Question

Materials Requirements Planning (MRP)

Franklin Fan’s two most profitable products are the ceiling fan (CF151) and the personal fan (PF032). With the rising popularity in home remodeling and personal comfort, Franklin Fan has enjoyed substantial demand for these two products. Last year, Kathryn Marley, the vice president of operations and supply chain management, approved the installation of a new MRP system. It is a first important step toward the eventual goal of a full-fledged ERP system. Marley worked closely with the task force that was created to bring MRP online. She frequently attended training sessions for selected employees, emphasizing how MRP should help Franklin Fan secure a better competitive edge. A year later, the MRP system is working fairly well. However, Marley believes that there is always a better way and seeks to continuously improve the company’s processes. To get a better sense of potential improvements, she met with the materials manager (Sue McCaskey), the production manager (Phil Stanton), and the purchasing manager (Joe Donnell). Here are some of their observations.

Materials Manager – Sue McCaskey

Inventory records and BOM files are accurate and well maintained. Inventory transactions are faithfully made when inventory is replenished or removed from the stockroom so current on hand balances are credible. There is an MRP explosion each week, which gives the company the new material requirements plan. It provides information that helps identify when new orders need to be launched. Information can also be searched to help identify which scheduled receipts need to be expedited and which ones can be delayed by assigning them a later due date, thereby making room for more urgent jobs.

One planner suggested that the MRP outputs should be extended to provide priority and capacity reports, with pointers as to which items need their attention. The original plan was to get the order-launching capability implemented first. However, there is no formal system of priority planning, other than the initial due date assigned to each scheduled receipt when it is released, transforming it from a planned order release into a scheduled receipt. The due dates do not get updated later even when there are unexpected scrap losses, capacity shortages, short shipments, Derived from the Flashy Flashers Case; Chapter 16; Page 582; Operations Management by Krajewski, Ritzman, & Malhotra (10th) 2013 Page 2 or last minute changes in the MPS (responding to requests from favorite customers). Jobs are scheduled on the shop floor and by suppliers according to the EDD rule, based on their due dates. If due dates assigned to scheduled receipts were updated, it might help get open orders done when they are really needed. Furthermore, planned order releases in the action bucket are translated into scheduled receipts (using inventory transactions), after checking that its components are available. The current system does not consider capacity problems when releasing new orders.

Production Manager – Phil Stanton

His primary complaint is that the shop workloads are anything but level. One week, they hardly have any work, and the supervisor overproduces (more than called for by the scheduled receipts) just to keep everyone busy. The next week can be just the opposite – so many new orders with short fuses that almost everyone needed to work overtime or else scheduled receipt quantities are reduced to cover immediate needs. It is feast or famine, unless they make things work on the shop floor! They do make inventory transactions to report deviations from plan for scheduled receipts, but these “overrides” make the scheduled receipt information in the MRP records more uncertain for the planners. A particular concern is to make sure that the bottleneck workstations are kept busy.

Purchasing Manager – Joe Donnell

Buyers are putting out to many fires, leaving little time for creative buying. In such cases, their time is spent following up on orders that are required in the very near future or that are even late. Sometimes, the MRP plan shows planned order releases for purchased items that are needed almost immediately, not allowing for the planned lead time. In checking the MRP records, the planned lead times are realistic and what suppliers expect. Last week, things were fine for an item, and this week a rush order needs to be placed. What is the problem? Marley tried to assimilate all this information. She decided to collect all the required information about the ceiling fan and personal fan (shown in the Table 1 through Table 4 and in Figure 1) to gain further insight into possible problems and identify areas for improvement.

Your Assignment

Put yourself in Marley’s place and prepare a report on your findings. Specifically, you are required to do a manual explosion for the ceiling fan and the personal fan for the next 6 weeks (beginning with the current week). Assume that it is now the start of week 1. Complete the MRP Derived from the Flashy Flashers Case; Chapter 16; Page 582; Operations Management by Krajewski, Ritzman, & Malhotra (10th) 2013 Page 3 records for each item in the BOMs on the Excel spreadsheet that will be provided by the professor.

Using the 5- Critical Thinking Process analysis the problems and provide solutions.

Table 1

Part Numbers & Descriptions and Part Number Description

(A) CF151 / 42” Ceiling Fan

(B) PF032 / 6” Personal Fan

(C) 2012000 / Ceiling Fan subassembly

(D) 3020003 /Ceiling Fan blades

(E) 4012000 /Ceiling Fan box

(F) 4015000 / Screws

(G) 4013000/ Electric Motor

(H) 3013003 /Housing

(I) 4010000 /Adhesive

(J) 4014000 /HDPE (High Density Polyethylene)

(K) 2012001 /Personal Fan subassembly

(L) 3020007 /Personal Fan blades

(M) 4012001 /Personal Fan box

(N) 4013002 /Electric Motor

(O) 3013004 /Housing

Table 2

Replacement Part Demand, Item Description & Pt. # Qty. Date

Blades, (30200007), 100, Week 3

Answer 1

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Problems and uncertainties

• MRP does not provide priority and capacity reports with pointers to which items need attention
• There is no formal system of priority planning
• Due date assigned to each scheduled receipt are not updated later when there are unexpected scrap losses, capacity shortages, short shipment or last minute changes in MPS.
• The system does not consider capacity problem when releasing new orders.
• Shop workloads are anything but level
• There is no creative buying for the buyers
• MRP plan shows planned order releases for purchased items that are needed almost immediately, not allowing for the planned lead time.

Information of problems stated.

MRP does not provide priority reports with pointers to which items need attention this leads to conflict in lead time between many different orders. The ultimate result being delayed delivery of goods requested for.

The system does not have formal system priority planning. Items with urgency are not given the needed attention hence tasks that are not urgent end up being completed before those that needed much priority.

The system does not update dates in case there are changes in schedule due to scrap losses, capacity shortages, and short shipment and last minute changes. This leads to missed deadlines of customer orders. As a result the system does not produce priority whenever this change happens.

The system does not consider capacity problem when releasing orders. Planned order releases in the action bucket are translated into scheduled receipts. This leads to either mass production of ceiling and personal fans.

Due to many fires from the system the buyers are left with no opportunity for creative buying this leads to wastage of time in following orders required in the very near future

The last problem is that the system shows planned orders releases for purchased items late. This does not allow for the planned lead time for manufacturing the fans. Either the materials to be purchased arrive later than expected or assembling takes place very late.

Good and bad points

The good

• Inventory records and BOM files are accurate and well maintained. This produces accurate inventory records
• Inventory transactions are faithfully made when inventory is replenished or removed from stock room. This leads to correcting timing of stock and time because current on-hand balances are credible.

The bad

• In implementation they did not follow the original plan of implementing order-launching capability first. Now the system does not have formal priority planning. It only relies on the initial date assigned to each schedule receipt when it is released. The result is that due dates are not updated later whenever there are unexpected losses, shortages, or last minute change.
• The production system is not consisted- in one week they hardly have any work leading to overproduction so that everyone is kept busy. The next week will have so many orders with short fuses that everybody needs to work overtime or scheduled receipts quantities are reduced to cover immediate needs. The consequences of this are lack of consisted MRP records for planners.
• There are many fires which put away buyers and give them little time for creative buying. Buyers spent most of their time following up on orders required in the near future or are past deadlines.
• The planned lead time and the period of showing planned order release in the system do not match. Planned release is sometimes shown immediately they are needed. This conflicts with the planned lead time.

How to improve resource planning

Through use of proper coordination between lead-time given and the quantity required for each week in order to make purchases and manufacture the other part within the specified time.

With respect to quantity decision use the “little as possible ” rule to make orders in the required lead time. Apply the fixed period requirement rule to make order of enough material for the fixed number of periods.