3 – Cherry – The Production Planning Process (starting at Demand Management)
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Mart Doyle
The Materials Requirements Planning Record.
The MRP record is a way of viewing the quantities of raw materials and when they will be needed in order to produce the necessary amount of a product. The following will review the different components of a MRP record as well as using Fitter Snacker as an example to explain how the numbers are obtained.
The first step in preparing the record is converting he quantities of raw materials from cases to 500-pound batches. Each shipping case of oats weighs 72 pounds, so to go from cases to the number of batches you will need to multiply the number of cases needed for the week (provided by the MPS) by 72 and then divide by 500. This will tell how many batches are needed to produce the required number of product for the week. Next the Gross Requirements need to be calculated. This is done by multiplying the converted quantity of cases in terms of batches by the amount of a raw material needed per batch. Next on the record are the scheduled receipts which tell the expected arrival dates of the raw material orders. Following the scheduled receipts are the planned receipts which tell when the planned orders are to arrive. A Planned order is an order that has not yet been placed but will need to be at a specific time in order to ensure that there are enough of a raw material on hand. The on hand row shows how much of a raw material is on hand at the start of the week. Last on the record is the planned orders row. The planned quantities are recommendations for the quantity that should be ordered in order to prevent running out of a raw material.
Multiple Choice:
An MRP Record can show the following information:
a. The quantity of a raw material that will be needed to produce the necessary amount of a product.
b. When a raw material should be ordered to ensure that there is enough materials on-hand to fulfill the production schedule demand.
c. How much of a raw material is on-hand at a given time.
d. all of the above
(D)
The specific view of data is frequently called the MRP record, which is the standard way of viewing the MRP process on paper.
• The first two rows of the MRP record are the MPS that was the output from Demand Management
• The next row is Gross Requirements. The Gross Requirements figures are calculated by multiplying the MPS quantity (in production batches) by the pounds of oats needed for a batch of snack bars
• The next row is Scheduled Receipts. This row shows the expected arrival dates of ordered of materials that have already been placed, meaning that the supplier has been given the purchase order and is in the process of fulfilling it
• The next row is Planned Receipts, which shows when Planned Orders will arrive
• Next is the On Hand row
• The last row is Planned Orders. This is the quantity that the MRP calculation recommends ordering, and it is the output from the MRP process that is used by Purchasing to determine what to order to produce the product and when to order it.
One of the important steps in creating a purchase order is the selection of the vendor. Using the source overview screen in SAP’s integrated software, employee’s can view a wealth of informatrion about each vendor, simulate the price from each vendor, as well as look at a vendor evaluation.
Q. Which of the followin are ways of configuring the SAP/R3 system to rate vendors
a) quality of goods provided
b) on-time delivery
c) both a and b
d) none of the above
Answer: c
By using the system, FS can select the best vendor every time they make an order. Since multiple vendors are in the system, they can monitor whose prices are the lowest and change which vendor they place the order with each time. By doing this, FS can be reducing their expenses rather than just keeping them steady or increasing.
MRP process creates planned orders to purchase raw material to meet the dependent requirements based on the record created by the production plan.MRP also provides the general view of the purchase requisition and purchase order. Depend on the situation, the planner can review and make changes to the planned order.The process carried on quickly without potential errors by receieving a request after planned order is converted to a purchase requisition. The MRP can automatically create purchase requisition based on some rules previously set. MRP’s Source Overview Screen provides the up-to-date information about the vendor in order to help the planner to evaluate each vendor and select the best one.
Using Demand Management, FS is able to link the Sales and Operations Planning process with the Detailed Scheduling and MRP processing. Master Production Scheduling is the production plan for all finished goods. MPS is an input to MRP. Fitter Snacker uses Demand Management to split monthly production planning. The MPS plan intergrates purchasing in this process. Demand Management involves little to no human input yet input from other processing systems. By intergrating systems that have the data history, Fitter Snacker has a better handle on forecasting.
MPS records link:
A. Sales and Operations planning
B. Detailed Scheduling
C. MRP processes
D. Both B & C
Answer: D. Both B & C
In FS case, because information on sales and demand is not shared between Marketing and Production, the company coould not generate an accurate Master Production Scheduling. Basically, because the information is not available in real time, it is difficult for them to feasibly share the information. Because FS does not have a very accurate Master Production Scheduling, the company’s efficiency is reduced since the production does not match very well with the sale forecast.
ERP Systems allow data to be entered in real time. When providing production data to accounting, data can be entered into the SAP R/3 through third-party hardware. The accounting is impacted by material transaction when using an ERP. Once receipts are on record, the system automatically updates the inventory. With ERP, capturing data for inventory and manufacturing eliminates the need to reconcile records.
How does using a ERP assist in accounting?
A. Company can hire fewer accountants
B. Productivity increases
C. Records can be in real-time
D. Company can buy new software
Answer: C.
I agree that an ERP system would definitely help with accounting. I think it would also greatly benefit Fitter Snacker’s production plan since one of their major issues is that their inventory levels are not always accurate. With an ERP system, their inventory would be updated in real-time, which would prove to be extremely helpful in both the production planning process and for any accounting involving Fitter Snackers.
Accounting is definitely one of the most crucial benefactors. Providing correct and consistent data is important not only for the company but for customers as well.
Accounting is surely a key in maintaining customer loyalty (no customer would want to be charged more than the product’s worth, and no company wants to be paid less for a product), but there is also the investor aspect which is not addressed in the book. Investors, especially institutional investors, dig through those financial reports and determine the company’s financial health based on it.
Also, financial reports are late, as happens with old, disintegrated systems, it can potentially trigger a panic, which would adversely affect stakeholders.
Demand management is the step that links the sales and operations planning process with Detail Scheduling and Material Requirement Planning. The input of the process is the sales and operations planning process and the information from factory calendar. The factory calendar is used to determine how many working day of each month/week.
The output of this process is the mater production schedule which indicates the production plan for all the finished goods (i.e. which ones to make and when to make them). For the FS example, the mater production schedule is planned on a week by week basis. To calculate the weekly production plan:
(Monthly demand) * ( # of working days in week)
( # of working days in the month)
The FS Company cannot generate an accurate master production schedule because the information is not shared between Marketing, in which sales forecast is generated and Production.
Question: Which statement below is NOT true:
a. Input for the Demand Management is the factory calendar
b. Master Production Schedule can be planned by week or by day
c. Demand Management does not link with Material Requirement Planning
d. Accurate Master Production Schedule cannot be archieved if information is not shared between Production and Marketing.
The correct answer is C
here is an example of where integration could help significantly. without proper coordination between departments, there is inaccurate, or incomplete information. therefore the FS company cannot go throgh the necessary steps to produce their products in a timely, efficient manner.
It seems that extensive scheduling is ideal for a company to continue producing without problems like manufacturing too much or too little. The integrated system along with forecasting tools would help Fitter Snacker to produce a proper schedule and produce an accurate amount each period.
Material Requirement Planning in SAP gives users the overview of the Planned Oder and the Dependent requirement. Based on the record created by the production plan, the MRP process creates planned orders to purchase raw material to meet the dependent requirements. The Material Requirement Planning also provides the general view of the purchase requisition and purchase order. Depend on the situation, the planner can review and make changes to the planned order before making a purchase requisition. When a planned order is converted to a purchase requisition, a request is sent to the Purchase to place the order. This makes the process carried on quickly without potential errors.
The MRP can automatically create purchase requisition based on some rules previously set (i.e. the planned order would be converted to purchases requisition within a specific amount of time). One more advantage of the MRP is that its Source Overview Screen provides the up-to-date information about the vendor (prices, rating, quality of goods) in order to help the planner to evaluate each vendor and select the best one.
Questions:
What is the right order when placing an order using MRP system:
a. Purchase requisition -> planned order -> purchase order
b. Planned order -> purchase requisition -> purchase order
c. Purchase requisition -> order review-> purchase order
d. Planned order -> purchase order -> purchase requisition.
The correct answer is B
By placing all of this onto a computer it also makes it easier for information to flow from person to person. It may be different in Fitter Snacker but when placing orders in my office a lot of people have to look at them and adjust it accordingly. By having such an integrated and controlled system errors can be avoided and one purchase order can be made for my office with less error.
Materials Requirements Planning (MRP) is the process that determines the quantity and timing of the production or purchase of subassemblies and raw materials needed to support the Master Production Schedule (MPS). This process tackles the question, “what do we need to produce the product, and when do we need to order those raw materials to ensure sufficient time in the production process?
The Bill of Material (BOM) gives the manufacturer a list of materials, including quantities, that are needed to make a product. This list includes all subassemblies and raw materials. Lead times and lot sizing are also utilized in determining timing and quantity of production. Lot sizing answers question such as, “how many raw materials are needed to produce this product?” and “how much quantity of a purchased item do we actually need?” Management must ensure that planned inventories are sufficient to meed sales forecasting and consumer demands. Allowing enough time in between ordering raw materials and the actual production of the product is essential in meeting these demands.
Multiple Choice Question:
What of the following is NOT a goal that the MRP process tackles?
A. determining what subassemlies are needed to manufacture product
B. determining what quantity of raw materials is neeeded to manufacture product
C. determining plans for development of machine capacity and available labor
D. determing the amount of time needed between ordering raw materials and the actual production of the product.
Correct answer is (C).
Bill of Material (BOM) is a list of the materials (including quantities) needed to make a product. To determine timing and quantity or purchase orders requires information on lead time and lot sizing. Lead time is the sum of the time required for the supplier to receive and process the order, take material out of stock, package it, load it on a truck and deliver it to the manufacturer. The MRP process answers the question “What do we need to order to produce the product, and when do we need to order these raw materials?” Materials Requirements Planning (MRP) is the process that determines the quantity and timing of the production or purchase of subassemblies.
7 Example of Weekly Master Production Schedule
• Convert quantities from cases to 500-pound batches.
• Multiply the number of batches by the pounds per batch quantities (which is given in the BOM) to get the gross requirements for each raw material
• Subtract the existing raw material inventory and purchase orders that have already been placed from the gross requirements to determine the net requirements
• Plan orders in multiples
Materials Requirement Planning is clearly very important to companies. It helps to ensure the the company is operating at peak efficiency by enabling the production manager to know exactly what materials need to be ordered, when the materials need to be ordered, and what quantity needs to be ordered. The company will save money because the production manager will no longer be blindsided by increased demand and forced to pay expedited shipping rates. Also, MRP could prevent the production manager from ordering too much of a perishable ingredient, thus reducing waste.
Materials Requirements Planning is becoming more and more essential to the business process, especially for future sales planning. Your response was simple but to the point. MRP systems help plan what you need to produce what and the lag time in producing what is needed. This obviously will help serve the customer better by being able to explain exactly where the order is in process. This is also aided by using a Bill of Material, which specifically states the raw materials needed to produce a given product. Using these systems help streamline the ordering process, eliminating most duplicate orders and gives the salespeople a better understanding of what is involved in making the products.
Detailed Scheduling is a decision on the amount of time that the production lines spend producing different products. Longer production runs mean that fewer machine setups are required and would cut production cost, and shorter production runs would be used for lower the inventory levels for finished products. The detailed scheduling decision needs to balance between setup cost and holding costs to minimize total cost of the company.
Fitter Snacker is able to use this function because it process under repetitive manufacturing, which allows production lines to switch from one product to another similar one.
The key to this section is that the duration of the production runs should be decided by evaluating the cost of equipment setup and holding inventory.
Question:
What advantages does “longer production runs” has?
a.Decrease of communication cost
b.Decrease of production cost
c.Decrease of transportation cost
d.Decrease of holding cost
Answer is b.
One important factor to consider in the Fitter Snacker model is the relatively short shelf life of the products. As a result, holding costs are much higher than in other industries because of the rate at which products spoil. For this reason longer production runs are not always desirable, but it depends on the particular business.
Would it be more efficient for Fitter Snacks to have separate productions lines to prevent downtime? The savings in time may compensate the cost of the extra equipment and eventually even save money
In my opinion, no because with the equipment they have, they are able to meet the production demand 11 out of 12 months without going into overtime. So why would they buy more equipment if they can produce what they need on one set. Not only would their expenses go up because they have to purchase it but they would need to increase the amount of people working so some can operate that machine as well there would be a lot of down time since they would not need to be running the machines all the time and if they did, then they would have a lot of inventory. So although they wouldn’t need to switch the single machine between their products, overall I think it would cause more of a loss than a gain.
I agree with Saraya that more equipment does not equal efficiency. In fact, it would add more unnecessary costs and inventory overload at times when demand is down.
I agree, you can see from the fitter snacker example that the products did not last very long, however, what about products on the market that proclaim freshness and things of that nature, how do you think that effects their production cycle and processing
Demand Managements processes break down the production process of a company into detailed scheduling. The output of this process is called the master production schedule (MPS). This basically determines which bars to make, how many to make, and when to make them. This demand management process beaks the monthly production planing values into finer time periods. It constantly breaks it down using simple division until a daily plan can be made. Using this process a company can determine how much product they have to produce on certain days to meet demand.
What is the lowest “finer time period” that Fitter Snacker breaks its production planning into?
A) Monthly
B) Hourly
C) Weekly
D) Daily <——- Answer
The Demand Management step of the production planning process links the Sales and Operations Planning process with the Detailed Scheduling and MRP processes. The output of the Demand Management process is the master production schedule (MPS), which is the production plan for all finished goods. The MPS is also an input in the MRP process, which determined what raw materials to order to support the production schedule. The daily production values for NRG-A and NRG-B were calculated by taking the monthly production plan value and dividing it by the number of working days in the month. The company cannot relate its possible sales to its capacity and to the time available to make to product. This, FS cannot produce an accurate MPS. The MPS is an input to the Detained Scheduling and MRP processes.
The Demand Management step of the production planning process links
A. Gross Requirements and Scheduled Receipts
B. the Sales and Operations Planning process with the Detailed Scheduling and MPS processes
C.the Sales and Operations Planning process with the Detailed Scheduling and MRP processes
D. Lead Times and Lot Sizing
C
I knew that Demand Management dealth with obtaining more raw materials for the company, I didn’t realize however that it also dealth with sales.
At the end of the production planning process, production data has to be provided to accounting. SAP R/3 allows data entry by using barcode reader, using a wireless PDA, and eventually, will be made with Radio frequency identification (RFID). Integrated ERP system allows material transaction can be recorded automatically. It also has the ability to adjust for changes in material cost. All data is entered in real time, and accounting and manufacturing records do not have to be reconciled since it is captured for both at the same time. A key point made, though, is that for ERP to be useful in this sense of recording data of supplies, employees must follow the process of recording the transaction. Accurate data requires both a capable information system and properly trained and motivated employees. This is just another reenforcement of the idea that an ERP system has no use if it is not being correctly used. Though it makes things significantly easier for employees, they still need to know how to enter the transactional data when materials comes in. They need to know how to accurately fill out a Goods receipt if using SAP R/3. The same applies when product is sold.
Which of the following data-collection tools will soon simplify the data collection process?
A) Radio Frequency Identification
B) Bar code reader
C) Wireless PDA
D) Manuel Entry
A
“Properly trained and motivated” is an important phrase. In many organizations, employees (and sometimes management) are set in their ways and considerable effort must be expended just to convince them that integrated systems are a better way of handling transactions. Only after the employees are willing to accept the new system can any efficient training program be pursued.
Companies like walmart already benefit from technology like this. Its amazing how many parts of the production and sales process is connects at a given point in time.
The Demand management step links the S and OP process with the MRP process. MPS stands for Master Production schedule, and it is the production plan for all finished goods. This MPS is the output for the Demand Management process. The Materials Requirement Process (MRP) determines the quantity and timing of the production or purchase of materials for products. In order to develop this process, the lead time and lot sizing must be found first. the lead time is the sum of the time required to receive and process an order, take material out of stock, package it, load it into a truck, and delier it to a manufacturer. Lot sizing is the process of determining production quantities and order quantities.
what is lot sizing?
the process of determining production quantities and order quantities.
Material Requirements Planning (MRP) allows a company such as Fitter Snacker to plan which materials they will need in advance. In addition to knowing what materials theyll need in advance, the SAP system will automatically generate purchase orders, taking into account lead times and lot sizing, and allow fitter snacker to send the purchase orders with a few simple clicks. This process give Fitter Snacker the ability to continuously run their operations without having to worry about their inventory needs, which means that the production line should never be shut down due to a lack of materials. This alone (not shutting down the production line), should save Fitter Snacker significant amounts of money.
The MRP system should do all of the following things except:
A) Save Fitter Snacker money.
B) Increase Fitter Snacker’s production capacity
C) Automatically create purchase orders.
D) Account for lot sizing and lead times.
Answer: B
A material requirements planning system would definitely be beneficial to Fitter Snacker. Worrying about inventory needs is very time consuming, and when a production line has to be shut down, it not only costs them crucial time, but also a lot of money.
The purpose of demand management is to figure out when to make a product. It sets out to figure out demand and does on a daily, weekly, or monthly basis. It can be broken down into days to figure out how much can be produce in months with different days. This is called the master production schedule and it doesn’t require user input. It can be determined by using the data from the sales and operation planning ( this details how to balance market demand with production capacity). Fitter Snacker does not do this because its systems are not integrated to where they can share info between marketing and production.
Here is the multiple choice question
If April 1st is a Thursday and the monthly demand for the NRG-A bars is 10,000 cases and the normal work week is Monday through Thursday, determine how many cases will be produced COMBINED in the 1st two weeks? ( Round down to the nearest number)
A. 2727cases
B. 3000 cases
C. 3333 cases Answer is C
D. 4500 cases
I am sorry i meant for the entire month so change 1st two weeks to the entire month.
The bill of material is the list of materials needed to make a product for a specified amount. Depending on the process of making the product determines the complexity in calculating the bill of materials. In Fitter case it is simple due to all ingredients being mixed together. The bill of material helps calculate how much of a material is needed to produce the final product.
Multiple Choice
If all of fitter ingredients besides raisins add up to 430 lbs for a 500 lb batch of NRG-A. How much of the raisins( in lbs) must be in the batch?
A. 70 lbs
B. 0 lbs
C. x> or equal to 0 lbs
D. x>0 lbs
Answer: D
Material Resource Planning, MRP, facilitates the purchasing of raw materials for a company. The bill of material, BOM, is a detailed list of each of the materials and quantities of materials needed to produce a particular product. With MRP, more than just what needs to be ordered is determined, but also when and how. Lead times are taken into consideration when ordering materials. This includes the time required for the supplier to process an order, package and ship that order, and the time necessary for the manufacturer to unload the order and start using the materials. Lot sizing is the process of determining production or order quantities. It is affected by packaging and shipping constraints. Lot sizing allows a company like Fitter Snacker to order supplies in a manner that is feasible and most efficient.
What does MRP not show?
A: How much raw material is needed
B:How long ordering materials will take
C:How much manpower is needed to process an order <—–
D:How much should be ordered at a time
Demand management allows a company to predict the amount of product to produce. Fitter Snacker determines the amount to produce most likely based on the experience of a manager. With an integrated ERP, Fitter Snacker would be able to forecast sales based on past sales. The Master Production Schedule is an integral component of demand management. The MPS outlines which products should be produced and when. Irregularities in data can be adjusted to provide the most accurate forecasting.
What time interval is not included in the Master Production Schedule?
A)1 Month
B) 1 shift <——-
C) 1 day
D)1 Week
QUESTION:
The term _________ describes all of the activities that occur between the growing or mining of raw materials and the appearance of inished products on the store shelf.
A: Supply chain
B: Repetitive manufacturing
C: Materials Requirement Planning (MRP)
D: Fitter Snacker
Answer: A
QUESTION:
Materials requirements planning (MRP) determines the amount and timing of raw material orders. This process answers the questions, “What raw materials should we be ordering so we can meet a particular level of production?” and “When should we order these materials?”
QUESTION:
What does MRP stands for?
Answer: Materials Requirements Planning
“Fitter Snacker has several problems to decide how many bars to make and when to make them.” So in that case, what are the problems that can be occur during that situation?
A: Communication, Weather Forecasting, and Marketing Problems
B: Communication, Inventory, Accounting and Purchasing Problems
C: Communication, Inventory, Transportation and Manafacture Problems
D: All of the above
Based on these three questions, I found that it is very interesting to me. Not only that, I felt that these are very related of how I play the Supply Chain Game couple weeks ago as well.
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