Mechanical Engineering Department, Engineering College, 26-04-2021

Ajmer

Learning Outcomes
8ME1A: Computer Integrated Manufacturing Systems

Inventory types

Inventory control procedures

Tarun Kumar Aseri
Asst. Prof.
Mechanical Engineering Material Requirements
Engineering College, Ajmer Planning (MRP)
Barliya Circle, NH-8,
Ajmer-305025, India Manufacturing Resource
Email: tarunaseri[at]ecajmer.ac.in planning (MRP II)

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Tarun Kumar Aseri Mechanical Department

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Inventory Management Inventory Types

• Raw material and purchased components
• Achieving an optimum balance between two competing objectives: • Basic material out of which the product and components are made
• Purchased components are similar to raw material
To minimize • In-process inventory
investment in • The material during manufacturing lead time before the processing has been
inventory completed
• Finished product
• Stored finished product (service parts or product) in the factory or warehouse before
shipment
To maximize the • Maintenance, repair and tooling inventories
service level • Cutting tools and fixtures used to operate machines
(customer & • Repair parts needed to fix the machines that are under break down
Firm)

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Mechanical Engineering Department, Engineering College, 26-04-2021
Ajmer

Inventory control procedures Order point systems

To manage various kind of inventories, following two inventory control
• When to Order and How much to Order
procedures can be used:
• Need to established a “REORDER POINT”
• Order point systems
• A computerized inventory control system, track the inventory level
• The traditional approach continuously as transactions are entered against existing stokes
• The items are restoked when the inventory level become LOW
• Appropriate control procedure for inventory type 3 and 4 (i.e. finished product,
maintenance and repair parts and tooling) Economic order quantity (EOQ)
• Material requirements planning
• Appropriate control procedure for inventory type 1 and 2 (i.e. raw material,
purchased components and in-process) × ( )× ( )
=
( )

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Economic order quantity (EOQ) Example

• Economic lot sizes • The annual usage (demand rate) for the drill is 8000 unit per year
• Safety stock levels • The cost to place an order, including vendor’s setup charge, is $100.
• Ordering policies and • The holding cost to carry the drill inventory is $1.60 per drill per year
reorder points • Determine the order quantity for the drill
• ABC inventory analysis 2× ×
• Automatic generation of =
requisitions for purchasing
× ×$
= = 1000
$ .
• Each time an order is placed, it is most economical to order 1000 units

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Mechanical Engineering Department, Engineering College, 26-04-2021
Ajmer

Material Requirements Planning (MRP) Material Requirements Planning (MRP)

Product A
• It is Computational Technique that converts the master schedule for Material A
end products into a detailed schedule for the raw material and Material B Assembly A Product A
components used in the end products. Material C Product B
Material D Raw
• The detailed schedule identifies the quantities of each raw material and . materials
Assembly B Product B
component item . Product C
.
• It also tells when each item must be ordered and delivered so as to Material n Assembly C Product C
meet the master schedule for the final product Product n

• MRP is often considered to be a subset of inventory control • All these steps must be incorporated into the MRP computations.
• An effective tools to minimize the unnecessary inventories investment • Although each separate computation is uncomplicated, the magnitude of all the
• MRP also useful in production scheduling and purchasing of materials data to be processed is large and dynamic
• Hence, with out computer aided facility, the master schedule could not be
followed.
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Basic concepts of MRP Independent versus dependent demand

• Independent versus dependent demand • Independent demand means that demand for a product is unrealated to
• Lumpy demand demand for other items
• Example: End product and spare parts
• Lead times
• Dependent demand means that demand for the item is related directly
• Common use items to the demand for some other product
• Component parts, raw material and subassemblies
• At the time of forecasting the demand for the end product, the raw
material and component parts are not forecasted
• As the delivery schedule get established than the requirement of the
raw material and component parts are estimated.

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Mechanical Engineering Department, Engineering College, 26-04-2021
Ajmer

Lumpy Demand Lead times

• In general, the demand of component, raw materials occur at gradual, • The allowable time to get complete a job from start to finish.
continuous type. • Two type of lead time:
• The large increments correspond to the quantities needed to make a • Ordering lead time
certain batch of the final product. • Manufacturing lead time
• Ordering lead time: time between initiation of purchase requisition to
LUMPY DEMAND receipt of the item from the vendor.
• MRP is an appropriate approach for dealing with inventory situation • Manufacturing lead time: Time needed to process the part through the
characterized by lumpy demand. sequence of machines specified on the route sheet

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Common use items Customer

orders
Sales forecasts
Service parts
requirements

• Several product are can be manufactured with basic raw materials

Master
• A component may be used in different product Engineering
production
Inventory
changes transaction
schedule
• MRP collect these common-use-items from different product to effect
Structure of
economies in ordering the raw material and manufacturing the MRP system
Bill of MRP Inventory
components. material file Processor record file

Output
reports

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Mechanical Engineering Department, Engineering College, 26-04-2021
Ajmer

Customer Service parts Customer Service parts

Categories Sales forecasts Sales forecasts
orders requirements orders requirements

Master Master
Engineering Inventory Engineering Inventory
production production
changes transaction changes transaction
schedule schedule
BOM and
Structure of
Structure of
MRP system
Bill of MRP Inventory Product Bill of MRP Inventory
material file Processor record file material file Processor record file

Output Output
reports reports

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Customer
orders
Sales forecasts
Service parts
requirements MRP Output Reports
• The material requirements planning program generates a variety of
Master outputs that can be used in the planning and management of plant
Engineering Inventory
changes
production
transaction
operations.
schedule
• Primary Outputs are:
Structure of 1. Order release notice, to place orders that have been planned by the MRP
MRP system system
Bill of MRP Inventory 2. Report showing planned orders to be released in future periods
material file Processor record file 3. Rescheduling notices, indicating changes in due dates for open orders
4. Cancellation notices, indicating cancellation of open orders because of
change in the master schedule
Output 5. Reports on inventory status
reports

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Mechanical Engineering Department, Engineering College, 26-04-2021
Ajmer

MRP Output Reports

• Secondary Outputs are:
1. Performance reports of various types, indicating cost, item usage, actual
versus planned lead times and other measures of performance

2. Exception reports, showing deviations from schedule, orders that are

overdue, scrap and so on • Secondary Outputs are:
1. Performance reports of various types, indicating cost, item
3. Inventory forecasts, indicating projected inventory levels (both aggregate usage, actual versus planned lead times and other measures of

inventory as well as item inventory) in future periods.

MRP Output 2.
performance
Exception reports, showing deviations from schedule, orders
Reports that are overdue, scrap and so on
3. Inventory forecasts, indicating projected inventory levels (both
aggregate inventory as well as item inventory) in future
periods.
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Benefits of MRP Manufacturing Resource Planning (MRP II)

• Reduction in inventory
• MRP mainly affects raw materials, purchased components and work-in-process • The purpose was to offer a broader planning and control tool to its
inventories.
• Users claim a 30% to 50% reduction in work-in-process predecessor, the MRP 1.
• Improved customer service • MRP 2 is a computer-based system that creates production schedules
• Some MRP proponents claim that late orders are reduced 90% including the arrival of materials, machine and labor.
• Quicker response to change in demand and in the master schedule • MRP II defines what resources, what quantities, and at what time they
• Greater productivity will be necessary to carry out all business production processes.
• Claims are that productivity can be increased by 5 to 30% though MRP
• Labor requirement are reduced correspondingly • Ideally, it addresses operational planning in units and financial
• Reduced setup and product changeover cost
planning .
• Better machine utilization
• Increased sales and reductions in sales price
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Mechanical Engineering Department, Engineering College, 26-04-2021
Ajmer

Manufacturing Resource Planning (MRP II) Manufacturing Resource Planning (MRP II)
• In addition to answering questions about what, how many and when to In addition to the MRP I tools, the MRP II calculates and solves:
purchase materials from MRP I, MRP II answers the following
questions: • The planning of the manufacturing resources of the organization
• What resources are necessary? • Ability to simulate production processes
• What amount of resources?
• Optimized calculation of routes and work centers
• When will these resources be necessary?
• MRP II identifies the capacity problems of the production plan. It • It is based on the study of demand and the market.
resolves the divergences between the availability of resources and • It covers more departments, not only production but also
planned consumption.
purchasing, quality, financial, etc.

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The inputs are: Advantages of an MRP II

• Work Progress Feedback, showing how the work has progressed, to all The advantages of using an MRP II System are shown below:
levels of the schedule so that the next run can be updated on a regular basis.
• All the advantages coming from MRP I
• Resource Scheduling, which is the calculation of resources to convert the
raw materials into finished goods. • Optimization of machinery usage and productivity improvement
• Batching Rules takes into account the logic which batches are produced (i.e. • Coordination and control of production and inventories
EBQ, Lot for Lot, etc.) • Ease of adaptation to order changes.
• Rough Cut Capacity Planning (RCCP), to match the workload to the • Reduction of outsourcing and idle times
capacity available.
• Financial knowledge of planned and real production.
• Software extension programs, such as including sale orders processing, cost
accounting, etc.

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Mechanical Engineering Department, Engineering College, 26-04-2021
Ajmer

MRP vs MRP II Summary

Stands for Material Requirements Planning Stands for Manufacturing Resource Planning
Inventory management system, four types of inventory and
inventory control procedures
Plan the needs for materials Plan the needs for resources

Material Requirements Planning (MRP), Basic concept, detailed

It comprises only the manufacturing area It includes the entire organization

structure of MRP system and Benefits of MRP

It is an open system Closed loop manufacturing resource planning

It responds to what, how much and when to acquire It responds the same as MRP I, and also how much and when it
MRP II, concept and advantages over MRP
materials will be produced, and what are the available resources

Improves the materials and production scheduling Improves productivity

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Thank you for

your kind
attention

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