Chapter 7: Material Requirements Planning

Question 1

What is a material requirements plan

Answer 1

It is a logical plan.
It aggregates the production system to produce products at the right time, place, and in the right quantities. MRP systems are present in small, medium and large organizations.

Question 2

What are important reasons for implementing an MRP system

Answer 2

• the operating efficiency of a plan needs to be improved
• customer service needs to be improved
• investment in inventory needs to be minimized

Question 3

What is the meaning of dependency of demand

Answer 3

It means that demand for one item depends on the demand for another item, it is more common in the manufacturing environment.

For example, the demand for tires and engines is dependent on a motor vehicle being built.

Question 4

Explain demand management

Answer 4

It takes place once an organization has received orders from customers and also makes decisions based on the forecast demand. One cannot exist without the other.

Question 5

An organization must have the correct processes in place to enable it to interface with the market. What are the examples of these processes

Answer 5

• keeping an order book
• entering every sale into the order book
• forecasting demand
• promising orders by customers to the sales force
• distributing the finished product to customers

Question 6

To guarantee that the dependent demand is used effectively it is important that an operations manager has the following knowledge:

Answer 6

• all information concerning delivery lead times: the lead time is the time it will take a supplier to deliver
• specific bills of materials: a bill of materials (BOM)
• inventory that is available in stock: stock that’s in the warehouse
• a master production schedule: schedule informs workers about what component to manufacture and when
• orders outstanding from suppliers: the operations manager should know which materials and parts suppliers have not yet delivered

Question 7

What are the three basic inputs into the MRP system

Answer 7

Input 1: MPS
Input 2: BOM
Input 3: accurate inventory records

Question 8

Explain the master production schedule (input 1)

Answer 8

The MPS is the document that spells out what has to be manufactured and by which time the manufactured product has to be finished. It is therefore a recipe that informs the operations department about what needs to be manufactured.

Question 9

Explain the bill of materials - BOM structure (input 2)

Answer 9

The BOM is a list that contains all the items needed to build one item of a finished product and must contain all items whether manufactured by the organization or bought from outside suppliers.

-modular bills
-phantom bills
-planning bills
-low-level coding

Question 10

Explain modular bills

Answer 10

Modular BOMs are used for products with modular design. Modular design entails that all the parts or components required to manufacture an organizations products can be divided into modules that are easily interchangeable or replaced when it is required

Question 11

Explain phantom bills

Answer 11

Are created for subassemblies that are not used on a regular basis to justify their own BOMs

Question 12

Explain planning bills

Answer 12

Is used during the planning stage of a product

Question 13

Explain low level coding

Answer 13

Takes place when identical items are used at various levels of a BOM

Question 14

Explain accurate inventory records (input 3)

Answer 14

Inventory records are the stored information regarding the status of all items required at a specific time period or in a time bucket. The following will be included in the time bucket:
- Gross requirements for each part
- Scheduled receipt date of the material
- Stock on hand in the warehouse or store

Question 15

The MRP systems outputs are classified in two types of reports

Answer 15

1. Primary reports - main reports produced
2. Secondary reports - optional reports produced

Question 16

What are the main reports produced under primary reports

Answer 16

• change report: details all the changes that can be done to existing orders
• orders planned: provides information regarding the number of orders
• orders released: this report is the authorization to start work

Question 17

What are the optional reports produced under secondary reports

Answer 17

• reports relating to performance control: evaluates the performance of the system and operations management
• reports relating to planning: used to forecast future inventory demand
• exception reports: highlight any major deviation from what has been planned

Question 18

Explain safety stock

Answer 18

It’s also referred to as buffer stock and it is the inventory that compensates for unexpected fluctuations in supply and demand

Question 19

Explain lot sizes

Answer 19

Lot sizing is selecting the optimal size of a batch of products to be manufactured to meet the requirements of the process

Question 20

What are the dynamics of MRP

Answer 20

• when changes occur in the design of a product or in the schedules for items and production processes the BOM and MRP must also be changed
• many organizations do not replan their materials plan if only small changes take place over time
• if too many changes are made to the materials plan, it develops system nervousness

Question 21

What are the two basic methods to prevent system nervousness

Answer 21

1. Time fences - method designates a certain portion of the MPS that is not rescheduled
2. Pegging - pegging is upward tracing of materials and components in the BOM from lower levels to the parent part to enable the planner to determine the reasons behind changes in requirements

Question 22

What are the advantages of using a material requirements planning system

Answer 22

• avoidance of inventory problems
• effective linkages between planning efforts
• early identification of problem areas
• highlights hidden problems
• instantaneously available information

Question 23

MRP requires a detailed MPS

Answer 23

• the MPS is an inaccurate document that does not reflect the true situations
• plans are changed at a moment’s notice
• system nervousness is present
• the forward planning part of the MPs is inadequate

Question 24

What are the disadvantages of using an MRP system

Answer 24

• MRP requires a detailed MPS
• inadequate information available on the BOM, outstanding orders, suppliers and lead time, effort required in recording information is too much
• information collected is incorrect - any error has major negative impact