Material Requirement Planning - Essay Example

Data of Material Requirement Planning Material requirement planning is a method used to obtain the demand for the finished goods through forecasting. In such cases, such demands are referred to as independent demands. Once the demand for the finished goods is obtained, the demand for the components or the subassemblies will depend on those for the finished goods. The method of material requirement planning is used for dependent demand and for both the manufacturing and assemblies. MRP is also used to optimize the inventory costs in case the finished product is composed of several components. Space Age Furniture manufactures tables and cabinets to hold portable televisions and microwave ovens. It has the part no. 3079 which is used in two subassemblies, no. 435 used in Gemini TV stand and no.257 used in the Saturn Microwave. Using a lot size of 1,000; i) Develop MRP for Space Age Furniture: Using the master schedule, in week 1, 600 Gemini and 300 Saturn were made. Here, parts no. 435 and 257 were use in the subassemblies and part 3079 were also each used in each sub assemblies to make the final products. Therefore, to make the final product in week one; 600 +300 = 900 Gross requirement for week 1 = 900 Week 2: Gemini + Saturn = 400 + 400 Gross requirement is 800 Inventory in hand = 100 Net requirement = 700 Week 3: Gemini 700 + Saturn 400 = 1,100 Gross requirement = 1,100 Inventory in hand = 0 Net requirement = 1,000 Week 4: 500 + 600 = 1,100 Gross requirement = 1,100 Inventory in hand = 100 Net requirement = 1,000 Week 5: Gross requirement = 400 + 300 = 700 Inventory in hand = 200 Net requirement = 500 Week 6: Gross requirement = 600 + 300 Inventory in hand = 0 Net inventories = 900 ii) Ways for improvement over sub-assemblies in lot sizes of 1,000. To improve the over sub-assemblies in lot sizes of 1,000, the management can increase the demand for the final product so that, all the sub-assemblies produced can be used in the production of the final product (Gray, 2000). For this mater, any week when sub-assemblies of lot sizes 1,000 are produced and the number is higher than the minimum required, the rest can be used for production in the next or the following week following the week in question. For this problem, if the sub-assemblies of lot sizes 1,000 have produced a lumpy demand for part no. 3079, it therefore means that, the demand for the different subassemblies such as part no. 257 and part no. 435 must also increase, hence increasing the demand for the subassemblies used to produce the final product. To make good use of this, the over demanded quantity of part no. 3079 can be used to produce more final products to boost profits (Magee, 2010). iii) Analysis of the trade-off between overtime costs and inventory costs Any overtime work, the machinist is paid a 50% premium. If he is paid $22 on normal working hours, it means, during overtime, he is paid $11. On the other hand, inventory costs include $0.25 to hold any part per week and it also costs $0.75 to hold the sub-assemblies in inventory per week. This means that it costs $1 to hold all these components in the inventory per week. It means therefore that, for every hour, overtime is paid at $11, for a whole week, there are 40-hours worked. It therefore shows that, the on each unit produced, there is $1 that is used per unit for inventory and in every hour of overtime, there is $11 paid. It therefore means that, there should be more units produced per hour in order to compensate for the $11 which is paid. This means, in each hour, the production should be more than $11 for it to be considered economical. iv) A new MRP that improves the base MRP To improve the base MRP, there should be production of the final product through a critical consideration of the inventory in hand. It therefore means that, there would not be any production beyond the minimum lot sizes allowed and any inventory in hand will be considered and used in production in the following week. Therefore, for Week 1: 600 + 300 =900 In this case, there ought to have been 1,000 produced for each Gemini and Saturn, but instead, only 900 were produced. The materials that were supposed to be used to produce the rest of the 100 units that contains 400 Gemini and 700 Saturn will be used to produce more in the second week, or to reduce the gross requirement of the following week. 400 + 700 that will remain will be used in the second week. Week 2: Gross requirement would be 800 and inventory in hand would be 1,100. Therefore, to week three we will take 300 extra plus 1,200. Week 3: Gross requirement = 1,100 Inventory in hand = 1,500 Net requirement = 2,600 Week 4: Gross requirement = 1,1,00 Inventory in hand = 400 + 900 Net inventory = 2,600 Week 5: Gross requirement = 700 Inventory in hand = 200 + 1,300 Net requirement = 2,300 Week 6: Gross inventory = 900 Inventory in hand = 800 Net inventory = 1,700 v) Comparing the types of production processing: Examples of batch floe process include scheduling air travel, manufacturing furniture, processing mortgage loans etc. it differs from the job process with respect to volume, variety as well as the quantity involved. In batch flow, a narrow range of services are repeatedly provided. On the other hand, job shop process include hospital emergency rooms, or making of customized cabinets (Martin, 2011). This process creates the required flexibility that is needed to create a variety of goods and services in all significant quantities. Job shop process is therefore the primary mode of operation due to its flexibilities to produce a variety of products and in different shapes, quantities and volumes. vi) Ways in which management can keep track of job status and location during production Management needs to use the bar-code system to track job status and location during production. A bar code is always sent to the production control office whenever something is completed in order to be scanned. The computer system is therefore used to keep track of everything taking place (Carrie, 2011). vii) Changes that might be beneficial to the company and/or add value to the customer: A company would consider adopting a total quality management (TQM). In this case, all processes will work successfully and the company will appear competitive. TQM is always required in making business to be constantly more efficient and have constant gradual changes in improvements (Reiter, 1999). When the company later starts realizing problems with their processing, they might decide to embark on re-engineering. This system is normally used to make major and sometimes radical changes in a company. However, re-engineering is only considered by a company if something is seriously broken and not in place with the company’s present and continued profitability or existence. It means therefore that, that particular thing would be a threat to the company’s existence. Just in time production can also be considered in order to improve efficiency and make the company stop the warehouse costs that it incurs when the materials are stored before they are used and when they are stored before supplying them to the customers. This cost can then be used on other areas to improve production, hence add on profits. References Carrie, K. (2011). Job Tracking: Complete Business Solutions. Complete Business Solutions Journal , 23-25. Gray, J. (2000). Classic Productivity System. Business and Economics Journal , 6-8. Magee, J. (2010). Guides to Inventory Policy: Functions and Lot Sizes. Montclair Educational Journal , 3-9. Martin, J. (2011). Types of Production Procesing. Prehall Division Journals , 43-44. Reiter, S. (1999). How Management Keep Track of Job Status. Brain Mass Business Accounting Journal , 12-13. Read More