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Management Science II

Dr.T.T.Narendran

MODULE 3
Materials Management Materials Requirements Planning (Mrp)

Materials Requirements Planning (Mrp)

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

A Typical Mrp

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

Comparison Of Mrp And Traditional Systems

Dimension

MRP

Traditional

Demand

Dependent

Independent

Order Philosophy

Requirements

Replenishment

Forecast

Based on master schedule

Based on past demand

Control Concept

Control on all items

ABC

Objectives

Meet manufacturing needs

Meet customer needs

Lot Sizing

Discrete

EOQ

Demand Pattern

Lumpy but predictable Random

Types of Inventory

Work-in-process and raw materials

Finished goods and spare parts

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

Logical Analysis Preceding Mrp


When do we want to make how many of each product? What components are required? How many of each of these is already on hand? How many have already been ordered? When will they arrive? When are more needed and how many more? When should these be ordered?

Requirements For A Sound Mrp


A valid master plan Accurate bills of materials Accurate information on current inventories Accurate information on orders already placed. Reliable lead times An adequate flow of materials

Pre-Requisites Of Mrp
A time-phased master production schedule in which every item is described by bill of materials (BOM) A unique no. identifying each component and the parent in every BOM Properly structured, accurate BOM and tight control of engineering changes Accurate current inventory balances Accurate quantities and reliable delivery dates

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

Reliable lead times

Further requirements for practical application Computer software and hardware to handle huge volume of data Timely reporting of issues, receipts, inventory adjustments and order releases Discipline in handling and order releases Capable people (for handling and deciding)

Reasons For Failure Of Mrp


It is part of an incomplete system Driven by an invalid / mismanaged Master Production Schedule Inaccurate data Improperly structured BOM Under qualified users

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

Manufacturing Resource Planning (Mrp-Ii)

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

Just In Time (Jit) Manufacturing

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

Steps To Jit Manufacture

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

Steps To Jit Manufacture Jit Vs. Mrp: A Comparison


JIT MRP

Vendors

Part of your team

Adversaries

Scrap

Eliminate

Tolerate

Maintenance

Constant care to minimize breakdowns

Not critical, allow queues

Lead times

Minimize

Plan with them

Workers

Involve them

Impersonal-drive them

Inventory

Liability, try to eliminate

Asset, useful to absorb fluctuations

JIT VS. MRP: A COMPARISON (CONTD.)


JIT MRP

Lot size

Bare minimum (Single piece?)

To balance set-up cost & holding cost

Set-ups

Cut down the time

Plan for them

Queues (WIP)

Eliminate PRO-ACTIVE

Necessary RE-ACTIVE

Suitability

High to medium volume Medium to low volume

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

Evolution Of Manufacturing Control Systems


Order Point system
Forecast with past data. Inventory control with EOQ and ABC analysis.

Mrp
Based on Master schedule, B.O.M. and predicted demand. Complete inventory control. Convenient lot-size.

Evolution Of Manufacturing Control Systems (Contd.) Mrp Ii


Incorporates capacity planning. Incorporates feed back.

Jit
Emphasis on waste reduction. Aim for Zero defect. Aim for Zero Inventory. Quick change-overs. Small lots.

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

Multi-Skilled Worker

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

Kanban

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

Inventory Control Inventory Control


Costs In Inventory Control
Item cost or unit cost Ordering / set-up cost Clerical, administrative, expediting,

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

transportation, etc.,

Costs In Inventory Control


Inventory carrying costs

Locked-up capital

storage space

handling,

taxes (?)

insurance

obsolescence,

deterioration,

maintaining records

Shortage costs

Overtime requirements due to shortage

special clerical and administrative costs, expediting

loss of goodwill (?)

special transportation

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

lost production time

Classification Of Inventory Models


Static Dynamic Deterministic Probabilistic Uncertain

Probabilistic

Stock Level

Time

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

A Typical Inventory Model


Order quantity
= Economic Order Quantity (EOQ) + Safety (buffer) stock

inventory on hand - units on order

+ average demand over lead time

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

Indian Institute of Technology Madras

Management Science II

Dr.T.T.Narendran

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