APIX POLYBOB COMPANYGroup Assignment - Operations Management (OM)

Table of ContentCase Study Questions & Discussions

Case Study

Case Study Questions & Discussions

What are the key issues brought about in the conversation? What are the key symptoms, and what are the underlying problems? Be specific in your answers.

It is visible from the conversation that there is a huge gap between Material Requirement Planning (MRP) and Master Production Schedule (MPS). Both are not maintained properly in the organization. Inventory Management is also an issue.

These major planning issues leads to more inventory, high expediting cost, more premium freight costs from suppliers, and poor efficiency including more overtime to relieve some of the late order condition. Plant Manager also believes that EOQ and re-order points values are not correct.

Use the product information to develop an MRP approach to the problems. Would MRP solve the problems? If so, show specifically how MRP would avoid the problems discussed by Ken and Jim.

Proper Material Requirement Planning (MRP) Process can solve the problem of Apix Polybob Company. The purpose of the MRP is to determine the components needed, quantities and due dates so items in the Master Production Schedule (MPS) are made on time.

Bill of Material (BOM) will help to gather data to make the finished goods. BOM must be netted and exploded level. Lead time for each material will enable to trigger requirement based on Gross and Net requirement calculating the Inventory.

So Sales order / Gross requirement will generate the schedule receipt for the production. Calculation of Inventory for the component will provide the precise data for Net requirement. Considering and calculating lead time for the different level component, planned order can be released. EOQ and Reorder point will calculate more precise qty to release planned order.

Anu Mohan, Nirin Parikh, Shailen Mehta | Operational Management | Apix Polybob Company | 18-Sep-15

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Overall, systematic approach for MRP is very organized way to run the production with appropriate inventory.

Do any conditions bother you about the ability of MRP to deal with the problems? What specifically are those conditions?

If Sales department changes the order qty.Error in feeding Bill of Material (BOM).Delay in releasing the component.If supplier delay to supply the material.If safety / reorder point is not maintained properly.Issue in capacity utilization.For exploding the requirement, if EOQ doesn’t match.

Suppose it was discovered that only 250 of component E were in stock instead of the 300 listed on the inventory record. What problems would this cause (if any), and what are some of the ways that these problems could be addressed? How would (if at all) MRP help you when other methods might not?

There could be chance of delay to produce Finished Goods(FG). More qty of safety stock should be considered for order point. MRP has two main characteristics known requirement and the known period of requirement. Using the MRP Planner can reschedule due date of open order as required, reconcile error and try to find their cause, solve critical material shortage by expediting and replanning. MRP is detailed tool and it will give fair idea about material requirement to planner.

Suppose that the design engineer advises that he has a new design for component F. It won’t be ready until sometime after week 2, but he wants you to give a date for the first supplier shipment to come in, and you should be ready to tell the supplier how many to ship. Since the change is transparent to the customer, the design engineer advises you to go ahead and use up any existing material of the model. How will MRP help you to deal with this issue?

Though, new design is developed for component F; it should have ideally new part number. In the MRP, new part number should be created. Accordingly material product tree and level can be reordered. Lead time according to component F should be re-fixed in the MRP. BOM has to be changed, in case of change in component to make component F (new part number). MRP will help to make change easily. It will enable to make production / Inventory and related schedule robust.

Can you think of any other “what if” questions that might be more easily addressed by a systematic approach such as MRP?

Anu Mohan, Nirin Parikh, Shailen Mehta | Operational Management | Apix Polybob Company | 18-Sep-15

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MRP can be used for multiple products. Multiple BOMs and common materials can be easily maintained by MPR. eg. one part number goes as raw material (RM) to make few final products (FG), the common component will be nicely maintained in the Inventory.For different components, different order point can be maintained.MRP is equally useful to maintain several products and its components.

Case StudyKen Mack, plant manager for the Apix Polybob Company, was having a heated discussion with Jim Gould, the production and inventory control manager. Ken was getting tired of frantic calls from Ellen Uphouse, the marketing manager, concerning late orders for their Polybob customers and was once again after Jim to solve the problem. Some of the discussion points follow:

JIM: Look, Ken, I’m not sure what more we can do. I’ve reexamined the EOQ (Economic Order Quantity lot size) values and all the reorder points for all our inventory for all our Polybob models, including all component levels and purchased items. I’ve implemented strict inventory control procedures to ensure our accuracy levels to at least 80%, and I’ve worked with the production people to make sure we are maximizing both labor efficiency and utilization of our equipment. The real problem is with those salespeople. We no sooner have a production run nicely going, and they change the order or add a new one. If they’d only leave us alone for a while and let us catch up with our current late order bank, we’d be okay. As it is, everyone is getting tired of order changes, expediting, and making everything into a crisis. Even our suppliers are losing patience with us. They tend to disbelieve any order we give them until we call them up for a crisis shipment.

KEN: I find it hard to believe that you really have the EOQ and reorder point values right. If they were, we shouldn’t have all these part shortages all the time while our overall inventory is going up in value. I also don’t see any way we can shut off the orders coming in. I can imagine the explosion from Ellen if I even suggested such a thing. She’ll certainly remind me that our mission statement clearly points out that our number-one priority is customer service, and refusing orders and order changes certainly doesn’t fit as good customer service.

JIM: Then maybe the approach is to deal with Frank Adams (the chief financial officer). He’s the one who is always screaming that we have too much inventory, too much expediting cost, too much premium freight costs from suppliers, and poor efficiency. I’ve tried to have him authorize more overtime to relieve some of the late order conditions, but all he’ll say is that we must be making the wrong models. He continually points to the fact that the production hours we are paying for currently are more than enough to make our orders shipped at standard, and that condition has held for over a year. He just won’t budge on that point. Maybe you can convince him.

KEN: I’m not sure that’s the answer either. I think he has a point, and he certainly has the numbers to back him up. I’d have a real rough time explaining what we were doing to Ron Marrison (the CEO). There’s got to be a better answer. I’ve heard about a systems approach called material requirements planning or something like that. Why don’t you look into that. Take a representative model and see if that approach could help us deal

Anu Mohan, Nirin Parikh, Shailen Mehta | Operational Management | Apix Polybob Company | 18-Sep-15

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with what appears to be an impossible situation. I’m sure something would work. I know other factories have similar production conditions yet don’t seem to have all our problems.

Following is the information about Polybob model A that Ken suggested as a representative model to use for the analysis:

Component Lot Size Inventory Lead Time Scheduled Receipts

Reorder point

B 80 10 1 None 5C 150 40 1 None 15D 200 180 2 None 50E 400 300 2 None 70F 500 50 2 500, week 1 80

The following are the master schedule production lots for Model A:Complete 50 units, week 3Complete 50 units, week 5Complete 60 units, week 7Complete 60 units, week 9Complete 50 units, week 11

Upon seeing this information, Jim stated, “Look at how regular our production schedule is for this model. The reorder points will more than cover requirements, and none have lead times that make it tough to respond. This analysis should show that all the work I did on EOQ and reorder points was right, and the real problem lies with those sales and finance people who don’t understand our production needs.”

Anu Mohan, Nirin Parikh, Shailen Mehta | Operational Management | Apix Polybob Company | 18-Sep-15

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