Operation Management (Case: MRP at A-Cat Corp.)

18th of May 2015
Operations Management For Competitive Advantage

Group 4
Azis Rizky Prawira
Camelia Indah Murniwati
Jejen Nugraha
Muhammad Yuriansyah Putra
Nasrul Nabil Sangadji
1406513344
1406513376
1406589114
1406514100
1406589303
OUTLINE
Company Background of A-CAT Corp.

Problem Identification
Theory of MRP
Analysis
Conclusion & Lesson Learned
Company Background:
A-CAT Corp.
Mid-sized manufacturer and distributor of domestic electrical

appliances.
Operated two medium-sized facilities in Vidarbha region of
Maharashtra states of India.
Focus on the rural segment (low-income customers).
A-CATs manufacturing units had been in operation since 1986.
Annual sales of Rs6,000,000 US$120,000.
Had about 35 employees.
Manufactured electrical appliances for household use:
television signal boosters, transformers, FM radio kits,
electronic ballasts, battery chargers, voltage regulators, etc.
Problem Identification
Sunita Menon was assigned the task of preparing

the operation plan for the next eight weeks for the
product P0110.
The basic problem Menon Faced was deciding how
to produce economically.
After collecting the data (Bill of Materials, Product
Structure Diagram, Master Schedule, On Hand
Inventory, Costs Associated), Menon reached a
different answer for every lot-sizing technique that
she applied.
Theory of MRP
MRP is a planning approach to material / material

that ignoring the past, but look to the demands or
needs of future production.
MRP can be applied for planning materials / parts /
components or sub-assemblies that depend on the
product or inventory.
MRP is a computerized information system is built
specifically to help manufacturers manage inventory
and schedule of reservations / reception material /
materials.
MRP Input
Authorized
master production
schedule
Inventory
transactions
Inventory
records
MRP
explosion
Material
requirements
plan
Other
sources
of demand
Bills of
materials
Engineering
and process
designs
Information for MRP

Bill of Materials (BOM) of all products for certain that consists of several
levels (level).
Number parts / components are unique and permanent.
The existence of Master Production Schedule (MPS) of production. The
final result contains the time and amount.
The amount of material requirements / Notes Inventory (Inventory Record)
for each part / component products.
Stock code number.
Lead time for each part / component in an exact figure.
The required amount equal to that of the production schedule.
BOM Sample
Master Production Scheduling
Master production schedule (MPS): Total aggregate production for all types
of "family" seats
Inventory Record
Supply Notes : A record that shows an items lot-size policy,

lead time, and various time-phased data.
Gross requirements : The total demand derived from all parent
production plans.
Scheduled receipts are orders that have been placed but not yet
completed.
projected on-hand inventory: An estimate of the amount of
inventory available each week after gross requirements have
been satisfied.
planned receipts : Orders that are not yet released to the shop
or supplier.
planned order releases : An indication of when an order for a
specified quantity of an item is to be issued.
Lot Sizing in MRP Systems

Lot sizes the part quantities issued in the planned order receipt and
planned order release sections of an MRP schedule.
Analysis
Based on the data (Bill of Materials, Product

Structure Diagram, Master Schedule, On Hand
Inventory, Costs Associated), Lot Sizes will be
determined by using Lot Sizing Strategies below:
1.
2.
3.
4.
Lot for Lot (L4L)

Economic Order Quantity (EOQ)
Least Total Cost (LTC)
Least Unit Cost (LUC)
Bill of Material (BOM)
Level
0
(Quantity)
Independent
Demand
(1)
(2)
(2)
Dependent
Demand
(4)
(3)
Master Production Schedule

The End Item: P0110
On Hand Inventory
Cost
1. Lot for Lot (L4L)
Lot-for-Lot (L4L) is the most commont technique. It

Sets planned orders to exactly match the net
requirements
Produces exactly what is needed each week with no
inventory carroed over into future periods.
Minimizes carrying cost.
Does not take into account setup costs or capacity
limitations.
Step 1: MRP Explosion Calculations

MRP Explosion Calculations
Item
P0110
Q
L4L
LT
2
OH
240
SS
0
Week
Gross requirement
Scheduled receipts
Projected available balance
Net requirements
Planned order receipts
Planned order release

Item
POX
Q
LT
OH
SS
L4L
1
500
0
-4
-3
-2
-1
1
400
2
350
3
300
4
450
5
300
6
450
7
225
8
525
240
240
240
240
0
300
300
300
0
450
450
450
0
300
300
225
0
450
450
525
0
525
525
350
0
350
350
450
0
225
225
160
0
160
160
300
-2
-1
320
700
600
900
600
900
450
1050
180
0
0
520
0
520
520
600
0
600
600
900
0
900
900
600
0
600
600
900
0
900
900
450
0
450
450
1050
0
1050
1050
Week
-4
Gross requirement
Scheduled receipts
Net requirements
500
-3
500

Item
POY
Q
LT
OH
SS
L4L
1
340
0
Week
-4
Gross requirement
Scheduled receipts
Net requirements

Item
P1X1
Q
LT
OH
SS
L4L
1
500
0
L4L
1
600
0
340
-2
-1
320
700
600
900
600
900
450
1050
20
0
0
680
0
680
680
600
0
600
600
900
0
900
900
600
0
600
600
900
0
900
900
450
0
450
450
1050
0
1050
1050
Week
-4
Gross requirement
Scheduled receipts
Net requirements

Item
P1X2
Q
LT
OH
SS
340
-3
500
-3
500
1580
-2
-1
2080
2400
3600
2400
3600
1800
4200
0
1580
1580
2400
0
2400
2400
3600
0
3600
3600
2400
0
2400
2400
3600
0
3600
3600
1800
0
1800
1800
4200
0
4200
4200
Week
-4
Gross requirement
Scheduled receipts
Net requirements
600
-3
600
960
-2
-1
1560
1800
2700
1800
2700
1350
3150
0
960
960
1800
0
1800
1800
2700
0
2700
2700
1800
0
1800
1800
2700
0
2700
2700
1350
0
1350
1350
3150
0
3150
3150
Step 2: Lot-for-Lot Run Size for an MRP Schedule

P0110
Week
P0X
Week
Net Requirements Production Quantity Ending Inventory Holding Cost Setup Cost Total Cost
1
160
160
0
0
500
500
2
350
350
0
0
500
1000
3
300
300
0
0
500
1500
4
450
450
0
0
500
2000
5
300
300
0
0
500
2500
6
450
450
0
0
500
3000
7
225
225
0
0
500
3500
8
525
525
0
0
500
4000
-1
520
520
0
0
400
400
1
600
600
0
0
400
800
2
900
900
0
0
400
1200
3
600
600
0
0
400
1600
4
900
900
0
0
400
2000
5
450
450
0
0
400
2400
6
1050
1050
0
0
400
2800
POY
Week
-1
1
2
3
4
5
6
680
680
0
0
350
350
600
600
0
0
350
700
900
900
0
0
350
1050
600
600
0
0
350
1400
900
900
0
0
350
1750
450
450
0
0
350
2100
1050
1050
0
0
350
2450
P1X1
Week
P1X2
Week
-2
1580
1580
0
0
430
430
-1
2400
2400
0
0
430
860
1
3600
3600
0
0
430
1290
2
2400
2400
0
0
430
1720
3
3600
3600
0
0
430
2150
4
1800
1800
0
0
430
2580
5
4200
4200
0
0
430
3010
-2
960
960
0
0
400
400
-1
1800
1800
0
0
400
800
1
2700
2700
0
0
400
1200
2
1800
1800
0
0
400
1600
3
2700
2700
0
0
400
2000
4
1350
1350
0
0
400
2400
5
3150
3150
0
0
400
2800
Step 3: Total Cost Calculation for L4L

Item
P0110
P0X
P0Y
P1X1
P1X2
Total Cost L4L
Cost
4,000
2,800
2,450
3,010
2,800
15,060
2. Economic Order Quantity (EOQ)
Economic order quantity (EOQ) is the order quantity that

minimizes total inventory holding costs and ordering costs. It is one
of the oldest classical production scheduling models.
Step 1: EOQ Calculations
D = Annual Demand
H = Annual Holding Cost
S = Setup Cost
Step 2: MRP Explosion Calculations

Lv 0 (P0110)
EOQ = 588
LT :2
Gross requirement
schedule receipts
projected on hand
net requirements
Planned Ending Inventory
Planned order releases
Lv 1 (POX)
EOQ = 1287
LT :1
-3
Gross requirement
schedule receipts
projected on hand
net requirements
1287
Lv 1 (POY)
LT :1
Gross requirement
schedule receipts
projected on hand
net requirements
EOQ = 1665
-3
-2
588
-2
1176
500
676
1287
611
-2
1176
340
836
1665
829
1665
-1
1
2
3
400 350 300
4
450
5
6 7 8
300 450 225 525
240
160 350 300
588
588
428 78 366
588 588
450
588
504
588
300 450 225 525

588
588
204 342 117 180
588
-1
1
2
0 1176 1176
3
4
0 1176
5
6
0 1176
3
4
0 1176
5
6
0 1176
0 1176 1176
0 1176
0 1176
1665
1665
1665
1318 142
631
1120
1665
1665
1665
Total Cost :
D=
H=
S=
2DS/H =
EOQ =
Total Cost :
17940
52
500
345000
588
4719
1176 1176
1176
1176
1287 1287
1287
1287
722 833
944
1055
1287 1287
1287
1287
-1
1
2
0 1176 1176
D=
H=
S=
2DS/H =
EOQ =
34970
16.9
400
1655385
1287
3354
8
D=
H=
S=
2DS/H =
EOQ =
Total Cost :
36010
9.1
350
2770000
1665
2107
Lv 2 (P1X1)
EOQ = 10418
LT :1
-4
-3
Gross requirement
5148
schedule receipts
projected on hand
500
net requirements
4648
10418
5770
10418
-2
-1
1
0 5148 5148
2
3
0 5148
0 5148 5148
10418
622 5892
10418
0 5148
Lv 2 (P1X2)
EOQ = 4994
LT :1
-4
-3 -2
Gross requirement
3861
0
schedule receipts
projected on hand
600
net requirements
3261
0
4994
1733
4994
4994
4
5
0 5148
8
D=
H=
S=
2DS/H =
EOQ =
0 5148
10418
744
6014
10418
-1
1
3861 3861
2
3
0 3861
3861 3861
4994 4994
2866 3999
4994
0 3861
4
5
0 3861
0 3861
4994
138
1271
4994
Total Cost :
164060
1.3
430
108532000
10418
1766
8
D=
H=
S=
2DS/H =
EOQ =
Total Cost :
121582.5
3.9
400
24940000
4994
2351
Step 3: EOQ Run Size for an MRP Schedule

P0110
Week
P0X
Week
POY
Week
1
160
588
428
428
500
928
2
350
0
78
78
0
1006
3
300
588
366
366
500
1872
4
450
588
504
504
500
2876
5
300
0
204
204
0
3080
6
450
588
342
342
500
3922
7
225
0
117
117
0
4039
8
525
588
180
180
500
4719
-2
676
1287
611
199
400
599
-1
0
0
0
0
0
599
1
1176
1287
722
235
400
1233
2
1176
1287
833
271
400
1904
3
0
0
0
0
0
1904
4
1176
1287
944
307
400
2611
5
0
0
0
0
0
2611
6
1176
1287
1055
343
400
3354
-2
836
1665
829
145
350
495
-1
0
0
0
0
0
495
1
1176
1665
1318
231
350
1076
2
1176
0
142
25
0
1101
3
0
0
0
0
0
1101
4
1176
1665
631
110
350
1561
5
0
0
0
0
0
1561
6
1176
1665
1120
196
350
2107
P1X1
Week
P1X2
Week
-3
4648
10418
5770
144
430
574
-2
0
0
0
0
0
574
-1
5148
0
622
16
0
590
1
5148
10418
5892
147
430
1167
2
0
0
0
0
0
1167
3
5148
0
744
19
0
1186
4
0
0
0
0
0
1186
5
3861
10418
6014
150
430
1766
-3
3261
4994
1733
130
400
530
-2
0
0
0
0
0
530
-1
3861
4994
2866
215
400
1145
1
3861
4994
3999
300
400
1845
2
0
0
0
0
0
1845
3
3861
0
138
10
0
1855
4
0
0
0
0
0
1855
5
3861
4994
1271
95
400
2351
Step 4: Total Cost Calculation for EOQ

Total EOQ Cost
ITEM
COST (In Rs)
P0110
4719
POX
3354
POY
2107
P1X1
1766
P1X2
2351
TOTAL
14296
3. Least Total Cost (LTC)
Least Total Cost (LTC) is a dynamic lot-sizing technique that

calculates the order quantity by comparing the carrying cost and the
setup (or ordering) cost for various lot sizes and then selects the lot in
which these are most nearly equal.
Step 1
Step 2
Week Quantity Ordered

1
160
1-2
510
1-3
810
1-4
1260
1-5
1560
1-6
2010
1-7
2235
1-8
2760
Carrying Cost Setup Cost Total Cost Different

0
500
500
500
350
500
850
150
950
500
1450
450
2300
500
2800
1800
3500
500
4000
3000
5750
500
6250
5250
7100
500
7600
6600
10775
500
11275
10275

3
300
3-4
750
3-5
1050
3-6
1500
3-7
1725
3-8
2250

0
500
500
500
450
500
950
50
1050
500
1550
550
2400
500
2900
1900
3300
500
3800
2800
5925
500
6425
5425

5
300
5-6
750
5-7
975
5-8
1500

0
500
500
500
450
500
950
50
900
500
1400
400
2475
500
2975
1975

7
225
7-8
750

0
500
500
500
525
500
1025
25
Week
1
2
3
4
5
6
7
8
Net Requirement Prod. Qty Ending Inv.

160
510
350
350
0
0
300
750
450
450
0
0
300
750
450
450
0
0
225
750
525
525
0
0
Holding Cost
350
0
450
0
450
0
525
0
Setup Cost Total Cost

500
850
0
850
500
1800
0
1800
500
2750
0
2750
500
3775
0
3775
LTC
Level 0
P0110
Item
P0110
POX
POY
P1X1
P1X2
Week
1
2
3
4
5
6
7
8
Item
P0110
POX
POY
P1X1
PIX2
Inventory
240
500
340
500
600
Net Requirement
400
350
300
450
300
450
225
525
Cost/Unit Set Up Cost

200
500
65
400
35
350
5
430
15
400
Step 1
Step 2

1
520
1-2
520
1-3
2020
1-4
2020
1-5
3520
1-6
3520
1-7
5020
1-8
5020

0
400
400
400
0
400
400
400
975
400
1375
575
975
400
1375
575
2925
400
3325
2525
2925
400
3325
2525
5850
400
6250
5450
5850
400
6250
5450

3
1500
3-4
1500
3-5
3000
3-6
3000
3-7
4500
3-8
4500

0
400
400
400
0
400
400
400
975
400
1375
575
975
400
1375
575
2925
400
3325
2525
2925
400
3325
2525

5
1500
5-6
1500
5-7
3000
5-8
3000

0
400
400
400
0
400
400
400
975
400
1375
575
975
400
1375
575

7
1500
7-8
1500

0
400
400
400
0
400
400
400
Week
1
2
3
4
5
6
7
8

520
520
0
0
0
0
1500
1500
0
0
0
0
1500
1500
0
0
0
0
1500
1500
0
0
0
0
Holding Cost
0
0
0
0
0
0
0
0

400
400
0
400
400
800
0
800
400
1200
0
1200
400
1600
0
1600
LTC
Level 1
P0X
Item
P0110
POX
POY
P1X1
P1X2
Week
1
2
3
4
5
6
7
8
Item
P0110
POX
POY
P1X1
PIX2
Inventory
240
500
340
500
600
Qty
1
2
2
4
3
Net Requirement
510
0
750
0
750
0
750
0
Tot. Req
1020
0
1500
0
1500
0
1500
0

200
500
65
400
35
350
5
430
15
400
Step 1
Step 2

1
680
1-2
680
1-3
2180
1-4
2180
1-5
3680
1-6
3680
1-7
5180
1-8
5180

0
350
350
350
0
350
350
350
525
350
875
175
525
350
875
175
1575
350
1925
1225
1575
350
1925
1225
3150
350
3500
2800
3150
350
3500
2800

5
1500
5-6
1500
5-7
3000
5-8
3000

0
350
350
350
0
350
350
350
525
350
875
175
525
350
875
175
Week
1
2
3
4
5
6
7
8

680
2180
1500
0
0
1500
1500
0
0
0
0
0
1500
3000
1500
0
0
1500
1500
0
0
0
0
0
Holding Cost
263
263
0
0
263
263
0
0

350
613
0
875
0
875
0
875
350
1487.5
0
1750
0
1750
0
1750
LTC
Level 1
P0Y
Item
P0110
POX
POY
P1X1
P1X2
Week
1
2
3
4
5
6
7
8
Item
P0110
POX
POY
P1X1
PIX2
Inventory
240
500
340
500
600
Net Requirement
510
0
750
0
750
0
750
0
Qty
1
2
2
4
3
Tot. Req
1020
0
1500
0
1500
0
1500
0

200
500
65
400
35
350
5
430
15
400
Step 1
Step 2

1
1580
1-2
1580
1-3
7580
1-4
7580
1-5
13580
1-6
13580
1-7
19580
1-8
19580

0
430
430
430
0
430
430
430
300
430
730
130
300
430
730
130
900
430
1330
470
900
430
1330
470
1800
430
2230
1370
1800
430
2230
1370

5
6000
5-6
6000
5-7
12000
5-8
12000

0
430
430
430
0
430
430
430
300
430
730
130
300
430
730
130
Week
1
2
3
4
5
6
7
8

1580
7580
6000
0
0
6000
6000
0
0
0
0
0
6000
12000
6000
0
0
6000
6000
0
0
0
0
0
Holding Cost
150
150
0
0
150
150
0
0

430
580
0
730
0
730
0
730
430
1310
0
1460
0
1460
0
1460
LTC
Level 2
P1X1
Item
P0110
POX
POY
P1X1
P1X2
Week
1
2
3
4
5
6
7
8
Item
P0110
POX
POY
P1X1
PIX2
Inventory
240
500
340
500
600
Net Requirement
520
0
1500
0
1500
0
1500
0
Qty
1
2
2
4
3
Tot. Req
2080
0
6000
0
6000
0
6000
0

200
500
65
400
35
350
5
430
15
400
Step 1
Step 2

1
960
1-2
960
1-3
5460
1-4
5460
1-5
9960
1-6
9960
1-7
14460
1-8
14460

0
400
400
400
0
400
400
400
675
400
1075
275
675
400
1075
275
2025
400
2425
1625
2025
400
2425
1625
4050
400
4450
3650
4050
400
4450
3650

5
4500
5-6
4500
5-7
9000
5-8
9000

0
400
400
400
0
400
400
400
675
400
1075
275
675
400
1075
275
Week
1
2
3
4
5
6
7
8

960
5460
4500
0
0
4500
4500
0
0
0
0
0
4500
9000
4500
0
0
4500
4500
0
0
0
0
0
Holding Cost
338
338
0
0
338
338
0
0

400
738
0
1075
0
1075
0
1075
400
1813
0
2150
0
2150
0
2150
LTC
Level 2
P1X2
Item
P0110
POX
POY
P1X1
P1X2
Week
1
2
3
4
5
6
7
8
Inventory
240
500
340
500
600
Net Requirement
520
0
1500
0
1500
0
1500
0
Item
P0110
POX
POY
P1X1
PIX2
Qty
1
2
2
4
3
Tot. Req
1560
0
4500
0
4500
0
4500
0

200
500
65
400
35
350
5
430
15
400
Step 3: Total Cost Calculation for LTC
Item
P0110
P0X
P0Y
P1X1
P1X2
Total Cost
Cost
3,775
1,600
1,750
1,460
2,150
10,735
4. Least Unit Cost (LUC)
Least unit cost method a dynamic lot-sizing

technique that adds ordering and inventory carrying
cost for each trial lot size and divides by the number
of units in each lot size, picking the lot size with the
lowest unit cost.
LUC
Step 1
Week
Quantity Ordered
Carrying Cost
Setup Cost
Total Cost
Unit Cost
160
500
500
1-2
510
350
500
850
1-3
810
950
500
1450
1-4
1260
2300
500
2800
1-5
1560
3500
500
4000
1-6
1200
5750
500
6250
1-7
2235
7100
500
7600
1-8
2760
10775
500
11275
3.13
1.67
1.79
2.22
2.56
5.21
3.40
4.09
Week
Quantity Ordered
Carrying Cost
Setup Cost
Total Cost
Unit Cost
300
500
500
3-4
750
450
500
950
3-5
1050
1050
500
1550
3-6
1500
2400
500
2900
3-7
1725
3300
500
3800
3-8
2250
5925
500
6425
1.7
1.3
1.5
1.9
2.2
2.9
Week
Quantity Ordered
Carrying Cost
Setup Cost
Total Cost
Unit Cost
300
500
500
5-6
750
450
500
950
5-7
975
900
500
1400
5-8
1500
2475
500
2975
1.7
1.3
1.4
2.0
Week
Quantity Ordered
Carrying Cost
Setup Cost
Total Cost
Unit Cost
225
500
500
7-8
750
525
500
1025
2.2
1.4
Step 2
Level 0
P0110
Week
Net Requirement
Prod. Qty
Ending Inv.
Holding Cost
Setup Cost
Total Cost
160
510
350
350
500
850
350
850
300
750
450
450
500
1800
450
1800
300
750
450
450
500
2750
450
2750
225
750
525
525
500
3775
525
3775
LUC
Step 1
Week
Quantity Ordered
Carrying Cost
Setup Cost
Total Cost
Unit Cost
-1
-1-0
520
400
400
-1-1
1120
195
400
595
-1-2
2020
780
400
1180
-1-3
2620
1365
400
1765
-1-4
3520
2535
400
2935
-1-5
3970
3266.25
400
3666.25
-1-6
5020
5313.75
400
5713.75
0
0.77
0.53
0.58
0.67
0.83
0.92
1.14
Week
2
Quantity Ordered
900
Carrying Cost
0
Setup Cost
400
Total Cost
400
2-3
1500
195
400
595
2-4
2400
780
400
1180
2-5
2850
1218.75
400
1618.75
2-6
3900
2583.75
400
2983.75
Week
4
Quantity Ordered
900
Carrying Cost
0
Setup Cost
400
Total Cost
400
4-5
1350
146.25
400
546.25
4-6
2400
828.75
400
1228.75
Week
6
Quantity Ordered
1050
Carrying Cost
0
Setup Cost
400
Total Cost
400
Step 2
Level 1
P0X
Unit Cost
0.44
0.40
0.49
0.57
0.77
Unit Cost
0.44
0.40
0.51
Unit Cost
0.38
Week
Net Requirement
Prod. Qty
Ending Inv.
Holding Cost
Setup Cost
Total Cost
-1
180
58.5
58.5
520
1120
600
195
400
653.5
600
653.5
900
1500
600
195
400
1248.5
600
1248.5
900
1350
450
146.25
400
1794.75
450
1794.75
1050
1050
400
2194.75
Step 1
Week
Quantity Ordered
Carrying Cost
Setup Cost
Total Cost
Unit Cost
-1
-1-0
680
350
350
-1-1
1280
105
350
455
-1-2
2180
420
350
770
-1-3
2780
735
350
1085
-1-4
3680
1365
350
1715
-1-5
4130
1758.75
350
2108.75
-1-6
5180
2861.25
350
3211.25
0
0.51
0.36
0.35
0.39
0.47
0.51
0.62
Week
3
Quantity Ordered
600
Carrying Cost
0
Setup Cost
350
Total Cost
350
3-4
1500
157.5
350
507.5
3-5
1950
315
350
665
3-6
3000
866.25
350
1216.25
Week
5
Quantity Ordered
450
Carrying Cost
0
Setup Cost
350
Total Cost
350
5-6
1500
183.75
350
533.75
Step 2
LUC
Level 1
P0Y
Unit Cost
0.58
0.338
0.341
0.41
Unit Cost
0.78
0.36
Week
Net Requirement
Prod. Qty
Ending Inv.
Holding Cost
Setup Cost
Total Cost
-1
20
3.5
3.5
680
2180
1500
262.5
350
616
600
900
157.5
773.5
900
773.5
600
1500
900
157.5
350
1281
900
1281
450
1500
1050
183.75
350
1814.75
1050
1814.75
LUC
Step 1
Week
Quantity Ordered
Carrying Cost
Setup Cost
Total Cost
Unit Cost
-1
780
430
430
-1-0
3580
70
430
500
-1-1
5980
190
430
620
-1-2
9580
460
430
890
-1-3
11980
700
430
1130
-1-4
15580
1150
430
1580
-1-5
17380
1420
430
1850
-1-6
21580
2155
430
2585
0.55
0.14
0.10
0.093
0.094
0.10
0.11
0.12
Week
3
Quantity Ordered
2400
Carrying Cost
0
Setup Cost
430
Total Cost
430
3-4
3600
90
430
520
3-5
7800
180
430
610
3-6
11400
495
430
925
Week
6
Quantity Ordered
4200
Carrying Cost
0
Setup Cost
430
Total Cost
430
Step 2
Level 2
P1X1
Unit Cost
0.18
0.14
0.078
0.081
Unit Cost
0.10
Week
Net Requirement
Prod. Qty
Ending Inv.
Holding Cost
Setup Cost
Total Cost
-1
780
9580
8800
220
430
220
2800
6000
150
370
2400
3600
90
460
3600
460
2400
7800
5400
135
430
1025
3600
1800
45
1070
1800
1070
4200
4200
430
1500
LUC
Step 1
Week
Quantity Ordered
Carrying Cost
Setup Cost
Total Cost
Unit Cost
-1
360
400
400
-1-0
2460
157.5
400
557.5
-1-1
4260
427.5
400
827.5
-1-2
6960
1035
400
1435
-1-3
8760
1575
400
1975
-1-4
11460
2587.5
400
2987.5
-1-5
12810
3195
400
3595
-1-6
15960
4848.75
400
5248.75
1.11
0.23
0.19
0.21
0.23
0.26
0.28
0.33
Week
2
Quantity Ordered
2700
Carrying Cost
0
Setup Cost
400
Total Cost
400
2-3
4500
135
400
535
2-4
7200
540
400
940
2-5
8550
843.75
400
1243.75
2-6
11700
1788.75
400
2188.75
Week
4
Quantity Ordered
2700
Carrying Cost
0
Setup Cost
400
Total Cost
400
4-5
4050
101.25
400
501.25
4-6
7200
573.75
400
973.75
Week
6
Quantity Ordered
3150
Carrying Cost
0
Setup Cost
400
Total Cost
400
Step 2
Level 2
P1X2
Unit Cost
0.15
0.12
0.13
0.15
0.19
Unit Cost
0.15
0.12
0.14
Unit Cost
0.13
Week
Net Requirement
Prod. Qty
Ending Inv.
Holding Cost
Setup Cost
Total Cost
-1
360
4260
3900
97.5
400
97.5
2100
1800
45
142.5
1800
142.5
2700
4500
1800
45
400
587.5
1800
587.5
2700
4050
1350
33.75
400
1021.25
1350
1021.25
3150
3150
400
1421.25
Step 3: Total Cost Calculation for LUC
Item
P0110
P0X
P0Y
P1X1
P1X2
TOTAL
Cost (Rs)
3,775
2,195
1,815
1,500
1,421
10,706
Conclusion
Based on calculations, Total Cost for every lot-sizing

Method as follows
Lot-Sizing Method
Total Cost (Rs)
Lot-for-Lot (L4L)
15,060
Economic Order Quantity (EOQ)
14,296
Least Total Cost (LTC)
10,735
Least Unit Cost (LUC)
10,706
The lowest cost was obtained using the Least Unit Cost
Method of Rs10,706.
Sunita Menon should choose the Least Unit Cost Method
as Lot Sizing Strategy at A-Cat Corp.
Lesson Learned
MRP system determines detailed schedules that show exactly what

is needed over time.
MRP is most useful in industries where standard products are
made in batches from common components and parts.
The systems effectiveness depended on the inventory position and
policies, the bill of materials and the demand requirements for
finished goods and components.
Lot sizes are the production (or purchasing quantities) that are
used by the MRP system. The simplest case is when the system
schedules exactly what is needed each period (known as lot-forlot), but when there are significant cost (set up cost & carrying cost)
lot-for-lot might not be the least costly method.
The advantage of the least unit cost method is that it is more
complete analysis and would take into account ordering or setup
costs that might change as the order sizes increases.
The lowest cost from the alternatives method of Lot Sizing can be a
consideration for Lot Sizing.
References
Jacobs, F. Robert, and Richard B. Chase. Operations

and Supply Chain Management. 14th. Global Ed.
New York: McGraw-Hill Companies Inc. 2014.
Material Requirements Planning at A-Cat Corp.
2012. Richard Ivey School of Business Foundation.

Operation Management (Case: MRP at A-Cat Corp.)

Загружено:

Сведения о документе

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Operation Management (Case: MRP at A-Cat Corp.)

Загружено:

Авторское право:

Доступные форматы

18th of May 2015

Operations Management For Competitive Advantage

Company Background of A-CAT Corp.

Mid-sized manufacturer and distributor of domestic electrical

Sunita Menon was assigned the task of preparing

MRP is a planning approach to material / material

Information for MRP

Master Production Scheduling

Supply Notes : A record that shows an items lot-size policy,

Lot Sizing in MRP Systems

Based on the data (Bill of Materials, Product

Lot for Lot (L4L)

Bill of Material (BOM)

Master Production Schedule

1. Lot for Lot (L4L)

Lot-for-Lot (L4L) is the most commont technique. It

Step 1: MRP Explosion Calculations

MRP Explosion Calculations

MRP Explosion Calculations

MRP Explosion Calculations

MRP Explosion Calculations

Step 2: Lot-for-Lot Run Size for an MRP Schedule

Step 3: Total Cost Calculation for L4L

2. Economic Order Quantity (EOQ)

Economic order quantity (EOQ) is the order quantity that

Step 2: MRP Explosion Calculations

300 450 225 525

Step 3: EOQ Run Size for an MRP Schedule

Step 4: Total Cost Calculation for EOQ

3. Least Total Cost (LTC)

Least Total Cost (LTC) is a dynamic lot-sizing technique that

Week Quantity Ordered

Carrying Cost Setup Cost Total Cost Different

Week Quantity Ordered

Carrying Cost Setup Cost Total Cost Different

Week Quantity Ordered

Carrying Cost Setup Cost Total Cost Different

Week Quantity Ordered

Carrying Cost Setup Cost Total Cost Different

Net Requirement Prod. Qty Ending Inv.

Setup Cost Total Cost

Cost/Unit Set Up Cost

Week Quantity Ordered

Carrying Cost Setup Cost Total Cost Different

Week Quantity Ordered

Carrying Cost Setup Cost Total Cost Different

Week Quantity Ordered

Carrying Cost Setup Cost Total Cost Different

Week Quantity Ordered

Carrying Cost Setup Cost Total Cost Different

Net Requirement Prod. Qty Ending Inv.

Setup Cost Total Cost

Cost/Unit Set Up Cost

Week Quantity Ordered

Carrying Cost Setup Cost Total Cost Different

Week Quantity Ordered

Carrying Cost Setup Cost Total Cost Different

Net Requirement Prod. Qty Ending Inv.

Setup Cost Total Cost

Cost/Unit Set Up Cost

Week Quantity Ordered

Carrying Cost Setup Cost Total Cost Different

Week Quantity Ordered