 120

400 240 360 120


Solved Problem 2Solved Problem 2Item: D Lot size: FOQ = 500 unitsDescription: Lead time: 3 weeks


1

425425

2 3 4 5 6 7 8

Scheduled receipts


Planned receipts


425

Week

2525 2525

240

285 425 305

500

9 10

360 120

500

360305 305 305

500 500

Documents

To Accompany Ritzman & Krajewski Foundations of Operations Management, © 2003 Prentice Hall, Inc. All rights reserved. Chapter 15 Resource Planning