Chapter 13 Objectives

1. Contrast independent and dependent demand.

• Dependent demand is for items that are subassemblies or component parts to be used in the production of finished goods. (Ex: raw materials/parts to build a car)
• Independent demand is the item itself. (Ex: the car)

2. When is MRP appropriate?

• When transferring the finished product requirements of the master schedule into time-phased requirements for subassemblies and component parts.
• To determine when and how much to order.

3. How is safety stock included in a material requirements plan?

• To maintain smooth operations

4. What factors can create safety stock requirements in a MRP plan?

• A bottleneck process that can cause shortages in downstream processes
• Late orders
• Longer fabrication or assembly times

5. What is meant by safety time?

• Scheduling orders for arrival or completion sufficiently ahead of the time they are needed in order to eliminate or reduce the chance of waiting for those items

6. Contrast net-change system and regenerative system.

• Net-change system updates MRP records continuously
• Regenerative system updates MRP records periodically

7. Briefly discuss the requirements of effective MRP.

• A computer and the necessary software programs to handle computations and maintain records.
• Accurate and up-to-date master schedules, bills of materials and inventory records
• Integrity to file data

8. What are the main advantages of MRP?

• Low levels of in-process inventories
• Ability to keep track of material requirements
• Ability to evaluate capacity requirements generated by a given master schedule
• A means of allocating production time

9. Describe MRP II

• Expands scope of materials planning to include capacity requirements planning
• Involves other functional areas of an organization in the planning process
• Evolved from MRP because manufacturers recognized additional needs

10. What is lot sizing and what is its main goal? Why is it an issue with lumpy demand?

• Lot sizing is choosing a lot size for ordering or production
• Goal is to minimize sum of ordering cost and holding cost
• Issue with lumpy demand because planning horizon shorter with lumpy demand

11. Contrast planned-order receipts and scheduled receipts.

• Planned-order - quantity expected to be received by the beginning of the period in which it is shown
• Scheduled - open orders scheduled to arrive from vendors or elsewhere in the pipeline

12. How does ERP differ from MRP II?

• MRP II is an expanded approach to production resource planning, involving other areas of a firm in the planning process and enabling capacity requirements planning. ERP, however, is an integration of financial, manufacturing and human resources on a single computer system (standardized record keeping).

13. What are some costs of ERP?

• Hardware/Software/Professional services/Internal staff costs
• Maintaining/Upgrading/Optimizing costs