CHAPTER 14: MATERIALS REQUIREMENT PLANNING (MRP) Suggested Solutions to Selected Questions

Question 14.1 An exploded bill yields the following: Item J: 200 units Item K: 200 1 = 200 units Item L: 200 4 = 800 units Item M: 200 2 = 400 units. Question 14.2 The time-phased assembly plan for the gift bags is:

Summer II, 2009

Production of item M should be started by noon. Question 14.3 (a) Product structure:

(b)

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Question 14.11 (a)

Week Item A H C Gross requirement Order release Gross requirement Order release Gross requirement Order release 100 100 100 50 1 2 3 4 5 6 7 100 100 100 50 50 150 8 100 50 100 50 50 150 9 10 50 150 50 11 12 150

(b)
Level: 0 Item: A Week No. Gross requirement Scheduled receipt On hand Net requirement Planned order receipt Planned order release Level: 0 Item: H Week No. Gross requirement Scheduled receipt On hand Net requirement Planned order receipt Planned order release Level: 1 Item: C Week No. Gross requirement Scheduled receipt On hand Net requirement 50 Planned order receipt Planned order release Parent: A, H Lead Time: 2 2 3 Parent: Lead Time: 1 2 3 Parent: Lead Time: 1 2 3 Quantity: Lot Size: L4L 7 8 9 100 0 100 100 100 50

10 50 0 50 50

11

12 150 0 150 150

150

Quantity: Lot Size: L4L 7 8 9 100 0 100 100 100 Quantity: 1X Lot Size: L4L 7 8 9 100 50 50 50 50 100 0 100 100 50 50 0 50 50 150

10

11 50 0 50 50

12

50

10 50 0 50 50

11 150 0 150 150

12

50

100

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Question 14.12 (a)

Week Item A Gross requirement On hand: Net requirement Order receipt Order release Gross requirement On hand: Net requirement Order receipt Order release Gross requirement On hand: Net requirement Order receipt Order release Gross requirement On hand: Net requirement Order receipt Order release Gross requirement On hand: Net requirement Order receipt Order release Gross requirement On hand: Net requirement Order receipt Order release Gross requirement On hand: Net requirement Order receipt Order release Gross requirement On hand: Net requirement Order receipt Order release Gross requirement On hand: Net requirement Order receipt Order release Gross requirement On hand: Net requirement Order receipt Order release 1 2 3 4 5 6 7 8 100 0 100 100 100 0 50 100 0 100 100 100 100 100 100 50 0 50 50 150 100 0 100 100 50 100 100 0 0 50 100 100 0 0 50 50 50 150 0 150 150 150 75 50 75 100 25 75 75 100 0 100 100 100 0 100 100 150 150 0 150 150 150 0 150 150 150 0 150 150 50 0 50 50 150 50 0 50 50 50 0 50 50 50 0 50 50 50 150 0 150 150 150 0 150 150 9 10 50 0 50 50 150 50 0 50 50 11 12 150 0 150 150

50 50 100 50 50 50 50

50 100

100

100

50

75 75 50 75 100 25 75 75 100 100 25 75 75 50

150 50 0 50 50 150 50 0 50 50 100

75 75

50 50 75

75

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(b)

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Question 14.13 (a)

(b)

(c)
Level: 0 Item: 20 fan Week No. Gross requirement Scheduled receipt On hand 100 Net requirement Planned order receipt Planned order release Level: 1 Item: housing Week No. Gross requirement Scheduled receipt On hand 100 Net requirement Planned order receipt Planned order release Parent: 20 fan Lead Time: 1 week 2 3 4 Parent: Lead Time: 1 2 3 Quantity: Lot Size: 7 8 1,000 100 900 900 900 Quantity: 1X Lot Size: L4L 7 8

10

11

12

6 900 100 800 800

10

11

12

800

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Level: 1 Item: grills Week No. Gross requirement Scheduled receipt On hand 200 Net requirement Planned order receipt Planned order release

Parent: 20 fan Lead Time: 2 weeks 2 3 4

6 1,800 200 1,600 2,000

Quantity: 2X Lot Size: 500 7 8

10

11

12

400

2,000

Level: 1 Item: fan assembly Week No. Gross requirement Scheduled receipt On hand 150 Net requirement Planned order receipt Planned order release

Parent: 20 fan Lead Time: 3 weeks 1 2 3 4

6 900 150 750 750

Quantity: 1X Lot Size: L4L 7 8

10

11

12

750

Level: 1 Item: electrical unit Week No. Gross requirement Scheduled receipt On hand Net requirement Planned order receipt Planned order release

Parent: 20 fan Lead Time: 1 week 1 2 3 4

6 900

Quantity: 1X Lot Size: L4L 7 8

10

11

12

900 900 900

Level: 2 Item: frame Week No. Gross requirement Scheduled receipt On hand Net requirement Planned order receipt Planned order release

Parent: housing Lead Time: 2 weeks 2 3 4

5 800

Quantity: 1X Lot Size: L4L 7 8

10

11

12

800 800 800

Level: 2 Item: supports Week No. Gross requirement Scheduled receipt On hand Net requirement Planned order receipt Planned order release

Parent: housing Lead Time: 1 week 2 3 4

5 1,600 50 1,550 1,600

Quantity: 2X Lot Size: 100 7 8

10

11

12

1,600

Level: 2 Item: handle Week No. Gross requirement Scheduled receipt On hand Net requirement Planned order receipt Planned order release

Parent: housing Lead Time: 1 week 2 3 4

5 800 400 400 500

Quantity: 1X Lot Size: 500 7 8

10

11

12

100

500

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Level: 2 Item: hub Week No. Gross requirement Scheduled receipt On hand Net requirement Planned order receipt Planned order release

Parent: fan assembly Lead Time: 1 week 2 3 4 5 750

Quantity: 1X Lot Size: L4L 7 8

10

11

12

750 750 750

Level: 2 Item: blades Week No. Gross requirement Scheduled receipt On hand Net requirement Planned order receipt Planned order release

Parent: fan assembly Lead Time: 2 weeks 2 3 4 3,750 50 3,750 3,800

Quantity: 5X Lot Size: 100 7 8

10

11

12

3,800

Level: 2 Item: motor Week No. Gross requirement Scheduled receipt On hand Net requirement Planned order receipt Planned order release

Parent: electrical unit Lead Time: 1 week 2 3 4 5 900

Quantity: 1X Lot Size: L4L 7 8

10

11

12

900 900 900

Level: 2 Item: switch Week No. Gross requirement Scheduled receipt On hand 20 Net requirement Planned order receipt Planned order release

Parent: electrical unit Lead Time: 1 week 2 3 4 5 900 20 880 888 888

Quantity: 1X Lot Size: 12 7 8

10

11

12

Level: 2 Item: knob Week No. Gross requirement Scheduled receipt On hand: 20 Net requirement Planned order receipt Planned order release

Parent: electrical unit Lead Time: 1 week 2 3 4 5 900 200 200 200 200 700 700

Quantity: 1X Lot Size: 25 7 8

10

11

12

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Question 14.17

Lot-for-lot (L4L) Ordering Policy

Week 5 30 0 0 30 70

1 Gross requirements Beginning inventory Ending inventory Order receipts Order releases 30 40 10

2 10 10 30

3 40 10 0 30

4 0 0 30

6 70 0 0 70 20

7 20 0 0 20

8 0 0 10

9 10 0 0 10 80

10 80 0 0 80

11 0 0 50

12 50 0 0 50

40

CT = Order cost + holding cost = 7 orders

$150/order + 20 units

$2.50/unit/period = $1,100

Question 14.18

Economic Order Quantity (EOQ)

2 DS H 2 330 150 2.50 12

57.4, or 57 units

where D = period demand, S = setup or order cost, H = holding cost.

Reorder point

Demand during lead time 27.5, or 28 units

330 units week 12

1 week

1 Gross requirement Beginning inventory Ending inventory 40 Order receipts Order release 30 40 10

2 0 10 57

3 40 67 27 57

4 27 27 57

5 30 84 54 57

6 70 54 16* 57

Week 7 20 16 21 57

8 21 21 57

9 10 78 68 57

10 80 68 12*

11 12 12 57

12 50 12 5* 57 57

* Stockouts = 16 + 12 + 5 = 33

Total inventory = 10 + 10 + 27 + 27 + 54 + 21 + 21 + 68 = 238 Actual total cost: CT = Order cost + Holding cost + Stockout cost = 6 orders x $150/order + 238 units x $2.50 + 33 units x $10/unit stockout = 900.00 + 595.00 + 330.00 = $1,825.00
DS Q 2.50) QH 2

Theoretical total cost:

CT Order cost 330 Holding cost =

150 57 (12 57 2 868.42 855.00 $1,723.42

Note: Order and carrying costs are not equal due to rounding of the EOQ to a whole number.

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Note: The actual cost of using the EOQ policy under this case of varying demand is more than the theoretical cost. In addition, we were forced to use back orders when stockouts occurred. The poor performance with respect to stockout is due to the fact that average demand during lead time is not a very good measure of the necessary reorder point. You may wish to double the size of the fourth order in order to get:
Level: Item: Week No. Gross requirements On hand 40 Net requirement Planned order receipt Planned order release Parent: Lead Time: 1 2 3 10 40 10 30 57 Quantity: Lot Size: EOQ 7 8 9 20 41 21 10 21

1 30 40 0

4 27

5 30 27 3 57 57

6 70 54 16 57

10 80 11 69 114

11 45

12 50 45 5 57 52

57

57

114

57

Total cost with this approach: Setups: 5 150 = $750 364 = $910 Holding: 2.50

Setup + holding = total cost = $1,660.00

Question 14.19

Part-Period Balancing (PPB)

First, calculate the EPP: Setup cost EPP Holding cost

150 2.50

60

Next, determine the cumulative part periods that are closest to your computed EPP:
Periods Combined 1 1, 2 1, 2, 3 1, 2, 3, 4 1, 2, 3, 4, 5* 1, 2, 3, 4, 5, 6 Cumulative Net Req. 0 0 30 30 60 130 Part Periods Costs Order Hold 0 0 150 150 150 150 + + + + + + 25 50 50 50 200 725

30 30

0 + 30 0 + 30

2 = 60 2 + 70

3 = 270

* The part periods for an order encompassing periods 1, 2, 3, 4, and 5 most nearly approximates the EPP of 60.

Note: (1) We have assumed that: (a) a product ordered during a calendar week is available at the beginning of the following week; (b) shipments during a week take place at the beginning of the week. (2) DS and POM for Windows will produce the same result.

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Periods Combined 6 6, 7 6, 7, 8 6, 7, 8, 9* 6, 7, 8, 9, 10

Cumulative Net Req. 70 90 90 100 180

Part Periods 70 70 70 70 70 0=0 0 + 20 0 + 20 0 + 20 0 + 20 1 = 20 1 = 20 1 + 10 1 + 10

3 = 50 3 + 80

4 = 370

Costs Order Hold 150 + 0 150 + 50 150 + 50 150 + 125 150 + 925

* The part periods for an order encompassing periods 6, 7, 8, and 9 most nearly approximates the EPP of 60.

Periods Combined 10 10, 11 10, 11, 12*

Cumulative Net Req. 80 80 80 80 130 80

Part Periods 0=0 0=0 0 + 50 2 = 100

Costs Order Hold 150 + 0 150 + 0 150 + 250

* The part periods for an order encompassing periods 6, 7, 8, and 9 most nearly approximates the EPP of 60.

Finally, complete the materials requirement schedule with order receipts in weeks 3, 6 and 10:
1 30 40 10 2 10 10 60 3 40 10 30 60 4 30 30 Week 5 6 7 30 70 20 30 0 30 0 30 10 100 100 9 10 11 12 10 80 50 10 10 0 50 50 10 0 50 50 0 130 130 8

Gross requirements Beginning inventory Ending inventory Order receipts Order releases

Calculate total cost: CT = Order cost + holding cost = 3 orders $150/order + 230 units = $1,025.00 $2.50/unit/period

10

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