Most manufacturing companies can benefit from MRP system if it is properly installed and utilized.
Successful companies range from the small plant to the large plant. While some companies may benefit from a very elaborate MRP system, others may need only a simple system. Each company should determine the scope of MRP system needed on the basis of the incremental costs and benefits. Starting with a minimum system, a company can add features and determine whether the additional cost is justified by the additional benefits. By using this approach, each company can arrive at the type of MRP system, which is best suited to its needs.
Having a fixed master schedule and fixed lead times are not the obligatory requisite for a com- pany to install MRP, because MRP system doesn’t get spoilt by change in its capacity due to adjusting changes. However, those companies that have a fixed master schedule or fixed lead times can operate their MRP systems with less inventory than those that must add safety lead time or safety stock to cover uncertainties in supply or demand. Users of MRP system can be classified by the type of BOM they have as shown in Figure 7.11.
• Process industry
• Assembly only
• Assembly and fabrication
Process industry Assembly only Assembly and fabrication Figure 7.11. Types of BOM.
Process industry
A given input is split into several different outputs. For example: cracking and distillation of petroleum company, food processing industry, etc.
Material Requirement Planning 157 Assembly only
In these companies, all parts are purchased, and the company is not vertically integrated.
Assembly and Fabrication
It is a company which has a BOM of both assembly and fabrication operations. This company-which might be a machinery or appliance manufacturer-is vertically integrated through all stages of manufacturing.
Generally, the most benefit from MRP is achieved by companies of the third type, which have the most complex bills of materials.
There is tremendous room for the application of MRP concepts in the service industry. If a bill of materials is replaced by a bill of labor or a bill of activities, one can explode the master schedule of output into all the activities and personnel required to deliver a particular mix of services. Some service operations will also require a bill of materials where materials are important part of the goods-services bundle. As an example, The Ethiopian Airlines uses this system for maintenance system.
Pure Repetitive Manufacturing
In this manufacturing situation, the master schedule is the same from day-to-day and level loaded. In this case, a pull system such as JIT, work very well. Since there are no changes in the end products being made from day to day, the component parts needed each day are the same. The only uncertainty is breakdowns in the production process. These disruptions are handled by a pull system, since production will stop when using work centers stop. There is no need for MRP system to predict future production requirements with its more complicated, and expensive, computerized elements. The JIT system is adjusted for major events by the MRP system.
Batch Manufacturing
A batch process might utilize a hybrid of MRP-II and JIT type of system, particularly when the batches are somewhat repetitive in nature. In this case the master schedule will not be identical from day-to-day but will have some repetitive elements. MRP II is used to push material in to the factory and to plan capacity, while the JIT (pull system) is used for execution on the shop floor. This makes it possible to eliminate the shop-floor control element of MRP II with its substantial work-in-process tracking.
The hybrid system works particularly well when batch production has been organized in to cells so that MRP can provide shop orders to the cells rather than to each machine type JIT is used to pull material though each of the cell.
Job shop manufacturing
A job shop process which is batch oriented and not repetitive must use MRP II to plan and control production. An extreme example of this situation is where the factory makes only to order and each order is different like that of AMCE Company in Ethiopia. In this system a pull system will not work.
Different types of structure of engines must be pushed in to the company to meet customer’s demand that are different for each order. A capacity planning and shop-floor control system is needed to regu- late the flow of material through production. Even in this case however, certain elements of JIT such as reduction of setup times, multifunction workers, problem solving by workers and managers, and sup- plier partnerships can be used except kanban system.
As can be seen, there are various situations which are best suited to a pure JIT or pure MRP control systems and there are many opportunities for both too.
158 A Modern Approach to Operations Management Example 7.5. Given the product structure below, compute the net requirements to produce 100 units of subassembly A. No stock is on hand or on order.
X
H(1)
D(2)
B(2) A(1)
C(4)
G(2) H(2)
J(1)
G(1) H(1)
F(1) E(2)
J(1)
C(4) E(1)
H(1) C(4)
Figure 7.12
Example 7.6. A furniture company wants to make 200 chairs for its customers in the 5th week of August 2005.
You have been asked to prepare an MRP (materials requirement planning) for the required components with the product structure shown in Figure 7.13, and BOM (bill of materials) in Table 7.6.
Table 7.6
Items Inventory Lead time (weeks)
Chairs 120 1
Leg assembly 55 2
Back assembly 30 1
Seats 45 3
Rails 110 1
Legs 140 2
Tops 30 2
Spindles 80 2
Material Requirement Planning 159
CHAIR
LEG ASSEMBLY
BACK ASSEMBLY
RAILS LEGS TOP SPINDLES
SEAT
(1) (1) (1)
(4) (4) (1) (4)
(1)
Figure 7.9
Just-In-Time Approach
8
160
8.0 INTRODUCTION
Just-In-Time (JIT) originated in Japan. It is recognized as technique/philosophy/way of working and is generally associated with the Toyota motor company. In fact JIT was initially known as the ‘Toyota Production System’. Within Toyota Taiichi Ohno, a Mechanical Engineer & Manager by profession is credited as the originator of this way of working. The beginnings of this production system are rooted in the historical situation that Toyota faced. After the Second World War the president of Toyota said
‘Catch up with America in three years, otherwise the automobile industry of Japan will not survive’. At that time one American worker produced approximately nine times as much as a Japanese worker.
Taiichi Ohno found that American manufacturers made great use of economic order quantities-the idea that it is best to make a ‘lot’ or ‘batch’ of an item (such as a particular model of car or a particular component) before switching to a new item. They also made use of economic order quantities in terms of ordering and stocking the many parts needed to assemble a car.
Ohno felt that such methods would not work in Japan - total domestic demand was low and the domestic market demanded production of small quantities of many different models. Accordingly, Ohno devised a new system of production based on the elimination of waste. In his system waste was eliminated by:
• Just-In-Time. Items only move through the production system as and when they are needed
• Autonomation. Automating the production system so as to include inspection - human at- tention only being needed when a defect is automatically detected whereupon the system will stop and not proceed until the problem has been solved.
Ohno identified a number of sources of waste that he felt should be eliminated:
• Overproduction. Waste from producing more than is needed.
• Time spent waiting. Waste such as that associated with a worker being idle whilst waiting for another worker to pass him an item he needs (this may occur in a sequential line produc- tion process).
• Transportation/movement. Waste such as that associated with transporting items around a factory.
• Processing time. Waste such as that associated with spending more time than is necessary processing an item on a machine.
Just-In-Time Approach 161
• Inventory. Waste associated with keeping stocks.
• Defects. Waste associated with defective items.
At that time, the car prices in the USA were typically set using selling price = cost + profit mark-up. However in Japan, low demand meant that manufacturers faced price resistance, so if the selling price is fixed, how can one increase the profit mark-up? Obviously by reducing costs and hence a large focus of the system that Toyota implemented was to do with cost reduction.
To aid in cost reduction Toyota instituted production leveling-eliminating unevenness in the flow of items. So, if a component which required assembly had an associated requirement of 100 during a 25 day working month then 4 were assembled per day, one every two hours in an eight hour working day. Leveling also applied to the flow of finished goods out of the factory and to the flow of raw materials into the factory.
Toyota changed their factory layout. Previously all machines of the same type, e.g. presses, were together in the same area of the factory. This meant that items had to be transported back and forth as they needed processing on different machines. To eliminate this transportation different machines were clustered together so items could move smoothly from one machine to another as they were processed.
This meant that workers had to become skilled on more than one machine - previously workers were skilled at operating just one type of machine. Although this initially met resistance from the workforce it was eventually overcome.