BITS Pilani

Pilani|Dubai|Goa|Hyderabad

Master Production Schedule

1
Master Production Schedule

A master production schedule (MPS) is a plan for individual commodities to be

produced in each time period such as production, staffing, inventory, etc. It is
usually linked to manufacturing where the plan indicates when and how
much of each product will be demanded.

It is for the finished products that are to be sold to the customer

2
Shoe Manufacturer Problem
Each year, a shoe manufacturing company faces demands (which must be met
on time) for 3000, 5000, 2000 and 1000 pairs of shoes in the 4 consecutive
months respectively. Determine how to minimize the cost of meeting the demands
for shoes. The entire demand of the shoes has to be met.
Units to produce in
Input data each month
Initial inventory of shoes 500
Initial number of workers 100 How many workers to
Regular hours/worker/month 160 fire in each month
Maximum overtime hours/worker/month 20
Hiring cost/worker $1,600 How many workers to
Firing cost/worker $2,000 hire in each month
Regular wages/worker/month $1,500
Overtime wage rate/hour $13 No. of overtime hours
Labor hours/pair of shoes 4 to be used each month
Raw material cost/pair of shoes $15
Holding cost/pair of shoes in inventory/month $3
3
MRP
Topics

1. Dependent Demand
2. MRP Structure
3. MRP Management
4. Lot-Sizing Techniques
5. Extensions of MRP
6. MRP In Services
7. Enterprise Resource Planning (ERP)
Parts of a product

 No of parts in a product- hundreds/thousands.

 Number of suppliers of parts- dozens/hundreds.
 Lead time supply parts- days to months.
List of parts vs. BoM (Bill of Materials)

List of parts BoM = List of parts + Assembly tree

Bills of Material (BoM)

 List of components, ingredients,

and materials needed to make
the product +
 Product structure
 Items above a given level are called
parents
 Items below a given level are called
components or children

BoM = List of parts + Assembly tree

MRP Example from Textbook
BoM of a Speaker kit
BOM tree

Level Product structure for “Awesome” (A)

0 A

1 B(2) C(3)

2 E(2) E(2) F(2)

3 D(2) G(1) D(2)

 Requirement of parts for 50 speaker kits

Part B: 2 x number of As = (2)(50) = 100

Part C: 3 x number of As = (3)(50) = 150
Part E: 2 x number of Bs
+ 2 x number of Cs = (2)(100) + (2)(150) = 500
Part F: 2 x number of Cs = (2)(150) = 300
Part G: 1 x number of Fs = (1)(300) = 300
Part D: 2 x number of Bs
+ 2 x number of Fs = (2)(100) + (2)(300) = 800
Lead Time

The time required to purchase, produce, or Component Lead time

assemble an item A 1 week
 For production– sum of move, setup, and assembly or B 2 weeks
run times. C 1 week
 For purchased items– time between the recognition of D 1 week
a need and when it's available for production. E 2 weeks
F 3 weeks
G 2 weeks

Lead time

Ordered Received
Time-Phased Product Structure

Must have D and E

Start production of D completed here so
production can begin
on B
1 week
2 weeks to
D produce
B
2 weeks
E
A
2 weeks 1 week
E
2 weeks 1 week
G C
3 weeks
F
1 week
D
| | | | | | | |

1 2 3 4 5 6 7 8
Time in weeks
MRP Structure
Gross Requirements Plan
Determining Gross Requirements…1

 Starts with a production schedule for the end item (50

units of Item A in week 8).
 Using the lead time for the item, determine the week
in which the order should be released (a 1-week lead
time means the order for 50 units should be released
in week 7). This step is called "lead time offset" or
"time phasing"
 From the BOM, every Item A requires 2 Item Bs – 100
Item Bs are required in week 7 to satisfy the order
release for Item A
 The lead time for the Item B is 2 weeks – release an
order for 100 units of Item B in week 5
Determining Gross Requirements…2

 The timing and quantity for component requirements

are determined by the order release of the parent(s).
 The process continues through the entire BOM one
level at a time– often called "explosion."
 By processing the BOM by level, items with multiple
parents are only processed once, saving time and
resources and reducing confusion.
 Low-level coding ensures that each item appears at
only one level in the BOM.
Net Requirements Plan

2 × number of As = 80

3 × number of As = 120
Net Requirements Plan

2 × number of Bs = 130
2 × number of Cs = 200

2 × number of Cs = 200

2 × number of Bs = 130
2 × number of Fs = 390

1 × number of Fs = 195
Determining Net Requirements…1

 Starts with a production schedule for the end item – 50 units of

Item A in week 8.
 Because there are 10 Item As on hand, only 40 are actually
required – (net requirement) = (gross requirement – on-hand
inventory).
 The planned order receipt for Item A in week 8 is 40 units – 40
= 50 – 10.
 Following the lead time offset procedure, the planned order
release for Item A is now 40 units in week 7.
 The gross requirement for Item B is now 80 units in week 7.
 There are 15 units of Item B on hand, so the net requirement is
65 units in week 7.
 A planned order receipt of 65 units in week 7 generates a
planned order release of 65 units in week 5.
Determining Net Requirements…2

 The on-hand inventory record for Item B is updated to

reflect the use of the 15 items in inventory and shows no
on-hand inventory in week 8.
 This is referred to as the Gross-to-Net calculation and is
the third basic function of the MRP process.
Lot-Sizing Techniques…1

1. Lot-for-lot technique
 Orders just what is required for production based on net requirements.
 May not always be feasible.
 If setup costs are high, lot-for-lot can be expensive.

2. Economic order quantity (EOQ)

 EOQ expects a known constant demand but MRP systems often deal
with unknown and variable demand.

3. Periodic order quantity (POQ)

 Orders quantity needed for a predetermined time period
 Interval = EOQ / average demand per period
 Order quantity set to cover the interval
 Order quantity recalculated at the time of the order release
 No extra inventory.

4. Many more
 Lot-for-Lot Example

WEEK 1 2 3 4 5 6 7 8 9 10
Total
Gross requirements 35 30 40 0 10 40 30 0 30 55 270
Scheduled receipts

Projected on hand 35 35 0 0 0 0 0 0 0 0 0

Net requirements 0 30 40 0 10 40 30 0 30 55

Planned order receipts 30 40 10 40 30 30 55

Planned order releases 30 40 10 40 30 30 55

Holding cost = $1/week; Setup cost = $100; Lead time = 1 week

No on-hand inventory is carried through the system.

Total holding cost = $0
There are 7 setups for this item in this plan.
Total ordering cost = 7 x $100 = $700
MRP in Services

(a) PRODUCT STRUCTURE TREE

Buffalo Chicken Mac & Cheese

Garnish with Buffalo Chicken Baked Buffalo Chicken Mac &

mix, Blue Cheese, Scallions Cheese

Unbaked Buffalo Chicken Mac

& Cheese

Buffalo Chicken Mix

Grated
Smoked Blue Cooked Mac &
Buffalo Pepper Chopped
Pulled Cheese Elbow Cheese Milk
Sauce Jack Scallions
Chicken Crumbles Macaroni Base
Cheese
Extensions of MRP

 MRP-II: Resources required

 Closed-Loop MRP: Feedback to MPS
 Capacity Planning- Capacity of work centers
 DRP- Distribution Resource Planning

 ERP- Enterprise Resource Planning

Enterprise Resource Planning (ERP)

ERP modules include

 Basic MRP
 Finance
 Human resources
 Supply-chain management (SCM)
 Customer relationship management (CRM)
 Sustainability
MRP

Master
Production
Schedule

Inventory Bills of
Management Material

Work
Orders

Purchasing Routings
and and
Lead Times
Table 13.6 Lead Times
ERP and MRP
SAP's ERP Modules

30
Enterprise Resource Planning (ERP)

 ERP systems-
 Reduce transaction costs
 Increase the speed and accuracy of information
 Facilitates supply chain integration
 Can be expensive and time-consuming to install

31