Chapter

15

Resource Planning

DISCUSSION QUESTIONS 1. The purpose of this exercise is to get the students to think about the usefulness of ERP for each of their major areas of interest. Because groups consist of different functional area representatives, the discussion is intended to emphasize the cross-functional needs that are satisfied with an information system such as ERP. Some responses to this exercise include: Marketinginformation about the availability of finished products that can be promised for delivery; finished goods inventory performance (service levels, stockouts). Financeshort-term financing needs for production plans, developed from the order releases and projected inventory levels. Accountingbilling invoices for products shipped to customers; payments to suppliers of raw materials and purchased components, developed from the schedule of orders actually received. Operationsthe schedule of order releases to support the master schedule; estimates of capacity requirements at critical work centers. 2. Some responses from each functional area could include: Marketing: The available-to-promise quantities because they determine when orders can be promised to customers, the history of orders accepted for each product by time period because this information can be useful in projecting future demand patterns. Finance: The projected MPS quantities and inventory levels because they will indicate cash needs. Operations: The MPS start quantities because they indicate when production of products must begin to meet customer promises and because they provide the basis for estimating capacity needs at critical workstations. 3. A master flight schedule specifies the arrival and departure times for all the flights an airline must produce to meet customer demands. Here, the lead time is the time between departure and arrival, which is similar to the lead time in producing a quantity of a product. The passenger size of the aircraft is analogous to a production quantity, and the available-to-promise quantity in manufacturing bears similarity to the seats available on a given flight. In general, the flight schedule can be used to estimate the needs for resources such as pilots, flight attendants, airport slots, and aircraft.

Resource Planning

CHAPTER 15

431

4. The principles of MRP can be used for UPS by identifying bills of resources for resources such as employees, trucks, planes, and equipment. Forecasts of delivery requirements and the BORs can be used to estimate resource needs and project the loads on critical sorting operations. PROBLEMS 1. Bill of materials, Fig. 15.26 a. Item I has only one parent (E). However, item E has two parents (B and C). b. Item A has 10 unique components (B, C, D, E, F, G, H, I, J, and K). c. Item A has five purchased items (I, F, G, H, and K). These are the items without components. d. Item A has five intermediate items (B, C, D, E, and J). These items have both parents and components. e. The longest path is IECA at 11 weeks. 2. Item A. The bill of materials for item A is shown following.
A

B(2)

C(2)

D(2)

C(2)

E(1)

F(2)

3. Lead time is determined by the longest path, CBA, at 13 weeks. 4. The bill of materials for item A with lead times is shown following. a. Lead time is determined by the longest path G-E-B-A = 12 weeks. b. If purchased items D, F, G, and H are already in inventory, the lead time is reduced to: ABE = 8 weeks. c. Item G with the longest lead time.

432

PART 3

Managing Value Chains

A LT = 1 B(1) LT = 2 C(1) LT = 2

D(1) E(1) F(1) H(1) LT = 6 LT = 5 LT = 6 LT = 3 G(1) LT = 4 H(1) LT = 3

5. Refer to Figure 15.21 and Solved Problem 1.

FIGURE 15.21

A LT = 1 B(3) LT = 2 C(1) LT = 3

D(1) E(2) F(1) D(1) LT = 3 LT = 6 LT = 1 LT = 3 G(1) LT = 3

Material requirement to produce 5 units of end-item A: ( 5 A 3B per A ) = 15B 2 B on hand = 13B

( 5 A 1C per A) = 5C

Material requirement to produce 13B: (13B 1D per B ) = 13D

(13B 2 E per B ) = 26E

Material requirement to produce 5C:

( 5C 1D per C ) = 5D ( 5C 1F per C ) = 5F 1F
on hand = 4F

Resource Planning

CHAPTER 15

433

Material requirement to produce 4F: ( 4 F 1G per F ) = 4G 3G on hand = 1G Purchased material requirements net of on-hand inventory: 13 + 5 = 18D , 26E, and 1G. 6. MPS record in Fig. 15.28. The following table is from the Master Production Scheduling Solver in OM Explorer. The ATP row is not required for this problem.
Solver Master Production Scheduling Enter data in yellow shaded areas.
Lot Size Lead Time Quantity on Hand Forecast Customer Orders (Booked) Projected On-Hand Inventory MPS Quantity MPS start Available-to-Promise Inv (ATP) 60 20 20 60 1 35 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

20 18 28 28 23 30 33 38 15 17 9 14 9 7 8 35 57 60 60 60 60 51 53 60

15 57 29 60

1 38 60 60

Override Formulas

Restore Formulas

7. MPS record in Fig. 15.29

Lot Size: 100 Quantity on Hand: 75 Forecast Customer orders (booked) Projected on-hand inventory MPS quantity MPS start 1 65 40 10 100 January 2 3 65 65 10 85 45 60 100 100 100 4 45 0 15 100 5 50 35 65 100 100 February 6 7 50 50 70 0 95 45 100 100 8 50 0 95 100

434

PART 3

Managing Value Chains

8. An end-item
Lot Size: 100 Quantity on Hand: 80 Forecast Customer orders (booked) Projected on-hand inventory MPS quantity MPS start 1 30 22 50 100 2 20 30 20 3 35 15 85 100 4 50 9 35 100 Week 5 6 25 25 0 0 10 85 100 7 0 5 80 8 40 3 40 100 9 0 7 33 10 50 0 83 100

9. Ball Bearings Prospective MPS a.

Solver Master Production Scheduling Enter data in yellow shaded areas.
Lot Size Lead Time Quantity on Hand Forecast Customer Orders (Booked) Projected On-Hand Inventory MPS Quantity MPS start Available-to-Promise Inv (ATP) 500 1 400 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

550 300 400 450 300 350 200 300 450 400 300 350 250 250 200 150 100 100 100 100 350 500 100 150 350 500 500 500 300 500 50 150 500 500

500 500 500 500 500 500 250 250 250 150 300 400 400

Override Formulas

Restore Formulas

The first order for 500 (in week 4) should be accepted. Through week 4, on hand (400) plus three MPS quantities of 500 each = 1900. Of those, (300 + 350 + 250 + 250) = 1150 have been sold, leaving 750 available (250 after this commitment). b. The second order for 400 (in week 5) should be accepted. Through week 5, the 250 remaining after the first order plus one more MPS quantity of 500 = 750. Of those, 200 have been sold in the 5th week and 150 in the 6th week. Therefore, (250 + 500 200 150) = 400 are still available. There will be zero units remaining for sale even after accepting this order. c. The third order for 300 units (in week 1) should not be accepted. At that time, of the 400 on hand, plus 500 MPS quantity to arrive in the first week, a total of 300 plus 350 has been sold. Note that because no MPS is scheduled for the 2nd week,

Resource Planning

CHAPTER 15

435

the 350 ordered for the 2nd week must come from those on hand or those arriving in the 1st week. In total [(400 + 500) (300 + 350)] = 250 remaining, which will not cover the order for 300. d. The fourth order for 300 units (in week 7) should be accepted. After accepting the second order (part ii), zero units remain. In the 7th week 500 units arrive. Of those, demands of 100 in each of weeks 7 and 8 have been promised, leaving (500 200) = 300. This order of 300 units would reduce the quantity available to promise to zero units. 10. Morrison Electronics a. Prospective MPS
Quantity on Hand: 100 Forecast Customer orders (booked) Projected on-hand inventory MPS quantity MPS start 1 70 50 30 150 2 70 60 110 150 3 65 55 45 150 4 60 40 135 150 5 55 35 80 150 6 85 0 145 150 7 75 0 70 150 8 85 0 135 150

b. Revised forecast
Quantity on Hand: 100 Forecast Customer orders (booked) Projected on-hand inventory MPS quantity MPS start 1 70 50 30 150 2 70 60 110 150 3 75 55 35 150 4 70 40 115 150 5 70 35 45 150 6 100 0 95 150 7 100 0 5 150 8 110 0 35 150

Although the projected on-hand row indicates a negative balance, this difficulty will occur only if the actual orders meet the new forecast. If the new forecasts are solid, we should consider revising the master production schedule or shifting demand to avoid stockouts in week 7.

436

PART 3

Managing Value Chains

11. Completed MPS Record ITEM: 2" Pneumatic Control Valve LEAD TIME: 1 week
1 Forecast requirements Customer orders (booked) Projected on-hand inventory MPS quantity MPS start Available-to-promise (ATP) inventory 40 60 25 75 75 25 2 40 45 55 75

ORDER POLICY: 75 units QUANTITY ON HAND: 10 units

Week 3 40 30 15 75 30 4 40 35 50 75 5 30 10 20 75 65 6 30 5 65 75 7 50 5 15 75 75 8 50 0 40 75

Decisions on the arriving orders: Order 1 for 15 units in week 2 should be accepted because there are 25 units ATP from week 1. After this order is accepted 10 units remain in ATP from Week 1. Order 2 for 30 units in week 5 should be accepted because there are 30 units ATP from week 4. After this order is accepted 10 units still remain in ATP from week 1 and zero units from week 4. Order 3 for 25 units in week 3 should NOT be accepted because there are only 10 units remaining in ATP from week 1 and this is not adequate to fill the order completely. After this order is rejected 10 units continue to remain in ATP from week 1. Order 4 for 75 units in week 7 should be accepted because there will be 65 units in ATP from week 6, which, along with the 10 units that continue to remain in ATP from week 1, will be adequate to fill the order completely. 12. a. Completed MPS Record ITEM: Electric Hand Drill LEAD TIME: 1 week
1 Forecast requirements Customer orders (booked) Projected on-hand inventory MPS quantity MPS start Available-to-promise (ATP) inventory 15 20 10 60 10

ORDER POLICY: 60 units QUANTITY ON HAND: 30 units

Week 2 40 25 30 60 5 3 10 10 20 4 20 20 5 50 10 60 60 60 6 30 40 60 60

60

b. The shipping date would be week 2 because we will have 10 units from week 1 and 5 units from week 2 available-to-promise inventory to fill this order.

Resource Planning

CHAPTER 15

437

13. Completed MPS record ITEM: Product C LEAD TIME: 2 weeks

1 Forecast requirements Customer orders (booked) Projected on-hand inventory MPS quantity MPS start Available-to-promise (ATP) inventory 15 25 25 40 40 13 2 15 12 10 3 15 8 35 40 40 20 4 15 10 20

ORDER POLICY: 40 units QUANTITY ON HAND: 10 units

5 20 2 0 Week 6 7 20 3 20 40 40 37 20 0 0 8 20 0 20 40 40 40 9 15 0 5 10 15 0 30 40 40 11 15 0 15 12 15 0 0

14. Inventory record. The tables following were generated with the Single-Item MRP solver from OM Explorer. a. Fixed order quantity = 110

Inputs
Solver - Single-Item MRP
Enter data in yellow shaded areas. Periods Item Description
FOQ Rule

8 M405-X Table Top Assemby 1 90 110 40 60 60 85 110 110 110 110 85 5 5 70 110 90 110 2 Period (P) for POQ 3 85 4 5 80 Lot Size (FOQ) Lead Time Safety Stock 6 7 45 110 2 0 8 90

Gross Requirements Scheduled Receipts Projected On-Hand Inventory Planned Receipts Planned Order Releases

438

PART 3

Managing Value Chains

b. L4L

Inputs
Solver - Single-Item MRP
Enter data in yellow shaded areas. Periods Item Description
L4L Rule

8 M405-X Table Top Assemby 1 90 110 40 60 60 25 25 80 80 45 90 45 90 2 Period (P) for POQ 3 85 4 5 80 Lot Size (FOQ) Lead Time Safety Stock 6 7 45 2 0 8 90

Gross Requirements Scheduled Receipts Projected On-Hand Inventory Planned Receipts Planned Order Releases

c. POQ, P = 2

Inputs
Solver - Single-Item MRP
Enter data in yellow shaded areas. Periods Item Description
POQ Rule

8 M405-X Table Top Assemby 1 90 110 40 60 60 25 25 80 80 135 90 135 2 Period (P) for POQ 3 85 4 5 2 Lot Size (FOQ) Lead Time Safety Stock 6 7 80 45 2 0 8 90

Gross Requirements Scheduled Receipts Projected On-Hand Inventory Planned Receipts Planned Order Releases

15.

Completed inventory records a. FOQ of 150 units

Item: Rotor assembly 1 65 150 105 2 15 90 3 45 45 150 Week Gross requirements Scheduled receipts Projected on hand 20 Planned receipts Planned order releases Lot Size: 150 units Lead Time: 2 weeks 4 5 6 7 40 80 80 80 5 150 75 150 145 150 150 65 8 80 135 150

Resource Planning

CHAPTER 15

439

b. L4L
Item: Rotor assembly 1 65 150 105 2 15 90 3 45 45 75 Week Gross requirements Scheduled receipts Projected on hand 20 Planned receipts Planned order releases Lot Size: Lead Time: 4 5 6 40 80 80 5 80 75 80 0 80 80 L4L 2 weeks 7 80 0 80 8 80 0 80

c. POQ with P = 2
Item: Rotor assembly 1 65 150 105 2 15 90 3 45 45 155 Week Gross requirements Scheduled receipts Projected on hand 20 Planned receipts Planned order releases Lot Size: Lead Time: 4 5 6 40 80 80 5 80 155 160 0 POQ, P = 2 2 weeks 7 8 80 80 80 160 0

16. Completed inventory records a. FOQ of 50 units

Item: Drive shaft 1 35 80 55 50 2 25 30 3 15 15 50 Week Gross requirements Scheduled receipts Projected on hand 10 Planned receipts Planned order releases Lot Size: Lead Time: 4 5 6 20 40 40 45 50 50 5 50 15 50 50 units 3 weeks 7 50 15 50 8 50 15 50

b. L4L
Item: Drive shaft 1 35 80 55 5 2 25 30 40 3 15 15 40 Week Gross requirements Scheduled receipts Projected on hand 10 Planned receipts Planned order releases Lot Size: Lead Time: 4 5 6 20 40 40 0 5 50 0 40 50 0 40 L4L 3 weeks 7 50 0 50 8 50 0 50

440

PART 3

Managing Value Chains

c. POQ with P = 4
Item: Drive shaft 1 35 80 55 135 2 25 30 3 15 15 Week Gross requirements Scheduled receipts Projected on hand 10 Planned receipts Planned order releases Lot Size: Lead Time: 4 5 6 20 40 40 130 135 90 50 50 POQ, P = 4 3 weeks 7 8 50 50 0 0 50

17.

Rear wheel assembly, Fig. 15.35 a. Fixed order quantity = 300

Item: MQ09 Description: Rear wheel assembly Week 1 2 Gross requirements 205 Scheduled receipts 300 Projected on hand 100 195 195 Planned receipts Planned order releases 3 130 65 300 Lot Size: FOQ: 300 Lead Time: 1 week 4 5 6 7 8 85 70 60 95 280 300 280 210 150 55

b. Lot-for-lot
Item: MQ09 Description: Rear wheel assembly Week 1 2 Gross requirements 205 Scheduled receipts 300 Projected on hand 100 195 195 Planned receipts Planned order releases 3 130 65 20 Lot Size: Lead Time: 4 5 6 85 70 0 20 0 70 0 70 60 L4L 1 week 7 60 0 60 95 8 95 0 95

c. Period order quantity, P = 4

Item: MQ09 Description: Rear wheel assembly Week 1 2 Gross requirements 205 Scheduled receipts 300 Projected on hand 100 195 195 Planned receipts Planned order releases 3 130 65 150 Lot Size: POQ, P = 4 Lead Time: 1 week 4 5 6 7 8 85 70 60 95 130 150 130 60 0 95 0 95

Resource Planning

CHAPTER 15

441

18. Motor subassembly, Fig. 15.36 a. Fixed order quantity = 60

Item: GF4 Description: Motor assembly Week 1 2 Gross requirements 50 Scheduled receipts 60 Projected on hand 40 40 50 Planned receipts Planned order releases 3 4 35 15 5 Lot Size: FOQ: 60 Lead Time: 3 weeks 6 7 8 9 10 11 55 30 10 20 60 20 50 60 50 40 40 12 25 15

50 60

15 60

b. Lot-for-lot
Item: GF4 Description: Motor assembly Week 1 2 Gross requirements 50 Scheduled receipts 60 Projected on hand 40 40 50 Planned receipts Planned order releases 3 4 35 15 5 Lot Size: L4L Lead Time: 3 weeks 6 7 8 9 10 11 55 30 10 0 40 0 10 0 30 0 25 0 10 0 12 25 0 25

50 40

15 30

c. Period order quantity P = 60/15 = 4.

Item: GF4 Description: Motor assembly Week 1 2 Gross requirements 50 Scheduled receipts 60 Projected on hand 40 40 50 Planned receipts Planned order releases 3 4 35 15 5 Lot Size: POQ, P = 4 Lead Time: 3 weeks 6 7 8 9 10 11 12 55 30 10 25 30 70 30 35 0 0 25 35 25 0

50 70

15

442

PART 3

Managing Value Chains

19. BOM for product A shown in Fig. 15.37

FIGURE 15.37

C(1)

D(1)

B(2)

D(2)

C(1)

D(2)

Item: B Description: Week Gross requirements Scheduled receipts Projected on hand Planned receipts Planned order releases Item: C Description: Week Gross requirements Scheduled receipts Projected on hand Planned receipts Planned order releases

Lot Size: L4L Lead Time: 3 weeks 5 6 7 1000 0 0 1000

0 1000

3 1000 0 0 1000

Lot Size: Lead Time: 5 6 500 0 500 Lot Size: Lead Time: 5 6 1000 500 1200 2000 700 0 500

L4L 1 week 7

1000

Item: D Description: Week 1 Gross requirements Scheduled receipts 2000 Projected on hand 200 2200 Planned receipts Planned order releases

2 2000 200

FOQ: 2000 1 week 7 8

200

200 2000

The only action required is to delay the scheduled receipt of item D from week 1 to week 2.

Resource Planning

CHAPTER 15

443

20. MRP for Fig. 15.38

A B

C(2)

D(1)

D(1)

E(2)

F(2)

E(1)

F(2)

E(1)

F(1)

F(1)

F(1)

Data Category Lot-size rule Lead time Scheduled receipts On-hand inventory Item: C Description: Week Gross requirements Scheduled receipts Projected on hand Planned receipts Planned order releases Item: D Description: Week Gross requirements Scheduled receipts Projected on hand Planned receipts Planned order releases C FOQ = 220 3 weeks 280 (week 1) 25 D L4L 2 weeks None 0

Item E FOQ = 300 3 weeks 300 (week 3) 150 Lot Size: Lead Time: 5 6 200 135 155 220 F POQ (P = 2) 2 weeks None 600 FOQ = 220 3 weeks 7 8

1 280 305

3 170 135 220

25

305

135

155

155

3 85 0 85 180

Lot Size: Lead Time: 5 6 180 100 0 180 0 100

L4L 2 weeks 7

0 85

0 100

Item: E Description: Week Gross requirements Scheduled receipts Projected on hand 150 Planned receipts Planned order releases

1 85 65

65 300

3 180 300 185

4 100 85

Lot Size: Lead Time: 5 6 360 25 300 25

FOQ = 300 3 weeks 7 8

25

25

444

PART 3

Managing Value Chains

Item: F Description: Week Gross requirements Scheduled receipts Projected on hand 600 Planned receipts Planned order releases

1 170 430 430

2 300 130

3 360 200 430

4 200 0

Lot Size: Lead Time: 5 6

POQ = 2 2 weeks 7

Two action notices are identified: order 85 units of D and 430 units of F. 21. MRP for Fig. 15.39
A

B(2)

C(1)

D(2)

E(2)

F(1)

F(2)

E(1)

Item: B Description: Week Gross requirements Scheduled receipts Projected on hand Planned receipts Planned order releases Item: C Description: Week Gross requirements Scheduled receipts Projected on hand Planned receipts Planned order releases

50

50

2 100 50 0

Lot Size: Lead Time: 5 6 130 0 130 0 160 Lot Size: Lead Time: 5 6 85 20 40 125 20

L4L 2 weeks 7

8 160 0 160

0 130

1 20 50 30 80

2 70 40 80

3 20 20

4 20 0 125

POQ = 3 1 week 7 20 0 100

8 100 0 100

Resource Planning

CHAPTER 15

445

Item: D Description: Week Gross requirements Scheduled receipts Projected on hand 120 Planned receipts Planned order releases Item: E Description: Week Gross requirements Scheduled receipts Projected on hand Planned receipts Planned order releases Item: Description: F

2 100 20

Lot Size: Lead Time: 5 6 130 140 250 140 250 Lot Size: Lead Time: 5 6 570 160 190 600

FOQ = 250 2 weeks 7 8 160 140 230 250

120

20 250

20

3 510 160 600

FOQ = 600 2 weeks 7 8

70

70 600

70

160 600

190

190

Lot Size: Lead Time: 1 160 90 2 3 130 0 40 250 4 250 0 250 5 6 160 0 160 200

L4L 1 week 7 200 0 200 8

Week Gross requirements Scheduled receipts Projected on hand 250 Planned receipts Planned order releases

90 40

0 160

Action notices signal the need to place orders for 80 Cs and 600 Es. 22. MRP for products A, B, and C in Fig. 15.40
A
D(2) E(1) F(2) D(1)

B
E(2) F(2) D(2)

C
E(2) F(2)

446

PART 3

Managing Value Chains

Item: D Description: Week Gross requirements Scheduled receipts Projected on hand 150 Planned receipts Planned order releases Item: E Description: Week Gross requirements Scheduled receipts Projected on hand Planned receipts Planned order releases Item: Description: F

150

150 150

3 160 150 140 150

4 120 20

Lot Size: Lead Time: 5 6 125 110 45 150 85 150

FOQ = 150 3 weeks 7 8

85

85

2 120 120

3 80 40 80

4 120 0 80 250

Lot Size: Lead Time: 5 6 250 55 0 250 55 0 55

L4L 1 week 7

Week Gross requirements Scheduled receipts Projected on hand 100 Planned receipts Planned order releases

3 160 530 590 110

4 500 30

Lot Size: Lead Time: Safety Stock: 5 6 110 30 110 30

POQ, P = 2 2 weeks 30 units 7 8

100 590

100

30

30

Action notice: Order 590 of F 23. MRP for Fig. 15.41

D(2)

E(2)

C(2)

E(2)

D(1)

E(1)

D(1)

E(1)

E(1)

Resource Planning

CHAPTER 15

447

Product A B

2 125

3 80

Date 4 5 95

6 150 70

8 130

Data Category Lot-size rule Lead time Scheduled receipts On-hand inventory Item: C Description: Week Gross requirements Scheduled receipts Projected on hand Planned receipts Planned order releases

C L4L 3 weeks 200 (week 2) 85

Item D POQ (P = 3) 2 weeks None 625 Lot Size: Lead Time: 5 6 300 0 260 Lot Size: Lead Time: 5 6 260 370 0 260 630 0 300

E FOQ = 800 1 week 800 (week l) 350 L4L 3 weeks 7

85

85 155

2 250 200 35

4 190 0 155

8 260 0 260

35 300

Item: D Description: Week Gross requirements Scheduled receipts Projected on hand 625 Planned receipts Planned order releases Item: E Description: Week Gross requirements Scheduled receipts Projected on hand 350 Planned receipts Planned order releases

1 155 470 610

2 250 220

3 380 450 610

4 190 260 630

POQ(P = 3) 2 weeks 7 8 260 260

1 610 800 540

2 250 290

3 160 130 800

4 820 110 800

Lot Size: Lead Time: 5 6 440 110 800 470 800

FOQ = 800 1 week 7 8 260 470 210

Action notice: New orders should be opened for 155 Cs and 610 Ds.

448

PART 3

Managing Value Chains

24. MRP for Fig. 15.42

A

D(2)

C(3)

B(2)

E(1)

F(2)

D(1)

E(1)

F(2)

Data Category Lot-size rule Lead time Safety stock Scheduled receipts Beginning (on-hand) inventory Item: B Description: Week Gross requirements Scheduled receipts Projected on hand 125 Planned receipts Planned order releases Item: C Description: Week Gross requirements Scheduled receipts Projected on hand Planned receipts Planned order releases

B L4L 3 weeks 0 150 (week 2) 125

C FOQ = 700 3 weeks 0 450 (week 2) 0

Item D FOQ = 700 4 weeks 0 700 (week 1) 235

E L4L 2 weeks 50 None 750

F L4L 1 week 0 1400 (week 1) 0

125 205

2 240 150 35 240

4 240 0 205

Lot Size: Lead Time: 5 6 240 0 240 240 0

L4L 3 weeks 7

8 240 0 240

35

0 700

2 360 450 90

4 360 430 700

Lot Size: Lead Time: 5 6 360 70 700 70

FOQ = 700 3 weeks 7 8 360 70 410 700

90

Resource Planning

CHAPTER 15

449

Item: D Description: Week Gross requirements Scheduled receipts Projected on hand 235 Planned receipts Planned order releases Item: Description: E

1 205 700 730 700

2 480 250

4 240 10 700

Lot Size: Lead Time: 5 6 480 230 700 230

FOQ = 700 4 weeks 7 8 240 230 690 700

250

Week Gross requirements Scheduled receipts Projected on hand 750 Planned receipts Planned order releases Item: Description: F

1 700 50

4 700 50 700

Lot Size: Lead Time: Safety Stock: 5 6

L4L 2 weeks 50 units 7

50 700

50

50

50

50

50

Week Gross requirements Scheduled receipts Projected on hand Planned receipts Planned order releases

1 1400 1400 0 0

4 1400 0 0 1400

Lot Size: Lead Time: Safety Stock: 5 6

L4L 1 week 0 units 7

1400

Action notices are to issue orders for 700 Ds, 700 Cs, and 205 Bs. 25. MRP for Fig. 15.21
A LT = 1 B(3) LT = 2 C(1) LT = 3

D(1) E(2) F(1) D(1) LT = 3 LT = 6 LT = 1 LT = 3 G(1) LT = 3

450

PART 3

Managing Value Chains

Data Category Lot-size rule Lead time Safety stock Scheduled receipts On-hand inventory

B L4L 2 weeks 30 150 (wk 2) 30

C L4L 3 weeks 10 50 (wk 2) 20

Item D E POQ (P = 2) L4L 3 weeks 6 weeks 0 0 None 400 (wk 6) 60 400

F L4L 1 week 0 40 (wk 3) 0

G FOQ = 100 3 weeks 0 None 0

Item: A Lot Size: 50 Final Asm. Lead Time: 1 wk Quantity On Hand: 5 MPS Start Item: Description: B 1

2 50

Week 5 6 50

8 50

9 50

10

Week Gross requirements Scheduled receipts Projected on hand Planned receipts Planned order releases Item: Description: C

30

30

2 150 150 30

Lot Size: Lead Time: Safety Stock: 5 6 7 150 30 30 150 150 30 150

L4L 2 weeks 30 units 8 9 150 150 30 150 30 150

10

30

30 150

30

Week Gross requirements Scheduled receipts Projected on hand Planned receipts Planned order releases Item: Description: D

20

20

2 50 50 20

Lot Size: Lead Time: Safety Stock: 5 6 7 50 02 50 10 40 50 10

L4L 3 weeks 10 units 8 9 50 50 10 50 10 50

10

20 40

20

10

Week Gross requirements Scheduled receipts Projected on hand Planned receipts Planned order releases

3 40 20 350

Lot Size: POQ = 2 Lead Time: 3 weeks Safety Stock: 0 units 4 5 6 7 8 9 150 50 200 150 50 180 0 150 350 0 0 0

10

60

60 180

60

Resource Planning

CHAPTER 15

451

Item: Description:

E 1 2 3

Week Gross requirements Scheduled receipts Projected on hand Planned receipts Planned order releases Item: Description: F

400 400 100

400

400

Lot Size: L4L Lead Time: 6 weeks Safety Stock: 0 units 4 5 6 7 8 9 300 300 300 400 100 100 200 0 0 0 100

10

Week Gross requirements Scheduled receipts Projected on hand Planned receipts Planned order releases Item: Description: G

3 40 40 0

Lot Size: Lead Time: Safety Stock: 5 6 7 50 50 0 0 50 50 0 50 0

L4L 1 week 0 units 8 9

10

50

Week Gross requirements Scheduled receipts Projected on hand Planned receipts Planned order releases

Lot Size: Lead Time: Safety Stock: 4 5 6 7 50 50 0 50 100 0 0 0

FOQ = 100 3 weeks 0 units 8 9

10

0 100

CASE: FLASHY FLASHERS, INC. *

A. Synopsis Flashy Flashers, Inc. is a company that produces a line of automotive electrical components and serves about 75 auto parts suppliers and car dealers regionally. Recently the company installed an MRP system. After one years use, the MRP system was not living up to expectations. Jack Jacobs, the production and inventory control manager, has been assigned the duty of finding out why the system is not performing well. B. Purpose This case provides the data to develop the MRP records for two products of Flashy Flashers, Inc. In addition to reinforcing the skills of developing dependent demand
*

This case was prepared by Dr. Soumen Ghosh, Georgia Institute of Technology, as a basis for classroom discussion.

452

PART 3

Managing Value Chains

production plans, the case affords the opportunity to discuss the causes of some of the implementation problems experienced by the company. The instructor may want to assign the Master Production Scheduling supplement prior to discussing this case because the linkage between the MPS (available to promise quantities) and MRP can be fruitfully discussed. The case also emphasizes the role and value of action notices in the operation of an MRP system. C. Analysis A summary of the planned order release schedule is contained in Exhibit TN.1. The MRP records for both of the end items and each of the component items are contained in Exhibit TN.2. Examination of the MRP records indicates that some of them show shortages (negative projected on-hand balances). Some of these shortages are due to bad timing of outstanding scheduled releases. Often, expediting the scheduled receipt will rectify the record imbalance. Whether or not the scheduled receipt can indeed be expedited is debatable, given the case description. In addition, three of the shortages must be rectified by releasing a planned order with less than the normal lead time. In one instance, a scheduled receipt can be delayed because it is scheduled for arrival too early. These are symptoms of an MRP system that is not working well. D. Recommendations Recommendations to management include the following: 1. Stabilize the master production schedule so that new orders are not inserted into the schedule with less than normal lead times. 2. Synchronize the operations in the shop with the material planners so that priorities are valid. This will require updating priorities (scheduled dates of need for a component) as they change. 3. Train all employees who provide information to the MRP system in addition to those who must update the system. Only selected employees received training in the past. Everyone should be aware of the need for accurate and timely data. Also train those who will be primary users of the MRP information. E. Teaching Suggestions Initially the instructor should get agreement on the planned order release form (Exhibit TN.1). Be sure to rationalize any differences in the student forms because they will spur the discussion of the mechanics of producing MRP reports. The results lay the foundation for the conclusion that something definitely is wrong. After the mechanics are understood, the instructor should raise the question, What are the causes of these problems? The students will provide a host of possibilities, including: Ambitious salespeople accepting orders on short notice Poor estimates for lead times Bad priority planning system Lack of capacity Bad input data

Resource Planning

CHAPTER 15

453

Ineffective follow-up with suppliers Blaming everyone else The issue of whether the problem is one of capacity or priority scheduling is one that merits some discussion. Although specific data are not available to provide a definitive answer, the symptoms could be entirely the result of poor prioritiesworking on components that are not needed at the cost of those that are needed.
EXHIBIT TN.1 Completed Planned Order Release Form Week Item Description and Part Number 1)* RELEASE ACTION NOTICE Side Lens (SL111P) Side Lens Rubber Gasket (SL113P) Side Frame Subassembly (SL112A) 2)* RELEASE ACTION NOTICE (with 2 wk. lt) 3)* EXPEDITE NOTICE FOR SR (70) BY 1 WK. Side Frame (SL121F) Side Bulb Subassembly (SL122A) 4)* RELEASE ACTION NOTICE Flasher Bulb Subassembly (SL123A) 5)* RELEASE ACTION NOTICE Side Cable Grommet and Receptacle (SL131F) 6)* EXPEDITE NOTICE FOR SR (180) BY 1 WK. Flasher Cable Grommet and Receptacle (SL133F) Side Bulb (SL132P) 7)* RELEASE ACTION NOTICE Flasher Bulb (SL134P) 8)* DELAY NOTICE FOR SR(50) BY 2 WKS. Head Frame Subassembly (HL211A) Head Lens (HL212P) 9)* RELEASE ACTION NOTICE (with 3 wk. lt) 10)* EXPEDITE NOTICE FOR SR (110) BY 2 WKS. Head Lamp Module (HL222P) Head Frame (HL223F) Back Rubber Gasket (C3 I 0P) Screws (C206P) 11 350 100 60 110 100 100 12 13 14 15 16

100 110 60 110 110

100

60 350

90

75

75 80 180 2500 75 180

454

PART 3

Managing Value Chains

EXHIBIT TN.2 Item: SL111P Description: Side Lens Date Gross requirements Scheduled receipts Projected on hand: 15 Planned receipts Planned order releases 11 12

Completed MRP Worksheets Lot Size: Lead Time: Safety Stock: 13 140 225 350 14 15 80 145 16 145 0 350 units 2 weeks 0 units

15 350

15

225

RELEASE ACTION NOTICE

Item: SL112A Description: Side Frame Subassembly Date Gross requirements Scheduled receipts Projected on hand: 20 Planned receipts Planned order releases 11 12 13 100 100 20 110 Lot Size: Lead Time: Safety Stock: 13 100 20 100 14 15 80 40 100 100 16 110 30 100 100 units 1 week 20 units 14 15 80 0 60 16 110 0 110 Lot Size: Lead Time: Safety Stock: L4L 3 weeks 0 units

20

20 60

20

Item: SL113P Description: Side Lens Rubber Gasket Date Gross requirements Scheduled receipts Projected on hand: 20 Planned receipts Planned order releases Item: SL121F Description: Side Frame Date Gross requirements Scheduled receipts Projected on hand: 0 Planned receipts Planned order releases 11 13 110 70 60 100 12 60 14 15 16 11 12

20

20 100

20 100

Lot Size: Lead Time: Safety Stock:

L4L 3 weeks 0 units

0 100

0 100

Resource Planning

CHAPTER 15

455

EXHIBIT TN.2 (Cont.) Item: SL122A Description: Side Bulb Subassembly Date Gross requirements Scheduled receipts Projected on hand: 10 Planned receipts Planned order releases 11 12 60 50 0 110

Completed MRP Worksheets Lot Size: Lead Time: Safety Stock: 13 110 0 110 14 15 16 L4L 1 week 0 units

10

Item: SL123A Description: Flasher Bulb Subassembly Date Gross requirements Scheduled receipts Projected on hand: 0 Planned receipts Planned order releases 11 12 60 0 60 110 13 110 0 110 14 15 16

Lot Size: Lead Time: Safety Stock:

L4L 1 week 0 units

0 60

RELEASE ACTION NOTICE

Item: SL131F Description: Side Cable Grommet & Receptacle Date Gross requirements Scheduled receipts Projected on hand: 0 Planned receipts Planned order releases 11 12 110 110 13 14 15 16 Lot Size: Lead Time: Safety Stock: POQ (P = 2) 2 weeks 0 units

0 110

0 110

RELEASE ACTION NOTICE (WITH 1-WK LT)

Item: SL132P Description: Side Bulb Date Gross requirements Scheduled receipts Projected on hand: 35 Planned receipts Planned order releases 11 12 110 100 25 13 14 15 16 Lot Size: Lead Time: Safety Stock: 100 units 1 week 25 units

35

25

25

25

25

456

PART 3

Managing Value Chains

EXHIBIT TN.2 (Cont.)

Completed MRP Worksheets Lot Size: Lead Time: Safety Stock: 15 16 POQ (P = 2) 2 weeks 0 units

Item: SL133F Description: Flasher Cable Grommet & Receptacle Date Gross requirements Scheduled receipts Projected on hand: 0 Planned receipts Planned order releases 11 60 60 12 110 180 10 13 14

10

10

10

10

EXPEDITE NOTICE FOR SR(180) BY 1 WK

Item: SL134P Description: Flasher Bulb Date Gross requirements Scheduled receipts Projected on hand: 20 Planned receipts Planned order releases 11 60 100 60 100 12 110 50 100 13 14 15 16 Lot Size: Lead Time: Safety Stock: 100 units 1 week 25 units

50

50

50

50

RELEASE ACTION NOTICE

Item: HL211A Description: Head Frame Subassembly Date Gross requirements Scheduled receipts Projected on hand: 10 Planned receipts Planned order releases Item: HL212P Description: Head Lens Date Gross requirements Scheduled receipts Projected on hand: 15 Planned receipts Planned order releases 11 12 13 14 120 245 350 15 90 155 16 75 80 11 12 50 60 60 13 14 120 0 60 75 15 90 0 90 16 75 0 75 Lot Size: Lead Time: Safety Stock: L4L 2 weeks 0 units

10

60 90

DELAY SR(50) BY 2 WKS

Lot Size: Lead Time: Safety Stock: 350 units 2 weeks 15 units

15

15 350

15

Resource Planning

CHAPTER 15

457

EXHIBIT TN.2 (Cont.) Item: HL222P Description: Head Lamp Module Date Gross requirements Scheduled receipts Projected on hand: 50 Planned receipts Planned order releases 11

Completed MRP Worksheets Lot Size: Lead Time: Safety Stock: 13 90 15 16 POQ (P = 4) 4 weeks 10 units

50 75

14 75 110 10 100 65

12 60

10 75

10

RELEASE ACTION NOTICE (WITH 3-WK LT) EXPEDITE NOTICE FOR SR(110) BY 2 WKS
Item: HL223F Description: Head Frame Date Gross requirements Scheduled receipts Projected on hand: 70 Planned receipts Planned order releases 11 12 60 10 80 13 90 0 80 75 14 75 0 75 15 16 Lot Size: Lead Time: Safety Stock: L4L 1 week 0 units

70

Item: C310P Description: Back Rubber Gasket Date Gross requirements Scheduled receipts Projected on hand: 30 Planned receipts Planned order releases Item: C206P Description: Screws Date Gross requirements Scheduled receipts Projected on hand: 150 Planned receipts Planned order releases 11 12 120 30 2500 13 380 14 630 15 520 16 520 11 12 120 180 90 180 13 200 70 180 180 14 75 175 180 15 16

Lot Size: Lead Time: Safety Stock:

180 units 1 week 20 units

30

175

175

Lot Size: Lead Time: Safety Stock:

2500 units 1 week 30 units

150

2150 1520 1000 480 2500