Material Management

Case Study
Presentation

Benzie Products Company

Presented By Team 5-
Mayuri Kuchanwar
Aditya Dhokne
Aditya Kartha
Priyesh Raj
Mayur Naik
Gurudatta Dakhole
Introduction

 Material Requirement Planning (MRP) is a system used to avoid missing parts. It establishes a schedule showing
the components required at each level of the assembly and ,based on lead times, calculates the time when these
components will be needed.
 Objectives of MRP is to determine
1. What to order
2. How much to order
3. When to order
4. When to schedule delivery
 Three primary inputs to MRP systems
1. Master production schedule
2. Inventory records
3. Bills of Material
 Bill of Material – A listing of all the subassemblies, intermediates, parts, and raw materials that go into making
the parent assembly showing the quantities of each required to make an assembly.
 Benzie Products Company
 Benzie Products Company produces several lines of products, but one (they call it “product X”) uses unique parts to produce it
and the demand is very seasonal. There are some possible variations in the design, so the company tends to use available-to-
promise (ATP) logic to master schedule the product. Since the components to produce it are quite expensive, the company tries
very hard to minimize any inventory of the product or its components during the seasons with very low sales. Product X is just
now entering the low season, and the following chart represents the forecast data and actual customer orders for the next ten
weeks:

There are currently (at the start of week 1) 27 product X

left in inventory. The following represents the product
structure for product X:
The following table gives the relevant data for
components A, B, C, and D at the start of week 1:

In addition, component A has a scheduled

receipt of 60 units for week 2.
 Assignment 1 –
Complete the master schedule for Product X, including the projected available
inventory and the ATP numbers.
 Benzie Products Company uses master scheduling to complete production planning on one of their products called
Product X.
 Product X is a seasonal product, so demand can be forecasted. The way Benzie accounts for variation in their
production planning design is by understanding and effectively using ATP quantities.
 The following table is Benzie’s master schedule for the next 10 weeks for Product X:
Table 1: Product X MPS
Week 1 2 3 4 5 6 7 8 9 10
Forecast 25 20 16 16 15 15 13 11 10 9
Orders 27 21 16 13 11 9 7 4 3 2
MPS 50 50     50    
PAB 0 29 13 -3 32 17 4 43 33 24
ATP 0 0 23     41    

Starting inventory= 27
 Assignment 2 –
From the master schedule for Product X and using the data given for components A,
B, C, and D, create MRP grids for each of the components for the next ten weeks.
                         
Low-
Level Week 1 2 3 4 5 6 7 8 9 10
Code
                 
Gross Req 50 50 50
0 Part X Sched Rec              
  LT = 0 Proj Avail 0 0 0 0 0 0 0
  Lot-for-lot Net Req 50     50     50
    PO Rec 50     50     50
           
PO Rels 50 50 50
                 
Gross Req 50 50 50
1 Part A Sched Rec 60                
  LT = 2 wk Proj Avail (0) 0 10 10 10 20 20 20 30 30 30
  Lot = 60 Net Req 0     40     30    
  Inv = 0 PO Rec       60     60    
                 
PO Rels 60 60
    Gross Req   100     100     100    
                   
1 Part B Sched Rec
 
LT = 1 wk Proj Avail (2) 2 2 2 2 2 2 2 2 2 2
               
Lot = 100 Net Req 98 98 98
               
Inv = 2 PO Rec 100 100 100
                 
PO Rels 100 100 100
    Gross Req 200   60 200   60 200      
             
2 Part C Sched Rec
   12 2 242
LT = 2 wk Proj Avail (212) 12 202 2 192 242 242 242
           
Lot = 250 Net Req 48 58 8
           
Inv = 212 PO Rec 250 250 250
     250      250        
PO Rels 250
  2  Part D Gross Req 60 60
LT = 4 wk Sched Rec
Lot = 100 Proj Avail (63) 63 63 3 3 3 43 43 43 43 43
Inv = 63 Net Req 57
PO Rec 100
PO Rels 100
 Assignment 3 –
Suppose that a customer for Product X wants three additional units for their order scheduled for
week 4. What would you tell them? Specifically, if you cannot promise them the three units for week
4, what is the best that you can do given the information you have. Assume that adequate capacity
exists in all the production equipment.

 According to the MPS in Table 1, there are 0 units in ATP for week 4, so we cannot fulfill the order for
week 4. Given the MRP in Table 2, we can deliver 1 unit of Product X in week 4 and the remaining two
units in week 5. We only need 3 Part A’s to fulfill the entire order in week 4, so Part A is not the limiting
factor since the Product X lead time is equal to 0 and the Part A projected available is 10 in week 4.
 However, to make one Product X, two Part Bs are needed, so a total of 6 Part Bs are required to fulfill
the new three-unit order in week 4. Only 2 Part B’s are projected available for week 4, which is only
enough to make one Product X. Therefore, one Product X can be delivered in week 4, while the
remaining two Product X’s can be delivered in week 5.
 Assignment 4 –
The customer described in question 3 decides against placing the order for the extra units in week 4,
but shortly thereafter you are informed that someone in the warehouse dropped a box of component
C and broke 20 of them. They had to be scrapped. Describe the consequences and a plan of action to
deal with the problem. Assume the lead time for component C is a firm 2 weeks.

 The starting inv from C is reduced to 192. Since 8-part C’s are not available, this means 4 fewer part B’s will
be available, so production capacity for X decreases by 1 after using the two-Part B’s.
 Since there are no ATP units until week 5, the one Product X unit that could not be fulfilled on time because
of the broken Part Cs which cannot be made up until week 5 when the capacity is available.
                         
Low- Level
Week 1 2 3 4 5 6 7 8 9 10
Code
    Gross Req 200   60 200   60 200      

2 Part Sched Rec              

C
  LT = Proj Avail -8 -8 182  232 232 172  222 222 222 222
2 wk (192)
  Lot = Net Req 8   68 0   0 28      
250
  Inv = PO Rec     250 250     250      
192
    PO Rels 250 250   250        
 Assignment 5 –
It is clear that the company has set the safety stock (planning for extra material “just in case”
something goes wrong) level for components at zero in order to minimize their inventory during the
slow season. Discuss this policy, pointing out the pros and cons of such a policy. Develop what you
might suggest as a policy for safety stock given the information available in the case.

 Pros: Minimizing inventory holding costs and reducing the number of times fixed order costs occur.
Decreases complexity in logistics management.
 Cons: No room for error in the event of stock-outs or damaged components.
 As an alternate policy we could calculate the probability of stock outs to prevent them from occurring
as well as carrying component inventory based on Product X desired inventory level. It will have the
same level of costs but will lower inventory stock out levels/probability.
THANK YOU