Question

Answer 1

Steps to create the MRP 1) Enter the gross requirement as per Master Planning Schedule (MPS).Gross requirement of components is calculated as per usage in parent item. 2) Enter Schedule Order Receipts(SOR), if there are any. 3) Project On hand is calculated by this formula Previous period project on hand+Scheduled receipts+Planned order receipts- gross requirement 4) Net requirement Gross requirement- Projected on hand 5) Planned Order Release (POR) is manually entered such that time phased planned order receipt is equal to net require For example, if lead time is 1 period, and there is net requirement of 80 units in period 3, then there is a planned order release for 80 units in period 2, i.e. 1 period prior to the period in which requirement occurs. Planned Order Release quantity is as per the Lot size specified, i.e. LFL, or Fixed Order Quantity, or POQ or EOQ or in Multiples of a specified quantity. 6) If there is safety stock specified for an item, then safety stock quantity is added in Planned Order Release so that Project On Hand remains greater than or equal to safety stock as specified

a) MRP showing planned order releases for component A is following:

12 13 14 15 16 17 0 6 7 9 10 Item 240120 510 300 600 660 0 0 0 450 360 Gross Requirement Scheduled Receipt Proiected on Hand Net Requirement 1 Planned Order Receipt Planned Order Release SOR 240120 240120 510 510 510 300 600 660 300 600 660 300 600 660 ss = 450 450 360 360 360 240120 450 LFL

b) MRP showing planned order releases for component B is following:

12 13 14 15 16 17 6 9 10 Item 160 340 200 400 440 300 240 80 Gross Requirement Scheduled Receipt Proiected on Hand Net Requirement 1 Planned Order Receipt Planned Order Release SOR- 160 160 80 340 200 400 440 340 200 400 440 80 300 300 240 240 240 160 80 300 340 200400 440 LFL

c) MRP showing planned order releases for component C is following:

12 13 14 15 16 17 0 6 7 9 10 Item 560 280 1190700 1400 1540 1050 840 Gross Requirement Scheduled Receipt Proiected on Hand Net Requirement 2 Planned Order Receipt Planned Order Release 0 0 0 SOR = 560 560 1050 840 280 1190700 1400 1540 1050 840 280 1190700 1400 1540 560 280 1190700 1400 1540 1050 840 LFL

d)

Total cost of Lot for Lot = Holding cost + Ordering cost = 0*0.5+8*250 = $ 2000

Average demand for component C = 7560/8 = 945

EOQ = sqrt(2*945*250/.5) = 972

Schedule using EOQ is following:

12 13 14 15 16 17 0 6 7 9 10 Item 1050 840560 0 280 1190700 1400 1540 Gross Requirement Scheduled Receipt Proiected on Hand Net Requirement 2 Planned Order Receipt LFL Planned Order Release 216 784 1160 756 1944 972 216 940 240 894 1050 1944 972 466186 506 972 1944 54 1004 1944 1944 972 1944

Total cost of EOQ = 3780*0.5+5*250 = $ 3,140

Schedule using FOP of 2 weeks is following:

9 10 12 13 14 15 16 17 6 7 Item 1050 840 560 280 1190700 1400 1540 Gross Requirement Scheduled Receipt Proiected on Hand Net Requirement 2 Planned Order Receipt Planned Order Release SOR 840 1050 1890 840 280 560 840 1890 700 1190 1890 2940 1540 1400 2940 1890 LFL

Total cost of FOP (2 weeks) policy = (840+280+700+1540)*0.5+4*250 = $ 2,680

Schedule using FOP of 3 weeks is following:

Item 0 6 7 8 9 10 12 13 14 15 16 17 Gross Requirement Scheduled Receipt Proiected on Hand Net Requirement 1050 840 560 280 1190700 1400 1540 SOR = 1400 560 1050 2450 1890 700 280 2170 1540 1400 2940 ss = 2 Planned Order Receipt LFL Planned Order Release 2450 2170 2940

Total cost of FOP (3 weeks) policy = (1400+560+1890+700+1540)*0.5+3*250 = $ 3,795

We see that total cost of LFL (Lot-for-Lot) ordering policy is the lowest.