IMM 8th ed Ch 4

Introduction to Materials Management

• Authors: Chapman, Arnold, Gatewood, Clive

• Edition: 8th Edition

• Copyright: 2017 by Pearson Education, Inc.

Chapter 4 Overview

• Focus: Material Requirements Planning (MRP)

Chapter 4 Summary

Nature of Demand

• Independent Demand: Demand for products that is not driven by the demand for other goods.

  • Originates from outside sources.

  • Predominantly forecasted.

• Dependent Demand: Demand that is related to production levels of other items.

  • Calculated based on the Master Production Schedule (MPS).

Objectives of MRP

• Determine Requirements:

  • What to order.

  • How much to order.

  • When to order.

  • Delivery scheduling.

• Maintain Current Priorities.

Links to MPC Hierarchy

• MRP is integrated into the broader Manufacturing Planning and Control (MPC) framework.

Inputs to MRP

• Master Production Schedule (MPS): Quantities and timing for production.

• Inventory Records: Detailed records including planning factors such as lead times, order quantities, and safety stock.

• Bills of Material (BOM): Detailed definition of materials required for production.

MRP Process

1. Gross to Net Calculation:

   • Determine total requirements without accounting for inventory.

2. BOM Explosion:

   • Break down the components of assemblies to determine total needs.

3. Lead Time Offset:

   • Adjustments made to account for lead times in ordering processes.

4. Keeping Priorities Current:

   • Update plans based on changing demands.

Key Concepts in MRP

Low-Level Coding

• Assigning the lowest level in the BOM where a part resides.

Schedule Receipts vs Planned Orders

• Scheduled Receipts: Open orders expected to be delivered at a specific time.

• Planned Orders: Orders derived from the MRP that are scheduled but not yet released for processing.

• Firm Planned Orders: Orders that are set in quantity and schedule to stabilize fluctuations in demand.

Messages in MRP

• Release: Initiate an order to start the procurement or production process.

• Pull in: Adjust order quantities to meet increased demand.

• Push out: Adjust orders further into the schedule due to decreased demand.

• Cancel: Stop previously scheduled orders.

Bottom-up Replanning

• Adjustments made to correct systems based on changes at the lowest levels of the product structure.

Bill of Materials (BOM)

• Purpose:

  • Defines components needed to create a finished product.

  • Each part has a unique identifier (part number).

  • Changes in the BOM necessitate new part numbers.

Classification of BOM

• Indented BOM: Visual representation showing parent-component relationships.

• Planning BOMs: Grouping components for forecasting and simplifying planning processes.

• Multilevel BOM: Breaks down products into required components at various levels.

Key Terms Defined

• Lead Time: Duration required for a specific process.

• Exploding: Multiplying requirements based on usage to fulfill the needs outlined in the BOM.

• Offsetting: Adjusting requirements to the correct period based on lead times.

• Planned Order Release: Amount to order released in line with the MRP recommendations.

• Projected Available Inventory: Expected stock at the end of a period, taking into account orders placed.

Planner Responsibilities in MRP

• Launch Orders: Initiating production and purchasing processes.

• Reschedule Orders based on demand changes.

• Reconcile Errors and identify solutions to material shortages.

• Coordinate with other functions to resolve discrepancies in the supply chain.

MRP Example Problem

• Scenario: Lead time of 2 weeks and an order quantity of 200. Actions needed are determined based on MRP calculations to ensure smooth operation.

Additional Key Terms

• Exception Messages: Alerts generated when planners need to intervene due to MRP system outputs.

• Bottom-up Replanning: Adjustments made at lower product levels to manage changes effectively.

Conclusion

• MRP is integral to effective materials management, necessitating a thorough understanding of demand types, scheduling, order types, and BOM structures.