18ME56-OM_ Module 5 - MRP, Purchase and SCM.pdf
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This document discusses Material Requirements Planning (MRP) and Purchasing & Supply Chain Management (SCM), outlining their concepts, benefits, and processes. It provides details on MRP terms such as gross requirements, planned order releases, and inventory management, as well as best practices in procurement. The content is designed to enable students to apply MRP and SCM techniques in practical scenarios.
18ME56-OM_ Module 5 - MRP, Purchase and SCM.pdf
- 2. Module – 5: • Material Requirement Planning (MRP): • Dependent versus independent demand, an overview of MRP – MRP inputs and outputs, MRP processing, ERP capacity requirement planning, benefits and limitations of MRP. • Purchasing and Supply Chain Management (SCM): • Introduction, Importance of purchasing and SCM, the procurement process, Concept of tenders, Approaches to SCM, Vendor development. 2 Dept. of ME, JSSATE, Bengaluru
- 3. Module Outcome: At the end of this module, you will be able to: CO# Course Outcome Bloom’s Level 5 Apply MRP, purchasing and SCM techniques into practice. 3 3 Dept. of ME, JSSATE, Bengaluru Forecasting Learning Objectives: After completing this module, you should be able to:
- 4. 4 Dept. of ME, JSSATE, Bengaluru • A technique of determining the quantity and timing for the acquisition of dependent demand items needed to satisfy the MPS requirements. • A computerized inventory control and production planning system. • The main objective of any inventory system is to ensure that material is available when needed. • One objective of MRP is to maintain the lowest possible level of inventory. • MRP does this by determining when component items are needed and scheduling them to be ready at that time, no earlier and no later. Material Requirement Planning
- 5. 5 Dept. of ME, JSSATE, Bengaluru Material Requirement Planning Source: OM by Russel & Taylor
- 6. 6 Dept. of ME, JSSATE, Bengaluru • MRP is useful for dependent and discrete demand items, complex products, job shop production, and assemble-to-order environments. • Managing component demand inventory is different from managing finished goods inventory. • Independent demand is demand for a finished product, such as a computer, a bicycle, or a pizza. • Dependent Demand: Demand for components that are derived from the demand for the other items. • Parent and component items: A parent is an assembly made up of basic parts or components. When to use MRP; Terms
- 7. 7 Dept. of ME, JSSATE, Bengaluru Source: OM by Russel & Taylor Terms used in MRP
- 8. 8 Dept. of ME, JSSATE, Bengaluru • Lot size: The quantity of items required for an order (purchased from vendor or produced in-house). • Time phasing: Scheduling to produce or receive an appropriate amount (lot) of material so that it will be available in the time periods when needed – not before or after. • Time bucket: The time period used for planning purposes in MRP, usually a week. • Bill of materials: A listing of all the components (subassemblies and materials) that go into an assembled item. It includes the part numbers and quantity required per assembly. Terms used in MRP
- 9. 9 Dept. of ME, JSSATE, Bengaluru • Gross requirements: The total expected demand for an item or raw material during each time period without regard to the amount on hand. • For end items, these quantities are shown in the master schedule; for components, these quantities are derived from the planned-order releases of their immediate “parents.” • Projected on hand: The expected amount of inventory that will be on hand at the beginning of each time period (scheduled receipts plus available inventory from last period). • Net requirements: The actual amount needed in each time period. Terms used in MRP
- 10. 10 Dept. of ME, JSSATE, Bengaluru • Scheduled receipt: Materials already on order from a vendor or in-house shop. In MRP, both the quantity and the projected time of receipt are shown. • Planned receipt: Materials that will be ordered from a vendor or in-house shop. Otherwise, it is similar to scheduled receipt (no difference in some MRPs) • Lead-time offset: The supply time, or number of time buckets between releasing an order and receiving the materials. • Planned order release: The plan (quantity & date) to initiate the purchase or manufacture of items so that they will be received on schedule after the lead time offset. • Time fence: Management-specified date within which no changes in the master schedule are allowed. Terms used in MRP
- 11. 11 Dept. of ME, JSSATE, Bengaluru Source: OM by Russel & Taylor Inputs and Outputs of MRP Which end items are to be produced, when they are needed, and in what quantities. A listing of all of the assemblies, subassemblies, parts, part costs, and raw materials that are needed to produce one unit of a finished product. A database of information on every item produced, ordered, or inventoried. Bill of Materials
- 12. 12 Dept. of ME, JSSATE, Bengaluru • A listing of all of the assemblies, subassemblies, parts, part costs, and raw materials that are needed to produce one unit of a finished product. • Single level BoM and Indented BoM • Engineering bill of materials (EBOM) and Manufacturing bill of materials (MBOM) • EBOM- finished product details as it was originally designed. • (MBOM) contains information on all the parts and assemblies required to build a complete and shippable product (includes packing materials). Bill of Materials
- 13. 13 Dept. of ME, JSSATE, Bengaluru https://help.openbom.com/2018/09/08/bom-single-level-multi-level-flattened/ Bill of Materials
- 14. 14 Dept. of ME, JSSATE, Bengaluru Bill of Materials
- 15. 15 Dept. of ME, JSSATE, Bengaluru Bill of Materials Indented or Multi-level BoM
- 16. 16 Dept. of ME, JSSATE, Bengaluru • A visual depiction of the requirements in a bill of materials, where all components are listed by levels. Product Structure Tree Source: OM by Stevenson, W J Assembly Diagram
- 17. 17 Dept. of ME, JSSATE, Bengaluru Product Structure Tree Source: OM by Stevenson, W J
- 18. 18 Dept. of ME, JSSATE, Bengaluru Product Structure Tree Source: OM by Stevenson, W J
- 19. 19 Dept. of ME, JSSATE, Bengaluru Product Structure Tree
- 20. 20 Dept. of ME, JSSATE, Bengaluru Product Structure Tree
- 21. 21 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 1 • Use the information presented in the figure to do the following: • Determine the quantities of B, C, D, E, and F needed to assemble one X. • Determine the quantities of these components that will be required to assemble 10 Xs, taking into account the quantities on hand (i.e., in inventory) of various components: Source: OM by Stevenson, W J
- 22. 22 Dept. of ME, JSSATE, Bengaluru Product Structure Tree Source: OM by Stevenson, W J
- 23. 23 Dept. of ME, JSSATE, Bengaluru Product Structure Tree Thus, for one X, quantities of components required are: B = 2; C = 1; D = 6; E = 24+2+2 = 28; F = 2 Solution: a
- 24. 24 Dept. of ME, JSSATE, Bengaluru Product Structure Tree Solution: b Thus, for 10 Xs, quantities of components required are: B = 16; C = 0; D = 40; E = 100+16 = 116; F = 0 Source: OM by Stevenson, W J
- 25. 25 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 2 • An end product P is assembled by three subassemblies, A, B and C. Subassembly A consists of two units of D, two units of E and one unit of F. To make B, one G and three units of H are needed. Subassembly C requires two units of J and one unit of F. Component D requires two units of J and one K. • (a) Construct product structure tree for P mentioning the levels. • (b) Develop an indented level of bill of materials • (c) Compute the quantities of each component to produce 200 units of P
- 26. 26 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 2 P Level 0
- 27. 27 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 2 P Level 0 B C A Level 1
- 28. 28 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 2 P Level 0 B C A G H 3 J 2 D 2 F E 2 F Level 1
- 29. 29 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 2 P Level 0 B C A G H 3 J 2 D 2 F E 2 F Level 1 K J 2
- 30. 30 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 2 Bill of Materials Part No. or Name Qty. Level A 1 1 D 2 2 J 2 3 K 1 3 E 2 2 F 1 2 B 1 1 G 1 2 H 3 2 C 1 1 F 1 2 J 2 3 Product P Level 0
- 31. 31 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 2 Bill of Materials Part No. or Name Qty. per one P Total Qty. Required A 1 1 x 200 = 200 B 1 1 x 200 = 200 C 1 1 x 200 = 200 D 2 2 x 1 x 200 = 400 E 2 2 x 1 x 200 = 400 F 1 (1 x 200 )+ (1 x 200) = 400 G 1 1 x 1 x 200 = 200 H 3 3 x 1 x 200 = 600 J 4 (2 x 2 x 1 x 200) + (2 x 1 x 200) = 1200 K 1 1 x 2 x 200 = 400 Total P required = 200 units
- 32. 32 Dept. of ME, JSSATE, Bengaluru MRP Processing (Logic) • The MRP process consists of four basic steps: • (1) exploding the bill of material • (2) netting out inventory • (3) lot sizing, and • (4) time-phasing requirements. • The process is performed again and again, moving down the product structure until all items have been scheduled. Source: OM by Russel & Taylor
- 33. 33 Dept. of ME, JSSATE, Bengaluru MRP Processing (Logic) - Matrix Source: OM by Russel & Taylor
- 34. 34 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 3 • Complete the following MRP matrix for an item X: • In what periods should orders be released, and what should be the size of those orders? Source: OM by Russel & Taylor
- 35. 35 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 3 • Solution: Source: OM by Russel & Taylor
- 36. 36 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 4 • Complete the following MRP matrix for an item X. Determine when orders should be released and the size of those orders. Source: OM by Russel & Taylor
- 37. 37 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 3 • Solution: Source: OM by Russel & Taylor Item X Period in Weeks Lot size: 50 LT: 2 weeks 1 2 3 4 5 6 7 8 Gross requirements 25 30 56 25 100 40 30 20 Scheduled receipts 50 Projected on hand 30 5 25 19 44 0 10 30 10 Net requirements 31 06 56 40 20 0 Planned order receipts 50 50 56 50 50 Planned order releases 50 50 56 50 50
- 38. 38 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 4 • Complete the following MRP matrix for an item X. Determine when orders should be released and the inventory at the end of week 8. Item X Period in Weeks Lot size: 500 LT: 4 weeks 1 2 3 4 5 6 7 8 Gross requirements 150 150 150 150 200 200 180 320 Scheduled receipts 500 500 500 Projected on hand 300 150 0 350 200 0 300 120 300 Planned order releases 500 500
- 39. 39 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 4 • Complete the following MRP matrix for an item X. Determine when orders should be released and the inventory at the end of week 8. • MRP should have planned order releases of 500 units in week 2 and 4. • There are 300 units on hand at the end of week 8. Item X Period in Weeks Lot size: 500 LT: 4 weeks 1 2 3 4 5 6 7 8 Gross requirements 150 150 150 150 200 200 180 320 Scheduled receipts 500 500 500 Projected on hand 300 150 0 350 200 0 300 120 300 Planned order releases 500 500
- 40. 40 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 5 • Eighty units of end item E are needed at the beginning of week 6. Three cases (30 units per case) of J have been ordered and one case is scheduled to arrive in week 3, one in week 4, and one in week 5. • Note: J must be ordered by the case, and B must be produced in multiples of 120 units. There are 60 units of B and 20 units of J now on hand. Lead times are two weeks each for E and B, and one week for J. • Prepare a material requirements plan for component J.
- 41. 41 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 5 • Prepare a material requirements plan for component J. • Suppose that in week 4 the quantity of E needed is changed from 80 to 70. The planned-order releases through week 3 have all been executed. How many more Bs and Js will be on hand in week 6?
- 42. 42 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 5 Item E Period in Weeks Lot size: 80 LT: 2 weeks 1 2 3 4 5 6 Gross requirements 80 Scheduled receipts Projected on hand Net requirements 80 Planned order receipts 80 Planned order releases 80
- 43. 43 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 5 Component B (2) Period in Weeks Lot size: 120 units LT: 2 weeks 1 2 3 4 5 6 Gross requirements 160 Scheduled receipts Projected on hand 60 60 60 60 20 20 20 Net requirements 100 Planned order receipts 120 Planned order releases 120
- 44. 44 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 5 Component J (4) & J (3) Period in Weeks Lot size: 30 units (1 case) LT: 1 week 1 2 3 4 5 6 Gross requirements 480 240 Scheduled receipts 30 30 30 Projected on hand 20 20 20 50 80 110 110 Net requirements 460 160 Planned order receipts 480 180 Planned order releases 480 180
- 45. 45 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 5 Component J (4) & J (3) Period in Weeks Lot size: 120 units LT: 1 week 1 2 3 4 5 6 Gross requirements 480 240 Scheduled receipts 30 30 30 Projected on hand 20 20 20 50 80 50 50 Net requirements 460 160 Planned order receipts 480 180 Planned order releases 480 180
- 46. 46 Dept. of ME, JSSATE, Bengaluru Product Structure Tree – Example 6
- 47. 47 Dept. of ME, JSSATE, Bengaluru Purchasing and Supply Chain Management
- 48. 48 Dept. of ME, JSSATE, Bengaluru Purchasing, Procurement • Purchasing is the first phase of Materials Management. • Purchasing refers to the actual buying of materials and the activities associated with it. • Procurement includes purchasing, transportation, warehousing and inbound receiving. • Procurement is a closed loop process that begins with the requisition and ends with the payment.
- 49. 49 Dept. of ME, JSSATE, Bengaluru Purchasing • Purchasing is a managerial activity that goes beyond the simple act of buying. • It includes research and development for the proper selection of materials and sources, follow-up to ensure timely delivery; inspection to ensure both quantity and quality; to control traffic, receiving, storekeeping and accounting operations related to purchases. • The modern thinking is that Purchasing is a strategic managerial function and any negligence will ultimately result into decrease in profits.
- 50. 50 Dept. of ME, JSSATE, Bengaluru Purchasing - Importance • Purchasing function provides materials to the factory without which wheels of machines cannot move. • A one percent saving in materials cost is equivalent to a 10 percent increase in turnover. Efficient buying can achieve this. • Increasing proportion of one’s requirements are now bought instead of being made as was the practice in the earlier days. Buying, therefore, assumes significance. • Purchasing is the main factor in timely execution of industrial projects. • Materials management organisations that exist now have evolved out or purchasing departments.
- 51. 51 Dept. of ME, JSSATE, Bengaluru Purchasing -Objectives • To pay reasonably low prices for the best values obtainable, negotiating and executing all company commitments. • To keep inventories as low as is consistent with maintaining production. • To develop satisfactory sources of supply and maintain good relations with them. • To secure good vendor performance including prompt deliveries and acceptable quality. • To locate new materials or products as required. • To implement such programmes as value analysis, cost analysis, and make-or-buy to reduce cost of purchases.