Using The MRP System. Critical Aspects of Using the MRP System 1. The MRP Planner1. The MRP Planner The persons directly involved with the MRP system

Using The MRP Using The MRP SystemSystem

Critical Aspects of Using Critical Aspects of Using the MRP Systemthe MRP System

• 1. The MRP Planner1. The MRP Planner• The persons directly involved with the MRP The persons directly involved with the MRP

system outputs are planners. system outputs are planners. • Planners have the responsibility for making Planners have the responsibility for making

detailed decisions that keep the material detailed decisions that keep the material moving through the plant. moving through the plant.

• Computerized MRP systems often Computerized MRP systems often encompass tens of thousands of part encompass tens of thousands of part numbers. numbers.

• To handle this volume , planners are To handle this volume , planners are generally organized around logical generally organized around logical groupings of parts (such as metal parts, groupings of parts (such as metal parts, wood parts)wood parts)


The primary actions taken by an MRP planner are:The primary actions taken by an MRP planner are:• Release orders (i.e. launch purchase or shop Release orders (i.e. launch purchase or shop

orders when indicated by the system)orders when indicated by the system)• Reschedule due dates of existing open orders Reschedule due dates of existing open orders

when desirablewhen desirable• Analyze and update system planning factors for Analyze and update system planning factors for

the part numbers under her controlthe part numbers under her control• Find key problem areas requiring action now to Find key problem areas requiring action now to

prevent future crisesprevent future crises• Use the systems to solve critical material Use the systems to solve critical material

shortage problems so actions can be captured in shortage problems so actions can be captured in the records for the next processingthe records for the next processing


Order Launching Order Launching • Process of releasing orders to the shop or to vendors Process of releasing orders to the shop or to vendors

(purchase orders)(purchase orders)• This process is prompted by MRP when a planned This process is prompted by MRP when a planned

order release is in the current time period, the order release is in the current time period, the action action bucket bucket ((if there is a nonzero quantity in the first if there is a nonzero quantity in the first week’s entry of the POR row, called action bucket, week’s entry of the POR row, called action bucket, the computer issues an action noticethe computer issues an action notice). ).

• Order launching converts the planned order into a Order launching converts the planned order into a scheduled receipt reflecting the lead time offset. scheduled receipt reflecting the lead time offset.

• Order launching is the opening of shop and purchase Order launching is the opening of shop and purchase orders; closing these orders occurs when scheduled orders; closing these orders occurs when scheduled receipts are received into stockrooms. receipts are received into stockrooms.

• Procedures for opening and closing shop orders have Procedures for opening and closing shop orders have to be carefully defined so all transactions are to be carefully defined so all transactions are properly processed. properly processed.


• The orders indicated by MRP as ready The orders indicated by MRP as ready for launching are a function of lot sizing for launching are a function of lot sizing procedures and safety stock as well as procedures and safety stock as well as timing.timing.

• A key responsibility of the planner is A key responsibility of the planner is managing with awareness of the managing with awareness of the implications of these effects. implications of these effects.

• When an order is launched, it is When an order is launched, it is sometimes necessary to include a sometimes necessary to include a shrinkage allowance for scrap and other shrinkage allowance for scrap and other process yield situations. process yield situations.


Allocation and availability checkingAllocation and availability checking• A step prior to order launching that involves an A step prior to order launching that involves an

availability check for the necessary component or availability check for the necessary component or components.components.

• The planner role is key here. The planner role is key here. • If the components are not available for an order, the If the components are not available for an order, the

best course action might be to release a partial order. best course action might be to release a partial order. • Most MRP systems first check component availability Most MRP systems first check component availability

for any order that a planner desires to launch. for any order that a planner desires to launch. • If sufficient quantities of each component are available, If sufficient quantities of each component are available,

the shop order can be created and then the system the shop order can be created and then the system allocates the necessary quantities to the particular shop allocates the necessary quantities to the particular shop order (order (Shop orders are assigned by the computer, in Shop orders are assigned by the computer, in numerical sequencenumerical sequence). ).


Allocation and availability checkingAllocation and availability checking• After availability checking and allocation, After availability checking and allocation,

picking ticketspicking tickets are typically created and sent to are typically created and sent to the stockroom. the stockroom.

• The picking ticket calls for a specified amount The picking ticket calls for a specified amount of some part number to be removed from some of some part number to be removed from some inventory location, on some shop order, to be inventory location, on some shop order, to be delivered to a particular department or location. delivered to a particular department or location.

• When the picking ticket has been satisfied When the picking ticket has been satisfied (inventory moved), the allocation is removed (inventory moved), the allocation is removed and the on-hand balance is reduced and the on-hand balance is reduced accordingly. accordingly.


• 2. Exception codes2. Exception codes• Used “to separate the vital few from the trivial Used “to separate the vital few from the trivial

many”.many”.• If the manufacturing process is under control and If the manufacturing process is under control and

the MRP system is functioning correctly, exception the MRP system is functioning correctly, exception coding typically means only 10-20% of the part coding typically means only 10-20% of the part numbers will require planner review at each numbers will require planner review at each processing cycle. processing cycle.

• Exception codes are in Exception codes are in twotwo general categories. general categories.• The first, checking the input data accuracy, includes The first, checking the input data accuracy, includes

checks for dates beyond planning horizon, quantities checks for dates beyond planning horizon, quantities larger or smaller than check figures, nonvalid part larger or smaller than check figures, nonvalid part numbers, or any other desired check for incongruity. numbers, or any other desired check for incongruity.

• The second category of exception codes directly The second category of exception codes directly supports the MRP planning activity. supports the MRP planning activity.


• Include are the following kinds of exception Include are the following kinds of exception (action) messages or diagnostics:(action) messages or diagnostics:

• Part numbers for which a planned order is now in Part numbers for which a planned order is now in the most immediate time period (the most immediate time period (action bucketaction bucket).).

• Open order diagnostics when the present timing Open order diagnostics when the present timing and/or amount for a scheduled receipt is not and/or amount for a scheduled receipt is not satisfactory. Such a message might indicate that an satisfactory. Such a message might indicate that an open order exists that's not necessary to cover any open order exists that's not necessary to cover any of the requirements in the planning horizon. The of the requirements in the planning horizon. The most common type of open diagnostic shows most common type of open diagnostic shows scheduled receipts that are timed to arrive either scheduled receipts that are timed to arrive either too late or to early and should, therefore, have too late or to early and should, therefore, have their due dates revised to reflect proper factory their due dates revised to reflect proper factory priorities. priorities.


• A third general type of exception message indicates A third general type of exception message indicates problem areas for management; in essence, situations problem areas for management; in essence, situations where level 0 quantities can’t be satisfied unless the where level 0 quantities can’t be satisfied unless the present planning factors used in MRP are changed. present planning factors used in MRP are changed. One such exception code indicates a requirement has One such exception code indicates a requirement has been offset into the past period and subsequently been offset into the past period and subsequently added to any requirement in the first or most added to any requirement in the first or most immediate time bucket. This condition means an order immediate time bucket. This condition means an order should have been placed in the past. Since it wasn't, should have been placed in the past. Since it wasn't, lead times through the various production levels must lead times through the various production levels must be compressed to meet the end-item schedule. A be compressed to meet the end-item schedule. A similar diagnostic indicates the allocations exceed the similar diagnostic indicates the allocations exceed the on-hand inventory-a condition directly analogous to on-hand inventory-a condition directly analogous to overdrawing a checking account. Unless more overdrawing a checking account. Unless more inventory is received soon, the firm will not be able to inventory is received soon, the firm will not be able to honor all pick tickets issued, and there will be a honor all pick tickets issued, and there will be a material shortage in the factory. material shortage in the factory.


• 3. Bottom-up Replanning3. Bottom-up Replanning• Used to solve material shortage Used to solve material shortage

problems.problems.• Solution might be made by compressing Solution might be made by compressing

lead times throughout the product lead times throughout the product structure using the system and bottom-up structure using the system and bottom-up replanning (i.e. issuing an immediate replanning (i.e. issuing an immediate order to the vendor securing a promised order to the vendor securing a promised shorter lead time, order more parts and shorter lead time, order more parts and negotiate a reduction in lead time)negotiate a reduction in lead time)

System DynamicsSystem Dynamics

• It is essential that the MRP system It is essential that the MRP system mirror actual shop conditions; that is mirror actual shop conditions; that is both the physical system and the both the physical system and the information system have to cope information system have to cope with scrap, incorrect counts, with scrap, incorrect counts, changes in customer needs, changes in customer needs, incorrect bills of material, incorrect bills of material, engineering design changes, and engineering design changes, and poor vendor performance.poor vendor performance.


• Transactions during a periodTransactions during a period

Gross Gross requiremenrequirementsts

3030 2020 2020 00 4545

Scheduled Scheduled receiptsreceipts

5050

On hand On hand inventory inventory (10)(10)

3030 1010 4040 4040 4545

Planned Planned order order releasesreleases

5050 5050

LT=2FOQ=50

1 32 4 5

System DynamicsSystem DynamicsLets assume that during week 1 the following Lets assume that during week 1 the following

changes occurred, and the transactions were changes occurred, and the transactions were processed:processed:

• Actual disbursements from the stock for this part Actual disbursements from the stock for this part during week 1 were only 20 instead of the planned during week 1 were only 20 instead of the planned 50.50.

• The scheduled receipt for 50 due in week 1 was The scheduled receipt for 50 due in week 1 was received on Tuesday, but 10 units were rejected, received on Tuesday, but 10 units were rejected, so only 40 were actually received into inventory. so only 40 were actually received into inventory.

• The inventory was counted on Thursday and 20 The inventory was counted on Thursday and 20 additional pieces were found. additional pieces were found.

• A scheduled receipt for 50 in week 3 is created.A scheduled receipt for 50 in week 3 is created.• The requirement date for the 45 pieces in week 5 The requirement date for the 45 pieces in week 5

was changed to week 4. was changed to week 4. • Marketing requested an additional 5 pieces for Marketing requested an additional 5 pieces for

samples in week 2.samples in week 2.• The requirement for week 6 has been set at 25. The requirement for week 6 has been set at 25.


• ReschedulingRescheduling

Gross Gross requiremenrequirementsts

2525 2020 4545 00 2525


5050


2525 5555 1010 1010 3535


5050

2 3 54 6

Technical IssuesTechnical IssuesProcessing frequencyProcessing frequency• Since conditions change and new information is received, Since conditions change and new information is received,

the MRP records must be brought up to date so plans can the MRP records must be brought up to date so plans can be adjusted.be adjusted.

• Two issues are involved in the processing decision: Two issues are involved in the processing decision: how how frequentlyfrequently the records should be processed and the records should be processed and whether whether all the recordsall the records should be processed at the same time. should be processed at the same time.

• Processing all the records in one computer is called Processing all the records in one computer is called regenerationregeneration. .

• This signifies that all part number records are completely This signifies that all part number records are completely reconstructed each time the records are processed. reconstructed each time the records are processed.

• The problem with processing The problem with processing lessless frequently is that the frequently is that the portrayal of component status and needs expressed in the portrayal of component status and needs expressed in the records becomes increasingly out of date and inaccurate. records becomes increasingly out of date and inaccurate.

• MoreMore frequent processing of the MRP records increases frequent processing of the MRP records increases computer costs but results in fewer unpleasant surprises computer costs but results in fewer unpleasant surprises ((net-change systemsnet-change systems). ).

Technical IssuesTechnical IssuesSafety stock and safety lead timeSafety stock and safety lead time• Safety stockSafety stock is a buffer of a stock above and beyond is a buffer of a stock above and beyond

that needed to satisfy the gross requirements. that needed to satisfy the gross requirements. • Safety lead timeSafety lead time is a procedure whereby shop orders is a procedure whereby shop orders

or purchase orders are released and scheduled to or purchase orders are released and scheduled to arrive one or more periods before necessary to arrive one or more periods before necessary to satisfy the gross requirements.satisfy the gross requirements.

• Both safety stock and safety lead time are used in Both safety stock and safety lead time are used in practice and can be used simultaneously. practice and can be used simultaneously.

• Safety stock tends to be used in MRP systems where Safety stock tends to be used in MRP systems where uncertainty about quantities is the problem (e.g. uncertainty about quantities is the problem (e.g. where some small amount of scrap, spare part where some small amount of scrap, spare part demand, or other unplanned usage is a frequent demand, or other unplanned usage is a frequent occurrence). Safety lead time tends to be used when occurrence). Safety lead time tends to be used when the major uncertainty is the timing rather than the the major uncertainty is the timing rather than the quantity. For example, if a firm buys from a vendor quantity. For example, if a firm buys from a vendor who often misses delivery dates, safety lead time may who often misses delivery dates, safety lead time may provide better results than safety stock. provide better results than safety stock.

Technical IssuesTechnical Issues

Gross Gross requirerequirementsments

33 3535 1010

SchedulScheduled ed receiptsreceipts

On hand On hand inventorinventory (15)y (15)

1515 1515 1212 3535 1010 00 00 00 00 00


2323 1010

Safety lead time=1 LT=1 L4L An MRP Record with Safety Lead time

Technical IssuesTechnical Issues

Gross Gross requiremerequirementsnts

150150 120120 150150 120120


230230


117117 117117 117117 227227 227227 307307 187187 187187


230230 230230

Safety stock=80 LT=2 Lot size=230 An MRP Record with Safety Stock

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Using The MRP System. Critical Aspects of Using the MRP System 1. The MRP Planner1. The MRP Planner The persons directly involved with the MRP system