module-iv bu pom notes

8/6/2019 Module-IV bu pom notes

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Asst Prof Arvind GajakoshBE, MBA, NET


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It is a simple system of calculating arithmetically the

requirement of the i/p materials at different points

of time, based on the plan or schedule of production

of finished good. MRP is a computer based information system for

scheduling production and purchase of dependent

demand items.

MRP is a system of planning & scheduling the item

phased materials requirement for production

operations.


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Materials requirements planning (MRP) is a means fordetermining the number of parts, components, andmaterials needed to produce a product

MRP provides time scheduling information specifyingwhen each of the materials, parts, and componentsshould be ordered or produced

Dependent demand drives MRP

MRP is a software system


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Inventory reduction

Reduction in production and delivery lead times

Realistic commitments


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Three major sources of information are mandatory in

the MRP system. (i/p)

A master production schedule (MPS)

An inventory status file A bill of materials (BOM) file

Using these three info sources the MRP processing

logic provides following o/p.

Order release requirement Order rescheduling

Planned orders


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6

The McGraw-Hill Companies, Inc., 2004

Firm orders

from known

customers

Forecasts

of demand

from random

customers

Aggregate

product

plan

Bill of

material

file

Engineering

design

changes

Inventory

record file

Inventory

transactions

Master production

Schedule (MPS)

Primary reports

Secondary reports

Planned order schedule for

inventory and production control

Exception reports

Planning reports

Reports for performance control

aterial

planning

( RP

computer

program)

MRP Model/System


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The MPS is developed from firms customer orders or

from forecasts of demand before the MRP system

begins to operate.

The MPS is designed to meet market demand. Service components for customers are also entered

as end items in the MPS.

The MPS provides the focal info for the MRP system.


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Based on a MPS (master production schedule), amaterial requirements planning system:

Creates schedules identifying the specific parts and

materials required to produce end items

Determines exact unit numbers needed

Determines the dates when orders for those

materials should be released, based on lead times


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It consists the complete documentation of the

inventory status of each item in the product

structure, on hand quantity safety stock level,

quantity allocated and lead time. This file provides accurate info about of every item

controlled by the MRP system.

Pegging

Identify each parent item that created demand


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The BOM identifies how each end product is

manufactured, specifying all sub component items,

their sequence, their quantity in each finished unit.

This info is obtained from product designdocuments, work flow analysis & other stdmanufacturing & industrial engg documentation.

The primary info to the MRP from the BOM is the

product structure.


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B(4)

E(1)D(2)

C(2)

F(2)D(3)

A

Product Structure Tree for Assembly A Lead Times

A 1 day

B 2 days

C 1 day

D 3 days

E 4 days

F 1 day

Given theproduct structure tree for A and the lead time and demandinformation below, provide a materials requirements plan that defines thenumber of units of each component and when they will be needed


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Planned orders to be released at a future time Order release notices to execute the planned

orders

hanges in due dates of open orders due torescheduling

Cancellations or suspensions of open orders dueto cancellation or suspension of orders on themaster production schedule

Inventory status data


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Planning reports, for example, forecasting inventoryrequirements over a period of time

Performance reports used to determine agreement

between actual and programmed usage and costs

Exception reports used to point out seriousdiscrepancies, such as late or overdue orders


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As the MRP system is of dynamic nature, it reacts

well to the changing conditions.

MRP can identify potential bottlenecks and capacity

problems far enough in advance to adapt theschedule to them.

MRP system helps in planning & scheduling the item

phased material requirement for the production

operations.


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A computer is necessary

The product structure must be assembly oriented.

A valid master schedule has to be prepared.

BOM and inventory status info must be assembledand computerized.

Unreliable inventory and transactions data from the

shop floor can ruin a well planned MRP system.


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Goal: Plan and monitor all resources of a

manufacturing firm (closed loop):

manufacturing

marketing

finance

engineering

MRPII

is applicable to any manufacturing orgn,regardless of its size, location, product or process.

It provides info abt inventory investment levels,

plant expansion needs, & work force requirements.


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Enterprise Resource Planning Defined

R/3 System Components

Reasons for Implementing R/3

ERP


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Enterprise Resource Planning Systems is a computer

system that integrates application programs in

accounting, sales, manufacturing, and other functions

in the firm

It is a software package developed for optimum use of

resources of an enterprise in a planned manner.

It integrates entire enterprise starting from the

supplier to the customer, covering logistics, financial

and human resources.

This will enable the enterprise to increase

productivity by reducing costs.


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SAP AG, A German firm, is a world leader in ERPsoftware.

-Designed to operate

in a three-tierclient/serverconfiguration-Applications arefully integrated sothat data are shared

between allapplications


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R/3 SystemFunctional

Components

(ERP)

Sales & Distribution Human Resources

Manufacturing

& Logistics

Financial

Accounting


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Financials (daily transaction costs)

Controlling (working capital mgmt)

Asset management (current assets)


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Payroll

Benefits administration

Applicant data administration

Personnel development planningWorkforce planning

Schedule & shift planning

Time management

Travel expense accounting


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Materials management

Plant maintenance

Quality management

Production planning & control

Project management system


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Prospect & customer management

Sales order management

Configuration management

Distribution

Export controls

Shipping and transportation managementBilling, invoicing, and rebate processing


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Desire to standardize and improve processes

To improve the level of systems integration

To improve information quality


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Once a MPS is complete, we have to focus on

PPC. There are four types of PPC system.

Pond draining systems

Push systems Pull systems

Bottlenecks systems


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In the pond draining approach to PPC, the

emphasis is on holding reservoirs of materials tosupport production.

Pond draining system can be used in eitherproduct-focusedorprocess focusedproduction.

It requires little info about customers, suppliers

and production.

It may lead to excessive inventories to store RM.


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In push system emphasis shifts to using info

about customers, suppliers & production to

manage material flow.

Batches of RMs are planned to arrive at a factoryabout when needed to make batches of parts.

Push systems have resulted in great reductions

of RMs inventories & in greater worker and

machine utilization when compared to pond

draining systems.


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In pull systems of PPC, the emphasis is on

reducing inventory levels at every stage ofproduction.

In pull systems we look only at t

he next stageof production & determine what is needed there,

and then we produce only that.

RMs and parts are pulled from the back of the

factory toward the front of the factory where

they become FGs.


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Some PPC systems focus on production

bottlenecks that impede (delays) production

because they have less capacity than upstream

or downstream stages.

At bottleneck operations, batches of products

arrive faster than they can be completed.


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It is nothing but deciding future courses of action of

the orgzn well in advance so that executives at

different level will play their role.

PPC has three phases.

Planning phase

Action phase

Control phase


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It has two categories of a planning namely prior

planning & active planning.

Prior planning means pre-production planning.

Active planning means the actual production

planning which includes various activities directly

related to the production at micro level

immediately following the prior planning.

The modules of prior planning are product

development and design, forecasting, aggregateplanning etc.

The modules of active planning are process

planning and routing, loading, scheduling etc.


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This phase has the major step of dispatching.

Dispatching is the transition from planning phase to

action phase.

In this case the worker is ordered to start to

manufacturing the product.

The tasks which are included in dispatching are job

order, inspection order etc.


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This phase has the following two major modules.

Progress reporting: here data regarding what ishappening with the job is collected. Also it helps

to make comparison with the present level of

performance.

Corrective action: the tasks under correctiveaction primarily make provisions for an unexpected

event. Some examples of corrective actions are:

crating schedule flexibility, capacity modificationsetc.


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Determination of plant capacity

Production design is the first level planning for the

inputs, conversion activities & outputs of a

production operation.

Design capacity: it is the rate of o/p of goods or

services under full scale operating conditions.

Ex: a cement factory may be designed to produce

200 tons/day.


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System capacity: the max. o/p of a specific product

that the sys of workers & less equipments is

capable of producing as an integrated whole is

called system capacity.

System capacity may be less than that of the designcapacity.

System efficiency= Actual o/p___

system capacity


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Capacity is a measure of the ability to produce

goods or services.

Capacity planning is the task of determining the LT

& ST capacity needs of an orgzn and then

determining how these needs will be satisfied.

LT capacity strategies:

Develop a new product lines

Expand existing facilities

Construct production plants

ST capacity strategies : capacity decision are takenby considering the fluctuations in demand caused

by seasonal and economic factors.


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Equipment selection is the process of identifying a

set of suitable equipments which are most suitable

for processing a set of products.


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It arranges the sales forecasts & sales orders.

It minimizes the working capital.

It ensures a better control of material.

It utilizes an optimum combination of resources andmethods to bring down production cost.

It ensures an orderly flow of production resulting in

the avoidance of rush orders, & minimizing

overtime.

It gives a better service to the customers by

producing the right product in the right quality and

at the right time.


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It is a selection of path or route over which every

piece is to travel in being transformed from RM into

FP.

Objectives of routing:

To decide the most feasible sequence of operations

and to ensure that the same are followed.

To utilise inputs like machines, materials, men etc.

in the most economical way.

To influence the design of the factory layout,building, machines etc.


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Value analysis is one of the major techniques of

cost prevention.

It is a disciplined approach that necessary functions

at min. cost without compromising on quality,

reliability, performance & appearance.

The society of US Value engineering was found in

1959.

The society of Japan Value engineering was found

in 1967. The society of India Value engineering was found in

1977. (INVEST-Indian Value engineering Society)


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Companys product shows decline in sales.

Companys prices are higher than those of its

competitors.

RM cost has gone up suddenly.

New designs are being introduced.

Rate of return on investment has a falling trend.


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Value analysis is the application of a set of

techniques to an existing product with a view to

improving its value.

Value engg is the application of exactly the same

set of techniques to a new product at the designstage, project concept or preliminary design.


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Cost value (labor, material, OH cost)

Exchange value (money or product)

Use value (price paid by the buyer)

Esteem value (appearance of the product)

Value = Performance (utility)

cost

Value can be increased by increasing the utility for

the same cost or by decreasing the cost for the

same utlity.


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Simplify the product.

Use cheaper and better materials.

Modify product design.

Use efficient processes.

Reduce the product cost.

Increase the utility of the product.

Save money or increase the profit.


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Identify the product

Collect relevant info

Define different functions

Different alternatives

Critically evaluate the alternatives

Develop the best alternative

Implement the alternative.


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It is much faster cost reduction technique.

It is a less expensive technique.

It reduces production costs and adds value to sales

income of the product.

Application of value engg: machine tool industries,

auto industries etc.


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Cost control:

Manufacturing cost is controlled by wastage

reduction, value analysis, inventory control and

efficient utilization of all resources.

Cost reduction:

Here this focuses on how to reduce the existing

cost of the product.

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