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PowerPoint presentation to accompany Heizer and Render Operations Management, 10e Principles of Operations Management, 8e
PowerPoint slides by Jeff Heyl
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Dependent Demand
For any product for which a schedule can be established, dependent demand techniques should be used
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Dependent Demand
Benefits of MRP
Dependent Demand
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
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Dependent Demand
Effective use of dependent demand inventory models requires the following
1. Master production schedule
5. Lead times
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Figure 14.1
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100
500
100
500 300
100
450
100
450 100
Figure 14.2
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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
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BOM Example
Level 0 1 B(2) Std. 12 Speaker kit Product structure for Awesome (A) A
12 Speaker kit w/ C(3) Std. amp-booster
E(2)
Packing box and installation kit of wire, bolts, and screws
E(2)
booster assembly
D(2)
G(1)
D(2)
Amp-booster 12 Speaker
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12 Speaker
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BOM Example
Level 0 1 Product structure for Awesome (A) A
D(2)
Part B: 2 x number of As = (2)(50) =Std. 12 Speaker 100 kit w/ B Std. 12 Speaker kit C (2) (3) Part C: 3 x number of As = (3)(50) =amp-booster 150 Part D: 2 x number of Bs + 2 x number of Fs = (2)(100) + (2)(300) = 800 E(2) 2 x number of Bs E(2) F(2) Std. 12 Speaker Part E: booster assembly + 2 x number of Cs = (2)(100) + (2)(150) = 500 box Part F: 2 x Packing number ofand Cs = (2)(150) = 300 kit of wire, G(1) D(2) Part G: 1installation xbolts, number of Fs = (1)(300) = 300 and screws
Amp-booster
12 Speaker
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12 Speaker
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MRP Structure
Data Files BOM Master production schedule Output Reports
MRP by period report
Lead times
(Item master file) Planned order report
Purchase advice
Exception reports Order early or late or not needed Order quantity too small or too large
Purchasing data
Figure 14.5
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Week 4 5
7 50 100
100
150 150 300 300
2 weeks
1 week 2 weeks
F.
D. G.
300
3 weeks 200 200 1 week
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10 10
1 10
2
40+10
3 40
4 50
5 20
7
15+30
=50
=45
Net = requirements
Figure 14.7
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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
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MRP Management
MRP is a dynamic system Facilitates replanning when changes occur
Regenerating
Net change
System nervousness can result from too many changes Time fences put limits on replanning Pegging links each item to its parent allowing effective analysis of changes
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Lot-Sizing Techniques
Lot-for-lot techniques order just what is required for production based on net requirements
May not always be feasible If setup costs are high, lot-for-lot can be expensive
Lot-Sizing Techniques
Part Period Balancing (PPB) looks at future orders to determine most economic lot size The Wagner-Whitin algorithm is a complex dynamic programming technique
Assumes a finite time horizon
Effective, but computationally burdensome
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Lot-for-Lot Example
1 Gross requirements Scheduled receipts Projected on hand 35 35 0 0 30 30 30 40 0 40 40 10 0 0 0 10 10 40 0 40 40 30 0 30 30 30 0 0 0 30 30 55 0 55 55 35 2 30 3 40 4 0 5 10 6 40 7 30 8 0 9 30 10 55
Net requirements
Planned order receipts Planned order releases
Lot-for-Lot Example
No on-hand inventory is carried through the system Total holding cost = $0 1 2 3 4 5 6 7 8 9 10
30 40 this 0 10 40 30 0 30 There are seven 35 setups for item in this plan requirements Total ordering cost = 7 x $100 = $700 Scheduled receipts Projected on hand 35 35 0 0 30 30 30 40 0 40 40 10 0 0 0 10 10 40 0 40 40 30 0 30 30 30 0 0 0 30 30 55 0 55 55 Gross 55
Net requirements
Planned order receipts Planned order releases
Net requirements
Planned order receipts Planned order releases
Holding cost = $1/week; Setup cost = $100; Lead time = 1 week Average weekly gross requirements = 27; EOQ = 73 units
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Annual demand = 1,404 Total cost = setup cost + holding cost 1 2 3 4 5 6 7 9 10 Total cost = (1,404/73) x $100 + (73/2) x ($1 x852 weeks) Gross cost = $3,798 Total 35 30 40 0 10 40 30 0 30 55 requirements Cost for 10 weeks = $3,798 x (10 weeks/52 weeks) = Scheduled $730 receipts
Projected on hand 35 35 0 0 30 73 73 73 0 0 0 0 0 7 73 73 0 0 0 4 73 73 0 0 0 0 0 16 73
Net requirements
Planned order receipts Planned order releases
Holding cost = $1/week; Setup cost = $100; Lead time = 1 week Average weekly gross requirements = 27; EOQ = 73 units
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PPB Example
1 Gross requirements Scheduled receipts Projected on hand 35 35 2 30 3 40 4 0 5 10 6 40 7 30 8 0 9 30 10 55
Net requirements
Planned order receipts Planned order releases
Holding cost = $1/week; Setup cost = $100; Lead time = 1 week EPP = 100 units
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Periods Combined
PPB Example
Part Periods
2 40 = 3 40 x41 30
Setup
6 7 30 8 0
30 70 1 70 35 80 120
40 40 0 10 40 70 = 40 x 1 + 10 x 3 230 = 40 x 1 + 10 x 3 + 40 x 4
100 + 70 = 170
40 70 70 100
10
0 100 + 0 = 100 Holding cost = $1/week; $100; + 190 = 490 Total cost Setup cost = 300
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PPB Example
1 Gross requirements Scheduled receipts Projected on hand 35 35 0 0 30 80 80 100 50 0 10 0 10 0 0 40 100 55 60 0 30 0 30 0 0 55 55 35 2 30 3 40 4 0 5 10 6 40 7 30 8 0 9 30 10 55
Net requirements
Planned order receipts Planned order releases
Holding cost = $1/week; Setup cost = $100; Lead time = 1 week EPP = 100 units
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Lot-Sizing Summary
For these three examples
Lot-for-lot EOQ PPB $700 $730 $490
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Lot-Sizing Summary
In theory, lot sizes should be recomputed whenever there is a lot size or order quantity change In practice, this results in system nervousness and instability Lot-for-lot should be used when low-cost JIT can be achieved
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Lot-Sizing Summary
Lot sizes can be modified to allow for scrap, process constraints, and purchase lots Use lot-sizing with care as it can cause considerable distortion of requirements at lower levels of the BOM When setup costs are significant and demand is reasonably smooth, PPB, Wagner-Whitin, or EOQ should give reasonable results
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Extensions of MRP
MRP II Closed-Loop MRP
MRP system provides input to the capacity plan, MPS, and production planning process
Capacity Planning
MRP system generates a load report which details capacity requirements
Table 14.4
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Capacity Planning
Feedback from the MRP system
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Smoothing Tactics
1. Overlapping
Sends part of the work to following operations before the entire lot is complete Reduces lead time
2. Operations splitting
Sends the lot to two different machines for the same operation Shorter throughput time but increased setup costs
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
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MRP in Services
(a) PRODUCT STRUCTURE TREE
Spinach #20004
Sauce #30006
Veal #30005
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MRP in Services
(b) BILL OF MATERIALS
Quantity 1
Unit cost
20002
20003 20004 30004 30005 30006
Cooked linguini
Prepared veal and sauce Spinach Uncooked linguini Veal Sauce
1
1 0.1 0.5 1 1
Serving
Serving Bag Pound Serving Serving
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MRP in Services
(c) BILL OF LABOR FOR VEAL PICANTE
Labor Hours Work Center 1 2 Operation Cook linguini Labor Type Helper one Setup Time .0069 .0005 .0125 Run Time .0041 .0022 .0500 Assemble dish Chef
Assistant Chef
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Figure 14.11
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Figure 14.11
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Inventory Management
Bills of Material
MRP
Work Orders
Figure 14.11
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Finance/ Accounting
Accounts Receivable
General Ledger
Accounts Payable
Electronic catalogs
Quality management
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Figure 14.12
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