Management

Operational Management
-Project-

VADD COMPANY

Authors : Predoiu Vlad Ionut

Rusu Diana Maria

Sirbu Alma Delia
Sabau Andreea Maria
Group : 135, 3rd Year
Date : 1/13/2015

Table of Contents
Introduction.....................................................................................................3
Key objectives of MRP system................................................................3
Conditions for implementation...............................................................3
CASE STUDY.....................................................................................................3
Exercise A........................................................................................................3
Product Structure.....................................................................................3
Exercise B........................................................................................................3
The lead times for LC Laptop..................................................................3
Time Phase Product Structure................................................................3
Exercise C........................................................................................................3

Introduction

Since before the Industrial Revolution there had been a need for a better
inventory control system. In times before, people would use a system of either
ordering their materials beforehand or by ordering their materials as needed.
The problem with this was either there would be too much inventory or too little
inventory to meet the demand needed. Large quantities of inventory can be
very costly for purposes of warehousing and deterioration of the material (e.g.
food spoilage, animal infestation, etc...). Secondly, the cost of waiting for
inventory as in a pull system can be costly as well. The loss of customers for the
wait of the final product can be very detrimental to the business as well as the
supplier of raw material. Thirdly there is the matter of taxes. The cost of keeping
inventory over the next fiscal year is considered an asset and therefore taxable.
So in the 1970's a new system was introduced called MRP.
Material Requirements Planning is a time phased priority-planning
technique that calculates material requirements and schedules supply to meet
demand across all products and parts in one or more plants. - Dr Vassilis
Moustakis
Material requirements planning is an efficient technique of business
planning that helps a company in its production. This is widely used technique;
especially many manufacturing companies are depending on it. MRP interprets
information on required products, raw materials, the consumer demand form
sales orders & previous sales forecast and the current stocks to find out what
quantity of product is required and when it is needed (Slack et al, 2001)
Key objectives of MRP system
1. Improve quality of customer service
2. Reduce inventory investment
3. Maximize production efficiency

A key question to a MRP process is the number of times a company

replenishes (or turns around) inventory within a year. There are accounts of
inventory annual turnover ratios of greater than 100, mainly reported by
Japanese companies. One can readily realize that the a high inventory ratio is
likely to be conducive to lowering production cost since less capital is tied up to
unused inventory.
We approach MRP as an organizational innovation and identify the
necessary measure whichmanagement should adopt in implementing it.
Motivational influences underlying MRP implementation include:

1. Recognition of business opportunity for the timely acquisition of MRP.

2. Recognition of technical opportunity for the timely acquisition of the
technologies
supporting MRP implementation.
3. Recognition of need for solving manufacturing and/or inventory problems
using MRP.
Conditions for implementation
Several requirements have to be met, in order to given an MRP implementation
project a
chance of success:
1. A feasible master production schedule must be drawn up, or else the
accumulated
planned orders of components might bump into the resource restrictions and
become
infeasible.
2. The bills of material should be accurate. It is essential to update them
promptly to reflect any engineering changes brought to the product. If a
component part is omitted from the bill of material it will never be ordered
by the system.
3. Inventory records should be a precise representation of reality, or else
the netting process and the generation of planned orders become
meaningless.
4. Lead times for all inventory items should be known and given to the MRP
system.
5. Shop floor discipline is necessary to ensure that orders are processed in
conformity with
the established priorities. Otherwise, the lead times passed to MRP will not
materialize.

CASE STUDY
VADD Company is multinational enterprise that produces laptops. It
provides high quality laptops fot both high class customers and low class
customers.
In our example we have chosen a simple low cost model (Laptop LC)
This model has three main components: Motherboard x1, Memory x1 and Case
x1.
On every Motherboard there is one processor installed, 2 x Cooling
Systems and 3 x Wired contacts.
The memory is made of 2 RAM chips, 1 HDD and 3 wired contacts (to
connect the components between them and also to the Motherboard).
The case is an independent purchased part, other components such as
video or sound cards are integrated on the Motherboard since it is a cheap
laptop model (not independent parts). The battery and the charger come with
the case.
-2
-1
-1
-1
-3

The lead time in producing and testing each component is:

days for the processor
day for the cooling system
day for contacts wires
day for the RAM memory
days for the Hardware

Further, it takes 2 days to assemble and test the Motherboard and 1 day
to assemble the Memory. Finally it takes 1 day to assembly the final product:
Laptop LC .

Exercise A
It is required to find out how many of each component do we need as we
have to sell 600 laptops.
In order to reveal how many parts are needed we have conducted a product
structure :
Product Structure

LAPTOP LC

MOTHERBOARD (1)

COOLING SYSTEM
(2) WIRES
CONTACT

RAM
PROCESSOR
(2)
(1)

MEMORYBOARD (1)

HARDWARE
(1)

LEVEL 0

LEVEL 1

LEVEL 2
For 60 Laptops we will need the following components:
60 laptops- 60 motherboards
60 laptops 60 Memory
60 Motherboards 60 Processors
60 Motherboards x2 120 Processors
(60 Motherboards+60 Memory)x3= 360 wired contacts
60 memory x2 = 120 RAM
60 Memory = 60 Hard Disks
So the requirements for 60 laptops are:
60 motherboards
60 memory
60 processors
120 cooling systems
360 contact wires
120 RAM
60 Hard disk

Exercise B
Preparing a time-phased product structure. For this we need to use the
lead times information.
First lets clarify what are the lead time for the components:
The lead times for LC Laptop
LEAD
COMPONENT

TIME

LAPTOP LC

MOTHERBOARD

MEMORY

PROCESSOR

COOLING
SYSTEM

CONTACT WIRES

RAM

1day CS

HARDDISK

CW 1day2 days Motherboard

Time Phase Product Structure

2 days Processor
1day LC Laptop
1day CW
RAM 1d
HDD

1day Memory

3 days

Exercise C
Building the gross requirements plan . The LC laptops require all items in
the product structure.Using the information computed in the first two tables we
conduct the gross requirements plan for the 60 units.
1

(LC
laptops )
Required
date

Lead
Time

60
1
60

Order date
(Motherboa
rd)
Required
date

60
2
60

Order date
(Memory)
Require
date

60
1
60

Order date
(RAM)
Required
date

120
1

Lea
d
Tim
e

On
Han
d

1
5
Order
date
( Hard
Disk )
Required
date
Order date
(Contact
Wires)
Required
date
2
10

Low
leve
l
cod
e
0

60

Order date
(Processor)
Required
date
60
Order date

20

15

Item
Ident.

120
Laptop
Gross
requirements
60
Projected on
hand
Net
Requirements
Planned Order
Receipts
180
180
Planned Order
Releases
Motherboa Gross
rd 180
requirements
180
Projected on
hand
60
Net
Requirements
Planned Order
Receipts
Planned Order
Releases
Memory
Gross
requirements
Projected on
hand
Net
Requirements
Planned Order
Receipts
Planned Order
Releases
Processor
Gross
requirements
Projected on
hand
Net
Requirements
Planned Order
Receipts
Planned Order
Releases
Cooling
Gross
sys.
requirements
Projected on
hand
Net
Requirements
Planned Order
Receipts
Planned Order

Da
y
1

Da
y
2

Da
y
3

Da
y
4

Da
y
5

Da
y
6

60
5

5
3
55
55

55
1
55
10

10

10

10

10
45
45

45
55
5

5
50
50

50
45
20

20

20
25
25

25
90
15

15

15
75
75

75

CONCLUSION
In conclusion, with this project we tried to create a MRP for a specific product.
This Project highlights the way in which the company has tackled the challenge
of operations management.
Thus we can see that the management of operations plays a very important role
in the VADD production of LC Laptops.
Today, the role of operations is not merely confined to that of controlling costs
, but is viewed as a means to achieve organizational goals. Proper
implementation of operations management tools, techniques and strategies can
give VADD company an operations-based advantage arising from reduced costs,
high quality and product performance