MRP Inventory & Customer Service and Forecasting Methods

Week 5 Guidance

If you did not start on your final project last week, then start this week.  Go to week 6 and read about the final project.  Please follow the rubric closely.  That is what I will grade you by.  You need to think about how you will present all information in this paper.   The more outside readings you have the easier it will be to put the paper together.  Please try to stay within the length guidelines. If you have question please let me know.  Waiting until the last week of class to put this paper together is not a wise move!  Remember, it cannot be late.  Please follow all directions carefully; it is worth a large portion of your total grade for the six weeks.  I will grade hard, but that should not be a problem for anyone because I hope I have you trained well in this area.

Well, it is almost over.  The fat woman (lady) is warming up her vocal chords.  She will be singing and dancing a jig before you know it.  I am sure several of you will be joining her.

 Chapter 9

  Video: https://youtu.be/jLPnYpZx980

 

·       Dependent demand item needs are generated from higher level item needs of which they are a part.

·       The dependent demand needs tend to be lumpy and not dispersed uniformly.

·       Dependent demand item needs are calculated from higher level item needs of which they are a part.

·       MRP creates schedules identifying the parts and materials required to be purchased or manufactured, time of the order release as well as the size of the order or production quantity. 

·       MRP keeps track of inventory levels and serves as a link between inventory, purchasing and production.

·       MRP inputs are:

a.      Master Production Schedule

b.      Bill of Materials                                                

c.      Inventory Records

·       Master Production Schedule is the driving force and the control mechanism of the MRP system because it specifies the quantity required of each end item or key assembly by time period.

·       The theme of MRP is producing or purchasing the right materials at the right time and having them available in the right places.

·       The MRP system uses backward scheduling. It uses low-level-coding and starts at the end item level and explodes requirements level-by-level.

·       MRP provides feedback about delayed or cancelled orders, changes in quantities and due dates of open and future orders.

·       MRP nervousness occurs as a result of the high frequency of updating the MRP system and the amount and timing of changes, cancellations, additions, delays in order/manufacturing quantities of an MRP system. If an MRP system is updated too frequently, the system becomes unstable and inefficient. On the other hand, if the system is not updated frequently enough, the system becomes inflexible. The trade-off between stability and flexibility can be balanced with the use of time fences. Time fence is a time period between current date and some time into the future where the schedule is frozen and no changes are allowed in the master production schedule. The shorter the time fence the more flexible and nervous the system is and the longer the time fence the more stable and inflexible the system is.

·        ERP constitutes the most general level of planning, followed by MRP II and MRP, while shop floor scheduling and control involves the most detailed planning.  

 

Chapter 10

Video: https://youtu.be/zERrqLFotSY

 

This is a fairly long and important chapter. Important points are:

1.            Good inventory management is important for successful organizations.

2.            The key issues are when to order and how much to order.

3.            Because all items are not of equal importance, it is necessary to establish a          classification system for allocating resources for inventory control.

4.            EOQ models answer the question of how much to order. Variations of the basic EOQ                  model include the quantity discount model and the economic run size model.

5.            EOQ models tend to be rather robust: even though one or more of the parameters may       be only roughly correct, the model can yield a total cost that is close to the actual       minimum.

6.            ROP models are used to answer the question of when to order. Different models are       used, depending on whether demand, lead time, or both are variable.

7.            Other models described are the fixed interval model and the single period model in the       supplement.

8.            All of the models in this chapter pertain to independent demand.    

             

The Single-Period Model is used to handle ordering of perishables (such as fresh fruits and vegetables, seafood, and cut flowers) as well as items that have a limited useful life (such as newspapers and magazines). Analysis of single-period situations generally focuses on two costs: shortage and excess. Shortage costs may include a charge for loss of customer goodwill as well as the opportunity cost of lost sales or unrealized profit per unit. Excess cost pertains to items left over at the end of the period and is the difference between purchase cost and salvage value. There may be costs associated with disposing of excess items which would make the salvage value negative and hence increase the excess cost per unit.