Dependent Demand
For any product for which a schedule can be established, dependent demand techniques should be used
Benefits of MRP
- Better response to customer orders
- Faster response to market changes
- Improved utilization of facilities and labour
- Reduced inventory levels
Dependent Demand (2)
- The demand for one item is related to the demand for another item
- Given a quantity for the end item, the demand for all parts and components can be calculated
- In general, used whenever a schedule can be established for an item
- MRP is the common technique
Effective use of dependent demand inventory models requires the following
- Master production schedule
- Specifications or bill of material
- Inventory availability
- Purchase orders outstanding
- Lead times
Master Production Schedule (MPS)
-Specifies what is to be made and when
Must be in accordance with the aggregate production plan
-Inputs from financial plans, customer demand, engineering, supplier performance
-As the process moves from planning to execution, each step must be tested for feasibility
-The MPS is the result of the production planning process
Master Production Schedule (MPS) (2)
- MPS is established in terms of specific products
- Schedule must be followed for a reasonable length of time
- The MPS is quite often fixed or frozen in the near term part of the plan
- The MPS is a rolling schedule
- The MPS is a statement of what is to be produced, not a forecast of demand
Master Production Schedule (MPS): Can be expressed in any of the following terms:
- A customer order in a job shop (make-to-order) company
- Modules in a repetitive (assemble-to-order or forecast) company
- An end item in a continuous (stock-to-forecast) company
Bills of Material
-List of components, ingredients, and materials needed to make product
-Provides product structure
=Items above given level are called parents
=Items below given level are called children
Accurate Records
- Accurate inventory records are absolutely required for MRP (or any dependent demand system) to operate correctly
- Generally MRP systems require more than 99% accuracy
- Outstanding purchase orders must accurately reflect quantities and scheduled receipts
Lead Times
-The time required to purchase, produce, or assemble an item
=For production – the sum of the order, wait, move, setup, store, and run times
=For purchased items – the time between the recognition of a need and the availability of the item for production
Low-level coding
ensures that each item appears at only one level in the BOM
The lowest position in which a material can appear in a BOM (bill of material). This represents the sequence in which items are run through MRP (Materials Requirements Planning). The requirements for low level 3 must be determined before the requirements for level 4 so that all independent and dependent demand requirements are known.
Safety Stock
- BOMs, inventory records, purchase and production quantities may not be perfect
- Consideration of safety stock may be prudent
- Should be minimized and ultimately eliminated
- Typically built into projected on-hand inventory
MRP Extension : Closed-Loop MRP
MRP system provides input to the capacity plan, MPS, and production planning process
MRP Extension: Capacity Planning
- MRP system generates a load report which details capacity requirements
- This is used to drive the capacity planning process
- Changes pass back through the MRP system for rescheduling
Capacity Planning
- Feedback from the MRP system
- Load reports show resource requirements for work centres
- Work can be moved between work centres to smooth the load or bring it within capacity
MRP in Services
-Some services or service items are directly linked to demand for other services
-These can be treated as dependent demand services or items
=Restaurants
=Hospitals
=Hotels
Distribution Resource Planning (DRP)
- Using dependent demand techniques through the supply chain
- Expected demand or sales forecasts become gross requirements
- Minimum levels of inventory to meet customer service levels
- Accurate lead times
- Definition of the distribution structure
Enterprise Resource Planning (ERP)
-ERP can be highly customized to meet specific business requirements
-Enterprise application integration software (EAI) allows ERP systems to be integrated with
=Warehouse management
=Logistics
=Electronic catalogs
=Quality management
-ERP systems have the potential to
=Reduce transaction costs
=Increase the speed and accuracy of information
-Facilitates a strategic emphasis on JIT systems and integration
Advantages of ERP Systems
- Provides integration of the supply chain, production, and administration
- Creates commonality of databases
- Can incorporate improved best processes
- Increases communication and collaboration between business units and sites
- Has an off-the-shelf software database
- May provide a strategic advantage
Disadvantages of ERP Systems
- Is very expensive to purchase and even more so to customize
- Implementation may require major changes in the company and its processes
- Is so complex that many companies cannot adjust to it
- Involves an ongoing, possibly never completed, process for implementation
- Expertise is limited with ongoing staffing problems
Time Fences
a means for allowing a segment of the master schedule to be designated as “not to be rescheduled”
Pegging
- In material requirements planning systems, tracing upward in the bill of material from the component to the parent item.
- this allows the production planner to determine the cause for the requirement and make a judgment about the necessity for a change in the schedule.
