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Chapter 12 - MRP and ERP



CHAPTER 12 MRP AND ERP Teaching Notes When covering the material in this chapter, the following points should be emphasized: • Dependent demand item needs are generated from higher level item needs of which they are a part. • Dependent demand tends to be lumpy and not dispersed uniformly. • MRP creates schedules identifying the parts and materials required to be purchased or manufactured, time of the order release, and the size of the order or production quantity. • MRP keeps track of inventory levels and serves as a link between inventory, purchasing, and production. • MRP inputs are: a. Master Production Schedule b. Bill of Materials c. Inventory Records • Master Production Schedule is the driving force and the control mechanism of the MRP system because it specifies the quantity required of each end item, or key assembly, by period. • The theme of MRP is producing or purchasing the right materials at the right time and having them available in the right places. • The MRP system uses backward scheduling. It uses low-level-coding and starts at the end item level and explodes requirements level-by-level. • MRP provides feedback about delayed or cancelled orders, and changes in quantities and due dates of open and future orders. • MRP nervousness occurs as a result of the high frequency of updating the MRP system and due to the amount and timing of changes, cancellations, additions, and delays in order/manufacturing quantities of an MRP system. If an MRP system is updated too frequently, the system becomes unstable and inefficient. On the other hand, if the system is not updated frequently enough, the system becomes inflexible. The trade-off between stability and flexibility can be balanced with the use of time fences. A time fence is a time interval during which changes can be made to orders. Between the current date and some time into the future where the schedule is frozen, no changes are allowed in the master production schedule. I have found the following approach to work quite well in terms of developing student understanding of MRP: 1. Emphasize the difference between independent and dependent demand. 2. Present an overview of MRP. Students find visual aids very helpful. Walk them through Figures 2, 3, 4, 5, 6, 8, and 9. 3. Go back through the chapter in more detail, covering low-level coding and lot-for-lot ordering, and working through a product structure tree and developing a material requirements plan. 4. Emphasize the inputs of MRP. 5. Solve at least two MRP problems completing two or three MRP tables for each problem. 6. Make copies of the blank MRP tables below and distribute multiple copies to each student.



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Chapter 12 - MRP and ERP



Master Schedule for:



Week



1



2



3



4



5



6



7



8



5



6



7



8



5



6



7



8



5



6



7



8



Quantity Week



Item: LT = Lot size : Gross requirements



Beg. Inv.



1



2



3



4



Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases Week Item: LT = Lot size: Gross requirements



Beg. Inv.



1



2



3



4



Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases Week Item: LT = Lot size: Gross requirements



Beg. Inv.



1



2



3



4



Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases



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Chapter 12 - MRP and ERP



Week Item: LT = Lot size: Gross requirements



Beg. Inv.



1



2



3



4



5



6



7



8



Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases



Reading: ABCs of ERP 1.



ERP (Enterprise Resource Planning) is an integrated information system that is used to plan the resources and processes needed to produce, ship, and account for all customer orders in both manufacturing and service organizations. Integration of databases permits standardization of processes, allows easier access to information by various departments, and more importantly, makes it possible to share information to make better and timely decisions in serving customers. For example, ERP makes it possible for departments such as accounting, sales, production, and materials management to have immediate access to new customer orders within the same system. ERP also allows a customer service representative to check for data quickly related to inventory, accounting, marketing, and production to respond rapidly to questions from customers.



2.



Three main reasons that firms adopt ERP are: 1. To integrate financial data: ERP creates a single version of the financial statements using a single database that incorporates financial information from different departments within the company. 2. To standardize manufacturing processes: ERP standardizes processes that produce the same product in different business units using a single, integrated information system, which can in turn save time and increase efficiency. 3. To standardize HR information: In companies with multiple business units, ERP unifies the information to track employee time and provides a means of communicating with employees about benefits and services. In general, ERP combines the databases used by different departments into a single, integrated software program with a single database so that departments can communicate easily and share information with each other.



3.



The hidden costs of ERP are: 1.



Training: Workers must learn a new set of processes.



2.



Integration and testing: Testing the links between ERP packages and other corporate applications.



3.



Data conversion: Cleaning and moving data.



4.



Data analysis: Cost of a data warehouse.



5.



Consultants ad infinitum: Consulting fees.



6.



Replacing your best and brightest: Turnover of IS employees working on ERP.



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Chapter 12 - MRP and ERP



4.



7.



Implementation teams can never stop: Companies cannot afford to send their project people back into the business due to the need for post-ERP installation activity.



8.



Waiting for ROI: It takes time for the ERP system to provide value after companies have had time to improve business processes affected by the ERP system.



9.



Post-ERP depression: Companies may experience a drop in their performance after their ERP system goes live.



ERP offers a natural platform to connect the firm’s internal databases with e-commerce operations of the company. However, due to specialized needs of e-commerce operations, ERP vendors are unable to support all of the requirements and needs of Internet-related operations of a firm. The niche Internet software vendors provide firms with specialized e-commerce software that is easy to install and use. Both ERP and specialized software vendors assist companies with their e-commerce applications. In addition, ERP also provides a natural platform to connect to the databases of suppliers and customers in the supply chain, which permits sharing of information regarding sales forecasts, inventories, production plans, etc. The integration of databases between suppliers and customers assists firms in making better decisions as a result of having additional information from their suppliers and/or their customers in the supply chain.



Answers to Discussion and Review Questions 1.



2.



3.



4.



Independent demand refers to demand for end items; dependent demand refers to usage of subassemblies and component parts, which is dependent on demand for a “parent” item. Independent demand is often random and therefore somewhat unpredictable; dependent demand is derived from demand for end items. MRP is appropriate when requirements planning must be accomplished for items with dependent demand. It is best suited to situations in which demand is “lumpy” rather than continual, and where lead times are fairly well known. a. A master schedule specifies the quantity and completion time of an end item. b. A bill of materials contains a listing of all the assemblies, subassemblies, parts, and raw materials that are needed to produce one unit of an end item. The listing in the bill of materials is hierarchical; it shows the quantity of each item needed to complete one unit of its parent item. c. An inventory record maintains the status of each item by time period: inventory on hand and on order; other information concerning suppliers, lead times, and lot sizes; and changes due to stock receipts and withdrawals, canceled orders, and similar events. d. The gross requirements are the total expected demand for an item during each period without regard to the amount on hand. e. The net requirements for an item are the actual amount needed in each period (gross requirement minus the projected on hand inventory). f. A time-phased plan essentially is a plan in which gross requirements for an end item in the current period lead to gross requirements and planned-order releases for assemblies, subassemblies, parts, and raw materials in earlier periods. Safety stock is not needed normally for dependent demand items below the end-item level because the gross requirements of these items are calculated from the quantities established for the end item in the master schedule. However, in practice, there are a number of reasons to carry safety stock in an MRP system. Some of these reasons include scrap, defective units, late deliveries due to longer than expected production time of components, and late deliveries of parts from suppliers. Maintaining safety stock is important for multi-level items because a shortage for a lower level item in the BOM could cause a shortage for the end item. However, if safety stock 12-4



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Chapter 12 - MRP and ERP



5.



6.



7.



8.



9.



10.



11.



12.



13.



14.



is carried for all dependent demand items, one of the main advantages of MRP (low levels of inventories) will be lost. The need for safety stock arises when variability exists in usage and/or lead time. With dependent demand, the causes of variability in lead time can be related to supplier deliveries or variability in internal processing (e.g., due to scheduling problems, machine breakdowns, material shortages, etc.). Usage variability may be due to excessive scrap or changes in lot sizes. For items subject to lead time variability, safety lead time results in scheduling orders for arrival or completion sufficiently ahead of the time that they are needed to eliminate or substantially reduce the chance of having to wait for those items. A net change system is one that is updated as changes occur, while a regenerative system is updated periodically. The regenerative system is best suited for systems that are fairly stable. It affords lower processing costs than a net change system, but it leads to a lag between the time a change occurs and the time it can be recorded. Hence, under a regenerative system, management may not have the latest information for planning and control. Successful MRP requires accurate inputs: master schedules, bills of materials, and inventory records. MRP also requires a computer to process information and to generate material requirements plans. The advantages of MRP are low levels of in-process inventories, the ability to keep track of material requirements, the ability to evaluate capacity requirements generated by a given master schedule, and the ability to determine inventory usage easily by backflushing. Some of the limitations of MRP are the requirement for very high accuracy in inventory record files and bill of material files, the need for scheduling discipline, the assumption of constant lead times, and the need for accurate forecasts. In addition, some of the chapter readings refer to the long time and significant cost of implementing MRP. MRP can contribute to productivity by providing management with the kinds of information it needs to make the best use of available resources. For example, it can be used for capacity planning to help reduce bottlenecks and better smooth demands on operations. MRP II is an acronym for manufacturing resources planning, which expanded the scope of MRP to include planning for financial and marketing resources to support the material requirements plan. Most MRP II systems have the capability for performing simulation also. When MRP II systems include feedback loops, they are referred to as closed loop MRP. Closed loop MRP systems evaluate a proposed material plan relative to available capacity. The evaluation is referred to as capacity requirements planning. If a proposed material plan is not feasible, it must be revised. The term lot sizing refers to selecting a quantity to order. The primary goal of lot sizing is to minimize the sum of ordering cost (or setup cost) and holding cost. In the case of uniform demand, an EOQ approach will yield an appropriate lot size. Under lumpy demand, it usually makes sense to time orders so that they arrive as needed. The EOQ amount, though, may not equal the quantity needed at a particular point in time. Lot-for-lot ordering often is used instead. However, some other lot size may yield lower total costs. Because of the variations in timing and quantity in lumpy demand cases, there may not be a single approach that will yield a reasonably good lot size consistently. Planned-order receipts refer to the quantity expected to be received by the beginning of the period in which the planned-order receipts quantity is listed (no order has been placed); scheduled receipts are open orders that have been placed with suppliers or the factory and are due to arrive at a specified date. In the 1970s, manufacturers began to recognize the importance of the difference between independent demand, which is relatively stable, and dependent demand which is rather “lumpy” 12-5



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Chapter 12 - MRP and ERP



15.



16.



by nature. Earlier EOQ models, which worked well for independent demand items, did not work very well for the more “lumpy” dependent demand items. Hence, MRP was developed to handle the more “lumpy” dependent demand items. Adjustments still have to be made under MRP, but it was developed to handle seasonal variations better than the older EOQ models could handle. MRP II (Manufacturing Resource Planning) involves an effort to expand the scope of production resource planning to include other functional areas of the firm in the planning process such as marketing, finance, and purchasing. The integration of these areas in the formulation of the resource plan allows the company to develop a plan that works and is acceptable to different areas of the company. On the other hand, ERP is an expanded effort that connects all parts of the organization as well as key portions of the supply chain to a single database. While MRP II builds links between the overall business plan, aggregate plan, and the master production schedule, ERP attempts to link and synchronize various independent databases within the firm and integrate them into one system. The unforeseen costs of MRP include the following: a. Training: Workers have to be trained to learn and become proficient with a new system and its processes. b. Integration and testing: Integrating the computer systems associated with different areas of the firm and testing the links between various corporate areas and systems. c. Data conversion and data analysis. d. Consultant fees. e. Solving implementation problems on an ongoing basis. f. Dealing with disappointing short-term results. g. Competition for high quality workers, especially in the IT field.



Taking Stock 1.



2.



3.



The tradeoffs involved in the decision to purchase an ERP software package are the costs vs. the benefits. The costs of implementation include actual cost of the software, training and implementation costs, cost of getting every department to cooperate, cost of integration and testing, cost of data conversion, cost of data analysis, and cost of employee salaries. The potential benefits of implementing ERP include faster access to data, ability to collect and analyze data, ability to respond to customer’s questions and needs in a timely fashion, integration of a company’s databases, integration of financial data, standardization of manufacturing processes, standardization of human resources information, and automation of the tasks involved in performing various business processes (e.g., taking an order from a customer). The executives of the organization, with input from different functional departments (marketing, operations, and finance) and from support functions such as human resources, engineering, and IT, must be involved in designing and implementing an ERP system. The representatives of these areas (usually at a fairly high level), with the supervision and consultation of top management, should be involved in the design, development, and implementation of the ERP system. A truly integrative ERP will involve the entire organization; therefore, everyone in the organization will need to be trained. However, the level and the intensity of training will depend on the job. The technology of ERP software has allowed many companies to integrate their databases, which in turn has allowed easier tracking of orders, faster response to customers’ inquiries, integration of financial data, and standardization of the manufacturing processes.



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Chapter 12 - MRP and ERP



a. Ease of use leads to lower training costs, fewer mistakes, and faster response to customers’ needs. Therefore, ease of use is critical and should be achieved with appropriate employee training. b. The complete integration of the system will enable the company to access different databases simultaneously, resulting in the utilization of a more complete set of information to make decisions. This is critical so that all areas of the company are using the same data to create plans. c. The ERP system may be unreliable in a couple of different ways. First, if the computer system keeps on crashing or going down, it becomes difficult to complete certain tasks in an efficient manner. The second type of unreliability deals with the actual data and information stored in the system not being accurate or reliable. The lack of reliability of the second type will lead to many customer service problems and will result in employees losing faith in the system. These employees will utilize other sources of information to make decisions because the formal ERP system has let them down too many times. Most businesses cannot function without the ERP system working properly; therefore, reliability is critical.



Critical Thinking Exercises 1.



2.



An end item, such as the chair, is considered to be an independent demand item with uniform demand. It is appropriate to use EOQ/ROP for the independent demand items because the assumption of continuous (uniform) usage and continuous monitoring is met. The components and parts that go into end items are considered to be dependent demand items. Their demand is dependent on the demand for the respective end items. Demand for parts and components tends to be lumpy and not continuous. Therefore, instead of continuous stocking and monitoring levels of inventory, these parts need to be stocked just prior to the time they will be needed for manufacturing. This policy of stocking just prior to the need on the shop floor will in turn assist in reducing inventory investment. In addition, while demand for independent demand items, such as the chair, is forecasted, demand for the parts, such as the legs, side rails, back support, etc., is calculated based on the demand for the chair. If EOQ/ROP approach is used for the dependent demand parts, too much unnecessary time could be spent to forecast each and every individual part. Because each forecast would be independent, there could be great amount of discrepancy and disagreement between the forecast for the end item and the forecast for the various parts. Therefore, it would be very inefficient to use the EOQ/ROP approach for the dependent demand items. Using an EOQ/ROP system for controlling component inventory will lead to problems such as too little inventory for some items, too much inventory for other items, and late orders for end items. For these items, instead of using EOQ/ROP approach, the company should consider installing an MRP system. Student answers will vary. Some possible answers are listed below. MRP: If anyone lied about information that they input to the MRP system, this action would violate the Virtue Principle. ERP: If a project manager in charge of an ERP implementation rewarded project team members with different amounts of time off, this action would violate the Fairness Principle. If the project team carelessly rushed through an ERP implementation so that team members could return to their primary functional roles, this action would violate the Utilitarian Principle. If a project manager intentionally over-stated the benefits and under-stated the costs of an ERP implementation, this action would violate the Virtue Principle.



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Chapter 12 - MRP and ERP



Solutions 1.



a. Each E requires 2 F + 1 G + 1 H. Each F requires 2 J + 4 D. Each G requires 2 L + 2 J. Each H requires 4 A + 2 D. Total J required = (2 F * 2 J) + (1 G * 2 J) = 4 + 2 = 6. Total D required = (2 F * 4 D) + (1 H * 2 D) = 8 + 2 = 10. Total L required = 1 G * 2 L = 2. Total A required = 1 H * 4 A = 4. Total required of each: F = 2, G = 1, H =1. J = 6, D = 10, L = 2, A = 4. b. Product structure tree (tree diagram) for stapler: Stapler



Top Assembly



Cover



Spring



Base Assembly



Slide Assembly



Base



Slide



Strike Pad



Rubber Pad(2)



Spring



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Chapter 12 - MRP and ERP



2.



Given: We have the following information: End Item



B(2)



E(2)



C



D(3)



F(3)



G(2)



End



B



C



D



E



F



G



H



LT (wk)



1



2



3



3



1



2



1



2



Amount on hand



0



10



10



25



12



30



5



0



Item



E(2)



H(4)



E(2)



a. If 20 units of the end item are to be assembled, how many additional units of E are needed? Step 1: Determine the gross requirements and the net requirements for the End Item: Item



Gross Requirements – On Hand =



Net Requirements



End Item



20 – 0 =



20



Step 2: Determine the gross requirements and the net requirements for B, C, & D. Multiply the net requirements for the end item by the usage quantities of B, C, & D to determine the gross requirements for B, C, & D.



Item



Gross Requirements – On Hand =



Net Requirements



B



(20 * 2) = 40 – 10 =



30



C



(20 * 1) = 20 – 10 =



10



D



(20 * 3) = 60 – 25 =



35



Step 3: Determine the gross requirements and net requirements for E. Multiply the net requirements for B, C, & D by the usage quantities of E to determine gross requirements for E. Item



Gross Requirements – On Hand =



Net Requirements



E



[(30 B * 2) + (10 C * 2) + (35 D * 2)] = 150 – 12 =



138



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Chapter 12 - MRP and ERP



b. Given: An order for the end item is to be shipped at the start of week 11. Determine the latest week that the order could be started. To solve this, we need to determine the longest sequence through the product structure tree moving from the end item down to the lowest items. The lead time for each item is indicated in bold to the left of each item in the product structure tree shown below. 1 wk End Item



2 wk B(2)



1 wk E(2)



3 wk C



2 wk F(3) 1 wk G(2) 1 wk



1 wk



Total LT = 4 wk



3 wk D(3)



1 wk E(2) 2 wk H(4) 1 wk



1 wk



5 wk



5 wk



5 wk



1 wk E(2) 1 wk



6 wk



5 wk



The longest sequence is 6 weeks (End Item – D – H). 11 – 6 weeks = start of week 5. 3.



Given: We have the following information: Item



End



L



C



K



B



J



G



H



LT (wk)



1



2



3



3



2



3



3



2



Amount on hand



0



10



15



20



30



30



5



0



Item End L C K



Direct Components L(2), C(1), K(3) B(2), J(3) G(2), B(2) H(4), B(2)



Using the information above, we can construct a product structure tree as shown below: End Item



L(2)



B(2)



C



J(3)



G(2)



K(3)



B(2)



H(4)



B(2)



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Chapter 12 - MRP and ERP



a. If 40 units of the end item are to be assembled, how many additional units of B are needed? Step 1: Determine the gross requirements and the net requirements for the end item: Item



Gross Requirements – On Hand =



Net Requirements



End Item



40 – 0 =



40



Step 2: Determine the gross requirements and the net requirements for L, C, & K. Multiply the net requirements for the end item by the usage quantities of L, C, & K to determine the gross requirements for L, C, & K.



Item



Gross Requirements – On Hand =



Net Requirements



L



(40 * 2) = 80 – 10 =



70



C



(40 * 1) = 40 – 15 =



25



K



(40 * 3) = 120 – 20 =



100



Step 3: Determine the gross requirements and net requirements for B. Multiply the net requirements for L, C, & K by the usage quantities of B to determine gross requirements for B. Item



Gross Requirements – On Hand =



Net Requirements



B



[(70 L * 2) + (25 C * 2) + (100 K * 2)] = 390 – 30 =



360



b. Given: An order for the end item is to be shipped at the start of week 8. Determine the latest week that the order could be started. To solve this, we need to determine the longest sequence through the product structure tree moving from the end item down to the lowest items. The lead time for each item is indicated in bold to the left of each item in the product structure tree shown below. 1 wk End Item



2 wk L(2)



2 wk B(2)



Total LT = 5 wk



3 wk C



3 wk J(3)



6 wk



3 wk G(2)



7 wk



3 wk K(3)



2 wk B(2) 2 wk H(4)



6 wk



6 wk



2 wk B(2)



6 wk



The longest sequence is 7 weeks (End Item – C – G). 8 – 7 weeks = start of week 1. 12-11 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



4.



Given: Eighty units of end item E are needed at the beginning of week 6. Three cases (30 units per case) of J have been ordered, and one case is scheduled to arrive in week 3, one in week 4, and one in week 5. Note: J must be ordered by the case, and B must be produced in multiples of 120 units. There are 60 units of B and 20 units of J on hand. Lead times are 2 weeks each for E and B, and 1 week for J. The product structure tree is shown below: E



B(2)



J(4)



J(3)



F(2)



a. Determine a material requirements plan for J. We will need to prepare material plans for E, B, and J. All given information is highlighted in bold in the tables below. POH is the projected on hand inventory at the beginning of each period. All MRP problems below will use the following formula to determine POH: POH (Current Period) = [POH + Planned-Order Receipts – Gross Requirements (Prior Period)] + Scheduled Receipts (Current Period) or using subscripts, we have the following: POHt = [POHt-1 + Planned-Order Receiptst-1 – Gross Requirementst-1] + Scheduled Receiptst Net Requirements = Max[(Gross Requirements – POH), 0]. Note: This ensures that we have net requirements only when the Gross Requirements > POH. Master Schedule for: E



Week



1



2



3



4



5



Quantity



E LT = 2 Lot size: Lot-for-Lot Gross requirements



6 80



Beg. Inv.



1



2



3



4



5



6 80



Scheduled receipts Projected on hand



0



0



0



0



0



0



0



Net requirements



80



Planned-order receipts



80



Planned-order releases



80



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Chapter 12 - MRP and ERP



B(2)



LT = 2



Lot size: Multiples of 120



Beg. Inv.



1



2



3



Gross requirements



4



5



6



20



20



160



Scheduled receipts Projected on hand



60



60



60



60



60



Net requirements



100



Planned-order receipts



120



Planned-order releases 120 Notes: Gross Requirements (week 4) = Planned-Order Releases of 80 E * 2 = 160. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4 POH4 = [60 + 0 – 0] + 0 = 60. POH5 = [POH4 + Planned-Order Receipts4 – Gross Requirements4] + Scheduled Receipts5 POH5 = [60 + 120 – 160] + 0 = 20. J(3) & J(4) LT = 1 Lot size: Multiples of 30 Gross requirements



Beg. Inv.



1



2 480



Scheduled receipts Projected on hand



3



20



20



20



4



5



6



240 30



30



30



50



80



50



Net requirements



460



160



Planned-order receipts



480



180



50



Planned-order releases 480 180 Notes: Gross Requirements (week 2) = Planned-Order Releases of 120 B * 4 = 480. Gross Requirements (week 4) = Planned-Order Releases of 80 E * 3 = 240. POH3 = [POH2 + Planned-Order Receipts2 – Gross Requirements2] + Scheduled Receipts3. POH3 = [20 + 480 – 480] + 30 = 50. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4. POH4 = [50 + 0 – 0] + 30 = 80. POH5 = [POH4 + Planned-Order Receipts4 – Gross Requirements4] + Scheduled Receipts5. POH5 = [80 + 180 – 240] + 30 = 50. POH6 = [POH5 + Planned-Order Receipts5 – Gross Requirements5] + Scheduled Receipts6. POH6 = [50 + 0 – 0] + 0 = 50. Planned-Order Receipts (week 2) = 16 * 30 = 480 (must order in cases of 30). Planned-Order Receipts (week 4) = 6 * 30 = 180 (must order in cases of 30).



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Chapter 12 - MRP and ERP



b.



Suppose that in week 4 the quantity of E needed is changed from 80 to 70 units. The planned-order releases through week 3 have all been executed. How many more Bs and Js will be on hand in week 6? Note: We are now at the start of week 4. Step 1: Before we do the MRP processing, we list what changes have occurred: 1. All Planned-Order Releases in weeks 1 – 3 have been executed. B had Planned-Order Releases in week 2 (120) corresponding to Planned-Order Receipts (120) in week 4. Change the Planned-Order Receipts to Scheduled Receipts in week 4. J had Planned-Order Releases in week 1 (480) corresponding to Planned-Order Receipts (480) in week 2. The Planned-Order Receipts would have been changed to Scheduled Receipts and received in week 2 (this increases inventory). J had Planned-Order Releases in week 3 (180) corresponding to Planned-Order Receipts (180) in week 4. These will show up as Scheduled Receipts in week 4 and will be added to the original amount of Scheduled Receipts (30) in week 4. 2. Scheduled Receipts for J in week 3 (30) would have been received (this increases inventory). 3. Gross requirements for all items in weeks 1 – 3 would have been disbursed (these transactions decrease inventory). Step 2: Determine the ending inventory for each item at the end of week 3. These will become the beginning inventory balances in week 4. Remember: Scheduled receipts increase inventory while gross requirements decrease inventory. Ending Inventory = Beginning Inventory + Scheduled Receipts – Gross Requirements Item E Ending Inventory



Week 1 0+0–0=0



Week 2 0+0–0=0



Week 3 0+0–0=0



Item B Ending Inventory



Week 1 60 + 0 – 0 = 60



Week 2 60 + 0 – 0 = 60



Week 3 60 + 0 – 0 = 60



Item J Ending Inventory



Week 1 20 + 0 – 0 = 20



Week 2 20 + 480 – 480 = 20



Week 3 20 + 30 – 0 = 50



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Chapter 12 - MRP and ERP



Step 3: Fill in all beginning inventory balances and scheduled receipts, and then change E to 70 units in week 6 of the master schedule. Our MRP tables are shown for weeks 4 – 6 only. Master Schedule for: E



Week



4



5



Quantity



E LT = 2 Lot size: Lot-for-Lot Gross requirements



6 70



Beg. Inv.



4



5



6 70



Scheduled receipts Projected on hand



0



0



0



0



Net requirements



70



Planned-order receipts



70



Planned-order releases B(2)



LT = 2



Lot size: Multiples of 120



70 Beg. Inv.



4



Gross requirements



140



Scheduled receipts



120



Projected on hand



60



180



5



6



40



40



Net requirements Planned-order receipts Planned-order releases Notes: POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4. POH4 = [60 + 0 – 0] + 120 = 180. POH5 = [POH4 + Planned-Order Receipts4 – Gross Requirements4] + Scheduled Receipts5. POH5 = [180 + 0 – 140] + 0 = 40.



12-15 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



J(4) & J(3) LT = 1 Lot size: Multiples of 30



Beg. Inv.



4



5



Gross requirements



210



Scheduled receipts



210



30



260



80



Projected on hand



50



6



80



Net requirements Planned-order receipts Planned-order releases Notes: Scheduled Receipts (week 4) = Original amount of 30 + 180 = 210. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4. POH4 = [50 + 0 – 0] + 210 = 260. POH5 = [POH4 + Planned-Order Receipts4 – Gross Requirements4] + Scheduled Receipts5. POH5 = [260 + 0 – 210] + 30 = 80. POH6 = [POH5 + Planned-Order Receipts5 – Gross Requirements5] + Scheduled Receipts6. POH6 = [80 + 0 – 0] + 0 = 80. Original on hand amounts (week 6): B = 20 & J = 50. Revised on hand amounts (week 6): B = 40 & J = 80. There will be an additional 20 units of B & 30 units of J on hand.



12-16 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



5.



a. Given: 120 units of end item Z are needed at the beginning of week 7. On hand balances: Z = 40, A 70, B = 100, and C = 30 units. There is a scheduled receipt of 20 units of C in week 4. Lead times are 2 weeks for Z and B, and 1 week for other items. Lot-for-lot ordering is used for all items. The product structure tree is shown below: Z



A(2)



C(3)



B(4)



D(2)



E(2)



C(2)



Prepare a material requirements plan for component C: We will need to prepare material plans for Z, A, B, and C. Master Schedule for: Z



Week



1



2



3



4



5



6



Quantity



Z LT = 2 Lot size: Lot-for-Lot Gross requirements



7 120



Beg. Inv.



1



2



3



4



5



6



7 120



Scheduled receipts Projected on hand



40



40



40



40



40



40



40



40



Net requirements



80



Planned-order receipts



80



Planned-order releases 80 Notes: POH7 = [POH6 + Planned-Order Receipts6 – Gross Requirements6] + Scheduled Receipts7 POH7 = [40 + 0 – 0] + 0 = 40. A(2) LT = 1 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



3



4



5



6



7



0



0



160



Scheduled receipts Projected on hand



70



70



70



70



70



70



Net requirements



90



Planned-order receipts



90



Planned-order releases 90 Notes: Gross Requirements (week 5) = Planned-Order Releases of 80 Z * 2 = 160.



12-17 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



B(4) LT = 2 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



3



4



5



6



7



0



0



320



Scheduled receipts Projected on hand



100



100



100



100



100



100



Net requirements



220



Planned-order receipts



220



Planned-order releases 220 Notes: Gross Requirements (week 5) = Planned-Order Releases of 80 Z * 4 = 320. POH6 = [POH5 + Planned-Order Receipts5 – Gross Requirements5] + Scheduled Receipts6 POH6 = [100 + 220 – 320] + 0 = 0. C(3) & C(2) LT = 1 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



3



4



440



270



Scheduled receipts Projected on hand



5



6



7



0



0



0



20 30



30



30



30



20



Net requirements



410



250



Planned-order receipts



410



250



Planned-order releases 410 250 Notes: Gross Requirements (week 3) = Planned-Order Releases of 220 B * 2 = 440. Gross Requirements (week 4) = Planned-Order Releases of 90 A * 3 = 270. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4 POH4 = [30 + 410 – 440] + 20 = 20. POH5 = [POH4 + Planned-Order Receipts4 – Gross Requirements4] + Scheduled Receipts5 POH5 = [20 + 250 – 270] + 0 = 0.



12-18 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



b. Given: 95 units of end item E are needed at the beginning of week 7. On hand balances: E = 5, B = 50, C = 100, and D = 80 units. There is a scheduled receipt of 30 units of C in week 4. Lead times are 2 weeks for E and C, and 1 week for other items. Assume lot-for-lot ordering except for D, where multiples of 40 must be used. The product structure tree is shown below: E



B(3)



D(2)



C(2)



I(2)



S(2)



D(2)



Prepare a material requirements plan for component D: We will need to prepare material plans for E, B, C, and D.



Master Schedule for: E



Week



1



2



3



4



5



6



Quantity



E LT = 2 Lot size: Lot-for-Lot Gross requirements



7 95



Beg. Inv.



1



2



3



4



5



6



7 95



Scheduled receipts Projected on hand



5



5



5



5



5



5



5



5



Net requirements



90



Planned-order receipts



90



Planned-order releases B(3) LT = 1 Lot size: Lot-for-Lot Gross requirements



90 Beg. Inv.



1



2



3



4



5



6



7



0



0



270



Scheduled receipts Projected on hand



50



50



50



50



50



50



Net requirements



220



Planned-order receipts



220



Planned-order releases 220 Notes: Gross Requirements (week 5) = Planned-Order Releases of 90 E * 3 = 270. POH6 = [POH5 + Planned-Order Receipts5 – Gross Requirements5] + Scheduled Receipts6 POH6 = [50 + 220 – 270] + 0 = 0.



12-19 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



C(2) LT = 2 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



3



5



6



7



0



0



180



Scheduled receipts Projected on hand



4



30 100



100



100



100



130



130



Net requirements



50



Planned-order receipts



50



Planned-order releases 50 Notes: Gross Requirements (week 5) = Planned-Order Releases of 90 E * 2 = 180. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4 POH4 = [100 + 0 – 0] + 30 = 130. POH5 = [POH4 + Planned-Order Receipts4 – Gross Requirements4] + Scheduled Receipts5 POH5 = [130 + 0 – 0] + 0 = 130. POH6 = [POH5 + Planned-Order Receipts5 – Gross Requirements5] + Scheduled Receipts6 POH6 = [130 + 50 – 180] + 0 = 0 D(2) & D(2) LT = 1 Lot size: Multiples of 40 Gross requirements



Beg. Inv.



1



2



3



4



100



440



80



20



Net requirements



20



420



Planned-order receipts



40



440



5



6



7



20



20



20



Scheduled receipts Projected on hand



80



80



80



Planned-order releases 40 440 Notes: Gross Requirements (week 3) = Planned-Order Releases of 50 C * 2 = 100. Gross Requirements (week 4) = Planned-Order Releases of 220 B * 2 = 440. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4 POH4 = [80 + 40 – 100] + 0 = 20. POH5 = [POH4 + Planned-Order Receipts4 – Gross Requirements4] + Scheduled Receipts5 POH5 = [20 + 440 – 440] + 0 = 20. Planned-Order Receipts (week 3) = 1 * 40 = 40 (multiples of 40 must be used). Planned-Order Receipts (week 4) = 11 * 40 = 440 (multiples of 40 must be used).



12-20 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



6.



Given: The company that makes a table wants to ship 100 units at the beginning of day 4, 150 units at the beginning of day 5, and 200 units at the beginning of day 7. Receipts of 100 wood sections are scheduled at the beginning of day 2. On hand balances: Braces = 60 and Legs = 120. Lead times (in days) for all items are shown in the table below. The product structure tree is shown below also: Quantity



Lead Time



1-200



1



201-550



2



551-999



3



Table



Wood Sections(2)



Braces(3)



Legs(4)



Prepare a material requirements plan using lot-for-lot ordering for all items: Master Schedule for: Table



Day



1



2



3



Quantity



Table Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



3



4



5



6



7



100



150



4



5



100



150



0



0



100 100



150



200



150



200



200 6



7 200



Scheduled receipts Projected on hand



0



0



0



Net requirements Planned-order receipts



0



0



0



Planned-order releases 100 150 200 Notes: POH5 = [POH4 + Planned-Order Receipts4 – Gross Requirements4] + Scheduled Receipts5 POH5 = [0 + 100 – 100] + 0 = 0. POH6 = [POH5 + Planned-Order Receipts5 – Gross Requirements5] + Scheduled Receipts6 POH6 = [0 + 150 – 150] + 0 = 0. Planned-Order Releases (days 3, 4, & 6) were back-scheduled 1 day from their Planned-Order Receipts because all lead times = 1 day for quantities of 1-200.



12-21 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



Wood Sections(2) Lot size: Lot-for-Lot



Beg. Inv.



1



2



3



4



200



300



100



0



Net requirements



100



Planned-order receipts



100



300 300



Gross requirements Scheduled receipts Projected on hand



5



6



7



400



100 0



0



100



0



0



0



400 400



Planned-order releases 400 400 Notes: Gross Requirements (day 3) = Planned-Order Releases of 100 Tables * 2 = 200. Gross Requirements (day 4) = Planned-Order Releases of 150 Tables * 2 = 300. Gross Requirements (day 6) = Planned-Order Releases of 200 Tables * 2 = 400. POH3 = [POH2 + Planned-Order Receipts2 – Gross Requirements2] + Scheduled Receipts3 POH3 = [100 + 0 – 0] + 0 = 100. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4 POH4 = [100 + 100 – 200] + 0 = 0. Planned-Order Releases (day 2) = 100 from Planned-Order Receipts of 100 in day 3 (lead time = 1 day for quantities of 1-200) + 300 from Planned-Order Receipts of 300 in day 4 (lead time = 2 days for quantities of 201-550) = 400. Planned-Order Releases (day 4) = 400 from Planned-Order Receipts of 400 in day 6 (lead time = 2 days for quantities of 201-550). Braces(3) Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



3



4



5



6



300



450



60



0



240 240



450



600



450



600



7



600



Scheduled receipts Projected on hand



60



60



60



Net requirements Planned-order receipts



0



0



0



Planned-order releases 240 450 600 Notes: Gross Requirements (day 3) = Planned-Order Releases of 100 Tables * 3 = 300. Gross Requirements (day 4) = Planned-Order Releases of 150 Tables * 3 = 450. Gross Requirements (day 6) = Planned-Order Releases of 200 Tables * 3 = 600. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4 POH4 = [60 + 240 – 300] + 0 = 0. POH5 = [POH4 + Planned-Order Receipts4 – Gross Requirements4] + Scheduled Receipts5 POH5 = [0 + 450 – 450] + 0 = 0. Planned-Order Releases (day 1) = 240 from Planned-Order Receipts of 240 in day 3 (lead time = 2 days for quantities of 201-550). Planned-Order Releases (day 2) = 450 from Planned-Order Receipts of 450 in day 4 (lead time = 2 days for quantities of 201-550). Planned-Order Releases (day 3) = 600 from Planned-Order Receipts of 600 in day 6 (lead time = 3 days for quantities of 551-999).



12-22 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



Legs(4) Lot size: Lot-for-Lot



Beg. Inv.



1



2



Gross requirements



3



4



5



6



400



600



120



0



280 280



600



800



600



800



7



800



Scheduled receipts Projected on hand



120



120



120



Net requirements Planned-order receipts



0



0



0



Planned-order releases 880 800 Notes: Gross Requirements (day 3) = Planned-Order Releases of 100 Tables * 4 = 400. Gross Requirements (day 4) = Planned-Order Releases of 150 Tables * 4 = 600. Gross Requirements (day 6) = Planned-Order Releases of 200 Tables * 4 = 800. POH3 = [POH2 + Planned-Order Receipts2 – Gross Requirements2] + Scheduled Receipts3 POH3 = [120 + 0 – 0] + 0 = 120. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4 POH4 = [120 + 280 – 400] + 0 = 0. POH5 = [POH4 + Planned-Order Receipts4 – Gross Requirements4] + Scheduled Receipts5 POH5 = [0 + 600 – 600] + 0 = 0. Planned-Order Releases (day 1) = 280 from Planned-Order Receipts of 280 in day 3 (lead time = 2 days for quantities of 201-550) + 600 from Planned-Order Receipts of 600 in day 4 (lead time = 3 days for quantities of 551-999) = 880. Planned-Order Releases (day 3) = 800 from Planned-Order Receipts of 800 in day 6 (lead time = 3 days for quantities of 551-999).



12-23 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



7.



Given: 80 units of end item X are needed at the beginning of week 6, and another 30 units are needed at the beginning of week 8. D can be ordered only in whole cases (50 units per case). One case of D (50 units) is received automatically every other week, beginning in week 1. On hand balances: B = 30 and D = 20 units. Lead times are a function of quantity as shown in the table below. The product structure tree is shown below also: Quantity



Lead Time



1-100



1 wk



101-200



2 wk



201-300



3 wk



301+



4 wk X



B(2)



D(2)



D(3)



F(2)



Prepare a material requirements plan for component D using lot-for-lot ordering for all items except D. We will need to prepare material plans for X, B, and D.



Master Schedule for: X



Week



1



2



3



4



5



Quantity



X Lot size: Lot-for-Lot Gross requirements



6



7



80 Beg. Inv.



1



2



3



4



5



6



8 30



7



80



8 30



Scheduled receipts Projected on hand



0



0



0



0



0



0



0



0



0



Net requirements



80



30



Planned-order receipts



80



30



Planned-order releases 80 30 Notes: Planned-Order Releases (week 5 and week 7) have a lead time of 1 week (lead time = 1 week for quantities of 1-100).



12-24 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



B(2) Lot size: Lot-for-Lot



Beg. Inv.



1



2



3



4



Gross requirements



5



6



160



7



8



60



Scheduled receipts Projected on hand



30



30



30



30



30



30



0



0



Net requirements



130



60



Planned-order receipts



130



60



0



Planned-order releases 130 60 Notes: Gross Requirements (week 5) = Planned-Order Releases of 80 X * 2 = 160. Gross Requirements (week 7) = Planned-Order Releases of 30 X * 2 = 60. POH6 = [POH5 + Planned-Order Receipts5 – Gross Requirements5] + Scheduled Receipts6 POH6 = [30 +130 – 160] + 0 = 0. Planned-Order Releases (week 3) = 130 from Planned-Order Receipts of 130 in week 5 (lead time = 2 weeks for quantities of 101-200). Planned-Order Releases (week 6) = 60 from Planned-Order Receipts of 60 in week 7 (lead time = 1 week for quantities of 1-100). D(2) & D(3) Lot size: Multiples of 50 Gross requirements



Beg. Inv.



Scheduled receipts Projected on hand



1



2



50 20



70



70



Net requirements



3



5



6



7



260



240



120



90



50



50



120 140 150



Planned-order receipts



4



10



8



50



60



20



50



180 200



100 100



40



10



50



Planned-order releases 150 200 100 50 Notes: Gross Requirements (week 3) = Planned-Order Releases of 130 B * 2 = 260. Gross Requirements (week 5) = Planned-Order Releases of 80 X * 3 = 240. Gross Requirements (week 6) = Planned-Order Releases of 60 B * 2 = 120. Gross Requirements (week 7) = Planned-Order Releases of 30 X * 3 = 90. POH3 = [POH2 + Planned-Order Receipts2 – Gross Requirements2] + Scheduled Receipts3 POH3 = [70 + 0 – 0] + 50 = 120. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4 POH4 = [120 + 150 – 260] + 0 = 10. POH6 = [POH5 + Planned-Order Receipts5 – Gross Requirements5] + Scheduled Receipts6 POH6 = [60 + 200 – 240] + 0 = 20. POH7 = [POH6 + Planned-Order Receipts6 – Gross Requirements6] + Scheduled Receipts7 POH7 = [20 + 100 – 120] + 50 = 50. POH8 = [POH7 + Planned-Order Receipts7 – Gross Requirements7] + Scheduled Receipts8 POH8 = [50 + 50 – 90] + 0 = 10.



12-25 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



8.



Given: Oh No! Inc. sells three models: A, B, and C. Lead times are 1 week for all items except C (2 weeks). On hand balances: B = 10, C = 10, and D = 25 units. Lot-sizing rules are lot-for-lot for all items except D, which must be ordered in multiples of 100. There is a scheduled receipt of 100 units of D in week 1. The master schedule shows that 40 units of A are needed at the beginning of week 4, 60 units of B at the beginning of week 5, and 30 units of C at the beginning of week 6. The product structure tree for each item is shown below: A



B



D



E



C



D(2)



F



D(4)



G



Prepare a material requirements plan for component D and its parents. We will need to prepare material plans for A, B, C, and D. Master Schedule for: A



Week



1



2



3



Quantity



A LT = 1 Lot size: Lot-for-Lot Gross requirements



4



5



6



5



6



0



0



5



6



40 Beg. Inv.



1



2



3



4 40



Scheduled receipts Projected on hand



0



0



0



0



0



Net requirements



40



Planned-order receipts



40



Planned-order releases Master Schedule for: B



40



Week



1



2



3



4



Quantity



B LT = 1 Lot size: Lot-for-Lot Gross requirements



60 Beg. Inv.



1



2



3



4



5



6



60



Scheduled receipts Projected on hand



10



10



10



10



10



10



Net requirements



50



Planned-order receipts



50



Planned-order releases



0



50



12-26 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



Master Schedule for: C



Week



1



2



3



4



5



Quantity



C LT = 2 Lot size: Lot-for-Lot Gross requirements



6 30



Beg. Inv.



1



2



3



4



5



6 30



Scheduled receipts Projected on hand



10



10



10



10



10



10



10



Net requirements



20



Planned-order receipts



20



Planned-order releases



D, D(2), & D(4) LT = 1 Lot size: Multiples of 100 Gross requirements



20



Beg. Inv.



Scheduled receipts Projected on hand



1



2



3



4



40



180



125



85



5



6



5



5



100 25



125



125



Net requirements



95



Planned-order receipts



100



Planned-order releases 100 Notes: Gross Requirements (week 3) = Planned-Order Releases of 40 A * 1 = 40. Gross Requirements (week 4) = (Planned-Order Releases of 50 B * 2) + (Planned-Order Releases of 20 C * 4) = 100 + 80 = 180. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4 POH4 = [125 + 0 – 40] + 0 = 85. POH5 = [POH4 + Planned-Order Receipts4 – Gross Requirements4] + Scheduled Receipts5 POH5 = [85 + 100 – 180] + 0 = 5. Planned-Order Receipts (week 5) = 1 * 100 = 100 (must order in multiples of 100).



12-27 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



9.



Given: 50 chain saws are needed at the start of week 8. The inventory information (shown in bold) and the product structure tree are listed below in the problem solution: a. Product tree structure: Saw A(2)



B



E(3)



D



C(4)



D(2)



F(3)



E(2)



D(2)



D



Assembly time chart:



A



E F Saw



B



D D C



E 1



2



3



4



5



6



7



8



week Start of week 2



Start of week 8



Master schedule: Master Schedule for: Saw



Week



1



2



3



4



5



6



7



Quantity



8 50



b. Material requirements plan for E using lot-for-lot ordering for all items. We will need to prepare material plans for Saw, A, C, and E. Master Schedule for: Saw



Week



1



2



3



4



5



6



7



Quantity



Saw LT = 2 Lot size: Lot-for-Lot Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases



8 50



Beg. Inv.



1



2



3



4



5



6



7



8 50



15



15



15



15



15



15



15



15



15 35 35



35 12-28



Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



A(2) LT = 1 Lot size: Lot-for-Lot Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases



Beg. Inv.



1



2



3



4



5



6



7



8



0



0



7



8



0



0



6



7



8



0



0



0



70 10



10



10



10



10



10



10 60 60



60



Notes: Gross Requirements (week 6) = Planned-Order Releases of 35 Saws * 2 = 70. C(4) LT = 2 Beg. 1 2 3 4 5 6 Lot size: Lot-for-Lot Inv. Gross requirements 140 Scheduled receipts Projected on hand 65 65 65 65 65 65 65 Net requirements 75 Planned-order receipts 75 Planned-order releases 75 Notes: Gross Requirements (week 6) = Planned-Order Releases of 35 Saws * 4 = 140. E(3) & E(2) LT = 1 Lot size: Lot-for-Lot Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts



Beg. Inv.



10



1



10



2



10



3



10



4



5



150



180



10 140 140



0 180 180



Planned-order releases 140 180 Notes: Gross Requirements (week 4) = Planned-Order Releases of 75 C * 2 = 150. Gross Requirements (week 5) = Planned-Order Releases of 60 A * 3 = 180. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4 POH4 = [10 + 0 – 0] + 0 = 10. POH5 = [POH4 + Planned-Order Receipts4 – Gross Requirements4] + Scheduled Receipts5 POH5 = [10 + 140 – 150] + 0 = 0. POH6 = [POH5 + Planned-Order Receipts5 – Gross Requirements5] + Scheduled Receipts6 POH6 = [0 + 180 – 180] + 0 = 0.



12-29 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



10.



Given: 40 units of an industrial robot are needed at the beginning of week 7. Subassembly G must be ordered in multiples of 80 and all other components are ordered lot-for-lot. The inventory information (shown in bold) and the product structure tree are listed below in the problem solution. Prepare the material plan for G. We will need to prepare material plans for Robot, C, & G. Robot



C(3)



B



E



Master Schedule for: Robot



F



G



Week



1



G(2)



2



3



4



H



5



6



Quantity



7 40



Robot LT = 2 Lot size: Lot-for-Lot Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases



Beg. Inv.



C(3) LT = 1 Lot size: Lot-for-Lot Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases



Beg. Inv.



1



2



3



4



5



6



7 40



10



10



10



10



10



10



10



10 30 30



6



7



0



0



30



1



2



3



4



5 90



20



20



20



20



20



20 70 70



70



Notes: Gross Requirements (week 5) = Planned-Order Releases of 30 Robots * 3 = 90.



12-30 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



G & G(2) LT = 2 Lot size: Multiples of 80 Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts



Beg. Inv.



1



15



2



15



3



15



15



4



5



140



30



15 125 160



35



6



7



5



5



Planned-order releases 160 Notes: Gross Requirements (week 4) = Planned-Order Releases of 70 C * 2 = 140. Gross Requirements (week 5) = Planned-Order Releases of 30 Robots * 1 = 30. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4 POH4 = [15 + 0 – 0] + 0 = 15. POH5 = [POH4 + Planned-Order Receipts4 – Gross Requirements4] + Scheduled Receipts5 POH5 = [15 + 160 – 140] + 0 = 35. POH6 = [POH5 + Planned-Order Receipts5 – Gross Requirements5] + Scheduled Receipts6 POH6 = [35 + 0 – 30] + 0 = 5. 11.



a. Given: Refer back to Solved Problem 3. On hand balances: N = 100 and E = 0. Scheduled receipts: I = 40 and V = 10 at the beginning of week 3. 120 E are needed at the start of week 5. We have the product structure tree shown below. Determine material requirements plans for E, I, N, and V using lot-for-lot ordering as was used in Solved Problem 3: E



M(3)



R(2)



Master Schedule for: E



I(2)



P



N(4)



Period



1



V



2



3



4



Quantity



E LT = 1 Lot size: Lot-for-Lot Gross requirements



5



6



7



8



6



7



8



0



0



0



120 Beg. Inv.



1



2



3



4



5 120



Scheduled receipts Projected on hand



0



0



0



0



0



0



Net requirements



120



Planned-order receipts



120



Planned-order releases



120



12-31 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



I(2) LT = 1 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



4



5



6



7



8



0



0



0



0



240



Scheduled receipts Projected on hand



3



40 0



0



0



40



40



Net requirements



200



Planned-order receipts



200



Planned-order releases 200 Notes: Gross Requirements (week 4) = Planned-Order Releases of 120 E * 2 = 240. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4 POH4 = [40 + 0 – 0] + 0 = 40. POH5 = [POH4 + Planned-Order Receipts4 – Gross Requirements4] + Scheduled Receipts5 POH5 = [40 + 200 – 240] + 0 = 0. N(4) LT = 2 Lot size: Lot-for-Lot



Beg. Inv.



1



2



Gross requirements



3



4



5



6



7



8



0



0



0



0



0



800



Scheduled receipts Projected on hand



100



100



100



100



Net requirements



700



Planned order receipts



700



Planned order releases 700 Notes: Gross Requirements (week 3) = Planned-Order Releases of 200 I * 4 = 800. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4 POH4 = [100 + 700 – 800] + 0 = 0. V LT = 2 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



4



5



6



7



8



0



0



0



0



0



200



Scheduled receipts Projected on hand



3



10 0



0



0



10



Net requirements



190



Planned order receipts



190



Planned order releases 190 Notes: Gross Requirements (week 3) = Planned-Order Releases of 200 I * 1 = 200. POH3 = [POH2 + Planned-Order Receipts2 – Gross Requirements2] + Scheduled Receipts3 POH3 = [0 + 0 – 0] + 10 = 10. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4 POH4 = [10 + 190 – 200] + 0 = 0.



12-32 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



b. Given: Assume that on hand balances and scheduled receipts remain the same as in part a. On hand balances: N = 100 and E = 0. Scheduled receipts: I = 40 and V = 10 at the beginning of week 3. New information: 100 E are needed at the start of week 5 and 55 are needed at the start of week 7. Determine the material requirements plans for E, I, N, and V using lot-for-lot ordering for E and I, and multiples of these order sizes: N = 800 and V = 200. E



M(3)



R(2)



Master Schedule for: E



I(2)



P



N(4)



Period



1



V



2



3



4



Quantity



E LT = 1 Lot size: Lot-for-Lot Gross requirements



5



6



100 Beg. Inv.



1



2



3



4



5



7



8



55 6



100



7



8



55



Scheduled receipts Projected on hand



0



0



0



0



0



0



0



0



Net requirements



100



55



Planned-order receipts



100



55



Planned-order releases I(2) LT = 1 Lot size: Lot-for-Lot Gross requirements



100 Beg. Inv.



1



2



4



55 5



200



Scheduled receipts Projected on hand



3



0



6



7



8



0



0



110



40 0



0



0



40



40



0



0



Net requirements



160



110



Planned-order receipts



160



110



Planned-order releases 160 110 Notes: Gross Requirements (week 4) = Planned-Order Releases of 100 E * 2 = 200. Gross Requirements (week 6) = Planned-Order Releases of 55 E * 2 = 110. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4 POH4 = [40 + 0 – 0] + 0 = 40. POH5 = [POH4 + Planned-Order Receipts4 – Gross Requirements4] + Scheduled Receipts5 POH5 = [40 + 160 – 200] + 0 = 0.



12-33 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



N(4) LT = 2 Lot size: Multiples of 800



Beg. Inv.



1



2



Gross requirements



3



4



640



5



6



7



8



620



620



620



440



Scheduled receipts Projected on hand



100



100



100



Net requirements



100



260



540 800



Planned order receipts



260 180 800



Planned order releases 800 800 Notes: Gross Requirements (week 3) = Planned-Order Releases of 160 I * 4 = 640. Gross Requirements (week 5) = Planned-Order Releases of 110 I * 4 = 440. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4 POH4 = [100 + 800 – 640] + 0 = 260. POH6 = [POH5 + Planned-Order Receipts5 – Gross Requirements5] + Scheduled Receipts6 POH6 = [260 + 800 – 440] + 0 = 620. V LT = 2 Lot size: Multiples of 200 Gross requirements



Beg. Inv.



1



2



4



160



Scheduled receipts Projected on hand



3



5



6



7



8



140



140



140



110



10 0



0



0



Net requirements



10 150 200



Planned order receipts



50



50 60 200



Planned order releases 200 200 Notes: Gross Requirements (week 3) = Planned-Order Releases of 160 I * 1 = 160. Gross Requirements (week 5) = Planned-Order Releases of 110 I * 1 = 110. POH3 = [POH2 + Planned-Order Receipts2 – Gross Requirements2] + Scheduled Receipts3 POH3 = [0 + 0 – 0] + 10 = 10. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4 POH4 = [10 + 200 – 160] + 0 = 50. POH5 = [POH4 + Planned-Order Receipts4 – Gross Requirements4] + Scheduled Receipts5 POH5 = [50 + 0 – 0] + 0 = 50. POH6 = [POH5 + Planned-Order Receipts5 – Gross Requirements5] + Scheduled Receipts6 POH6 = [50 + 200 – 110] + 0 = 140.



12-34 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



c. Case 1 Given: Refer back to part b. 1 week has elapsed. It is now the start of week 2. 100 E are needed at the start of week 9. Assume that all orders were released and received as planned. Notes: a. We will drop 1 week (week 1) from the material plans and add 1 week at the end of each plan. b. Any Planned-Order Releases from week 1 must now show up as Scheduled Receipts: Item N: Change Planned-Order Receipts of 800 in week 3 to Scheduled Receipts in week 3. Item V: Change Planned-Order Receipts of 200 in week 3 to Scheduled Receipts in week 3. The revised amount of Scheduled Receipts (week 3) = original amount of 10 + 200 = 210. c. Determine the on hand balances at the start of week 2: Determine the ending inventory for each item at the end of week 1. These will become the beginning inventory balances in week 2. Remember: Scheduled receipts increase inventory while gross requirements decrease inventory. Ending Inventory = Beginning Inventory + Scheduled Receipts – Gross Requirements Item E Ending Inventory



Week 1 0+0–0=0



Item I Ending Inventory



Week 1 0+0–0=0



Item N Ending Inventory



Week 1 100 + 0 – 0 = 100



Item V Ending Inventory



Week 1 0+0–0=0



E



M(3)



R(2)



I(2)



P



N(4)



V



12-35 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



c. continued Master Schedule for: E



Period



2



3



4



Quantity



E LT = 1 Lot size: Lot-for-Lot Gross requirements



5



6



100 Beg. Inv.



2



3



4



5



7



8



55 6



100



7



9 100



8



55



9 100



Scheduled receipts Projected on hand



0



0



0



Net requirements



100



55



0 100



Planned-order receipts



100



55



100



Planned-order releases I(2) LT = 1 Lot size: Lot-for-Lot Gross requirements



0



100 Beg. Inv.



2



3



4



0



0



55 5



200



Scheduled receipts Projected on hand



0



6



0



100 7



110



8



9



200



40 0



0



40



40



0



0



0



0



Net requirements



160



110



200



Planned-order receipts



160



110



200



0



Planned-order releases 160 110 200 Notes: Gross Requirements (week 4) = Planned-Order Releases of 100 E * 2 = 200. Gross Requirements (week 6) = Planned-Order Releases of 55 E * 2 = 110. Gross Requirements (week 8) = Planned-Order Releases of 100 E * 2 = 200. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4 POH4 = [40 + 0 – 0] + 0 = 40. POH5 = [POH4 + Planned-Order Receipts4 – Gross Requirements4] + Scheduled Receipts5 POH5 = [40 + 160 – 200] + 0 = 0. POH9 = [POH8 + Planned-Order Receipts8 – Gross Requirements8] + Scheduled Receipts9 POH9 = [0 + 200 – 200] + 0 = 0.



12-36 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



N(4) LT = 2 Lot size: Multiples of 800



Beg. Inv.



2



3



Gross requirements



640



Scheduled receipts



800



Projected on hand



100



100



900



4



5



6



440 260



Net requirements



260



8



9



620



620



800 620



180 800



Planned order receipts



7



620 180 800



Planned order releases 800 800 Notes: Gross Requirements (week 3) = Planned-Order Releases of 160 I * 4 = 640. Gross Requirements (week 5) = Planned-Order Releases of 110 I * 4 = 440. Gross Requirements (week 7) = Planned-Order Releases of 200 I * 4 = 800. POH3 = [POH2 + Planned-Order Receipts2 – Gross Requirements2] + Scheduled Receipts3 POH3 = [100 + 0 – 0] + 800 = 900. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4 POH4 = [900 + 0 – 640] + 0 = 260. POH6 = [POH5 + Planned-Order Receipts5 – Gross Requirements5] + Scheduled Receipts6 POH6 = [260 + 800 – 440] + 0 = 620. POH8 = [POH7 + Planned-Order Receipts7 – Gross Requirements7] + Scheduled Receipts8 POH8 = [620 + 800 – 800] + 0 = 620. V LT = 2 Lot size: Multiples of 200 Gross requirements



Beg. Inv.



2



4



160



Scheduled receipts Projected on hand



3



5



6



110



7



8



9



140



140



200



210 0



0



210



Net requirements



50



50 60 200



Planned order receipts



140



140 60 200



Planned order releases 200 200 Notes: Gross Requirements (week 3) = Planned-Order Releases of 160 I * 1 = 160. Gross Requirements (week 5) = Planned-Order Releases of 110 I * 1 = 110. Gross Requirements (week 7) = Planned-Order Releases of 200 I * 1 = 200. POH3 = [POH2 + Planned-Order Receipts2 – Gross Requirements2] + Scheduled Receipts3 POH3 = [0 + 0 – 0] + 210 = 210. POH4 = [POH3 + Planned-Order Receipts3 – Gross Requirements3] + Scheduled Receipts4 POH4 = [210 + 0 – 160] + 0 = 50. POH5 = [POH4 + Planned-Order Receipts4 – Gross Requirements4] + Scheduled Receipts5 POH5 = [50 + 0 – 0] + 0 = 50. POH6 = [POH5 + Planned-Order Receipts5 – Gross Requirements5] + Scheduled Receipts6 POH6 = [50 + 200 – 110] + 0 = 140. POH8 = [POH7 + Planned-Order Receipts7 – Gross Requirements7] + Scheduled Receipts8 POH8 = [140 + 200 – 200] + 0 = 140.



12-37 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



Case 2 Given: Refer back to the previous update. It is now the start of week 4. Assume that all orders were released and received as planned in weeks 2 and 3. Notes: a. We will drop 2 weeks (weeks 2 & 3) from the material plans and add 2 weeks at the end of each plan. b. Any Planned-Order Releases from weeks 2 & 3 must now show up as Scheduled Receipts: Item I: Change Planned-Order Receipts of 160 in week 4 to Scheduled Receipts in week 4. Item N: Change Planned-Order Receipts of 800 in week 5 to Scheduled Receipts in week 5. Item V: Change Planned-Order Receipts of 200 in week 5 to Scheduled Receipts in week 5. c. Determine the on hand balances at the start of week 4: Determine the ending inventory for each item at the end of week 3. These will become the beginning inventory balances in week 4. Remember: Scheduled receipts increase inventory while gross requirements decrease inventory. Ending Inventory = Beginning Inventory + Scheduled Receipts – Gross Requirements Item E Ending Inventory



Week 2 0+0–0=0



Item I Ending Inventory Item N Ending Inventory Item V Ending Inventory



Week 3 0+0–0=0



Week 2 0+0–0=0



Week 3 0 + 40 – 0 = 40



Week 2 100 + 0 – 0 = 100



Week 3 100 + 800 – 640 = 260



Week 2 0+0–0=0



Week 3 0 + 210 – 160 = 50



E



M(3)



R(2)



I(2)



P



N(4)



V



12-38 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



Master Schedule for: E



Period



4



Quantity



E LT = 1 Lot size: Lot-for-Lot Gross requirements



5



6



100 Beg. Inv.



4



5



7



8



55 6



100



7



9



10



11



10



11



0



0



9



10



11



0



0



0



100 8



55



9 100



Scheduled receipts Projected on hand



0



Net requirements



100



55



0 100



Planned-order receipts



100



55



100



Planned-order releases I(2) LT = 1 Lot size: Lot-for-Lot Gross requirements



0



100 Beg. Inv.



4



0



0



55 5



200



Scheduled receipts Projected on hand



0



6



0



100 7



110



8 200



160 40



200



0



0



0



0



Net requirements



110



200



Planned-order receipts



110



200



Planned-order releases 110 200 Notes: POH5 = [POH4 + Planned-Order Receipts4 – Gross Requirements4] + Scheduled Receipts5 POH5 = [200 + 0 – 200] + 0 = 0.



12-39 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



N(4) LT = 2 Lot size: Multiples of 800



Beg. Inv.



4



5



Gross requirements



440



Scheduled receipts



800



Projected on hand



260



260



1060



6



7



8



9



10



11



620



620



620



620



800 620



620



Net requirements



180



Planned order receipts



800



Planned order releases 800 Notes: POH6 = [POH5 + Planned-Order Receipts5 – Gross Requirements5] + Scheduled Receipts6 POH6 = [1060 + 0 – 440] + 0 = 620. V LT = 2 Lot size: Multiples of 200 Gross requirements



Beg. Inv.



4



6



110



Scheduled receipts Projected on hand



5



7



8



9



10



11



140



140



140



140



200



200 50



50



250



140



140



Net requirements



60



Planned order receipts



200



Planned order releases 200 Notes: POH5 = [POH4 + Planned-Order Receipts4 – Gross Requirements4] + Scheduled Receipts5 POH5 = [50 + 0 – 0] + 200 = 250. POH6 = [POH5 + Planned-Order Receipts5 – Gross Requirements5] + Scheduled Receipts6 POH6 = [250 + 0 – 110] + 0 = 140.



12-40 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



12.



Given: 200 carts must be ready at the beginning of week 8. The product structure tree, assembly time chart, and inventory information are shown in the solutions below: a. Product structure tree: Golf Cart



Top



Supports(4)



Base



Cover



Motor



Body



Frame



Controls



Seats(2)



Wheels(4)



Assembly Time Chart Supports Top



b. Cover



Cart Motor Frame Body



Controls



Base



Wheels Seats



2



3



4



5



6



7 week



Start of week 2



Start of week 8



12-41 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



c. Develop a material requirements plan that will provide 200 golf carts by week 8 assuming lot-for-lot ordering. Master Schedule for: Golf Cart



Week



1



2



3



4



5



6



7



Quantity



Golf Cart LT = 1 Lot size: Lot-for-Lot Gross requirements



8 200



Beg. Inv.



1



2



3



4



5



6



7



8 200



Scheduled receipts Projected on hand



0



0



0



0



0



0



0



0



0



Net requirements



200



Planned-order receipts



200



Planned-order releases Top LT = 1 Lot size: Lot-for-Lot Gross requirements



200 Beg. Inv.



1



2



3



4



5



6



7



8



200



Scheduled receipts Projected on hand



40



40



40



40



40



40



40



40



Net requirements



160



Planned-order receipts



160



0



Planned-order releases 160 Notes: Gross Requirements (week 7) = Planned-Order Releases of 200 Golf Carts * 1 = 200. Supports(4) LT = 1 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



3



4



5



6



7



8



0



0



640



Scheduled receipts Projected on hand



200



200



200



200



200



200



200



Net requirements



440



Planned-order receipts



440



Planned-order releases 440 Notes: Gross Requirements (week 6) = Planned-Order Releases of 160 Tops * 4 = 640.



12-42 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



12. c. (continued) Cover LT = 1 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



3



4



5



6



7



8



0



0



7



8



160



Scheduled receipts Projected on hand



0



0



0



0



0



0



0



Net requirements



160



Planned-order receipts



160



Planned-order releases 160 Notes: Gross Requirements (week 6) = Planned-Order Releases of 160 Tops * 1 = 160. Base LT = 1 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



3



4



5



6



200



Scheduled receipts Projected on hand



20



20



20



20



20



20



20



20



Net requirements



180



Planned-order receipts



180



0



Planned-order releases 180 Notes: Gross Requirements (week 7) = Planned-Order Releases of 200 Golf Carts * 1 = 200. Motor LT = 2 Lot size: Lot-for-Lot



Beg. Inv.



1



2



3



4



5



Gross requirements



6



7



8



120



120



180



Scheduled receipts Projected on hand



300



300



300



300



300



300



300



Net requirements Planned-order receipts Planned-order releases Notes: Gross Requirements (week 6) = Planned-Order Releases of 180 Bases * 1 = 180.



12-43 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



12. c. (Continued) Body LT = 3 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



3



4



5



6



7



8



0



0



7



8



0



0



180



Scheduled receipts Projected on hand



50



50



50



50



50



50



50



Net requirements



130



Planned-order receipts



130



Planned-order releases 130 Notes: Gross Requirements (week 6) = Planned-Order Releases of 180 Bases * 1 = 180. Seats(2) LT = 2 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



3



4



5



6 360



Scheduled receipts Projected on hand



120



120



120



120



120



120



120



Net requirements



240



Planned-order receipts



240



Planned-order releases 240 Notes: Gross Requirements (week 6) = Planned-Order Releases of 180 Bases * 2 = 360. Frame LT = 1 Lot size: Lot-for-Lot



Beg. Inv.



1



2



Gross requirements



3



4



5



6



7



8



0



0



0



0



0



130



Scheduled receipts Projected on hand



35



35



35



35



Net requirements



95



Planned-order receipts



95



Planned-order releases 95 Notes: Gross Requirements (week 3) = Planned-Order Releases of 130 Body * 1 = 130.



12-44 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



12. c. (Continued) Controls LT = 1 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



3



4



5



6



7



8



0



0



0



0



0



130



Scheduled receipts Projected on hand



0



0



0



0



Net requirements



130



Planned-order receipts



130



Planned-order releases 130 Notes: Gross Requirements (week 3) = Planned-Order Releases of 130 Body * 1 = 130. Wheel Assemblies(4) LT = 1 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



3



4



5



6



7



8



0



0



0



0



0



520



Scheduled receipts Projected on hand



240



240



240



240



Net requirements



280



Planned-order receipts



280



Planned-order releases 280 Notes: Gross Requirements (week 3) = Planned-Order Releases of 130 Body * 4 = 520.



12-45 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



13.



Given: Refer back to Problem 12. The revised plan calls for 100 golf carts to be available at the start of week 6, 100 at the start of week 8, and 100 at the start of week 9. a. Develop a master schedule for this revised plan.



Master Schedule for: Golf Carts



Week



1



2



3



4



5



Quantity



6



7



100



8



9



100



100



8



9



100



100



0



0



b. Determine the timing and quantities for orders for tops and bases. Golf Cart LT = 1 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



3



4



5



6



7



100



Scheduled receipts Projected on hand



0



0



0



0



0



0



0



0



Net requirements



100



100



100



Planned-order receipts



100



100



100



Planned-order releases Top LT = 1 Lot size: Lot-for-Lot Gross requirements



100 Beg. Inv. Inv.



1



40



40



2



3



4



5



6



100



100



100



7



8



100



100



0



0



9



Scheduled receipts Projected on hand



40



40



40



40



0



Net requirements



60



100



100



Planned-order receipts



60



100



100



Planned-order releases Base LT = 1 Lot size: Lot-for-Lot



60 Beg. Inv.



1



2



3



4



Gross requirements



5



100



100



6



7



8



100



100



0



0



100



0



9



Scheduled receipts Projected on hand



20



20



20



20



20



20



0



Net requirements



80



100



100



Planned-order receipts



80



100



100



Planned-order releases



80



100



0



100



12-46 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



c. The firm’s capacity limits the assembly of bases to 50 units per week. Revise the plan, but still meet delivery dates. Note: We should try to minimize inventory also. The key will be to move Planned-Order Receipts and Planned-Order Releases earlier in the plan. Consider the plan for Bases in b above: Planned Order-Receipts (week 8) = 100 Planned Order-Receipts (week 7) = 100 Planned Order-Receipts (week 5) = 80 Given the capacity limit of 50 per week, we could divide the Planned-Order Receipts as follows: Week 8 (100): Week 7 (50) & Week 8 (50) Week 7 (100): Week 5 (50) & Week 6 (50) Week 5 (80): Week 3 (30) & Week 4 (50) Note: Because some of these Planned-Order Receipts need to be planned earlier than they should be, the planner will have to lock in the timing and quantity of these Planned-Order Receipts by designating them as Firm Planned Orders so that the MRP system does not reschedule them automatically. Master Schedule for: Golf Carts



Week



1



2



3



4



5



Quantity



Golf Cart LT = 1 Lot size: Lot-for-Lot Gross requirements



6



7



100 Beg. Inv.



1



2



3



4



5



6



7



100



8



9



100



100



8



9



100



100



0



0



Scheduled receipts Projected on hand



0



0



0



0



0



0



0



0



Net requirements



100



100



100



Planned-order receipts



100



100



100



Planned-order releases Base LT = 1 Lot size: Lot-for-Lot



100 Beg. Inv.



1



2



3



4



Gross requirements



5



6



100



100



100



7



8



100



100



9



Scheduled receipts Projected on hand



20



20



20



20



50



100



50



100



50



30



50



50



50



50



50



50



50



50



50



50



0



Net requirements Planned-order receipts Planned-order releases



30



12-47 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



14.



Given: a. Draw a product structure tree (tree diagram) for the scissors. Lead times are 1 day for each component and final scissor assembly, but 2 days for the plastic grips. 600 scissors are needed on Day 6. On hand inventory: Straight blades = 200, bent blades = 350, and top blade assembly = 40.



Scissors



Screw



Bottom Blade Assembly



Straight Blade



Top Blade Assembly



Straight Plastic Grip



Bent Blade



Bent Plastic Grip



b. Material plans: Master Schedule for: Scissors



Week



Beg. Inv.



1



2



3



4



5



Quantity



Scissors LT = 1 Lot size: Lot-for-Lot Gross requirements



6



7



8



7



8



0



0



6



7



8



0



0



0



600 Beg. Inv.



1



2



3



4



5



6 600



Scheduled receipts Projected on hand



0



0



0



0



0



0



0



Net requirements



600



Planned-order receipts



600



Planned-order releases



Bottom Blade Assembly LT = 1 Lot size: Lot-for-Lot Gross requirements



600



Beg. Inv.



1



2



3



4



5 600



Scheduled receipts Projected on hand



0



0



0



0



0



0



Net requirements



600



Planned-order receipts



600



Planned-order releases



600



Notes: Gross Requirements (week 5) = Planned-Order Releases of 600 Scissors * 1 = 600. 12-48 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



Top Blade Assembly LT = 1 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



3



4



5



6



7



8



0



0



0



600



Scheduled receipts Projected on hand



40



40



40



40



40



40



Net requirements



560



Planned-order receipts



560



Planned-order releases



560



Notes: Gross Requirements (week 5) = Planned-Order Releases of 600 Scissors * 1 = 600. Screw LT = 1 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



3



4



5



6



7



8



0



0



0



600



Scheduled receipts Projected on hand



0



0



0



0



0



0



Net requirements



600



Planned-order receipts



600



Planned-order releases 600 Notes: Gross Requirements (week 5) = Planned-Order Releases of 600 Scissors * 1 = 600. Straight Blade LT = 1 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



3



4



5



6



7



8



0



0



0



0



600



Scheduled receipts Projected on hand



200



200



200



200



200



Net requirements



400



Planned-order receipts



400



Planned-order releases



400



Notes: Gross Requirements (week 4) = Planned-Order Releases of 600 Bottom Blade Assembly * 1 = 600.



12-49 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



Straight Plastic Grip LT = 2 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



3



4



5



6



7



8



0



0



0



0



600



Scheduled receipts Projected on hand



0



0



0



0



0



Net requirements



600



Planned-order receipts



600



Planned-order releases



600



Notes: Gross Requirements (week 4) = Planned-Order Releases of 600 Bottom Blade Assembly * 1 = 600. Bent Blade LT = 1 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



3



4



5



6



7



8



0



0



0



0



560



Scheduled receipts Projected on hand



350



350



350



350



350



Net requirements



210



Planned-order receipts



210



Planned-order releases



210



Notes: Gross Requirements (week 4) = Planned-Order Releases of 560 Top Blade Assembly * 1 = 560. Bent Plastic Grip LT = 2 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



2



3



4



5



6



7



8



0



0



0



0



560



Scheduled receipts Projected on hand



0



0



0



0



0



Net requirements



560



Planned-order receipts



560



Planned-order releases 560 Notes: Gross Requirements (week 4) = Planned-Order Releases of 560 Top Blade Assembly * 1 = 560.



12-50 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



15.



Given: A company has the following demand for its products, labor and machine standards, and available capacities: Week number Material (tons)



1 40



2 80



Production standard (hours per ton) Weekly production capacity (hours)



3 60



4 70



Labor 4



Machine 3



300



200



a. Determine capacity utilization for labor and machine for each of the four weeks: Capacity Requirements (Load) = Units * Standard Labor and/or Machine Requirements per Unit



Week number Material (tons) Labor standard Labor requirements (load) Machine standard Machine requirements (load)



Week number Labor requirements Labor capacity Labor utilization Machine requirements Machine capacity Machine utilization



Labor and Machine Capacity Requirements (Load) 1 2 3 40 80 60 4 4 4



4 70 4



40 * 4 = 160



80 * 4 = 320



60 * 4 = 240



70 * 4 = 280



3



3



3



3



40 * 3 = 120



80 * 3 = 240



60 * 3 = 180



70 * 3 = 210



Capacity Utilization (round % to two decimals) 1 2 3 160 320 240



4 280



300 160/300 * 100 = 53.33% 120



300 320/300 * 100 = 106.67% 240



300 240/300 * 100 = 80.00% 180



300 280/300 * 100 = 93.33% 210



200 120/200 * 100 = 60.00%



200 240/200 * 100 = 120.00%



200 180/200 * 100 = 90.00%



200 210/200 * 100 = 105.00%



b. Capacity utilization exceeds 100% for both labor and machine in week 2, and for machine in week 4. Production could be shifted to earlier or later weeks in which capacity is underutilized. Shifting to an earlier week would result in added carrying costs; shifting to later weeks would mean backorder costs. Another option could be to work overtime. Labor cost would increase due to overtime premium, a probable decrease in productivity, and a possible increase in accidents. 12-51 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



16.



Given: A company produces 2 products that go through a 3-day sequence of fabrication, assembly, and packaging. Each step requires 1 day for a lot to be processed and moved to the next department. Processing requirements for the departments (hours per unit) are:



Product A B



FABRICATION Labor Machine 2 1 1 1



ASSEMBLY Labor Machine 1.5 1 1 1



PACKAGING Labor Machine 1 .5 1.5 .5



Department capacities are all 700 hours of labor and 500 hours of machine time, except Friday, when capacities are 200 hours for both labor and machine time. The following production schedule is for next week: Product A B



Mon 200 300



Tue 400 200



Wed 100 200



Thu 300 200



Fri 100 200



a. Determine the labor and machine capacity requirements for each product and the total load at each department for each day. For example, the 200 units of Product A & 300 units of Product B will be processed at Fabrication on Monday, Assembly on Tuesday, and Packaging on Wednesday. Monday Fabrication Labor Load = (200 A * 2 = 400) + (300 B * 1 = 300) = 700. Monday Fabrication Machine Load = (200 A * 1 = 200) + (300 B * 1 = 300) = 500. Tuesday Assembly Labor Load = (200 A * 1.5 = 300) + (300 B * 1 = 300) = 600. Tuesday Assembly Machine Load = (200 A * 1 = 200) + (300 B * 1 = 300) = 500. Wednesday Packaging Labor Load = (200 A * 1 = 200) + (300 B * 1.5 = 450) = 650. Wednesday Packaging Machine Load = (200 A * .5 = 100) + (300 B * .5 = 150) = 250.



12-52 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



Day Product



Fabrication Labor Machine



Assembly Labor Machine



Packaging Labor Machine



Mon



A B Load Capacity



400 300 700 700



200 300 500 500



Tue



A B Load Capacity



800 200 1000 700



400 200 600 500



300 300 600 700



200 300 500 500



Wed



A B Load Capacity



200 200 400 700



100 200 300 500



600 200 800 700



400 200 600 500



200 450 650 700



100 150 250 500



Thu



A B Load Capacity



600 200 800 700



300 200 500 500



150 200 350 700



100 200 300 500



400 300 700 700



200 100 300 500



Fri



A B Load Capacity



200 200 400 200



100 200 300 200



450 200 650 200



300 200 500 200



100 300 400 200



50 100 150 200



b. Evaluate the loading for the first 3 days of the week: Monday: Fabrication: Load = capacity for both labor and machine. Tuesday: Fabrication: Labor load is over capacity by 300 hours. Machine load is over capacity by 100 hours. Assembly: Labor load is under capacity by 100 hours. Machine load = capacity. Wednesday: Fabrication: Labor load is under capacity by 300 hours. Machine load is under capacity by 200 hours. Assembly: Labor load is over capacity by 100 hours. Machine load is over capacity by 100 hours. Packaging: Labor load is under capacity by 50 hours. Machine load is under capacity by 250 hours. The schedule does not appear to be feasible. Fabrication is overloaded for labor and machine on Tuesday and underloaded for labor and machine on Wednesday. In addition, Assembly is overloaded for labor and machine on Wednesday. One solution could be to shift some of the 400 A & 200 B scheduled in Fabrication on Tuesday to Wednesday. For example, we could shift 150 A in Fabrication from Tuesday to 12-53 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



Wednesday. We now would schedule 250 A on Tuesday (400-150) and 250 A on Wednesday (100+150). The new load values are highlighted in bold in the table below:



Day Product



Fabrication Labor Machine



Assembly Labor Machine



Packaging Labor Machine



Mon



A B Load Capacity



400 300 700 700



200 300 500 500



Tue



A B Load Capacity



500 200 700 700



250 200 450 500



300 300 600 700



200 300 500 500



Wed



A B Load Capacity



500 200 700 700



250 200 450 500



375 200 575 700



250 200 450 500



200 450 650 700



100 150 250 500



Thu



A B Load Capacity



600 200 800 700



300 200 500 500



375 200 575 700



250 200 450 500



250 300 550 700



125 100 225 500



Fri



A B Load Capacity



200 200 400 200



100 200 300 200



450 200 650 200



300 200 500 200



250 300 550 200



125 100 225 200



12-54 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



17.



Given: The MRP department’s computer died just as it spit out the following information: Planned-Order Releases for Item J27 = 640 units in week 2. We have the following product structure tree and inventory information shown below: 565



X43



Y36(2)



J27(4)



N78



X43



Part Number 565 X43



On Hand 0 60



N78 Y36 J27



0 200 0



Lot Size Lot-for-lot Multiples of 120 Lot-for-lot Lot-for-lot Lot-for-lot



Lead Time 1 week 1 week 2 weeks 1 week 2 weeks



Step 1: Look at which items are linked together by the Planned-Order Releases for J27: J27, Y36, and 565. Step 2: Work from the bottom to the top of the product structure tree. Start with J27 to determine its Planned-Order Receipts, Net Requirements, and Gross Requirements. a. We know that J27 has a Planned-Order Release = 640 in week 2. The lead time for J27 = 2 weeks. This means that the Planned-Order Receipts = 640 in week 4 (2 weeks later). The lot size for J27 = lot-for-lot. This means that the Net Requirements = Planned-Order Receipts in week 4 = 640. The on hand balance for J27 = 0. This means that the Gross Requirements in week 4 = Net Requirements + On Hand = 640 + 0 = 640. b. If the Gross Requirements for J27 = 640 in week 4, then the Planned-Order Releases for Y36 = 160 (640 / 4) in week 4. The lead time for Y36 = 1 week. This means that the Planned-Order Receipts = 160 in week 5 (1 week later). The lot size for Y36 is lot-for-lot. This means that the Net Requirements = Planned-Order Receipts in week 5 = 160. The on hand balance for Y36 = 200. This means that the Gross Requirements in week 5 = Net Requirements + On Hand = 160 + 200 = 360.



12-55 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



c. If the Gross Requirements for Y36 = 360 in week 5, the Planned-Order Releases for 565 = 180 (360 / 2) in week 5. The lead time for 565 = 1 week. This means that the Planned-Order Receipts = 180 in week 6 (1 week later). The lot size for 565 is lot-for-lot. This means that the Net Requirements = Planned-Order Receipts in week 6 = 180. The on hand balance for 565 = 0. This means that the Gross Requirements in week 6 = Net Requirements + On Hand = 180 + 0 = 180. Conclusion: There should be a quantity of 180 listed in week 6 of the master schedule for Item 565. Below are the MRP tables verifying the proof discussed above: Master Schedule for: 565



Week



1



2



3



4



5



7



8



7



8



0



0



6



7



8



0



0



0



5



6



7



8



0



0



0



0



Quantity



565 LT = 1 Lot size: Lot-for-Lot



6 180



Beg. Inv.



1



2



3



4



5



Gross requirements



6 180



Scheduled receipts Projected on hand



0



0



0



0



0



0



0



Net requirements



180



Planned-order receipts



180



Planned-order releases Y36(2) LT = 1 Lot size: Lot-for-Lot



180 Beg. Inv.



1



2



3



4



Gross requirements



5 360



Scheduled receipts Projected on hand



200



200



200



200



200



200



Net requirements



160



Planned-order receipts



160



Planned-order releases J27(4) LT = 2 Lot size: Lot-for-Lot Gross requirements



160 Beg. Inv.



1



2



3



4 640



Scheduled receipts Projected on hand



0



0



0



0



0



Net requirements



640



Planned-order receipts



640



Planned-order releases



640



12-56 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



18.



Given: Develop a material requirements plan for component H. Use lot-for-lot ordering for all items. Lead times for the end item and each component (except B) = 1 week. The lead time for B = 3 weeks. On hand balances: B = 15 & E = 130. Scheduled Receipts for H = 50 in week 2. 60 units of A are needed at the start of week 8. We have the following product structure tree: A



C



B(2)



D(2)



E(2)



D(2)



H(3)



E(4)



K



H(3)



K



We will need material plans for A, B, C, E, & H. Master



Week



Schedule for: A



Quantity



A



LT = 1



Lot size: Lot-for-Lot



1



2



3



4



5



6



7



8 60



Beg. Inv.



1



2



3



4



5



6



7



Gross requirements



8 60



Scheduled receipts Projected on hand



0



0



0



0



0



0



0



0



0



Net requirements



60



Planned-order receipts



60



Planned-order releases



60



12-57 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



B(2)



LT = 3



Lot size: Lot-for-Lot



Beg. Inv.



1



2



3



4



5



6



Gross requirements



7



8



120



Scheduled receipts Projected on hand



15



15



15



15



15



15



15



15



Net requirements



105



Planned-order receipts



105



Planned-order releases C



LT = 1



Lot size: Lot-for-Lot



0



105



Beg. Inv.



1



2



3



4



5



6



Gross requirements



7



8



60



Scheduled receipts Projected on hand



0



0



0



0



0



0



0



0



Net requirements



60



Planned-order receipts



60



Planned-order releases E(2) & E(4)



LT = 1



Lot size: Lot-for-Lot



0



60



Beg. Inv.



1



2



3



Gross requirements



4



5



210



6



7



8



0



0



240



Scheduled receipts Projected on hand



130



130



130



130



130



0



0



Net requirements



80



240



Planned-order receipts



80



240



Planned-order releases 80 240 Notes: Gross Requirements (week 4) = Planned-Order Releases of 105 B * 2 = 210. Gross Requirements (week 6) = Planned-Order Releases of 60 C * 4 = 240.



12-58 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



H(3)



LT = 1



Lot size: Lot-for-Lot



Beg. Inv.



1



2



Gross requirements



4



240



Scheduled receipts Projected on hand



3



5



6



7



8



0



0



0



720



50 0



0



50



50



0



0



Net requirements



190



720



Planned-order receipts



190



720



Planned-order releases 190 720 Notes: Gross Requirements (week 3) = Planned-Order Releases of 80 E * 3 = 240. Gross Requirements (week 5) = Planned-Order Releases of 240 E * 3 = 720.



Case: Promotional Novelties Given: Promotional Novelties has received an order for 20,000 toy Tractor-Trailers to be ready at the beginning of week 8. The company can complete final assembly of the Tractor-Trailers at a rate of 10,000 a week. Tractors and Trailers are purchased and have a lead time = 3 weeks. The company has sufficient supply of Brackets on hand. Assembly time = 1 week for Tractors, Trailers, and Wheel Assembly. However, the Wheel Department can assemble a maximum of 100,000 Wheels a week. The manager plans to use the Wheel Department to full capacity, starting in week 2 of the schedule, and order additional Wheels from a supplier as needed. Wheels are ordered in sets (multiples) of 6,400, and the lead time from the supplier = 2 to 3 weeks. All items use lot-for-lot ordering except for the purchased Wheels (lot size = multiples of 6,400). Comments on the product structure tree shown in the text: The Wheel Assembly of the Tractor differs from the Wheel Assembly of the Trailer. The Body of the Tractor differs from the Body of the Trailer. The Tractor and the Trailer use the same Wheel. We will develop material plans for Tractor-Trailer, Tractor, Trailer, Tractor Wheel Assembly, Trailer Wheel Assembly, & Wheels. If the order of 20,000 tractor-trailers is due at the start of week 8 and final assembly is limited to 10,000 per week, then we must list 10,000 in week 7 and 10,000 in week 8 of the master schedule.



12-59 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



Master



Week



Schedule



Quantity



1



2



3



4



5



6



7



8



10,000



10,000



7



8



10,000



10,000



0



0



Net requirements



10,000



10,000



Planned-order receipts



10,000



10,000



Tractor-Trailer LT = 1 Lot size: Lot-for-Lot



Beg. Inv.



1



2



3



4



5



6



Gross requirements Scheduled receipts Projected on hand



0



0



0



0



0



0



Planned-order releases



0



10,000



10,000



6



7



10,000



10,000



0



0



Net requirements



10,000



10,000



Planned-order receipts



10,000



10,000



Tractor



LT = 1



Lot size: Lot-for-Lot



Beg. Inv.



1



2



3



4



5



Gross requirements



8



Scheduled receipts Projected on hand



0



0



0



0



0



Planned-order releases



0



10,000



10,000



5



6



7



10,000



10,000



0



0



Net requirements



10,000



10,000



Planned-order receipts



10,000



10,000



Trailer



LT = 1



Lot size: Lot-for-Lot



Beg. Inv.



1



2



3



4



Gross requirements



0



8



Scheduled receipts Projected on hand



0



0



0



0



Planned-order releases



0



0



10,000



0



10,000



12-60 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



Tractor Wheel Assembly LT = 1



Beg. Inv.



5



6



10,000



10,000



0



0



Net requirements



10,000



10,000



Planned-order receipts



10,000



10,000



Lot size: Lot-for-Lot



1



2



3



4



Gross requirements



7



8



0



0



7



8



0



0



Scheduled receipts Projected on hand



0



0



0



0



Planned-order releases



0



10,000



10,000



4



5



6



10,000



10,000



0



0



Net requirements



10,000



10,000



Planned-order receipts



10,000



10,000



Trailer Wheel Assembly LT = 1 Lot size: Lot-for-Lot



Beg. Inv.



1



2



3



Gross requirements Scheduled receipts Projected on hand



0



0



0



0



Planned-order releases



0



10,000



10,000



12-61 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



Wheels (6) & (12) LT = 1 Lot size: Lot-for-Lot



Beg. Inv.



1



2



3



Gross requirements



4



5



180,000



180,000



100,000



20,000



80,000



160,000



6



7



8



4,000



4,000



4,000



Scheduled receipts Projected on hand



0



0



0



0



Net requirements Planned-order receipts Planned-order releases



100,000 64,000*



100,000



100,000



100,000



100,000



100,000 64,000*



Notes: Gross Requirements (week 4) = Planned-Order Releases of (10,000 Tractor Wheel Assembly * 6) + (10,000 Trailer Wheel Assembly * 12) = 60,000 + 120,000 = 180,000. Gross Requirements (week 5) = Planned-Order Releases of (10,000 Tractor Wheel Assembly * 6) + (10,000 Trailer Wheel Assembly * 12) = 60,000 + 120,000 = 180,000. The Planned-Order Receipts in weeks 3, 4, & 5 would be entered as Firm Planned Orders locked in by the MRP planner so that the MRP system does not re-schedule these amounts automatically. Planned-Order Releases (week 2) = [Planned-Order Receipts (week 3) of 100,000] + [Planned-Order Receipts (week 5) of 64,000] = 100,000 + 64,000 = 164,000. 1.



The company will need a total of 360,000 Wheels. It will be able to produce only 300,000 during weeks 2, 3, & 4. The company will need to order at least 60,000 Wheels as indicated with the * in week 2. The company actually would have to purchase 10 sets of 6,400 Wheels per set = 64,000.



2.



The company will need the Wheels in week 5. If lead time will be 2-3 weeks, then assume that it will be 3 weeks, and order the Wheels from the supplier in week 2.



12-62 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



Case: DMD Enterprises Given: Marty wants to assemble 15 Arrows and 10 Darts each week to have them ready at the start of weeks 4 through 8. The product structure trees are given in the text along with inventory information on lead times, on hand amounts, and lot sizing rules. Scheduled Receipts: Arrows = 20 in week 1 & W = 18 in week 1. Darts = 20 in week 2 & F = 15 in week 2. Develop the material plans for all items. Master Schedule for: Arrows



Week



Master Schedule for: Darts



Week



1



2



3



4



5



6



7



8



15



15



15



15



15



4



5



6



7



8



10



10



10



10



10



4



5



6



7



8



15



15



15



15



15



25



10



0



0



0



Net requirements



5



15



15



15



Planned-order receipts



5



15



15



15



Quantity 1



2



3



Quantity



Arrows LT = 2 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



Scheduled receipts Projected on hand



1



2



3



20 5



25



25



25



5



15



15



15



3



4



5



6



7



8



10



10



10



10



10



22



12



2



0



0



Net requirements



8



10



10



Planned-order receipts



8



10



10



7



8



5



5



Planned-order releases Darts LT = 2 Lot size: Lot-for-Lot Gross requirements



Beg. Inv.



1



Scheduled receipts Projected on hand



2



20 2



2



22



22



8



10



10



3



4



5



6



5



15



15



15



5



0



10



20



Net requirements



15



5



Planned-order receipts



25



25



Planned-order releases X LT = 1 Lot size: Multiples of 25 Gross requirements



Beg. Inv.



1



2



Scheduled receipts Projected on hand



5



5



5



25



Planned-order releases



25



12-63 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Chapter 12 - MRP and ERP



Case: DMD Enterprises (continued) M LT = 1 Lot size: Lot-for-lot Gross requirements



Beg. Inv.



3



4



5



6



5



15



15



15



0



0



0



0



Net requirements



5



15



15



15



Planned-order receipts



5



15



15



15



5



15



15



15



2



3



4



5



6



16



20



20



3



0



0



Net requirements



13



20



20



Planned-order receipts



13



20



20



Scheduled receipts Projected on hand



0



1



0



Planned-order releases K(2) LT = 1 Lot size: Lot-for-lot



Beg. Inv.



1



2



0



Gross requirements Scheduled receipts Projected on hand



3



3



3



3



7



8



0



0



7



8



0



0



7



8



7



7



Planned-order releases



13 20 20 Gross Requirements (week 4) = Planned-Order Releases of 8 Darts * 2 = 16. Gross Requirements (week 5) = Planned-Order Releases of 10 Darts * 2 = 20. Gross Requirements (week 6) = Planned-Order Releases of 10 Darts * 2 = 20. F&F LT = 1 Lot size: Multiples of 30 Gross requirements



Beg. Inv.



3



4



5



6



25



33



10



10



25



0



27



17



Net requirements



33



0



0



Planned-order receipts



60



Scheduled receipts Projected on hand



1



2



15 10



10



25



Planned-order releases



60



Notes: Gross Requirements (week 3) = Planned-Order Releases of 25 X * 1 = 25. Gross Requirements (week 4) = Planned-Order Releases of (8 Darts * 1) + (25 X * 1) = 8 + 25 = 33. Gross Requirements (week 5) = Planned-Order Releases of 10 Darts * 1 = 10. Gross Requirements (week 6) = Planned-Order Releases of 10 Darts * 1 = 10.



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Chapter 12 - MRP and ERP



W & W(2) LT* = 2 or 3 Lot size: Multiples of 12 Gross requirements



Beg. Inv.



3



4



5



6



31



55



55



15



20



1



6



11



Net requirements



11



49



4



Planned-order receipts



12



54 60



60



12



Scheduled receipts Projected on hand



1



2



7



8



8



8



18 2



Planned-order releases



20



72



20



60



12



Notes: Gross Requirements (week 3) = Planned-Order Releases of (5 Arrows *1) + (13 K * 2) = 5 + 26 = 31. Gross Requirements (week 4) = Planned-Order Releases of (15 Arrows * 1) + (20 K * 2) = 15 + 40 = 55. Gross Requirements (week 5) = Planned-Order Releases of (15 Arrows * 1) + (20 K * 2) = 15 + 40 = 55. Gross Requirements (week 6) = Planned-Order Releases of 15 Arrows * 1 = 15. *Lead time = 2 weeks for orders < 36 & 3 weeks for orders ≥ 36. Planned-Order Releases (week 1) = [Planned-Order Receipts (week 3) = 12] + [Planned-Order Receipts (week 4) = 60] = 72. Q LT = 1 Lot size: Multiples of 30 Gross requirements



Beg. Inv.



3



4



5



13



20



20



15



2



12



Net requirements



18



8



Planned-order receipts



30



30



Scheduled receipts Projected on hand



15



1



15



2



15



6



7



8



22



22



22



Planned-order releases



30 30 Gross Requirements (week 3) = Planned-Order Releases of 13 K * 1 = 13. Gross Requirements (week 4) = Planned-Order Releases of 20 K * 1 = 20. Gross Requirements (week 5) = Planned-Order Releases of 20 K * 1 = 20.



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Chapter 12 - MRP and ERP



Operations Tour: Stickley Furniture 1.



Batch processing is used with typical lot sizes of 25 to 60 pieces of different types of furniture, such as tables, chairs, desks, dressers, etc. Repetitive processing is used at sawing, drilling, finishing, etc. Job shop processing is used for expensive one-of-a-kind special orders that may be received.



2.



Each job is accompanied by a set of bar codes that identifies the job and the operation. As each operation is completed, the operator removes a bar code sticker and delivers it to the scheduling office, where it is scanned into a computer, thereby enabling production control to keep track of progress on a job, and to know its location in the shop.



3.



The information needed to plan, schedule, and process the order for 40 mission oak dining room sets includes: a. Number of finished units presently in inventory b. Type of wood c. Type of furniture d. Style of furniture e. Number of finished products needed f.



List of component parts for each finished product



g. Operations required for each component part h. Inventory for each component part i.



Sequence of operations for each component



j.



Sequence of operations for each finished product



k. Orders already in progress or scheduled to precede this order l.



Unutilized equipment and labor



m. Processing times for each component and total processing time for the finished product 4.



One benefit would be the stability and improved morale brought about by maintaining a constant size workforce. A problem could be the buildup of inventories during certain quarters of the year.



5.



Because there is a dependent demand situation for all of the components that go into the finished products, the installation of an MRP system might be of great help to this company in meeting its delivery dates and in keeping inventory costs down.



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