This Document Contains Chapters 21 to 22 CHAPTER 21 MATERIAL REQUIREMENTS PLANNING Discussion Questions 1. What do we mean when we say that MRP is based on dependent demand? Decisions in MRP are directly driven by decisions made elsewhere in planning end-item production. The order quantities depend on the plans for end-item production. Without end-item production there is no need for an MRP system. 2. Discuss the importance of the master production schedule in an MRP system. The master production schedule “drives” the system. It states the planned due dates for end items. Material requirements planning computer runs, however, involve an iterative process. The master production schedule “proposes” or “hypothesizes” a tentative schedule. After the MRP run with this schedule, the shop scheduler examines the MRP plan for impractical loads on the productive system—either by stating excessive demands on personnel or equipment, or in excessive idle time. Then the master production schedule is revised and the program is run again. Because the entire MRP system is geared to satisfying the master production schedule, it is critical that the master production schedule be correct at the start of the first MRP run. The production scheduler then knows what effects any changes he makes on the schedule will have on the original MRP schedule. He can then take appropriate action as necessary, such as requesting that customers be contacted to try to extend promised dates if they are too close, or to arrange for early delivery or additional storage space if products will be completed prior to the promised delivery date. 3. Explain the need for time fences in the master production schedule. Time fences allow for some certainty in the planning of production resources and the execution of the MRP system. Since most items ordered in an MRP system have some lead time, the MPS must be firmed up early enough to allow for the lead times needed in ordering needed materials through the MRP system. If the MPS is allowed to change up until the last minute there will not be enough time to order everything needed to support it. 4. “MRP just prepares shopping lists. It does not do the shopping or cook the dinner.” Comment. An MRP system generates schedules to meet material needs. It starts with the master schedule and develops a time phased schedule which specifies what, when, and how many units of each material are required. Whether this schedule is adhered to, depends first on the master scheduler who may change the schedule. Then an inventory control personnel may choose to change order quantities or timing. Then the purchasing department may make further modifications to a purchase order, and finally the production scheduler may actually release the work to production—(which may be at some time other than that called for in the MRP schedule). 5. What are the sources of demand in an MRP system? Are these dependent or independent, and how are they used as inputs to the system? An MRP system has both dependent and independent item demands. The major demands on the system occur through the master production schedule (these are usually of independent origin). From here on throughout the system, the demands are then dependent on the master production schedule. Orders for spare parts and repair parts normally do not go through the master production schedule unless their amounts are large enough to place a significant load on the productive system. These demands (which are usually independent) are fed into the inventory records file by-passing the master production schedule. Once there, they are then exploded into the required parts and materials needed during the normal course of the MRP run. The parts and materials needed to make the spares and repair parts are, therefore, dependent demand. 6. State the types of data that would be carried in the bill of materials file and the inventory record file. The Bill of Materials file contains information about the product, including a listing of parts numbers, quantities needed per unit or product, and the assembly or process flow stipulating how the unit is structured. Engineering design changes that affect the product structure are placed into the Bill of Materials file. Also, parts or material changes that occur through a change of vendors or material composition are also added to update the file. The Inventory Record file contains a great deal of information about each inventory item. At a minimum, the file would contain the number of units on hand and on order, the number reserved for prior commitments, the cost of the item, the name and address of the vendor, the lead time needed to obtain a shipment, and any shipment size restrictions. Additional information may be added as desired, such as that contained in Exhibit 21.7. 7. Discuss the meaning of MRP terms such as planned order release and scheduled order receipts. A planned order release is an order currently planned to be released. It has not been released. Consequently, the planned order release can be changed based upon changes in demand as one example. A scheduled order receipt, on the other hand, reflects an order that has already been released. The scheduled order receipt indicates the anticipated arrival of the released order. Due to variations in delivery times, it may not arrive exactly at the planned arrival time. 8. Why is the MRP process referred to as an “explosion?” Dependent demand for items managed in an MRP system is driven by production orders for the independent demand end item. As end item orders are entered, the MRP system evaluates the impact on demand for all of the dependent demand items. The system calculates the dependent demand by examining the end item product structure tree one level at a time. For complex items, a small order for a single end item could result in inventory calculations and planned orders for hundreds of component parts and assemblies. One small order “explodes” into a very complex series of orders. 9. Many practitioners currently update MRP weekly or biweekly. Would it be more valuable if it were updated daily? Discuss. The performance of any operation will naturally vary from day to day. When the observed time period in which performance is measured is a week or two, the daily variations are smoothed; that is, the variations in performance are averaged. For example, below-average performance in one day may be offset by a higher-than-average performance the next day. Daily MRP runs monitor performance too closely and may even create an exception report calling a normal variation an abnormal deviation from expected output. 10. Should safety stock be necessary in an MRP system with dependent demand? If so, why? If not, why do firms carry it anyway? In most systems, there are some reasons to carry safety stock, even for items that only have dependent demand. Most reasons stem from uncertainty in the system and its environment. Some of these include: a. Possible short-notice increase in the production order quantity for the parent independent demand item. b. Rush orders for the parent independent demand item. c. Potential quality or yield issues with the MRP orders d. Lead time variation with the MRP orders e. Scrapped items in the MRP system 11. Contrast the significance of the term lead time in the traditional EOQ context and in an MRP system. In the traditional context, lead time is fixed—either as a discrete time or as a probability distribution. Such lead time constancy or variation is outside of the inventory model. Lead time in an MRP system is assumed to be a variable. While specific lead times are stated for planning purposes, these times may be speeded up or delayed as conditions warrant. Indeed, it is this ability to detect needed changes in lead times—either by expediting or de-expediting—that many users cite as one of the most valuable features of MRP. 12. Planning orders on a lot-for-lot is commonly done because it is simple and intuitive. It also helps to minimize holding costs as you are only ordering what is needed when it is needed. So far it sounds like a good idea. Are there any disadvantages to this approach? The main problem lies in its simplicity – there is no analysis of the costs involved. It will work well when setup costs are extremely low and lead times are dependable. These are traits needed to implement a JIT system, and lot-for-lot is a very JIT-type logic. When setup costs are high, as in Solved Problem 4, lot-for-lot ordering is not appropriate and can be quite expensive compared to other methods. 13. What is meant when we say that the least total cost (LTC) and least unit cost (LUC) methods are dynamic lot-sizing techniques? Dynamic means that the order sizes are always changing as our needs change across time. In the EOQ approach, the order quantity is the same every time. In lot-for-lot ordering, the quantities do change, but they are always exactly what is needed in a period. In LTC and LUC we consider the effect of cumulative needs across time to determine best ordering quantities. Order quantities change throughout time, and the number of periods we order for each time will change too. Also, as we roll through time and new demand requirements are known, previously developed planned orders may end up changing. These methods are dynamic indeed! Objective Questions 1. Match the industry type to the expected benefits from an MRP system, as High, Medium, or Low. Expected Benefit (High, Medium, or Industry Type Low) Assemble-to-stock High Assemble-to-order High Fabricate-to-stock Low Fabricate-to-order Low Manufacture-to-order High Process Medium 2. MRP is based on what type of demand? Dependent demand 3. Which scheduling process drives requirements in the MRP process? Master production scheduling 4. What term is used to identify the difference between the number of units of an item listed on the master schedule and firm customer orders? Available to promise 5. What are the three primary data sources used by the MRP system? Master production schedule, bill of materials, inventory records file 6. What is another common name for the bill of materials? Product structure tree -or- product tree 7. What is the process to ensure that all of the needs for a particular item are calculated at the same time in the MRP process? Low-level coding 8. What is the MRP term for the time periods used in planning? Time buckets 9. a. X A B C D E F G 105 404 150 295 270 -10 180 490 (Sample MRP schedule worksheet) Period: 1 2 3 4 5 6 7 8 9 10 Item: OH: LT: SS: Q: Gross requirements Scheduled receipts Projected available balance Net requirements Planned order receipts Planned order releases Item: OH: LT: SS: Q: Gross requirements Scheduled receipts Projected available balance Net requirements Planned order receipts Planned order releases Item: OH: LT: SS: Q: Gross requirements Scheduled receipts Projected available balance Net requirements Planned order receipts Planned order releases Item: OH: LT: SS: Q: Gross requirements Scheduled receipts Projected available balance Net requirements Planned order receipts Planned order releases 10. Period: 1 2 3 4 5 Item: OH: LT: SS: Q: J 40 1 0 L4L Gross requirements 75 50 70 Scheduled receipts Projected available balance 40 0 0 0 0 Net requirements 35 50 70 Planned order receipts 35 50 70 Planned order releases 35 50 70 Level Period: 1 2 3 4 5 6 7 8 9 10 Item: OH: LT: SS: Q: Z 0 2 0 L4L Gross requirements 50 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 0 0 Net requirements 50 Planned order receipts 50 Planned order releases 50 Item: OH: LT: SS: Q: A 0 1 0 L4L Gross requirements 100 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 0 0 Net requirements 100 Planned order receipts 100 Planned order releases 100 Item: OH: LT: SS: Q: B 0 1 0 L4L Gross requirements 200 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 0 0 Net requirements 200 Planned order receipts 200 Planned order releases 200 Item: OH: LT: SS: Q: C 0 1 0 L4L Gross requirements 300 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 0 0 Net requirements 300 Planned order receipts 300 Planned order releases 300 Item: OH: LT: SS: Q: D 0 1 0 L4L Gross requirements 400 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 0 0 Net requirements 400 Planned order receipts 400 Planned order releases 400 Item: OH: LT: SS: Q: E 0 3 0 L4L Gross requirements 800 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 0 0 Net requirements 800 Planned order receipts 800 Planned order releases 800 11. Level Period: 1 2 3 4 5 6 7 8 9 10 Item: OH: LT: SS: Q: A 0 2 0 L4L Gross requirements 30 Scheduled receipts 10 Projected available balance 0 10 10 10 10 10 10 0 Net requirements 20 Planned order receipts 20 Planned order releases 20 Item: OH: LT: SS: Q: C 10 1 0 50 Gross requirements 20 Scheduled receipts Projected available balance 10 10 10 10 10 40 40 40 Net requirements 10 Planned order receipts 50 Planned order releases 50 Item: OH: LT: SS: Q: B 0 1 0 L4L Gross requirements 50 60 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 Net requirements 50 60 Planned order receipts 50 60 Planned order releases 50 60 Item: OH: LT: SS: Q: D 0 2 0 50 Gross requirements 50 60 40 Scheduled receipts Projected available balance 0 0 0 0 40 0 0 0 Net requirements 50 60 0 Planned order receipts 50 100 Planned order releases 50 100 Item: OH: LT: SS: Q: E 50 1 0 200 Gross requirements 100 220 Scheduled receipts 50 Projected available balance 100 100 100 0 180 180 180 180 Net requirements 0 220 Planned order receipts 400 Planned order releases 400 Item: OH: LT: SS: Q: F 150 1 0 L4L Gross requirements 400 Scheduled receipts 50 Projected available balance 200 200 200 0 0 0 0 0 Net requirements 200 Planned order receipts 200 Planned order releases 200 12. Product structure tree Level Low-level coded product structure tree Level Indented bill of materials Single level bill of materials A A B(2) B(2) E C(3) D(2) D(2) F(2) B C(3) E F(2) F(2) D C D(2) D F(2) E D(2) Period: 1 2 3 4 5 6 7 8 9 10 Item: OH: LT: SS: Q: A 0 1 0 L4L Gross requirements 20 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 Net requirements 20 Planned order receipts 20 Planned order releases 20 Item: OH: LT: SS: Q: B 0 2 0 L4L Gross requirements 40 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 Net requirements 40 Planned order receipts 40 Planned order releases 40 Item: OH: LT: SS: Q: C 15 1 0 L4L Gross requirements 60 Scheduled receipts Projected available balance 15 15 15 15 15 15 0 0 Net requirements 45 Planned order receipts 45 Planned order releases 45 Item: OH: LT: SS: Q: E 0 2 0 50 Gross requirements 40 Scheduled receipts 20 Projected available balance 0 20 20 20 30 30 30 30 Net requirements 20 Planned order receipts 50 Planned order releases 50 Item: OH: LT: SS: Q: F 0 1 0 180 Gross requirements 80 90 Scheduled receipts Projected available balance 0 0 0 0 100 10 10 10 Net requirements 80 Planned order receipts 180 Planned order releases 180 Item: OH: LT: SS: Q: D 50 1 0 L4L Gross requirements 100 45 40 Scheduled receipts Projected available balance 50 50 0 0 0 0 0 0 Net requirements 50 45 40 Planned order receipts 50 45 40 Planned order releases 50 45 40 Period: 1 2 3 4 5 6 7 8 9 10 Item: OH: LT: SS: Q: A 20 2 0 L4L Gross requirements 50 Scheduled receipts 10 Projected available balance 30 30 30 30 30 30 30 30 30 0 Net requirements 20 Planned order receipts 20 Planned order releases 20 Item: OH: LT: SS: Q: B 0 2 0 50 Gross requirements 20 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 30 30 30 Net requirements 20 Planned order receipts 50 Planned order releases 50 Item: OH: LT: SS: Q: C 50 1 0 100 Gross requirements 200 20 Scheduled receipts 100 Projected available balance 150 150 150 150 150 50 50 30 30 30 Net requirements 50 Planned order receipts 100 Planned order releases 100 Item: OH: LT: SS: Q: D 100 3 0 L4L Gross requirements 200 Scheduled receipts 100 Projected available balance 100 100 200 200 0 0 0 0 0 0 Net requirements 0 Planned order receipts Planned order releases Item: OH: LT: SS: Q: E 10 2 0 L4L Gross requirements 100 50 Scheduled receipts Projected available balance 10 10 10 10 0 0 0 0 0 0 Net requirements 90 50 Planned order receipts 90 50 Planned order releases 90 50 Item: OH: LT: SS: Q: F 0 2 0 50 Gross requirements 270 150 50 Scheduled receipts Projected available balance 0 0 30 30 30 30 30 30 30 30 Net requirements 270 120 20 Planned order receipts 300 150 50 Planned order releases 300 150 50 Level Period: 1 2 3 4 5 6 7 8 9 10 Item: OH: LT: SS: Q: A 5 2 0 20 Gross requirements 20 Scheduled receipts 10 Projected available balance 5 5 15 15 15 15 15 15 15 15 Net requirements 5 Planned order receipts 20 Planned order releases 20 Item: OH: LT: SS: Q: C 0 1 0 L4L Gross requirements 20 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 0 0 Net requirements 20 Planned order receipts 20 Planned order releases 20 Item: OH: LT: SS: Q: B 10 2 0 40 Gross requirements 60 40 Scheduled receipts 20 Projected available balance 10 10 10 10 10 10 10 10 10 10 Net requirements 30 30 Planned order receipts 40 40 Planned order releases 40 40 Item: OH: LT: SS: Q: D 100 3 0 160 Gross requirements 120 120 20 Scheduled receipts Projected available balance 100 100 100 100 140 20 0 0 0 0 Net requirements 20 0 Planned order receipts 160 Planned order releases 160 Item: OH: LT: SS: Q: F 0 2 0 L4L Gross requirements 40 40 Scheduled receipts 40 Projected available balance 0 0 0 0 0 0 0 0 0 0 Net requirements 0 40 Planned order receipts 40 Planned order releases 40 Item: OH: LT: SS: Q: E 100 2 0 L4L Gross requirements 160 80 Scheduled receipts 60 Projected available balance 100 0 0 0 0 0 0 0 0 0 Net requirements 0 80 Planned order receipts 80 Planned order releases 80 Period: 1 2 3 4 5 6 7 8 9 10 Item: OH: LT: SS: Q: A 20 1 0 L4L Gross requirements 20 20 60 50 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 Net requirements 0 20 60 50 Planned order receipts 20 60 50 Planned order releases 20 60 50 Item: OH: LT: SS: Q: B 50 1 0 L4L Gross requirements 40 120 100 Scheduled receipts 30 Projected available balance 40 40 40 40 0 0 0 0 Net requirements 80 100 Planned order receipts 80 100 Planned order releases 80 100 Item: OH: LT: SS: Q: C 60 2 0 L4L Gross requirements 60 180 150 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 Net requirements 0 180 150 Planned order receipts 180 150 Planned order releases 180 150 Item: OH: LT: SS: Q: D 25 1 0 50 Gross requirements 180 150 Scheduled receipts Projected available balance 25 25 45 45 45 45 45 45 Net requirements 155 105 Planned order receipts 200 150 Planned order releases 200 150 Item: OH: LT: SS: Q: E 0 2 0 100 Gross requirements 180 150 Scheduled receipts Projected available balance 0 0 20 20 70 70 70 70 Net requirements 180 130 Planned order receipts 200 200 Planned order releases 200 200 Item: OH: LT: SS: Q: F 0 2 0 100 Gross requirements 360 80 300 100 Scheduled receipts Projected available balance 0 0 40 60 60 60 60 60 Net requirements 360 40 240 40 Planned order receipts 400 100 300 100 Planned order releases 400 100 300 100 Period: 1 2 3 4 5 6 7 8 9 10 Item: OH: LT: SS: Q: A 20 1 0 L4L Gross requirements 30 30 40 Scheduled receipts Projected available balance 20 0 0 0 0 0 0 0 Net requirements 10 30 40 Planned order receipts 10 30 40 Planned order releases 10 30 40 Item: OH: LT: SS: Q: B 0 1 0 L4L Gross requirements 10 30 40 Scheduled receipts 10 Projected available balance 0 0 0 0 0 0 0 0 Net requirements 0 30 40 Planned order receipts 30 40 Planned order releases 30 40 Item: OH: LT: SS: Q: C 10 1 0 50 Gross requirements 20 60 80 Scheduled receipts 50 Projected available balance 40 40 40 30 30 30 0 0 Net requirements 20 50 Planned order receipts 50 50 Planned order releases 50 50 Item: OH: LT: SS: Q: D 20 2 0 100 Gross requirements 10 100 30 100 40 Scheduled receipts Projected available balance 10 10 10 80 80 80 40 40 Net requirements 90 20 20 Planned order receipts 100 100 100 Planned order releases 100 100 100 Item: OH: LT: SS: Q: E 10 2 0 50 Gross requirements 150 150 Scheduled receipts Projected available balance 10 10 10 10 10 10 10 10 Net requirements 140 140 Planned order receipts 150 150 Planned order releases 150 150 Assume all items ordered L4L. Level Period: 1 2 3 4 5 6 7 8 9 10 Item: OH: LT: SS: Q: A 0 1 0 L4L Gross requirements 100 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 0 0 Net requirements 100 Planned order receipts 100 Planned order releases 100 Item: OH: LT: SS: Q: B 0 2 0 L4L Gross requirements 200 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 0 0 Net requirements 200 Planned order receipts 200 Planned order releases 200 Item: OH: LT: SS: Q: C 0 2 0 L4L Gross requirements 400 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 0 0 Net requirements 400 Planned order receipts 400 Planned order releases 400 Item: OH: LT: SS: Q: D 0 3 0 L4L Gross requirements 600 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 0 0 Net requirements 600 Planned order receipts 600 Planned order releases 600 Item: OH: LT: SS: Q: E 0 2 0 L4L Gross requirements 1200 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 0 0 Net requirements 1200 Planned order receipts 1200 Planned order releases 1200 Item: OH: LT: SS: Q: F 0 3 0 L4L Gross requirements 800 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 0 0 Net requirements 800 Planned order receipts 800 Planned order releases 800 Assume all items are ordered L4L. Period: 1 2 3 4 5 6 7 8 9 10 Standard Model Demand: 300 400 Sports Model Demand: 200 100 Radio/CD OH: 50 LT: 2 SS: 0 Q: L4L Gross requirements 300 200 500 Scheduled receipts Projected available balance 50 50 50 0 0 0 0 0 Net requirements 250 200 500 Planned order receipts 250 200 500 Planned order releases 250 200 500 Standard Trim OH: 0 LT: 2 SS: 0 Q: L4L Gross requirements 300 400 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 Net requirements 300 400 Planned order receipts 300 400 Planned order releases 300 400 Standard HW OH: 0 LT: 3 SS: 0 Q: L4L Gross requirements 300 400 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 Net requirements 300 400 Planned order receipts 300 400 Planned order releases 300 400 Sport Trim OH: 0 LT: 2 SS: 0 Q: L4L Gross requirements 200 100 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 Net requirements 200 100 Planned order receipts 200 100 Planned order releases 200 100 Sport HW OH: 0 LT: 3 SS: 0 Q: L4L Gross requirements 200 100 Scheduled receipts Projected available balance 0 0 0 0 0 0 0 0 Net requirements 200 100 Planned order receipts 200 100 Planned order releases 200 100 Least Total Cost Period 1 2 3 4 5 6 7 8 9 10 Gross Requirements 30 50 10 20 70 80 20 60 200 50 Projected available balance 60 10 0 230 160 80 60 0 50 0 Net requirements 20 200 Planned order receipts 250 250 Planned order releases 250 250 Least Unit Cost Period 1 2 3 4 5 6 7 8 9 10 Gross Requirements 30 50 10 20 70 80 20 60 200 50 Projected available balance 60 10 0 430 360 280 260 200 0 0 Net requirements 20 50 Planned order receipts 450 50 Planned order releases 450 50 Calculations Weeks Quantity ordered Carrying cost Order cost Total cost Unit cost 4 20 $0.00 $10.00 $10.00 $0.500 4 to 5 90 0.70 10.00 10.70 0.119 4 to 6 170 2.30 10.00 12.30 0.072 4 to 7 190 2.90 10.00 12.90 0.068 4 to 8 250 5.30 10.00 15.30 0.061 4 to 9 450 15.30 10.00 25.30 0.056 4 to 10 500 18.30 10.00 28.30 0.057 9 200 0.00 10.00 10.00 9 to 10 250 2.50 10.00 12.50 For Least Total Cost, order for periods 4 through 8, since carrying cost is the closest to ordering cost. For Least Unit Cost, order for periods 4 through 9, since this has the lowest unit cost. Period 1 2 3 4 5 6 7 8 9 10 Gross Requirements 20 10 15 45 10 30 100 20 40 150 Projected available balance 50 40 25 160 150 120 20 0 150 0 Net requirements 20 0 40 0 Planned order receipts 180 190 Planned order releases 180 190 Weeks Quantity ordered Carrying cost Order cost Total cost Unit cost 4 20 $0.00 $9.00 $9.00 $0.450 4 to 5 30 0.20 9.00 9.20 0.307 4 to 6 60 1.40 9.00 10.40 0.173 4 to 7 160 7.40 9.00 16.40 0.103 4 to 8 180 9.00 9.00 18.00 0.100 4 to 9 220 13.00 9.00 22.00 0.100 4 to 10 370 31.00 9.00 40.00 0.108 Least Total Cost method indicates that 180 units should be ordered to cover the needs for periods 4 through 8, since the carrying cost is equal to the order cost ($9). Least Unit Cost it tied at $.100 for ordering for periods 4 through 8 and 4 through 9. Therefore, order either 180 or 220 units in period 2. a. Product Structure Tree Level b. Low-level Coded Product Structure Tree Level c. Indented bill of materials Single level bill of materials A A B(2) B(2) E(4) C(3) F(3) D C(3) B D(3) E(4) H(2) F(3) E(5) C G(2) D(3) D H(2) H E(5) G(2) d. Level 0 100 units of A Level 1 200 units of B 300 units of C Level 2 600 units of F 600 units of H 1000 units of D (3x3x100 + 1x100) Level 3 3800 units of E (4x2x100 + 5x2x3x100) 1200 units of G ANALYTICS EXERCISE: An MRP Explosion – Brunswick Motors Recently, Phil Harris, the Production Control Manager at Brunswick, read an article on Time-Phased Requirements Planning. He was curious about how this technique might work in scheduling Brunswick’s engine assembly operations, and decided to prepare an example to illustrate the use to Time-Phased Requirements Planning. Phil’s first step was to prepare a master schedule for one of the engine types produced by Brunswick - the Model 1000 engine. This schedule indicates the number of units of the Model 1000 engine to be assembled each week during the past twelve weeks, and is shown below. Next, Phil decided to simplify his requirements planning example by considering only two of the many components that are needed to complete the assembly of the Model 1000 engine. These two components, the Gear Box and the Input Shaft, are shown in the Product Structure Diagram shown below. Phil noted that the Gear Box is assembled by the Sub-Assembly Department, and is subsequently sent to the main engine assembly line. The Input Shaft is one of several component parts manufactured by Brunswick that are needed to produce a Gear Box sub-assembly. Thus, levels 0, 1, and 2 are included in the Product Structure Diagram to indicate the three manufacturing stages that are involved in producing an engine: the Engine Assembly Department, the Sub-Assembly Department, and the Machine Shop. The manufacturing lead times required to produce the Gear Box and Input Shaft components are also indicated in the Product Structure Diagram. Note that two weeks are required to produce a batch of Gear Boxes, and that all of the Gear Boxes must be delivered to the assembly line parts stockroom before Monday morning of the week in which they are to be used. Likewise, it takes three weeks to produce a lot of Input Shafts, and all of the shafts that are needed for the production of Gear Boxes in a given week must be delivered to the Sub-Assembly Department stockroom before Monday morning of the week. In preparing the MRP example Phil planned to use the worksheets shown on the next page and make the following assumptions: 1. Seventeen gear boxes are on hand at the beginning of week 1, and five gear boxes are currently on order to be delivered at the start of week 2. 2. Forty input shafts are on hand at the start of week 1, and 22 are scheduled for delivery at the beginning of week 2. Solution/Teaching Note This is a simple case that can be used as an in-class exercise or a group assignment. To start the class, quickly explain the basics of calculating net requirements. Then, distribute this case, have the students read the case, and give a brief explanation or what they are expected to do. It is probably best to have students work in pairs or small teams for this exercise. 1. Initially, assume that Phil wants to minimize his inventory requirements. Assume that each order will be only for what is required for a single period. Engine Assembly Master Schedule Week 1 2 3 4 5 6 7 8 9 10 11 12 Demand 15 5 7 10 15 20 10 8 2 16 Gear Box Requirements Week: 1 2 3 4 5 6 7 8 9 10 11 12 Gross Requirements 15 5 7 10 0 15 20 10 0 8 2 16 Scheduled Receipts 5 Projected Available Balance 2 2 0 0 0 0 0 0 0 0 0 0 Net Requirements 5 10 0 15 20 10 0 8 2 16 Planned Order Receipt 5 10 15 20 10 8 2 16 Planned Order Release 5 10 15 20 10 8 2 16 Input Shaft Requirements Week: 1 2 3 4 5 6 7 8 9 10 11 12 Gross Requirements 10 20 30 40 20 16 4 32 Scheduled Receipts 22 Projected Available Balance 30 32 32 2 0 0 0 0 0 0 0 0 Net Requirements 38 20 0 16 4 32 0 0 Planned Order Receipt 38 20 16 4 32 Planned Order Release 38 20 16 4 32 2. Phil would like to consider the costs that his accountants are currently using for inventory carrying and setup for the gearbox and input shafts. These costs are as follows: Part Cost Gear Box Setup = $90/order Inventory Carrying Cost = $2/unit/period Input Shaft Setup = $45/order Inventory Carrying Cost = $1/unit/period Gear Box Input Shaft Setup Cost = 8 orders x $90 = $720 Setup Cost = 5 orders x $45 = $225 Inventory = (2+2) x 2 = $8 Inventory = (30+32+32+2) x 1 = $96 Total = $728 Total = $321 Total Cost = $1,049 3. Find a better schedule by reducing the number of orders and carrying some inventory. What are the savings with this new schedule? Engine Assembly Master Schedule Week 1 2 3 4 5 6 7 8 9 10 11 12 Demand 15 5 7 10 15 20 10 8 2 16 Gear Box Requirements Week: 1 2 3 4 5 6 7 8 9 10 11 12 Gross Requirements 15 5 7 10 0 15 20 10 0 8 2 16 Scheduled Receipts 5 Projected Available Balance 2 2 10 0 0 30 10 0 0 18 16 0 Net Requirements 5 0 0 15 0 0 8 0 Planned Order Receipt 15 45 0 26 Planned Order Release 15 45 26 Input Shaft Requirements Week: 1 2 3 4 5 6 7 8 9 10 11 12 Gross Requirements 30 90 52 Scheduled Receipts 22 Projected Available Balance 10 32 32 0 0 0 0 0 0 0 0 0 Net Requirements 58 52 Planned Order Receipt 58 52 Planned Order Release 58 52 Gear Box Setup Cost = 3 orders x $90 = $270 Inventory = 88 x $2 = $176 Total = $446 Input Shaft Setup Cost = 2 orders x $45 = $90 Inventory = 74 x 1 = $74 Total = $164 Total Cost = $610 Total cost of this solution is $439 less than the initial solution, a reduction of about 42%. Note: Inventory carrying costs in parts 2 and 3 are figured based on ending inventory levels (projected available balance). CHAPTER 22 WORK CENTER SCHEDULING Discussion Questions 1. What are the objectives of work-center scheduling? The objective can vary but include: meeting due dates, minimizing lead time, minimizing setup times and cost, minimizing work-in-process inventory, and maximizing machine and/or worker utilization. 2. Distinguish between a work center, a GT cell, and an assembly line. A work center may have the flow of products going in any direction between departments. A GT cell is somewhere in between a work center and a flow shop in terms of product flow. A flow shop has the flow of products going in a specific sequence for all products. 3. What practical considerations are deterrents to using the SOT rule? Perhaps one will encounter a situation whereby those jobs with the shortest operations times are least urgent than those with long due-dates. Also long jobs will always be preempted in a dynamic shop so they may never be completed. A good example would be applying this rule to all student assignments (including term papers) for one semester. At the beginning of the semester, this works quite well, but it results in the term papers being postpone until immediately before their due-date, typically resulting in inadequate time to complete the term paper. 4. What priority rule do you use in scheduling your study time for midterm examinations? If you have 5 exams to study for, how many alternative schedules exists? Most students will probably respond that they use either FCFS (first things first) or SOT. After understanding the chapter’s material, they should use SOT and have one schedule, but many will respond—two or more schedules. There are 5! possible schedules: 5 x 4 x 3 x 2 x 1 = 120 schedules. 5. The SOT rule provides an optimal solution in a number of evaluation criteria. Should the manager of a bank use the SOT rule as a priority rule? Why? Even though the SOT rule is optimal, the bank manager may still choose the FIFO rule for customer sequencing in order to keep the sense of “fairness;” whoever comes in first, gets served first. There is another reason that prevents using SOT – how will the bank employees know in advance how much time it will take to serve a customer? 6. Why does batching cause so much trouble in work centers? Batching can appear to improve efficiency and reduce setups. However, in some situations batching can lead to split lots, broken setups, lost parts, defects, late deliveries, large WIPs and the hockey stick phenomenon. 7. What job characteristics would lead you to schedule jobs according to “longest processing time first”? If the jobs with the longest processing times were also those with the least slack time or were critical to downstream operations, LOT might be used in lieu of SOT. The resultant minimization of idle time might also be highly important. 8. Why is managing bottlenecks so important in work-center scheduling? The bottlenecks constrain capacity and limit throughput. Poor bottleneck management can lead to large WIPs. More on this topic in Chapter 23. 9. Under what conditions is the assignment method appropriate? The assignment method is appropriate when there are n “things” to be distributed to n “destinations,” each thing must be assigned to one and only one destination, and only one evaluation criterion can be used. 10. The chapter discusses the use of Gantt charts in shop floor control. You were introduced to Gantt charts in the chapter on Project Management. Projects and work center processes are rather different in nature. Why is it that the same tool can be used in planning and controlling both? Both types of processes include planning, executing, and controlling a number of different tasks across time with a finite set of resources. In projects the tasks are interdependent, and the nature of the project dictates the precedence relationships. In shop floor control the tasks are usually not interdependent except for the fact that they are completed on the same set of resources. The precedence in shop floor control is at the scheduler’s discretion, and will usually be established by some sort of priority scheduling rule(s). 11. Why is it desired to have smooth, continuous flow on the shop floor? This leads to efficient operations with a minimum of work-in-process inventory. When flow is interrupted, non-productive time is introduced into the process. Typically the input rate will continue unchanged, so introduction of non-productive time naturally increases the amount of inventory in the process itself. This non-productive time also decreases the potential for output from the process, making it less productive. 12. Data integrity is a big deal in industry? Why? Data inaccuracy coupled with computer usage simply “speeds up the mess” and results in serious problems, such as excess inventory, stockouts, missed due dates, costing inaccuracies, etc. 13. Explain why scheduling personnel in a service operation can be so challenging. Unlike daily operations in a manufacturing process, demand in a service process is rarely smooth or under much control of the operations manager. Customers arrive when they want to, and they want service when they arrive – it’s not reasonable to expect to be able to hold a rush of customers and service them throughout the day. Often there are predictable patterns to customer demand that managers can use to help develop schedules, but with workers expecting to work a certain number of hours once they arrive for a shift, there is often excess capacity during slow periods if the manager plans to have sufficient staff during rush periods. Balancing good customer service with the desire to minimize labor costs in the operation is a continuous challenge. 14. How might planning for a special customer affect the personnel schedule in a service? Since services are often very labor intensive, meeting the special requirements of important customers can lead to difficulties in scheduling. This can make it difficult to schedule two consecutive days off. The Brown and Tivrewala heuristic can aid in remedying this problem. Objective Questions 1. What is the term used for an information system that links, schedules, dispatches, tracks, monitors, and controls customer encounters with a service organization? Service Execution System (SES) 2. What do we generally call an area in a business where productive resources are organized and work is completed? Work center 3. What type of inventory are we trying to minimize as the result of work-center scheduling? Work in process 4. A key part of work-center scheduling is job sequencing – deciding in what order jobs are scheduled to start/complete. What is the term for the simple rules used to aid this process using a single bit of data about the jobs? Priority rules 5. By the SOT rule, the jobs would be assigned in the following order: 103, 105, 101, 102, and 104. Activity 103 105 101 102 104 Flow Time 4 5 6 7 9 Cumulative 4 9 15 22 31 The mean flow time is: (4+9+15+22+31)/5 = 81/5 = 16.2 days 6. Job Tech A Tech B Tech C J-432 11 14 6 J-487 8 10 11 J-492 9 12 7 Row reduction Job Tech A Tech B Tech C J-432 5 8 0 J-487 0 2 3 J-492 2 5 0 Column reduction Job Tech A Tech B Tech C J-432 5 6 0 J-487 0 0 3 J-492 2 3 0 Draw minimum number of vertical and horizontal lines to cover zeros Job Tech A Tech B Tech C J-432 3 4 0 J-487 0 0 5 J-492 0 1 0 Cover the zeros with lines again. Assign J-432 to C, J-487 to B and J-492 to A Minimum cost is 6+10+9 = $25 7. Car Customer pick-up time Remaining overhaul time Number of remaining operations Slack Slack per remaining operations A 10 4 1 6 6.0 B 17 5 2 12 6.0 C 15 1 3 14 4.7 Select car C first, then A and B tie for second. 8. Job Time Flow time D 1 1 B 3 4 H 4 8 G 5 13 F 6 19 C 7 26 A 8 34 E 10 44 a. SOT Total flow time is 149 days, mean flow time is 149/8 = 18.625 days. Job Time Flow time E 10 10 G 5 15 D 1 16 B 3 19 H 4 23 F 6 29 C 7 36 A 8 44 b. Scheduling E and G first, then using SOT, the following schedule results: Total flow time is 192 days, mean flow time is 192/8 = 24.0 days. Alternate schedules could be developed, such as a due-date schedule. 9. Job Processing time Delay time Total time Due date CR 1 2 12 14 27 1.93 2 5 8 13 18 1.38 3 9 15 24 25 1.04 4 7 9 16 26 1.63 5 4 22 28 24 0.86 Sequences: Critical ratio would be 5,3,2,4,1 Earliest due date: 2,5,3,4,1 Shortest processing time: 2,1,4,3,5 10. a. FCFS Flow Job Processing time Due date time A 4 20 4 B 12 30 16 C 2 15 18 D 11 16 29 E 10 18 39 F 3 5 42 G 6 9 48 Total flow time 196 Mean flow time 28 b. SOT Flow Job Processing time Due date time C 2 15 2 F 3 5 5 A 4 20 9 G 6 9 15 E 10 18 25 D 11 16 36 B 12 30 48 Total flow time 140 Mean flow time 20 c. STR Job Processing time Due date Slack Flow time F 3 5 2 3 G 6 9 3 9 D 11 16 5 20 E 10 18 8 30 C 2 15 13 32 A 4 20 16 36 B 12 30 18 48 Total flow time 178 Mean flow time 25.4 d. DD Flow Job Processing time Due date time F 3 5 3 G 6 9 9 C 2 15 11 D 11 16 22 E 10 18 32 A 4 20 36 B 12 30 48 Total flow time 161 Mean flow time 23 e. Summary Priority rule Mean flow time (days) FCFS 28.0 SOT 20.0 STR 25.4 DD 23.0 11. Task Length (days) Due Date (days hence) Slack Late Fine (days) I 3 4 1 $ 1,500 II 1 5 4 $ 500 III 2 7 5 $ 1,500 IV 4 6 2 $ 1,500 Income is the same for all priority rules. Costs are for late fines. SOT Order Task Length (days) Completion Date (days) Due Date (days hence) Days Late Late Fine 1 II 1 1 5 0 $ 0 2 III 2 3 7 0 $ 0 3 I 3 6 4 2 $ 3,000 4 IV 4 10 6 4 $ 6,000 Total: $ 9,000 FCFS Order Task Length (days) Completion Date (days) Due Date (days hence) Days Late Late Fine 1 I 3 3 4 0 $ 0 2 II 1 4 5 0 $ 0 3 III 2 6 7 0 $ 0 4 IV 4 10 6 4 $ 6,000 Total: $ 6,000 EDD Order Task Length (days) Completion Date (days) Due Date (days hence) Days Late Late Fine 1 I 3 3 4 0 $ 0 2 II 1 4 5 0 $ 0 3 IV 4 8 6 2 $ 3,000 4 III 2 10 7 3 $ 4,500 Total: $ 7,500 STR Order Task Length (days) Completion Date (days) Due Date (days hence) Days Late Late Fine 1 I 3 3 4 0 $ 0 2 IV 4 7 6 1 $ 1,500 3 II 1 8 5 3 $ 1,500 4 III 2 10 7 3 $ 4,500 Total: $ 7,500 LPT Order Task Length (days) Completion Date (days) Due Date (days hence) Days Late Late Fine 1 IV 4 4 6 0 $ 0 2 I 3 7 4 3 $ 4,500 3 III 2 9 7 2 $ 3,000 4 II 1 10 5 5 $ 2,500 Total: $ 10,000 FCFS actually works out to be the least cost of the priority rules in this problem. We would not expect that to be the case most of the time. 12. Job Process A Time Process B Time Order of Selection Position in Sequence 1 9 6 6th 5th 2 8 5 5th 6th 3 7 7 7th 4th 4 6 3 3rd 7th 5 1 2 1st 1st 13. Job Process I Time Process II Time Order of Selection Position in Sequence A 4 5 2nd 2nd B 16 14 5th 3rd C 8 7 3rd 5th 14. Customizing Job Time Painting Time Order of Selection Position in Sequence 1 3.0 1.2 7th 6th 2 2.0 0.9 5th 7th 3 2.5 1.3 8th 5th 4 0.7 0.5 1st 10th 5 1.6 1.7 10th 3rd 6 2.1 0.8 4th 8th 7 3.2 1.4 9th 4th 8 0.6 1.8 2nd 1st 15. Job Operation time 1 Operation time 2 Order of Selection Position in Sequence A 5 2 2nd 6th B 16 15 6th 2nd C 1 9 1st 1st D 13 11 5th 3rd E 17 3 3rd 5th F 18 7 4th 4th 16. Jobs 1 2 3 4 7 9 3 5 3 11 7 6 4 5 6 2 5 9 10 12 A B Individuals C D Row reduction Jobs 1 2 3 4 4 6 0 2 0 8 4 3 2 3 4 0 0 4 5 7 A B Individuals C D Column reduction Jobs 1 2 3 4 4 3 0 2 0 5 4 3 2 0 4 0 0 1 5 7 A B Individuals C D Jobs 1 2 3 4 5 3 0 2 0 4 3 2 3 0 4 0 0 0 4 6 A B Individuals C D Optimal solution Jobs Optimal solution Assign Cost (thousands) B 1 $3 A 3 3 C 4 2 D 2 9 Total $17 17. Machine 1 2 3 4 5 6 65 50 60 55 80 0 30 75 125 50 40 0 75 35 85 95 45 0 60 40 115 130 110 0 90 85 40 80 95 0 145 60 55 45 85 0 A B C Machinist D E F Row reduction would not change the matrix. Column reduction follows. Machine 1 2 3 4 5 6 35 15 20 10 40 0 0 40 85 5 0 0 45 0 45 50 5 0 30 5 75 85 70 0 60 50 0 35 55 0 115 25 15 0 45 0 A B C Machinist D E F Machine 1 2 3 4 5 6 30 1 0 15 5 35 0 0 4 0 85 5 0 5 45 0 45 50 5 5 25 0 70 80 65 0 60 5 0 0 35 55 5 115 2 5 15 0 45 5 A B C Machinist D E F Machine 1 2 3 4 5 6 25 1 0 10 0 30 0 0 4 5 85 5 0 1 0 40 0 40 4 5 0 5 20 0 65 7 5 60 0 60 5 5 0 3 5 55 1 0 115 3 0 15 0 45 1 0 A B C Machinist D E F Machine Optimal solution Assign Cost A dummy 0 B 1 30 C 5 45 D 2 40 E 3 40 F 4 45 Total 200 18. Area 1 2 3 4 1400 1800 700 1000 600 2200 1500 1300 800 1100 1200 500 1000 1800 2100 1500 Bob Dave Associate Nick Dick Row reduction Area 1 2 3 4 700 1100 0 300 0 1600 900 700 300 600 700 0 0 800 1100 500 Bob Dave Associate Nick Dick Column reduction Area 1 2 3 4 7 00 500 0 300 0 1000 9 00 700 3 00 0 7 00 0 0 200 1 100 500 Bob Dave Associate Nick Dick Area 1 2 3 4 7 00 3 00 0 100 0 8 00 9 00 500 5 00 0 9 00 0 0 0 11 00 300 Bob Dave Associate Nick Dick Optimal Area Optimal solution Assign Cost Bob 3 $700 Dave 1 600 Nick 4 500 Dick 2 1800 Total $3600 19. Machine 1 2 3 4 5 6 11 12 3 10 5 12 10 7 9 7 14 13 8 12 4 15 16 7 9 5 13 17 11 12 A B Job C D E Row reduction Machine 1 2 3 4 5 3 8 9 0 7 0 7 5 2 4 0 7 6 1 5 0 11 12 3 5 0 8 12 6 7 A B Job C D E Column reduction Machine 1 2 3 4 5 A B Job C D E Optimal solution Machine 1 2 3 4 5 B Job C D E Optimal solution Assign Cost A 4 $ 3 B 3 10 C 2 14 D 5 9 E 1 5 Total $41 20. What is another common term for shop-floor control? Production activity control 21. Which graphical tool commonly used in project management is also very useful in shop-floor control? Gantt chart 22. What shop-floor control document tells the supervisor which jobs are to be run, in what order, how long each will take? Daily dispatch list 23. What feature of manufacturing planning and control systems operates under the premise that planned work input to a work center should never exceed the planned work output? Input/output control 24. Period 8AM 9AM 10AM 11AM Noon 1PM 2PM 3PM 4PM 5PM 6PM 7PM Requirement 2 3 5 8 8 6 5 8 8 6 4 3 Assigned 2 1 2 3 2 0 0 6 2 0 0 1 On duty 2 3 5 8 8 7 5 8 8 8 8 3 25. Period 11AM Noon 1PM 2PM 3PM 4PM 5PM 6PM 7PM 8PM 9PM Requirements 4 8 5 3 2 3 5 7 5 4 2 Assigned 4 4 0 0 0 3 2 2 0 0 0 On-duty 4 8 8 8 4 3 5 7 7 4 2 26. Which simple scheduling concept can be applied to help schedule workers for service operation with changing staffing requirements throughout the day? First-hour principle (or rule) CASE: Keep Patients Waiting? Not in my office Answers to Questions 1. The features of the appointment scheduling system crucial in capturing “many grateful patients” were: I. A careful allotment of proper time to each patient according to the individual’s needs. II. Giving each patient a specific time such as 10:30 as opposed to ambiguous timings such as “come in a half-hour.” III. Keeping openings in the time slot for emergency patients. IV. Dealing efficiently with latecomers and with telephone calls from patients in a way so as to minimize the interference with the schedules of regular patients. 2. The assistants in charge of scheduling are instructed to keep openings in the time slot for emergency cases. The number of such openings varies according to different times of the week and different seasons. These cases are usually taken care of after the initial visits are over, which are allowed a time of 30 minutes, but often last for less time. If the interruption due to an emergency case is a short one, the doctor can catch up with regular appointments. If it is a long one, the patients scheduled for the next one or two hours are given the choice of making new appointments or waiting. In case the patients choose to wait, they are tried to fit into the slots for the emergency cases. In this way it is ensured that the appointments for the whole day are not messed up. 3. The case of latecomers is handled efficiently to make sure that the other appointments do not lag behind due to them. If a patient is late by 10 minutes or less, he is treated right away but is reminded of the original appointment time. If a patient is late by more than 10 minutes the other schedules are followed. The late patient is either given another appointment or squeezed in as soon as possible. No-shows are recorded in the patient chart for up to a maximum of three times, after which the patient is sent a letter saying that time was allotted for him and he failed to keep the appointments for three times. He is also told that if the same case is repeated in the future, then he will be billed for the wasted time. 4. The schedule for these patients can vary significantly depending on how the patients are categorized. Solution Manual for Operations and Supply Chain Management F. Robert Jacobs, Richard B. Chase 9780078024023, 9780077824921, 9781260238907, 9780077228934, 9781259666100
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