A number of quantity-determination (lot-sizing) procedures have been developed
The primary consideration in MRP lot-sizing procedures is the nature of the net requirements data
Requirements don’t reflect the independent demand assumption of constant uniform demand
Requirements are discrete
Requirements can be lumpy
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Manufacturing Planning and ControlMPC 6th EditionChapter 6aAdvanced Material Requirements PlanningAfter the initial phase of Material Requirements Planning (MRP) is complete, advanced issues become the new focus of the firm.AgendaDetermining Manufacturing Order QuantitiesA number of quantity-determination (lot-sizing) procedures have been developedThe primary consideration in MRP lot-sizing procedures is the nature of the net requirements dataRequirements don’t reflect the independent demand assumption of constant uniform demandRequirements are discreteRequirements can be lumpyMRP Lot-Sizing AssumptionsAll requirements occur at the beginning of the periodAll future requirements must be met (no backorders)Ordering decisions occur at regular intervalsRequirements are appropriately offset for manufacturing lead timesComponent requirements are satisfied at a uniform rate during each periodDetermining Order QuantitiesEconomic Order Quantity (EOQ)Simple, widely used techniqueAssumes constant, uniform demandMay require adjustment when demand is lumpyPeriodic Order Quantity (POQ)Uses EOQ formula to compute time between orders (TBO)Lot-size varies based upon the forecast requirements for the coverage periodDoesn’t allow for combining orders during periods of light demandPart Period Balancing (PPB)Attempts to equalize the costs of ordering and holding inventoryConsiders alternate coverage periods and the scenario where ordering and inventory costs are most nearly equalWon’t always identify the cost-minimizing planWagner-Whitin AlgorithmOptimizing procedure to identify the cost-minimizing plan for a time-phased scheduleRequires much more computational effortMay not identify optimal plan under all conditionsBuffering against UncertaintyBuffering can be effective when uncertainty is unavoidableBuffering should not be used to accommodate a poorly performing MRP systemUncertainty has two main sourcesDemand–timing and quantitySupply–timing and quantitySafety Stock and Safety Lead TimeThere are two basic ways to buffer uncertaintySafety stock–additional stock intended to cover unanticipated requirementsSafety lead time–releasing orders earlier than necessary to ensure receipt before the required due datePerformance of Safety Stock vs. Safety Lead TimeTiming UncertaintyQuantity UncertaintySafety lead time outperforms safety stock under timing uncertaintySafety stock outperforms safety lead time under quantity uncertaintyOther Buffering TechniquesScrap allowances–useful if scrap is significant and unavoidableReduce uncertaintyIncrease forecast accuracy, improve system parameter accuracy (BOM, inventory), reduce lead times, improve product quality.Provide system slackAdditional production capacity to allow for unplanned requirementsSlack costs moneyNervousnessNervousness occurs when even small changes to higher-level MRP records or the master production schedule leads to significant changes in the MRP plansNervousness is most damaging in MRP systems with many levels in the product structureSome lot-sizing techniques (such as POQ) can amplify the nervousnessReducing System NervousnessPrinciplesMRP enhancements should be attempted only after a basic MPC system is in place.Discrete lot-sizing procedures can reduce inventory costs, but the complexity shouldn’t outweigh the savings.Safety stocks should be used when uncertainty is related to quantity.Safety lead times should be sued when uncertainty is related to timing.PrinciplesMRP system nervousness can result from lot-sizing rules, parameter changes, and other causes. Precautions should be taken to dampen the amplitude and impact.Uncertainty needs to be reduced before implementing complex procedures.MRP system enhancements should follow the development of ever more intelligent users.Quiz – Chapter 6aWhat is the primary consideration when selecting a lot-sizing procedure?In a situation where the main source of uncertainty is due to timing of customer orders, which buffering strategy would be expected to perform best?In a situation where the main source of uncertainty is due to quantity of demand, which buffering strategy would be expected to perform best?
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