IE7315: Production Systems

MRP Decision Support System Project Assignment

Production Planning at Greek Manufacturing Company

Originally Developed by:
Dr. C. Basnet
Department of Management Systems, University of Waikato
Private Bag 3105, Hamilton 2020, New Zealand
Telephone: + 647 838 4562; Fax: + 647 838 4270
Chuda@waikato.ac.nz
http://www.mngt.waikato.ac.nz/depts/mnss/chuda/PMSimulation/MRPSIM.htm
In this assignment you play the role of the production planner of the Greek Manufacturing Company, and develop a decision support
system to help you in that role. All the required information is presented in the spreadsheet MRP-SIM.XLS. Obtain this file from the
course website (http://blackboard.wayne.edu).
You manage two products, Alpha ( ) and Beta ( ), for which orders are placed on you in variable quantities throughout the week.
These products are made up of components (Comma, Delta, Epsilon, Fi, and Gamma), some of which are produced within the
company, and others are sourced from vendors. In carrying out the production, the parts are routed through processing machines
(Kappa, Mu, Pi, Rho, and Sigma) within the company where processing time is spent. See the Bill of Materials and Routing in the
spreadsheet. Lead-times and other information are also available on the spread-sheet.
The production planning is done on a weekly basis. At the beginning of the week, inventories are checked and orders are
released both within the company and to the vendors. Through the week the processing of the orders takes place. As customer
orders arrive, they are filled from inventory on-hand. Orders may be filled partially if there is insufficient on-hand inventory for
the whole order. Unfilled orders are placed on file and filled when the product is available. The cycle repeats week by week.
This scenario is simulated by a simulator incorporated in the spreadsheet.
Playing the Game
Open the spreadsheet with the application Microsoft Excel. The main screen is shown in Figure 1, next page. The upper left
corner shows the products currently being processed by the machines and their queues (quantities being produced). It also
shows orders placed with the vendor. The lower part of the screen shows the current inventory position (graphically on the
left side, and the numbers on the right side). Current pending customer orders are also shown. (It is important here to distinguish
between three kinds of orders: customer orders, which are placed by the customer with you; shop orders, which are placed by
you with the production staff, and vendor orders, which you place with the vendors, outside the company). The centre of the
screen shows the current week and day. The simulation game begins on week 21 and continues until week 32. The middle
part of the screen shows buttons that navigate you to different parts of the spreadsheet.
To play the game, you first need to initialise the game. Use the button Initialise Game for this purpose. This causes a history of
demand to be created up until week 20. You can view these by clicking the two buttons Forecast Alpha and Forecast Beta. As you
play the game, new demands are also updated and may be viewed and analysed. You may initialise the game again any time; this
will cause the game to restart.

Prepared by Dr. Ratna Babu Chinnam for IE 7315: Production Systems at Wayne State University

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IE7315: Production Systems

Figure 1. Main Screen of the Simulator

You can view the current inventory, work in progress, and vendor orders at this time. Next you need to decide on orders to place for
next week, their priorities, and overtime to authorise for the next week. Once you have made the decisions, communicate it to the
simulator by clicking on the button Make/Alter Decisions. In placing the shop orders, it is important to take into consideration the
product structure (the Bill of Materials). If the components needed for your order are not available in the inventory, the order cannot
be processed until all the components are available. The remaining on-hand inventory is updated and displayed as you enter your
decisions. Obviously, this does not apply to the purchased components, of which you can order as many as you like. If you change
your mind before the week is simulated, you can change your decisions using the same button. The Use MRP button in the order
form permits you to use MRP decision support. You need to build the MRP tables first to use this button! You can always override the
MRP table suggestions. Once the decisions are entered, you may press the Simulate! button to let the production for the week begin,
and to let the time advance to the next week. The queues of the machines, the finishing of the work, the inventory position, the arrival
of orders, and the filling of the orders are animated on the screen. You can adjust the speed of animation by moving the scroll bar at
the middle right of the screen.
Profits are accumulated for every item in the order that is filled. For every item in the order that is late (back-ordered), a penalty is
charged per day. There are also costs associated with holding inventory (both finished and work in process) and with overtime work.
These and other details of the model may be viewed by pressing the button View Model Details. At the end of the week your
financial performance is shown at the top right of the screen. This shows both your current and cumulative performance.
You are now ready to make decisions for the next week and to repeat the cycle. This cycle consists of making the decisions,
simulating the system, monitoring the result, then making the decisions again ... ... until week 32. Your objective is to maximise
your cumulative profit at the end of the game.
Assignment
For the purpose of this assignment, play the game for a while until you have a good understanding of what is happening. The game
is designed to enhance your understanding of:

Prepared by Dr. Ratna Babu Chinnam for IE 7315: Production Systems at Wayne State University

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IE7315: Production Systems

Bill of Materials
Routing
Order review and release
Priority setting
Production capacity
Variability in production
Work in process
Queuing
Inventory costs
Customer service
Forecasting
Master production scheduling (MPS)
Material requirements planning (MRP)
Capacity requirements planning (CRP)
After playing the game for a while you may wish to have some sort of computer support to make your decisions. You can create this
for yourself. Past data may be used for forecasting, which leads to a MPS, and this MPS, when broken into the components through
MRP, should help you in deciding how many parts / products to order and when. A CRP module can help you decide how much
overtime to order. Your specific assignment is to create a decision support system (DSS) using these concepts. Follow the following
instructions exactly as given.
Guidelines for Completing the Assignment
Step 1. Familiarise yourself with the simulator. Play the game in an ad-hoc manner, guessing the decisions.
What is the highest profit you made while playing in an ad-hoc manner? ________________
Step 2. Play the game on a reorder point basis. The idea of a reorder point (ROP) is to set a minimum level of inventory at which you
order inventories, choosing your own order size. Try different ROPs and order sizes. Enter your best reorder policy:
Item
Alpha
Beta
Comma
Delta
Epsilon
Fi
Gamma

Reorder point

Order size

What is the highest profit you made while playing on a reorder point basis? ________________
Step 3. The next step is playing the game with a DSS, built by you. To do this, you need a forecasting model to forecast demand of
products Alpha and Beta. This should be fed into the master production schedule (MPS) of the MRP worksheet. Next you need to
explode this MPS into the MRP, which will then tell you what order to release each week. When you create the CRP model from the
MRP model, you can decide how much overtime to use.
Remember though, that the decision support system is there to help in decision-making. It suggests things for you to do,
but it does not dictate your decisions. You can override it any time.
Here are the steps to create the DSS.
A. Forecasting. I suggest you use linear regression for forecasting. Use the menu item Tools | Data Analysis | Regression. The YRange is of course the demand, and the X-Range is the number of weeks. Use the output of this analysis to create your forecast.
Prepared by Dr. Ratna Babu Chinnam for IE 7315: Production Systems at Wayne State University

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IE7315: Production Systems

The forecast formula is: Intercept + (X Variable 1) * (Number of weeks). This should create the forecast up to week 35. You need to
forecast the demand for both Alpha and Beta.
B. Master Production Scheduling. You need to link your forecasts to the MPS (in the worksheet MRP). Use the VLOOKUP
function provided in EXCEL to do this. This function will look up from the forecast table (called Forecast1 and Forecast2 for Alpha and
Beta respectively) appropriate Forecast (column D) and insert into the MPS table. (Hint: You need to insert something like
VLOOKUP (week, Forecast1, column No.) into the MPS).
The scheduled receipt row needs to be linked to the appropriate work-in-process information in the Main Screen. The current on
hand needs to be linked obviously to the current inventory from the Main Screen.
C. Material Requirements Planning. The MRP explosion should of course be based on the BOM. Do your work in the worksheet
MRP. Make sure the gross requirements are always derived from the parent, not necessarily from the finished product. I suggest you
use the lot for lot policy for all MRP explosions, with a lead-time of one week.
D. Capacity Requirements Planning. The CRP should be based on the Routing information in the workbook. Combine the
requirements of work for each of the work centres. Make sure you take into account the work requirements for order in progress
(scheduled receipts). I suggest you use the full work requirements for these.
E. Decision Support System. The summary information at the bottom of the worksheet summarises the order releases for the
current week. The overtime should come from CRP, if more than the available 40 hours are needed. Insert the appropriate formulas
to gather this information from the appropriate places. Your DSS is now complete. You can now use this DSS when using the button
Make/Alter Decisions to make your decisions. The Use MRP button will get the order releases and the overtimes from the MRP
worksheet. Remember though that this is always just a suggestion, you can change the decisions manually particularly in view of
the component availabilities and work-in-progress.
F. Play! See if your DSS is any good. Play the game using your MRP models to make the decisions.
What is the highest profit you made while playing with your DSS? ________________

Prepared by Dr. Ratna Babu Chinnam for IE 7315: Production Systems at Wayne State University

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