Session 3 - Information Used in the Material Planning Process
Learning Objectives
3.1 Information Used in Material Planning
− Differentiate among planning factors, inventory status data, and historical demand and usage data.
− Explain the relative advantages of meaningful and non-meaningful item numbers.
− Describe at least five sources of requirements for the master production schedule (MPS).
− Explain the minimum length of the planning horizon for the MPS.
− Describe the role of the bill of material (BOM) in material planning.
3.2 Characteristics of the Material Planning Process
− Explain the differences in material planning approaches used in different production environments.
− Briefly describe the material requirements planning (MRP) model and its functions.
− Briefly describe the functions of key MRP planning process parameters.
− List at least five key performance characteristics of MRP.
3.1 Information Used in Material Planning
3.1.1 Inventory data: 1. planning factors, 2. inventory status data, and 3. historical demand and usage data
Inventory data are 3 different types of item data that are used in the scheduling of components for end items on the MPS.
Planning factors are:
-Lot size (order quantity)
-Lead time
-Safety stock
-Scrap
Inventory Status data:
-On-hand balance
-Allocations
-Scheduled receipts: when the item will arrive and how much
Historical demand and usage:
Historical demand and Month-to-date and year-to-date usage rates can be used to evaluate order policies and methods and improve planning decisions.
3.1.2 advantages of meaningful and non-meaningful item numbers
Item numbering
Meaningful and non-meaningful id
3.1.3 the MPS (or anticipated build schedule) and 5 sources of requirements for the master production schedule
-The MPS represents the products or end items that the company plans to produce over a planning horizon.
-The goals of the master scheduling are as follows:
Balance supply and demand as dictated by the production plan
Plan efficient use of company resources
Determine end-item priorities (due dates) shown in the MPS.
-Role of the master scheduler is to balance the 3 objectives of operations:
Customer service
Production efficiency
Inventory investment
-Master scheduling grid and time buckets: master scheduling usually is based on weekly buckets.
-rolling schedule: the MPS represents a rolling schedule.
MPS Formula (session 3-27):
Prj available balance (t=1) = PAB (t-1) + MPS qty - (max bw customer order and forecast during PTF and customer order during DTF)
3.1.4 MPS planning horizon should be at least as long as the cumulative lead time for the item being scheduled.
- Reconciliation of differences (Rough-cut Capacity Planning)
a. The time-phased resource requirements of the MPS must be compared with key available resources. This validation process is called RCCP.
If available capacity > required capacity/load => MPS can be achieved.
If available capacity <= required capacity/load => increasing capacity or reducing load is to be investigate. In other terms, explore options:
Schedule overtime
Add shifts and/or extra workers
Route through alternative work centers
Subcontract
As a last resort only, reduce load by changing/revising the MPS.
b. Finally, the master scheduler needs to measure the capability of the MPS in terms of the following:
3.1.5 engineering data: BOM, product structure and part interdependencies, lead time.
3.2 Characteristic of the Material Planning Process
3.2.1 Material Planning in different production environments:
a. Project and Engineer-to-Order Environment:
Demand is lumpy; product volume is low.
Projects often are unique, generally large, and of lengthy duration.
b. Process Flow Environment:
Demand is stable and continuous; volume is high and variety is medium to low.
Production usually is make-to-stock; it is scheduled to meet forecasted demand rather than customer orders.
All products have similar routings.
Products tend to be commodities, with exceptions in pharmaceuticals.
Plants are designed for a specific throughput and require specialized equipment.
Scheduling is characterized by the following:
- Production is authorized by production schedules; work orders are not issued.
- If forecasts are less than full capacity, plants slow down to match demand, or run to full capacity and then shut down temporarily.
c. Lean Environment (repetitive manufacturing):
demand is stable and continuous and volume is high
product variety is low and products are standard and not complex
process is repetitive
machinery and workers in the factory are flexible.
Scheduling is characterized by the following:
- Rate of production, or takt time, is determined by rate of demand. Compliance with takt time is a productivity measure.
- Production scheduling employs a technique called "heijunka" to level production
throughout the production process to match the rate of end-item sales.
- Work cell operations start in response to kanban signals rather than work orders.
- Manufacturing lead times are short.
d. MRP Environments
demand is discontinuous or lumpy and not stable and continuous.
Two types of production environments have this characteristic in common:
Low-volume, high-variety make-to-order job shop or batch production environments
Medium-to-high volume, low-to-high variety assemble-to-order repetitive flow environments
3.2.2 MRP Model
Principal Functions of MRP
input:
planning factors
inventory data
master production schedule
BOMs
output:
planned order releases for purchased items
planned order releases for manufactured items
exception reports and action messages
MRP Functions:
It plans and controls the firm’s inventories, establishing what, how much, and when to order.
It plans and controls orders released to the factory floor and suppliers in order to meet the right due dates and keeps due dates valid.
It provides accurate planned order loading for use by capacity requirements planning and constraint management
3.2.3 Planning Process Parameters
Planning horizon
Time buckets
Replanning frequency
Time Fences: nervousness refers to instability when changes in higher-level records cause significant changes in lower-level schedules or orders. Devices such as time fences, which restrict changes, introduce stability into the master schedule.
3.2.4 Performance Characteristics of MRP
Manufacturing orders released on time
Purchase orders released on time
Downtime due to shortages
Excess inventory
Number of changes to purchase orders
Orders released to manufacturing without material shortages
Due dates of orders met
Action messages trends
Education and Training
Session 4 - MRP Mechanics: The Basics
Learning Objectives
4.1 Introduction
− Identify the major inputs to the material requirements planning (MRP) system.
− Describe the concept of a rolling schedule.
− Describe the need for and use of low-level codes.
4.2 MRP Calculation of Gross and Net Requirements
− Perform the explosion process for a material requirements plan.
− Perform the netting process for converting gross to net requirements.
− Create planned order receipts and releases.
4.1 introduction
4.1.1 inputs to MRP system
MRP obj and functions
Summary of Inputs:
a. Planning factors:
− Lot size
− Lead time
− Safety stock
− Scrap and yield
b. Inventory status data:
− On-hand balance
− Allocations: is a classification of quantities of items that have been assigned to specific orders, but not released.
− Scheduled receipts: is a purchase order or shop order that has been released.
c. Bills of material (BOMs)
d. Master production schedule (MPS)
4.1.2 Rolling schedule concept
4.1.3 the need for and use of low-level codes
-Low-level coding
-Assigning codes
-Significance of low-level codes
4.2 MRP calculation of Gross and Net Requirements
-Gross and net requirements and planned orders
-Sources of gross requirements from MPS and Service Parts Demand and interplant requirements
-Net requirements and planned orders for items low-level code 0:
Preliminary PAB (t) = PAB (t-1) - allocation + scheduled receipts - gross requirements
PAB (adjusted for safety stock) = Preliminary PAB - safety stock = net requirement If < 0
If < 0 => create planned order receipt per lot size policy.
Final PAB (t) = preliminary PAB (t) + planned order receipt quantity
Definitions:
-the "planned order" is an anticipated order to cover anticipated future needs. It is not an actual released order.
-"Allocations" are components on hand but not available because allocated to specific planned orders but not yet physically removed from inventory.
-"Scheduled receipts" are for planned orders scheduled before week week1 and are due during the planning horizon.
- Gross Requirements calculation for item level code 1 starting from level code 0 and using BOM
- Net requirements and planned orders for items level code 1 using netting process from level code 1 item gross requirements.
Summary of MRP Process Logic
-The netting process is used to determine planned orders.
-MRP explosion sequence and process:
a. Calculate gross requirements for level 0 end item assemblies based on MPS and service parts schedule.
b. Calculate net requirements based on gross requirements, and create planned order receipts and releases.
c. Post planned order release data for level 0 end items to corresponding gross requirements periods of level 1 components, adjust (explode) for quantities per parent item, and repeat netting and creation of planned order receipts and releases as at level 0.
d. Repeat this process through the lowest level component codes.
- Netting (gross to net) process
a. Apply gross requirements and allocations vs on-hand balances, scheduled receipts, and safety stock.
b. If a net requirement exists, create a planned order receipt based on lot-size policy.
c. Determine a planned order release date by offsetting for lead time.
!Session 5 - using MRP Outputs and Managing Projects!
5.1 maintaining the material plan
5.2 project management
5.1 Maintaining the Material Plan
Maintain order priorities:
a. Factors affecting the material plan
b. Maintain valid priorities
MRP sw generates exception reports that suggest actions to maintain valid priorities:
Release planned orders
Expedite order
Delay an order or scheduled receipt
Cancel a planned order or scheduled receipt
-net change MRP (explosion and netting reqs only for parts or items affected by the change).
-full regeneration MRP (all planned orders are removed and MPS is fully exploded down to establish valid priorities).
c. Pegging: is the capability to identify, for a given item, the sources of its gross requirements.
unexpected events can cause components of an end item to arrive late. To assess and address the impact of such events, planners must be able to trace the gross reqs for an affected item to its immediate parent and upward to its parent in the MPS.
The planner can then use bottom-up planning to evaluate and implement alternative solutions such as:
-compressing LT
-cutting order qty
-substituting material
-changing the MPS
d. Single-level vs Full Pegging
e. Where-used list
f. Firm planned orders: describes an order that is frozen in quantity and time.
g. What-if Analysis and simulation
h. Revision of planning parameters:
- lead time
- lot size
- safety stock and safety lead time
- scrap factor : planned order release = planned order receipt / (1 - scrap factor)
- Kanban quantity and cycle time (related to material planning in lean/JIT)
i. Closing the MRP loop
- MRP role
- relationship to Master scheduling / capacity planning / engineering / inventory mngmnt / purchasing and production / marketing and sales
l. Integration of Lean/JIT and ERP/MRP
- pull vs push systems
- advantages and disadvantages of lean/JIT
- repurposing ERP
3.1 Information Used in Material Planning
− Differentiate among planning factors, inventory status data, and historical demand and usage data.
− Explain the relative advantages of meaningful and non-meaningful item numbers.
− Describe at least five sources of requirements for the master production schedule (MPS).
− Explain the minimum length of the planning horizon for the MPS.
− Describe the role of the bill of material (BOM) in material planning.
3.2 Characteristics of the Material Planning Process
− Explain the differences in material planning approaches used in different production environments.
− Briefly describe the material requirements planning (MRP) model and its functions.
− Briefly describe the functions of key MRP planning process parameters.
− List at least five key performance characteristics of MRP.
3.1 Information Used in Material Planning
3.1.1 Inventory data: 1. planning factors, 2. inventory status data, and 3. historical demand and usage data
Inventory data are 3 different types of item data that are used in the scheduling of components for end items on the MPS.
Planning factors are:
-Lot size (order quantity)
-Lead time
-Safety stock
-Scrap
Inventory Status data:
-On-hand balance
-Allocations
-Scheduled receipts: when the item will arrive and how much
Historical demand and usage:
Historical demand and Month-to-date and year-to-date usage rates can be used to evaluate order policies and methods and improve planning decisions.
3.1.2 advantages of meaningful and non-meaningful item numbers
Item numbering
Meaningful and non-meaningful id
3.1.3 the MPS (or anticipated build schedule) and 5 sources of requirements for the master production schedule
-The MPS represents the products or end items that the company plans to produce over a planning horizon.
-The goals of the master scheduling are as follows:
Balance supply and demand as dictated by the production plan
Plan efficient use of company resources
Determine end-item priorities (due dates) shown in the MPS.
-Role of the master scheduler is to balance the 3 objectives of operations:
Customer service
Production efficiency
Inventory investment
-Master scheduling grid and time buckets: master scheduling usually is based on weekly buckets.
-rolling schedule: the MPS represents a rolling schedule.
MPS Formula (session 3-27):
Prj available balance (t=1) = PAB (t-1) + MPS qty - (max bw customer order and forecast during PTF and customer order during DTF)
3.1.4 MPS planning horizon should be at least as long as the cumulative lead time for the item being scheduled.
- Reconciliation of differences (Rough-cut Capacity Planning)
a. The time-phased resource requirements of the MPS must be compared with key available resources. This validation process is called RCCP.
If available capacity > required capacity/load => MPS can be achieved.
If available capacity <= required capacity/load => increasing capacity or reducing load is to be investigate. In other terms, explore options:
Schedule overtime
Add shifts and/or extra workers
Route through alternative work centers
Subcontract
As a last resort only, reduce load by changing/revising the MPS.
b. Finally, the master scheduler needs to measure the capability of the MPS in terms of the following:
Resource usage - is the MPS within the material, or other constraints in each period?
Customer service levels - will due dates be met? Will delivery performance be acceptable?
Cost-effectiveness - is the plan economical? Will excess costs be incurred for overtime, subcontracting, expediting, or transportation?
3.1.5 engineering data: BOM, product structure and part interdependencies, lead time.
3.2 Characteristic of the Material Planning Process
3.2.1 Material Planning in different production environments:
a. Project and Engineer-to-Order Environment:
Demand is lumpy; product volume is low.
Projects often are unique, generally large, and of lengthy duration.
b. Process Flow Environment:
Demand is stable and continuous; volume is high and variety is medium to low.
Production usually is make-to-stock; it is scheduled to meet forecasted demand rather than customer orders.
All products have similar routings.
Products tend to be commodities, with exceptions in pharmaceuticals.
Plants are designed for a specific throughput and require specialized equipment.
Scheduling is characterized by the following:
- Production is authorized by production schedules; work orders are not issued.
- If forecasts are less than full capacity, plants slow down to match demand, or run to full capacity and then shut down temporarily.
c. Lean Environment (repetitive manufacturing):
demand is stable and continuous and volume is high
product variety is low and products are standard and not complex
process is repetitive
machinery and workers in the factory are flexible.
Scheduling is characterized by the following:
- Rate of production, or takt time, is determined by rate of demand. Compliance with takt time is a productivity measure.
- Production scheduling employs a technique called "heijunka" to level production
throughout the production process to match the rate of end-item sales.
- Work cell operations start in response to kanban signals rather than work orders.
- Manufacturing lead times are short.
d. MRP Environments
demand is discontinuous or lumpy and not stable and continuous.
Two types of production environments have this characteristic in common:
Low-volume, high-variety make-to-order job shop or batch production environments
Medium-to-high volume, low-to-high variety assemble-to-order repetitive flow environments
3.2.2 MRP Model
Principal Functions of MRP
input:
planning factors
inventory data
master production schedule
BOMs
output:
planned order releases for purchased items
planned order releases for manufactured items
exception reports and action messages
MRP Functions:
It plans and controls the firm’s inventories, establishing what, how much, and when to order.
It plans and controls orders released to the factory floor and suppliers in order to meet the right due dates and keeps due dates valid.
It provides accurate planned order loading for use by capacity requirements planning and constraint management
3.2.3 Planning Process Parameters
Planning horizon
Time buckets
Replanning frequency
Time Fences: nervousness refers to instability when changes in higher-level records cause significant changes in lower-level schedules or orders. Devices such as time fences, which restrict changes, introduce stability into the master schedule.
3.2.4 Performance Characteristics of MRP
Manufacturing orders released on time
Purchase orders released on time
Downtime due to shortages
Excess inventory
Number of changes to purchase orders
Orders released to manufacturing without material shortages
Due dates of orders met
Action messages trends
Education and Training
Session 4 - MRP Mechanics: The Basics
Learning Objectives
4.1 Introduction
− Identify the major inputs to the material requirements planning (MRP) system.
− Describe the concept of a rolling schedule.
− Describe the need for and use of low-level codes.
4.2 MRP Calculation of Gross and Net Requirements
− Perform the explosion process for a material requirements plan.
− Perform the netting process for converting gross to net requirements.
− Create planned order receipts and releases.
4.1 introduction
4.1.1 inputs to MRP system
MRP obj and functions
Summary of Inputs:
a. Planning factors:
− Lot size
− Lead time
− Safety stock
− Scrap and yield
b. Inventory status data:
− On-hand balance
− Allocations: is a classification of quantities of items that have been assigned to specific orders, but not released.
− Scheduled receipts: is a purchase order or shop order that has been released.
c. Bills of material (BOMs)
d. Master production schedule (MPS)
4.1.2 Rolling schedule concept
4.1.3 the need for and use of low-level codes
-Low-level coding
-Assigning codes
-Significance of low-level codes
4.2 MRP calculation of Gross and Net Requirements
-Gross and net requirements and planned orders
-Sources of gross requirements from MPS and Service Parts Demand and interplant requirements
-Net requirements and planned orders for items low-level code 0:
Preliminary PAB (t) = PAB (t-1) - allocation + scheduled receipts - gross requirements
PAB (adjusted for safety stock) = Preliminary PAB - safety stock = net requirement If < 0
If < 0 => create planned order receipt per lot size policy.
Final PAB (t) = preliminary PAB (t) + planned order receipt quantity
Definitions:
-the "planned order" is an anticipated order to cover anticipated future needs. It is not an actual released order.
-"Allocations" are components on hand but not available because allocated to specific planned orders but not yet physically removed from inventory.
-"Scheduled receipts" are for planned orders scheduled before week week1 and are due during the planning horizon.
- Gross Requirements calculation for item level code 1 starting from level code 0 and using BOM
- Net requirements and planned orders for items level code 1 using netting process from level code 1 item gross requirements.
Summary of MRP Process Logic
-The netting process is used to determine planned orders.
-MRP explosion sequence and process:
a. Calculate gross requirements for level 0 end item assemblies based on MPS and service parts schedule.
b. Calculate net requirements based on gross requirements, and create planned order receipts and releases.
c. Post planned order release data for level 0 end items to corresponding gross requirements periods of level 1 components, adjust (explode) for quantities per parent item, and repeat netting and creation of planned order receipts and releases as at level 0.
d. Repeat this process through the lowest level component codes.
- Netting (gross to net) process
a. Apply gross requirements and allocations vs on-hand balances, scheduled receipts, and safety stock.
b. If a net requirement exists, create a planned order receipt based on lot-size policy.
c. Determine a planned order release date by offsetting for lead time.
!Session 5 - using MRP Outputs and Managing Projects!
5.1 maintaining the material plan
5.2 project management
5.1 Maintaining the Material Plan
Maintain order priorities:
a. Factors affecting the material plan
b. Maintain valid priorities
MRP sw generates exception reports that suggest actions to maintain valid priorities:
Release planned orders
Expedite order
Delay an order or scheduled receipt
Cancel a planned order or scheduled receipt
-net change MRP (explosion and netting reqs only for parts or items affected by the change).
-full regeneration MRP (all planned orders are removed and MPS is fully exploded down to establish valid priorities).
c. Pegging: is the capability to identify, for a given item, the sources of its gross requirements.
unexpected events can cause components of an end item to arrive late. To assess and address the impact of such events, planners must be able to trace the gross reqs for an affected item to its immediate parent and upward to its parent in the MPS.
The planner can then use bottom-up planning to evaluate and implement alternative solutions such as:
-compressing LT
-cutting order qty
-substituting material
-changing the MPS
d. Single-level vs Full Pegging
e. Where-used list
f. Firm planned orders: describes an order that is frozen in quantity and time.
g. What-if Analysis and simulation
h. Revision of planning parameters:
- lead time
- lot size
- safety stock and safety lead time
- scrap factor : planned order release = planned order receipt / (1 - scrap factor)
- Kanban quantity and cycle time (related to material planning in lean/JIT)
i. Closing the MRP loop
- MRP role
- relationship to Master scheduling / capacity planning / engineering / inventory mngmnt / purchasing and production / marketing and sales
l. Integration of Lean/JIT and ERP/MRP
- pull vs push systems
- advantages and disadvantages of lean/JIT
- repurposing ERP
Session 5.1 - using MRP Outputs
5.1 Maintaining the Material Plan
Maintain order priorities:
a. Factors affecting the material plan
b. Maintain valid priorities
MRP sw generates exception reports that suggest actions to maintain valid priorities:
Release planned orders
Expedite order
Delay an order or scheduled receipt
Cancel a planned order or scheduled receipt
-net change MRP (explosion and netting reqs only for parts or items affected by the change).
-full regeneration MRP (all planned orders are removed and MPS is fully exploded down to establish valid priorities).
c. Pegging: is the capability to identify, for a given item, the sources of its gross requirements.
unexpected events can cause components of an end item to arrive late. To assess and address the impact of such events, planners must be able to trace the gross reqs for an affected item to its immediate parent and upward to its parent in the MPS.
The planner can then use bottom-up planning to evaluate and implement alternative solutions such as:
-compressing LT
-cutting order qty
-substituting material
-changing the MPS
d. Single-level vs Full Pegging
e. Where-used list
f. Firm planned orders: describes an order that is frozen in quantity and time.
g. What-if Analysis and simulation
h. Revision of planning parameters:
- lead time
- lot size
- safety stock and safety lead time
- scrap factor : planned order release = planned order receipt / (1 - scrap factor)
- Kanban quantity and cycle time (related to material planning in lean/JIT)
i. Closing the MRP loop
- MRP role
- relationship to Master scheduling / capacity planning / engineering / inventory mngmnt / purchasing and production / marketing and sales
l. Integration of Lean/JIT and ERP/MRP
- pull vs push systems
- advantages and disadvantages of lean/JIT
- repurposing ERP
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