DAVIS

F O U R T H E D I T I O N AQUILANO

CHASE

chapter 17 Inventory Systems for

Dependent Demand PowerPoint
Presentation
by
Charlie
Cook
The McGraw-Hill Companies, Inc., 2003
 Chapter
Chapter Objectives
Objectives
Explain the changing role of materials requirements
planning (MRP) within a manufacturing organization.
Discuss the role of MRP within an enterprise resource
planning (ERP) system.
Introduce the fundamental concepts and calculations
that drive an MRP system.
Define the various elements that make up an MRP
system.
Demonstrate how MRP-related systems are used in
service operations.

The McGraw-Hill
 Chapter
Chapter Objectives
Objectives (contd)
(contd)
Recognize that MRP and JIT can be used together
within an organization.

The McGraw-Hill
 Master
Master Production
Production Schedule
Schedule
Master Production Schedule (MPS)
A time-phased production plan that specifies
how many of, and when to build, each end item.
Material Requirements Planning
Determines the number of subassemblies,
components, and raw materials required and
their build dates to complete a given number of
end products by a specific date.

The McGraw-Hill
 The
The Role
Role of
of MRP
MRP within
within
the
the Manufacturing
Manufacturing Function
Function

Exhibit 17.1
The McGraw-Hill
The
The Role
Role of
of MRP
MRP within
within an
an ERP
ERP System
System

Exhibit 17.2
The McGraw-Hill
 Master
Master Production
Production Schedule
Schedule
Time Fences
Periods of time with each period having some
specified level of opportunity for the customer
to make changes.
Frozen
Make no or only insignificant changes to products.
Moderately firm
Allow some changes in specific products.
Flexible
Allow almost any variation in products.

The McGraw-Hill
Integrating
Integrating MRP
MRP and
and JIT
JIT into
into the
the Supply
Supply
Chain
Chain

Exhibit 17.3
The McGraw-Hill
Master
Master Production
Production Schedule
Schedule Time
Time Fences
Fences

Exhibit 17.4
The McGraw-Hill
 Material
Material Requirements
Requirements Planning
Planning
(MRP)
(MRP) Systems
Systems
Materials Requirements Planning System
Creates requirements and schedules identifying
the parts, components, and materials necessary
to produce the end products specified in the
MPS.
Links inventory and scheduling systems.

The McGraw-Hill
Purposes,
Purposes, Objectives,
Objectives, and
and Philosophy
Philosophy

of
of MRP
MRP
Inventory Control
Order the right part in the right quantity at the
right time.
Assign Operating Priorities
Order with the right due date and keep the due
date valid.
Capacity
Plan for a complete and accurate load.
Plan for an adequate time to view future load.

The McGraw-Hill
 Inventory
Inventory Management
Management Under
Under MRP
MRP
Theme
Getting the right materials to the right place at
the right time.
Objectives
Improve customer service.
Minimize inventory investment.
Maximize production operating efficiency.
Philosophy
Expedite materials if overall production.
schedule will be delayed.
De-expedite materials if schedule falls behind.
The McGraw-Hill
 Benefits
Benefits of
of an
an MRP
MRP System
System
More competitive pricing
Lower selling price
Lower inventory levels
Improved customer service
Faster response to market demands
Increased flexibility to change the master
schedule
Reduced setup and tear-down costs
Reduced idle time

The McGraw-Hill
Industry
Industry Application
Application and
and Expected
Expected Results
Results

Exhibit 17.5
The McGraw-Hill
 MRP
MRP System
System Structure
Structure
Demand for Products
Available-to-promise
Demand for spare parts and supplies
Bill of Material (BOM) File
A list of subassemblies, components, and raw
materials, and their respective quantities
required to produce specific end items
Also, product structure or product tree file

The McGraw-Hill
 MRP
MRP System
System Structure
Structure
Inventory Records File
Computerized record-keeping system for the
inventory status of all subassemblies,
components, and raw materials.
Peg record file (also where-used file)
Inventory transaction file

The McGraw-Hill
 Overall
OverallView
Viewof
ofthe
theInputs
Inputsto
toaaStandard
StandardMRP
MRPProgram
Program
and
andthe
theReports
ReportsGenerated
Generatedbybythe
theProgram
Program

Exhibit 17.6
The McGraw-Hill
Product
Product Structure
Structure Tree
Tree for
for Product
Product AA

Exhibit 17.7
The McGraw-Hill
 Subassemblies
Subassemblies and
and Parts
Parts List
List in
in an
an
Indented
Indented Format
Format and
and in
in aa Single-Level
Single-Level List
List

Exhibit 17.8
The McGraw-Hill
Part
Part LL Hierarchy
Hierarchy in
in (a)
(a) Expanded
Expanded to to
the
the Lowest
Lowest Level
Level of
of Each
Each Item
Item in
in (b)
(b)

Exhibit 17.9
The McGraw-Hill
The
The Inventory
Inventory Status
Status Record
Record
for
for an
an Item
Item in
in Inventory
Inventory

Exhibit 17.10
The McGraw-Hill
 MRP
MRP Computer
Computer Program
Program
Output Reports
Primary reports
Planned orders
Order release notices
Changes in due dates
Cancellations or suspensions of open orders
Inventory status data
Secondary reports
Planning reports
Performance reports
Exceptions reports

The McGraw-Hill
Product
Product Structure
Structure Tree
Tree for
for Product
Product TT

Exhibit 17.11
The McGraw-Hill
 Materials
Materials
Requirements
Requirements
Plan
Planfor
for
Completing
Completing
100
100units
unitsofof
Product
ProductTTinin
Period
Period88

Exhibit 17.12
The McGraw-Hill
 The
The Environment
Environment of
of the
the Master
Master Scheduler
Scheduler

Source: Romeyn C. Everdell and Woodrow W. Chamberlain, Master

Scheduling in a Multi-Plant Environment, Proceedings of the American
Production and Inventory Control Society (1980), p. 421. Exhibit 17.13
The McGraw-Hill
The
The Aggregate
Aggregate Plan
Plan and
and the
the Master
Master
Production
Production Schedule
Schedule for
for Mattresses
Mattresses

Exhibit 17.14
The McGraw-Hill
CRP:
CRP: Workload
Workload for
for Work
Work Center
Center

Exhibit 17.15
The McGraw-Hill
Scheduled
Scheduled Workload
Workload for
for Work
Work Center
Center AA

Exhibit 17.16
The McGraw-Hill
 Manufacturing
Manufacturing Resource
Resource Planning
Planning
(MRP
(MRP II)
II)

MRP II
Advanced MRP system that takes into
consideration the equipment capacities and
other resources associated with a
manufacturing facility.
Sales and Operations Planning (S&OP)
Extends MRP by aligning customer demand with
both in-house and supplier resources.

The McGraw-Hill
 Lot
Lot Sizing
Sizing in
in MRP
MRP Systems
Systems
Lot Sizing
Lot sizes are the part quantities issued in the
planned order receipt and the planned order
release sections of an MRP schedule.
Lot-Sizing Techniques
Lot-for-lot
Economic order quantity (EOQ)
Least total costs
Least unit cost

The McGraw-Hill
Lot-for-Lot
Lot-for-Lot Method
Method of
of Determining
Determining
Production
Production Quantities
Quantities

Exhibit 17.17
The McGraw-Hill