MRP is a tool to deal with these problems. It provides answers for several questions: What items are required? How many are required? When are they required? MRP can be applied both to items that are purchased from outside suppliers and to subassemblies, produced internally, that are components of more complex items. The data that must be considered include: The end item or items being created. How much is required at a time. When the quantities are required to meet demand.
Shelf life of stored materials. Inventory status records. Records of net materials available for use already in stock on hand and materials on order from suppliers. Bills of materials. Details of the materials, components and sub-assemblies required to make each product. Planning Data. This includes all the restraints and directions to produce the end items. Output 2 is the "Recommended Purchasing Schedule". This lays out both the dates that the purchased items should be received into the facility AND the dates that the Purchase orders, or Blanket Order Release should occur to match the production schedules.
Messages and Reports: Purchase orders. An order to a supplier to provide materials. Reschedule notices. These recommend cancelling, increasing, delaying or speeding up existing orders. If there are any errors in the inventory data, the bill of materials commonly referred to as 'BOM' data, or the master production schedule, then the output data will also be incorrect "FIFO": First In, First Out.
Data integrity is also affected by inaccurate cycle count adjustments, mistakes in receiving input and shipping output, scrap not reported, waste, damage, box count errors, supplier container count errors,production reporting errors, and system issues.
Many of these type of errors can be minimized by implementing pull systems and using bar code scanning. Another major problem with MRP systems is the requirement that the user specify how long it will take for a factory to make a product from its component parts assuming they are all available.
Additionally, the system design also assumes that this "lead time" in manufacturing will be the same each time the item is made, without regard to quantity being made, or other items being made simultaneously in the factory.
A manufacturer may have factories in different cities or even countries. It is not good for an MRP system to say that we do not need to order some material, because we have plenty thousands of miles away. The overall ERP system needs to be able to organize inventory and needs by individual factory, and inter-communicate the needs in order to enable each factory to redistribute components, so as to serve the overall enterprise.
This means that other systems in the enterprise need to work properly, both before implementing an MRP system and in the future. For example, systems like variety reduction and engineering, which makes sure that product comes out right first time without defects , must be in place. Production may be in progress for some part, whose design gets changed, with customer orders in the system for both the old design, and the new one, concurrently.
The overall ERP system needs to have a system of coding parts such that the MRP will correctly calculate needs and tracking for both versions. Parts must be booked into and out of stores more regularly than the MRP calculations take place. Note, these other systems can well be manual systems, but must.
For example, a 'walk around' stock intake done just prior to the MRP calculations can be a practical solution for a small inventory especially if it is an "open store". The other major drawback of MRP is that takes no account of capacity in its calculations.
This means it will give results that are impossible to implement due to manpower or machine or supplier capacity constraints. In the MRP II or MRP2 concept, fluctuations in forecast data are taken into account by including simulation of the master production schedule, thus creating a long-term control. A more general feature of MRP2 is its extension to purchasing, to marketing and to finance integration of all the functions of the company , ERP has been the next step.
Materials for which replenishment is only triggered by the kanban signal are not planned in the planning run. However, you can include these materials in long-term planning.
The materials are planned in the planning run and corresponding procurement proposals are created. These procurement proposals do not directly trigger replenishment but provide a preview of future consumption. In this process, replenishment is also triggered by the kanban signal. KANBAN WITHOUT MRP If you do not want the material to be included in the planning run, that is, you do not want any additional replenishment elements planned orders or purchase requisitions to be created, you have to exclude the material from the planning run in the storage location assigned to the supply area of the supply source.
If a material is procured without MRP, you must make the following settings:. You must also define from which storage location the components are to be backflushed.
If capacity requirements are to be created. If the material is to be included in long-term planning. However, the other storage locations are planned in MRP. You must maintain a repetitive manufacturing profile in the MRP data screen for replenishment strategies with a cost collector in-house production with run schedule quantities, manual KANBAN.
In the SAP standard system, a profile is available that is specially intended for KANBAN, that is, using this profile, the system creates a cost collector without a run schedule header. When the demand source requests a kanban from the supply source, the system creates a replenishment element run schedule quantity, production order, purchase order, and so on for the required quantity.
The material is replenished using this element and it is also backflushed with reference to this element. The system also posts the goods receipt to this element when the material is delivered. That is, procurement elements in this storage location do not create dependent requirements for the components of the material controlled by KANBAN procedures.
Therefore, if a material planned in this way has lower-level components, these components can only be procured using KANBAN or consumption-based planning procedures. However, it is possible to plan the component requirements using long-term planning. In long-term planning, you can also create simulative dependent requirements for KANBAN materials which provides you with the information you require to negotiate with your vendors.
This means: Procurement elements in storage locations that are included in MRP trigger the creation of dependent requirements for lower-level components. Procurement elements in storage locations that are excluded from MRP do not trigger the creation of dependent requirements for lower-level components.
If a material is planned and procured with MRP, you must make the following settings: You must maintain a valid MRP type for the material. This means, the setting "ND" No planning is not allowed. The origins of MRP go back to the early s, a few decades before the widespread computerization of the nuts and bolts of manufacturing logistics. Its inventor, Joseph Orlicky, developed the system in response to the established Toyota Production System later known under the generalized name of Kanban.
Despite the fact that both systems have been around for more than 40 years now, the debate over the merits of MRP and Kanban still continues. Kanban has its flaws as well, especially when it comes to responding to dramatic disruptions in supply or demand, which having a minimal inventory surplus could exacerbate.
Ohno actually anticipated this criticism of his system and provided a rebuttal, saying that by trimming down the excesses around the production process, exposing the manufacturer to the potential dangers mentioned above, Kanban drives manufacturers to redouble their efforts into boosting efficiency across the entire enterprise.
The shortfalls of both systems have resulted in some companies developing hybrid Push-Pull systems where demand estimates are far more accurate and inventory quotas are driven by study of actual sales figures. Hybrids like these could very well be the manufacturing system to look at going forward. Browse Business Software Categories A.
Accounting Application Development Asset Management. The bill of materials may not accurately represent the product components or assembly stages, or ongoing inventory transactions may not be correctly entered in the inventory records, or the master production schedule may not be updated to reflect the latest actual demands and delivery dates.
To Japanese managers, kanban or the just-in-time system is an approach for providing smoother production flows and making continual improvements in processes and products. Kanban attempts to reduce work in progress to an absolute minimum. In addition, the system constantly attempts to reduce lead times, work-in-process inventories, and setup times. To achieve this, the system attempts to eliminate stock between the successive processes and to minimize any idle equipment, facilities, or workers.
Kanban assumes that the production rate at the final assembly line is even. Revisions in the monthly master production schedule needed to meet market condition changes must be small. It also requires that the daily schedule for each part or assembly remain nearly the same every day. Kanban has its roots in employee motivation and assumes that workers will perform at their best when they are entrusted with increasing responsibility and authority.
Each kanban worker has the right to stop the assembly line when he or she is falling behind or discovers a defective part or subassembly. The approach also assumes that employees will help other people when they fall behind and that each person is capable of doing different types of jobs. The kanban approach keeps the setup times and costs at negligible levels.
The just-in-time system requires strict discipline and cooperation on the part of management, supervisors, and workers, along with new methods and procedures for manufacturing planning and control. Up to now, kanban has been used for mass-produced items in Japan, Europe, and more recently in North America. The kanban move ticket replaces the job orders and routing sheets of the past.
It emphasizes small lot sizes. The system requires short lead times, which translate into small inventories at every stage. Because a chain of move tickets connects all stages from suppliers to retailers, companies never need additional paperwork for planning and control. Kanban is a pull system; the user department pulls the part or subassemblies from the supplier departments.
No extra production or inventories are permitted. Most companies that use kanban also have quality circles that work to cut down on lot sizes, reduce lead and setup times, help solve vendor problems, and minimize scrap losses. Workers are highly motivated to implement their own suggestions with kanban. A Chrysler plant in Canada that has used kanban reports great reductions in its inventory levels.
Appliance makers like General Electric, Westinghouse, RCA, and others are also experimenting with kanban in some of their plants. Not every application of kanban is a success story. The factory receives its plastic body panels five times each day from the Budd Company, located miles away in Ohio. GM assembly division increased its inventory turns from 22 in to 28 in and is now shooting for turns per year.
GM has modified kanban and other procedures of its own to accommodate the extended geographic range of its suppliers. It is also bringing suppliers in at the design stages of components and subassemblies.
GM suppliers are now pressing for long-term contracts, so the company is trying to reduce the number of suppliers from the 3, it now uses. The assembly division is also emphasizing statistical quality control competence with every supplier. It hopes to soon totally eliminate receiving inspection in its plants. Finally, GM has recently begun to commission truckers with smaller, more maneuverable trucks.
Big units or complex subassemblies need to be scheduled separately under routine planning and control procedures. Products that need to be run in small lots or those needed infrequently also have to be scheduled under routine procedures. Kanban cannot tolerate a constantly changing master production schedule and starts breaking down if there are frequent revisions in volumes or models.
Advocates claim it can simultaneously maximize the use of critical resources and the plant output and minimize work-in-process inventories and manufacturing lead times or throughput times. This approach determines priorities for each operation using a weighted function of a number of important criteria, like advantageous product mix, due dates, necessary safety stocks, and use of bottleneck machines.
These factors must be carefully established and fine-tuned right at the start. OPT is a proprietary computer software package, which accepts data regarding production requirements and manufacturing facilities normally available from the plant records.
The system then tests the existing work load and spotlights capacity bottlenecks. OPT uses its algorithm to schedule individual jobs efficiently, while taking care of the existing bottlenecks. Developers of this system claim that their process breaks down a total production plan into separate stages and searches for the best possible detailed schedule.
Since production data are rarely accurate, no schedule can be perfect. They also stress that it makes use of an ideal batch size for each product at every production stage. OPT does require, however, detailed information about inventory levels, product structures, routings, and setup and operation timings for each and every procedure of each product.
The developers claim that only the bottleneck stages need to be planned in detail; the other phases can be planned in very general terms. They also assert that the system takes into account scores of factors that control production efficiency, plant capacity, work in progress, setup times, substitutions, overlapping among process batches, subcontracts, and safety stocks.
The program plots these factors on a nine-dimensional graph and determines a near-optimum combination. The OPT originators are aggressive sellers. In companies employing about people, OPT can be implemented within two or three months. Theoretically, MRP requires rerunning after each disruption. It can provide 1, work instructions within 30 seconds. Users report, however, that the system works best for situations that involve a few fundamental products with large batch sizes but each with only a few operations.
Fewer procedures mean smaller product networks and hence a system that may be easy to work with. About companies worldwide have bought OPT packages. Most were facing serious capacity or production lead-time problems.
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