As described in preceding discussion, MRP is a processor which processes inputs (relating data) to give a time phased detailed schedule for raw materials and components. These inputs are shown in Figure 7.3.
• Master production schedule (MPS)
• Bill of material (BOM)
• Inventory status file (ISF) which provides the information such as: Inventory status, Replenishment lead times, and Manufacturing lead time.
7.6.1 MASTER PRODUCTION SCHEDULE (MPS)
One of the three principal inputs of MRP system, the master production schedule, is a list of what end products are to be produced, how many of each product is to be produced, and when the products are to be ready for shipment. A master production schedule (Figure 7.4) is to MRP system what a program is to a computer. It is a driving input which an MRP system depends for its real effectiveness and usefulness because it is the determinant of future load, inventory investment, production, and delivery service.
MPS
Inventory status file
MRP Processing
Logic BOM file
Order release requirements (orders to be released now.)
Order rescheduling (expedite, in expedite, cancel
open orders)
Planned order (future)
Figure 7.3. MRP System.
Product demand that makes up the master schedule can be separated into three categories. The first consists of firm customer order for specific products. These orders usually include a specific delivery date, which has been promised to the customer by the sales department. The second category is forecasted demand. Based on statistical techniques applied to past demand, estimates provided by the sales staff, and other sources, the firm will generate a forecast of demand for its various product lines. The third category is demand for individual component parts, which will be used as repair parts and are stocked by the firm’s service department. The third category is excluded from the master schedule because it doesn’t represent demands for end products.
For the purpose of material requirements planning, the time periods of the master production schedule must be identical to those on which the MRP system is based. The sales forecast and the
140 A Modern Approach to Operations Management master production schedule that management and the marketing organization use are often, however, developed and stated in terms of months or quarters. They are also stated in terms of product models.
The MPS must then be broken down and restated in terms of weeks and specific end-item numbers.
The period of time that the master production spans is the planning horizon which may be divided into a firm portion and a tentative portion. The firm portion is determined by the cumulative (procurement and manufacturing) lead time. Taking some samples by considering the previous example of a tractor producing company, the planning horizon, the broken down of the master production schedule can be shown as follows:
Product Hoist #35 Hoist #45 Hoist #55
50 50 50 60 60
100 80 75 60 50
200 200 150 150 100 100 100 150 150 200 250 250 250 250 Planning horizon
Tentative Firm
A M J J A S O N D J F M A M J
200
End item Motor 3848 Motor 4002 Drum 12-305
60 60
30 30 30 30
25 50
16 17 18 19
Figure 7.4. A Master Production Schedule.
7.6.2 BILL OF MATERIAL (BOM)
Computation of the raw material and component requirements for end products listed in the master schedule, is done by the product structure. The product structure is specified by the bill of materials, which is a listing of component parts and subassemblies that make up each product. A file which lists all assemblies together is the bill-of-materials file.
The structure of an assembled product can be pictured by taking a simple product in which a group of individual components make up two subassemblies, which in turn make up the product (Figure 7.5). The product structure is in the form of a pyramid in which lower level feeding into the
Material Requirement Planning 141 levels above the items at each successively higher level are called the parents of the items in the level directly below. For example, subassembly S1 is the parent of components C1, C2 and C3. Product P1 is the parent of subassemblies S1 and S2. In the product structure, the amount (number) of each item required for the parent item is specified. This is indicated by a number in parentheses to the right and below each block.
P1
C3 C2
C1
S2 S1
C5
C4 C6
(2) (2) (1)
Figure 7.5. Product Structure for Product P1.
For example subassembly S2 contains two of each components C4 and C5 and one of components C6.The other information contained in the bill-of-material file are the part number, child parent numbers, the date each child is to become effective or to be removed from use in the bill (effective date control for schedule engineering changes), dropout and yield percentages, shop floor delivery destination, and engineering revision level.
7.6.3 INVENTORY RECORD FILE
It comprises the individual item inventory records containing the status data required for the determination of net requirements. This file is kept update by the position of inventory transactions which reflect the various inventory events taking place. Each transaction (stock receipt, disbursement, scrap, etc) changes the status of the respective inventory item.
In addition to the status data, the inventory records also contain so-called planning factors used principally for the size and timing of planned orders. Planning factors include item lead time, safety stock (if any), scrap allowance, lot-sizing algorithms, etc. The item lead time for raw materials, components and assemblies must be established in the inventory record file in which the ordering lead time can be determined from purchasing records and the manufacturing lead time can be determined from the process route sheets (or routing file).
MRP depends on accurate inventory records to perform its planning function. This is accom- plished by utilizing a computerized inventory system which maintains the inventory record file or item master file. The types of data contained in the record for a given item would typically include the categories shown in Figure 7.6. The file contains three segments:
1. Item master data segment 2. Inventory status segment 3. Subsidiary data segment.
142 A Modern Approach to Operations Management
Part no Description Lead time Std cost Safety stock Class Last year’s usage
Cycle Set up
Order Qty
Scrap allowance Cutting data Pointers Etc
Period
Total
3 4 5 6 7 8 9
Control
Balance 1 2 Allocated
Allocated
Scheduled receipt On hand
Planned order release Order details Pending action Counters Keeping track Item master
Data Segment
Item master Status Segment
Subsidiary Data Segment
Figure 7.6. Inventory Record File.
7.6.3.1 The item master data segment
It gives the item identification (by part numbers) and other data such as lead time, cost, and order quantity.
7.6.3.2 Inventory status segment
It provides a time-purchased record of inventory status. In MRP it is important to know not only the current level of inventory, but also the future change that will occur against the inventory status. Therefore the inventory status segment lists the gross requirements for the item, scheduled receipts, on-hand status, and planned—order release.
7.6.3.3 Subsidiary data segment
It contains miscellaneous information pertaining to purchase orders, scrap or rejects, engineering change actions, and so on.
Generally the three segments in the inventory record file consists of Item master data segment which has
••••• Item identity
••••• Item characteristics
••••• Planning factors
••••• Safety stocks
••••• Pointer to other files.