Chapter 7

Question 1

What are the benefits to material requirements planning (MRP)?

Answer 1

1. better respond to customer orders as a result of improved adherence to schedules
2. improved utilization of facilities and labor
3. faster response to market changes
4. reduced inventory levels

Question 2

The dependence technique used in a production environment is called…

Answer 2

material requirements planning (MRP)

Question 3

Effective use of dependent inventory models requires that the operations manager know the following:

Answer 3

1. Master production schedules (what Is to be made and when)
2. Specifications or bill of material (material and parts required)
3. Inventory availability (what is stock)
4. Purchase orders outstanding (what is on order, expected receipts)
5. Lead Times (how long does it take to get various components)

Question 4

Demand for items is dependent when…

Answer 4

the relationship between the items can be determined.

Therefore, once management receives an order or makes a forecast for the final product, quantities for all components can be computed.

Question 5

When the requirements of MRP are met…

Answer 5

dependent models are preferable to the EOQ models. Dependent models are better not only for manufacturers and distributors but also for a wide variety of firms.

Question 6

What is the basis of Enterprise Resource Planning (ERP)?

Answer 6

MRP because it provides such a clean structure for dependent demand

Question 7

What is ERP?

Answer 7

ERP is an information system for identifying and planning the enterprise-wide resources needed to take, make, ship and account for customer orders.

Question 8

What is a Master Production Schedule (MPS)?

Answer 8

A master production schedule (MPS) specifies what is to be made and when. The schedule must be in accordance with the production plan. The production plan sets the overall level of output in broad times. The plan also includes a variety of inputs, including financial plans, customer demand, engineering capabilities, labor availability, inventory fluctuations, supplier performance and other considerations.

While the aggregate production plan is established in gross terms such as families of products or tons of steel. The Master Production schedule is established in terms of specific products.

Question 9

As the planning process moves from the production plan to execution…

Answer 9

each of the lower-level plans must be feasible.

One of the major strengths of the MRP is its ability to determine precisely the feasibility of a schedule within aggregate capacity constraints.

Question 10

The master schedule can be expressed in any of the following terms…

Answer 10

1. A customer order in a job shop (make-to order)
2. Modules in a repetitive focus company (assemble-to-order)
3. An end item in a continuous company (stock-to-forecast)

Question 11

What is a bill of material?

Answer 11

a list of components, ingredients, materials needed to make a product

Question 12

what are modules?

Answer 12

modules are not final products to be sold but are components that can be produced and assembled into units

Question 13

What are planning bills?

Answer 13

sometimes called Pseudo bills or super bills. They are created in order to assign an artificial parent to the BOM. Such bills are used:

1. When we want to group subassemblies so the number of items to be scheduled is reduced.
2. When we want to issue ‘kits’ to the production departments.

Question 14

what is low level coding?

Answer 14

Low level coding of an item in a BOM is necessary when identical items exist at various levels in the BOM. Low level coding means that the item is coded at the lowest level at which it occurs. It is a convention to allow easy computing of the requirements of an item.

Question 15

comment on lead time for components

Answer 15

Once managers determine when products are needed, they determine when to acquire them. The time required to acquire an item is known as lead time. Lead time for a manufactured item consists of move, setup and assembly times for each component. For a purchased item, the lead time includes the time between recognition or need for an order and when it is available for production.

Question 16

Components of MRP system?

Answer 16

A master production schedule, a BOM, inventory and purchase records, and lead times for each item are the ingredients of a material requirements planning system.

Question 17

what is a gross material requirements plan?

Answer 17

The gross material requirements plan is a schedule. It combines master production schedule and the time-phased schedule. It shows when an item must be ordered from suppliers if there is no inventory on hand or when the production of an item must be started to satisfy demand for the finished product by a particular date

Question 18

what is a net requirements plan?

Answer 18

So far we have considered gross material requirements, which assumes that there is no inventory on hand. When there is inventory on hand, we prepare a net requirements plan.

Question 19

comment on safety stock

Answer 19

Realistically, managers need to realize that BOMs, inventory records and lead times may not be perfect. This means that some consideration of safety stock may be prudent. Safety stock should be minimized, with the goal of ultimate elimination. When safety stock is deemed absolutely necessary, the usual policy is to build it into the projected on-hand inventory of the MRP logic. Distortion can be minimized when safety stock is held at the finished goods level at the purchased component or raw material level.

Question 20

what are the different lot sizing techniques?

Answer 20

1. Lot for lot
2. Economic order quantity (EOQ)
3. Part period balancing

Question 21

what is a lot sizing technique?

Answer 21

An MRP system is an excellent way to determine production schedules and net requirements. However, whenever we have a net requirement, a decision must be made about how much to order. This decision is called a lot sizing technique.

Question 22

comment on lot for lot technique

Answer 22

Lot for lot technique produces exactly what it requires. This decision is consistent with the objective in an MRP system which is to meet the requirements of dependent demand. Thus, and MRP system should produce units only as needed, with no safety stock and no anticipation of further orders. When frequent orders are economical and just in time inventory techniques are implemented, lot for lot can be very efficient. However, when setup costs are significant or management has been unable to implement JIT, lot for lot can be expensive.

Question 23

comment on economic order quantity (EOQ) technique

Answer 23

EOQ can be used as a lot sizing technique But as we indicated there, EOQ is preferable when relative constant independent demand exists, not when we know the demand. EOQ is a statistical technique using averages whereas MRP assumes known demand reflected in a master production schedule. Operations should take advantage of demand in information than it is known rather than assuming a constant demand.

Question 24

comment on part period balancing technique

Answer 24

PPB is a more dynamic approach to balance setup and holding costs. PPB uses additional information by changing the lot size to reflect requirements of the next lot size in the future. PPB attempts to balance setup and holding cost for known demands.