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APIX POLYBOB COMPANY

Group Assignment - Operations Management (OM)

Table of Content
Case 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-Sep15
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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 doesnt 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 wont
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?
MRP can be used for multiple products. Multiple BOMs and common materials can be easily
Anu Mohan, Nirin Parikh, Shailen Mehta | Operational Management | Apix Polybob Company | 18-Sep15
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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 Study
Ken 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, Im not sure what more we can do. Ive 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. Ive implemented
strict inventory control procedures to ensure our accuracy levels to at least 80%, and
Ive 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 theyd only leave us alone for a while and let us catch up with our current
late order bank, wed 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 shouldnt have all these part shortages all the time while our overall
inventory is going up in value. I also dont 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. Shell
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 doesnt fit
as good customer service.

JIM:

Then maybe the approach is to deal with Frank Adams (the chief financial officer). Hes
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. Ive tried to
have him authorize more overtime to relieve some of the late order conditions, but all
hell 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 wont
budge on that point. Maybe you can convince him.

KEN:

Im not sure thats the answer either. I think he has a point, and he certainly has the
numbers to back him up. Id have a real rough time explaining what we were doing to
Ron Marrison (the CEO). Theres got to be a better answer. Ive heard about a systems
approach called material requirements planning or something like that. Why dont you
look into that. Take a representative model and see if that approach could help us deal
with what appears to be an impossible situation. Im sure something would work. I know

Anu Mohan, Nirin Parikh, Shailen Mehta | Operational Management | Apix Polybob Company | 18-Sep15
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other factories have similar production conditions yet dont 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

B
C
D
E
F

80
150
200
400
500

10
40
180
300
50

1
1
2
2
2

Scheduled
Receipts
None
None
None
None
500, week 1

Reorder point
5
15
50
70
80

The following are the master schedule production lots for Model A:
Complete 50 units, week 3
Complete 50 units, week 5
Complete 60 units, week 7
Complete 60 units, week 9
Complete 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 dont understand our
production needs.

Anu Mohan, Nirin Parikh, Shailen Mehta | Operational Management | Apix Polybob Company | 18-Sep15
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