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Outcome 4: Use software-generated information to make decisions at operational, tactical and strategic levels in an organization. Assessment Criteria: 4.

3 Prepare a spreadsheet to enable material requirements planning and calculate economic order quantities.

Manufacturing

1
Gross Requirements Scheduled Receipts Available Net Requirements Planned Order Receipts Planned Order Releases

2 20

3 30

4 25

5 15 8 7 7

computer information system Determines quantity & timing of dependent demand items

2 5 25

23

33

33

Demand for one item is related to the demand for

another item. Consider Ford Explorer: Fords demand for auto tires and radiators depend on the production of Explorer. o 4 tires and 1 radiator go into each finished Explorer.

Computer system Mainly discrete products Accurate bill-of-material Accurate inventory status 99% inventory accuracy Stable lead times

Increased customer satisfaction due to meeting

delivery schedules Faster response to market changes Improved labor & equipment utilization Better inventory planning & scheduling Reduced inventory levels without reduced customer service

1. Master Production Schedule (MPS) 2. Bills of Materials (BOM) 3. Accurate Inventory Records 4. Purchase Orders Outstanding

5. Lead Times for Each Component

Specifies WHAT (No. of finished product or item) is to


be made and WHEN Must accordance with a production plan which: sets the overall level of output in broad terms MPS tells what is required to satisfy demand and meet the production plan Establishes what items to make and when, in terms of specific products. Reasonable length of time time takes to produce a product.

Production: Capacity Inventory Procurement: Supplier performance

Marketing: Customer Demand Aggregate Production Plan Master Production Schedule (MPS) Material Requirements Plan (MRP) Execute capacity plans

Finance: Cash flow Human Resources: Manpower planning

Management: Return on Investment Capital

Engineering: Design completion


Change production plan?

Months
Aggregate Production Plan (shows the total quantity of amplifiers

January
1,500

February
1,200

Weeks
Master Production Schedule (Shows the specific type and quantity of amplifier to be produced 240 watt amplifier

100

100

100

100

150 watt amplifier


75 watt amplifier

500
300

500

450
100

450

Make to Order (Process Focus) Number of end items

Assemble to Order or Forecast (Repetitive)

Stock to Forecast

(Product Focus) Schedule finished product

Typical focus of the master production schedule Number of inputs


Examples:

Schedule orders

Schedule modules

Motorcycles, autos, Print shop Machine shop TVs, fast-food Fine dining restaurant restaurant

Steel, Beer, Bread Light bulbs, Paper

List

of the raw materials, sub-assemblies, intermediate assemblies, sub-components, components, parts and the quantities of each needed to manufacture an end product do vary somewhat in scope E.g: recipe for cake, specifying ingredients and quantities/amount, full set of drawings for an ambulance

Provides product structure (tree)


Parents:

Items above given level Children: Items below given level


Shows low-level coding
Lowest

level in structure item occurs Top level is 0; next level is 1 etc.

Speaker Kits, Inc., packages high-fidelity components for mail order. Components for the top-of-the-line speaker kit, AiWA II (A), include 2 standard 12-inch speaker kits (Bs) and 3 standard 12-inch speaker kits with amp-booster (Cs). Each B consists of two 12-inch speakers (Ds) and 2 shipping boxes each with an installation kit (E). Each of the three speaker kits with amp-booster kits (Cs) has 2 speaker boosters (Fs) and 2 installation kits (Es). Each speaker booster (F) includes two 12-inch speakers (Ds) and 1 amp-booster (G). The total for each AiWA II is 4 standard 12-inch speakers and twelve 12-inch speakers with the amp-booster (Gs). As we can see, the demand for B, C, D, E, F and G is completely dependent on the master production schedule for A the AiWA II speaker kits.

Level 0 1
A
B(2) Std 12 Speaker kit C(3) Std 12 Speaker kit
w/ amp-booster

E(2)

E(2)

Std 12 Speaker booster assembly

F(2)

12 speaker

D(2)

Packing box of installation kit of wire, bolts and screws

G(1)
amp-booster

12 speaker

D(2)

Product structure (tree) for AiWA II Speaker Kit shows


four levels : 0, 1, 2, 3

four parents: A, B, C, F - has at least one level below B, C, D, E, F, G are components (children) has at least one level above B, C, F are both parent and component (children) Number in parentheses ( ) no.of units needed to make the item immediately above it.

Determine the number of units of each item required to satisfy demand for a new order of 50 AiWA II speaker kits. Part A = 50 units
Part B = 2 x number of As Part C = 3 x number of As

= 2 (50) = 3 (50)

= 100 = 150

Part D = 2 x number of Bs + 2 x number of Fs

= 2 (100) + 2 (300) = 800

Firm should achieved at least 99% record accurate

Should exist as a by-product of well-managed

purchasing and inventory-control department Good purchasing data (purchase data execute, records of those orders and scheduled delivery dates available) good production plans effective MRP system.

Time required to acquire (purchase, produce or

assemble) Example 3: Lead times for AiwA II Speaker


Component A Lead Time 1 week Component E Lead Time 2 weeks

B C D

2 weeks 1 week 1 week

F G

3 weeks 2 weeks

Must have D and E completed here so production can begin on B 1 week 2 weeks to produced

Start production of D

D
2 weeks

B E A

2 weeks 2 weeks

E
G
3 weeks

1 week

1 week

C F

1 week

D
1 2 3 4 5 6 7 8

Outcome 4: Use software-generated information to make decisions at operational, tactical and strategic levels in an organization. Assessment Criteria: 4.3 Prepare a spreadsheet to enable material requirements planning and calculate economic order quantities.

Aggregate Production Plan


Set due dates for the availability of end items NOT when end item will be manufactured
Bill of Material (Product Structure Tree) Lead time Inventory level

Master Production Schedule

Material Requirement Plan

WEEK
1
A. Required date Order released date

LEAD TIME 6 7 50 100 8 50

1 week

B. Required date Order released date


C. Required date Order released date E. Required date Order released date F. Required date Order released date D. Required date Order released date

100 150 200 200 300 150 300 300 200 200 300 300

2 weeks
1 week 2 weeks 3 weeks 1 week

300 600
600

G. Required date Order released date

2 weeks = Lead Time


BOM Lead Time

Example 4 : Gross MRP

assumes that there is no inventory on hand

If there is inventory on hand

net requirement plan include: i. gross requirement ii. on-hand inventory ii. net requirements iv. planned order receipt (quantity planned to be received at a future date) v. planned order release (schedule date for an order to be released)

ITEM ON HAND A B C D E F G 10 15 20 10 10 5 0

Constructing a net requirements plan is similar to constructing a GRP. Stating with item A - work backward to determine net requirements for all item.

Lead LowItem Lot On Safety AlloTime level IdentiSize Hand Stock cated (weeks) Code fication Gross Requirements Schedule Receipts Project On Hand Net Requirement Planned Order Receipts Planned Order Releases

Week

Refer to product structure, on-hand inventory, and lead times.


i. ITEM A: Gross requirement = 50 units (at week 8), item on-hand = 10 units net requirement & planned order receipt = 50 10 = 40 units (at week 8) Lead times = 1 week, so planned order release = week 7 (40 units)

Lot Size

Lead Low- Item On Safety AlloTime level IdentiHand Stock cated (weeks) Code fication

Week

1
Gross Requirements

Lotforlot

10

50

Schedule Receipts
Project On Hand Planned Order Receipts Planned Order Releases

10 10 10 10 10 10 10 10 10 40 40 40 Lead Time of 1 week

Net Requirement

ii. ITEM B: Gross requirement = 100 units (week 7) - BA item on-hand = 15 units ** Requirement for item B depends on the net requirement of A: net requirement for A = 40 Requirement for BA = 2(40) = 80 (at week 7) net requirement & planned order receipts for BA = 80 15 = 65 (at week 7) Lead times = 2 week, so planned order release = 65 (week 5)
PT TP

Lot Size

Lead Low- Item On Safety AlloTime level IdentiHand Stock cated (weeks) Code fication

Week

1
Gross Requirements

Lotforlot

15

80

Schedule Receipts
Project On Hand Planned Order Receipts Planned Order Releases

15 15 15 15 15 15 15 15 65 65 65 Lead Time of 2 weeks

Net Requirement

E D

iii. ITEM C: Gross requirement = 150 units (week 7) - CA item on-hand = 20 units ** Requirement for item C depends on the net requirement of A: net requirement for A = 40 Requirement for CA = 3(40) = 120 (at week 7) net requirement & planned order receipts for CA = 120 20 = 100 (at week 7) Lead times = 1 week, so planned order release = 100 (week 6)

Lot Size

Lead Low- Item On Safety AlloTime level IdentiHand Stock cated (weeks) Code fication

Week

1
Gross Requirements

Lotforlot

20

120

Schedule Receipts
Project On Hand Planned Order Receipts Planned Order Releases

20 20

20 20 20

20 20 20 100 100 100 Lead Time of 1 week

Net Requirement

iv. ITEM E: Gross requirement = 200 units (week 5) - EB = 300 units (week 6) - Ec item on-hand = 10 units ** Requirement for item E depends on the net requirement of B: net requirement for B = 65 Requirement for EB = 2(65) = 130 (at week 5) net requirement & planned order receipts for EB = 130 10 = 120 (at week 5) Lead times = 2 weeks, so planned order release = 120 (week 3)
Net E

ITEM E: Gross requirement = 300 units (week 6) - Ec


** Requirement for item E is also depends on the net requirement of C: net requirement for C = 100 Requirement for EC = 2(100) = 200 (at week 6) net requirement & planned order receipts for EC = 200 (**no more on-hand inventory for item E, after been used for B) Lead times = 2 weeks, so planned order release = 200 (week 4)
Net E

Lot Size

Lead Low- Item On Safety AlloTime level IdentiHand Stock cated (weeks) Code fication

Week

1
Gross Requirements Schedule Receipts Project On 10 10 Hand Net Requirement

Lotforlot

10

130B 200C

10 10 10 10

120 200 120 200 120 200 Lead Time of 2 weeks

Planned Order Receipts Planned Order Releases

v. ITEM F: Gross requirement = 300 units (week 6) - FC item on-hand = 5 units ** Requirement for item F depends on the net requirement of C: net requirement for C = 100 Requirement for FC = 2(100) = 200 (at week 6) net requirement & planned order receipts for FC = 200 5 = 195 (at week 6) Lead times = 3 week, so planned order release = 195 (week 3)

Lot Size

Lead Low- Item On Safety AlloTime level IdentiHand Stock cated (weeks) Code fication

Week

1
Gross Requirements Schedule Receipts Project On 5 Hand Net Requirement

Lotforlot

200C

5 195 195

Planned Order Receipts Planned Order Releases

195 Lead Time of 3 weeks

D G

vi. ITEM D: Gross requirement = 600 units (week 5) - DF = 200 units (week 6) - DB item on-hand = 10 units ** Requirement for item D depends on the net requirement of F: net requirement for F = 195 Requirement for DF = 2(195) = 390 (at week 3) net requirement & planned order receipts for DF = 390 - 10= 380 (at week 3) Lead times = 1 weeks, so planned order release = 380 (week 2)
Net D

ITEM D: Gross requirement = 200 units (week 6) - DB item on-hand = 10 units ** Requirement for item D is also depends on the net requirement of B: net requirement for B = 65 Requirement for DB = 2(65) = 130 (at week 5) net requirement & planned order receipts for DB = 130 (**no more on-hand inventory for item D - after been used for F) Lead times = 1 weeks, so planned order release = 130 (week 4)
Net D

Lot Size

Lead Low- Item On Safety AlloTime level IdentiHand Stock cated (weeks) Code fication

Week

1
Gross Requirements Schedule Receipts Project On 10 10 Hand Net Requirement

Lotforlot

10

390F

130B

10 10 380 380 380

0 130 130

Planned Order Receipts Planned Order Releases

130

Lead Time of 1 week

F B

vii. ITEM G: Gross requirement = 300 units (week 3) - GF item on-hand = 0 units ** Requirement of item G depends on the net requirement of F: net requirement for F = 195 Requirement for GF = 1(195) = 195 (at week 3) net requirement & planned order receipts for GF = 195 (at week 3) Lead times = 2 weeks, so planned order release = 195 (week 1)

Lot Size

Lead Low- Item On Safety AlloTime level IdentiHand Stock cated (weeks) Code fication

Week

1
Gross Requirements Schedule Receipts Project On 0 Hand Net Requirement

Lotforlot

195F

0
195

Planned Order Receipts Planned Order Releases

195 195 Lead Time of 2 weeks Complete MRP

Assessment Criteria: 4.3 Prepare a spreadsheet to enable material requirements planning and calculate economic order quantities.

BOM

Master Production Schedule

MRP by Period Report

MRP by date report

Lead Times (Item Master File) Inventory Data

Planned order report

Purchase advice

Purchasing data

MRP planning programs (computer and software)

Exception report

BOM AiWAII Gross Requirements Schedule Receipts Project On Hand

Lead Time

Lot Size

Minimum quantity

Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8

50

10
Net Requirement Planned Order Receipts Planned Order Releases

10

10

10

10

10

10

10

10 40 40

40

BOM AiWAII

Gross Requirements Schedule Receipts Project On Hand =BOM!$ =BOM!$E =BOM!$E =BOM!$E =BOM!$E =BOM!$E =BOM!$E =BOM!$E =BOM!$E E$7 $7 $7 $7 $7 $7 $7 $7 $7 Net Requirement Planned Order Receipts Planned Order Releases
=$L$7$L$9 =$L$10
=$L$11

Lead Minimum 1 Lot Size Time quantity Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 =BOM!$G $7

AiWA II Speaker Kit - MRP Excel