Krajewski Chapter 15

Resource Planning
Chapter 15
2007 Pearson Education
How Resource Planning

fits the Operations Management
Philosophy
Operations As a Competitive
Weapon
Operations Strategy
Project Management
Process Strategy
Process Analysis
Process Performance and Quality
Constraint Management
Process Layout
Lean Systems
Supply Chain Strategy

Location
Inventory Management
Forecasting
Sales and Operations Planning
Resource Planning
Scheduling
Resource Planning
at Starwood
Starwood manages employees, equipment, and supplies at
750 hotels around the world to ensure that the needs and
expectations of each and every customer are met.
To help forecast these needs, Starwood now uses an
enterprise resource planning (ERP) system.
Included in the ERP system by Oracle is an electronic
reservation system that profiles the preferences of guests,
allowing the staff to provide a customized experience for
each guest.
The ERP system schedules the hotels staff members,
projects the amount of food, beverages, and other
resources needed for the hotels food-service department.
Starwoods ERP system also features a centralized
database with accounting data, payroll, accounts payable
information, general ledger and balance sheet, as well as
income statements for its various properties.
Resource Planning and

ERP
Resource planning: A process that takes sales and
operations plans; processes information in the way
of time standards, routings, and other information
on how the firm produces its services or products;
and then plans the input requirements.
Enterprise process: A companywide process that
cuts across functional areas, business units,
geographical regions, and product lines.
Enterprise resource planning (ERP) systems:
Large, integrated information systems that support
many enterprise processes and data storage needs.
ERP Application Modules
ERP Design
ERP revolves around a single comprehensive
database that can be made available across the
entire organization (or enterprise).
The database collects data and feeds them into the
various modular applications (or suites).
As new information is entered as a transaction in one
application, related information is automatically updated in
the other applications.
The ERP system streamlines the data flows throughout the
organization and provides employees with direct access to
a wealth of real-time operating information.
ERP eliminates many of the cross-functional coordination
problems older nonintegrated systems suffered from.
Dependent Demand
Dependent demand: The demand for an item that
occurs because the quantity required varies with the
production plans for other items held in the firms
inventory.
Parent: Any product that is manufactured from one
or more components.
Component: An item that goes through one or
more operations to be transformed into or become
part of one or more parents.
Lumpy Dependent Demand Resulting

from Continuous Independent Demand
Parent Inventory
(Independent)
Component Demand
(Dependent)
Possible Planning
and Control Systems
The most prominent systems now in use are the
material requirements planning (MRP) system, the
Drum-Buffer-Rope (DBR) system, and lean systems.
Products with many levels
Capacity is leveraged to
Using system as catalyst for
of components, and more

customization
Lumpy demand, often with
larger batch sizes
Make-to-order, assembleto-order, and make-to-stock
strategies
Lower and intermediate
volumes, with flexible flows
control bottlenecks and

entire system flow
Simpler product structures
and more standardized
products
Assemble-to-order or maketo-stock strategy
Relatively higher volumes,
with flexible flows
transitioning to line flows
continuous improvement
Small lot sizes, consistent
quality, reliable suppliers,
and flexible workforce
Assemble-to-order or maketo-stock strategy
High volumes and wellbalanced line flows
Material
Requirements Planning
Material requirements planning (MRP): A
computerized information system developed specifically to
help manufacturers manage dependent demand inventory and
schedule replenishment orders.
MRP explosion: A process that converts the requirements

of various final products into a material requirements plan that
specifies the replenishment schedules of all the
subassemblies, components, and raw materials needed to
produce final products.
Bill of materials (BOM): A record of all the components

of an item, the parentcomponent relationships, and the
usage quantities derived from engineering and process
designs.
MRP Inputs
Authorized
master production
schedule
Inventory
transactions
Inventory
records
MRP
explosion
Material
requirements
plan
Other
sources
of demand
Bills of
materials
Engineering
and process
designs
Bill of Materials Terms

Usage quantity: The number of units of a
component that are needed to make one unit of its
immediate parent.
Inventory items:
End item: The final product sold to a customer.
Intermediate item: An item that has at least one parent
and at least one component.
Subassembly: An intermediate item that is assembled (as
opposed to being transformed by other means) from more
than one component.
Purchased item: An item that has one or more parents
but no components because it comes from a supplier.
Part commonality: The degree to which a

component has more than one immediate parent.
Bill of Materials
Back
legs
Front
legs
Back slats
Seat cushion
Leg supports
Seat-frame
boards
A
Ladder-back
chair
Bill of Materials
A Ladder-back
chair
B (1)
Ladder-back
subassembly
F (2)
Back legs
C (1)
Seat
subassembly
G (4)
Back slats
H (1)
Seat frame
J (4)
Seat-frame boards
D (2)
Front
legs
I (1)
Seat cushion
E (4)
Leg
supports
Master
Production Schedule
Master production schedule (MPS): A part of the material
requirements plan that details how many end items will be
produced within specified periods of time.
MPS for a Family of chairs
April
1
Ladder-back chair
May
3
Aggregate
production plan
for chair family
150
150
Kitchen chair
Desk chair
120
200
200
670
120
200
200
670
Master Production
Scheduling Process
Operations must first create a prospective MPS to test
whether it meets the schedule with the resources.
Developing a Master
Production Schedule
MPS for
Weeks 1 & 2
Forecast is less than
booked orders in week 1;
projected on-hand inventory
balance = 55 + 0 38 = 17.
Forecast exceeds booked

orders in week 2; projected onhand inventory balance
= 17 + 0 30 = 13. The
shortage signals a need to
schedule an MPS quantity for
completion in week 2.
Available-To-Promise
Inventory
Available-to-promise (ATP) inventory: The
quantity of end items that marketing can promise to
deliver on specified dates.
It is the difference between the customer orders already
booked and the quantity that operations is planning to
produce.
As new customer orders are accepted, the ATP

inventory is reduced to reflect the commitment of
the firm to ship those quantities
Actual inventory stays unchanged until the order is
removed from inventory and shipped to the customer.
MPS Worksheet
MPS
Schedule
with
ATP
Item: Ladder-back chair
Order Policy: 150 units

Lead Time: 1 week
May
April
Quantity
on Hand:
55
Forecast
30
30
30
30
35
35
35
35
Customer
orders booked
38
27
24
Projected
on-hand
inventory
17
137
107
77
42
122
87
MPS quantity
150
150
150
17
91
MPS start
Available-topromise (ATP)
inventory
150
150
The
ordersbooked
booked
until
next
MPS
receipt
Thetotal
totalofofcustomer
customer orders
until
thethe
next
MPS
receipt
is 38 is 27
ATP
= 55 (on-hand)
(MPS
quantity)
38 = 17.
+ units.
24
+ 8The
= 59
units.
The ATP += 0150
(MPS
quantity)
59 = 91 units.
2007 Pearson
Education
MPS for Product A

Application 15.1
MPS for Product A

Application 15.1
Inventory Record
Inventory record: A record that shows an items lot-size policy,
lead time, and various time-phased data.
Gross requirements: The total demand derived from all parent
production plans.
Scheduled Receipts (open orders) are orders that have been
placed but not yet completed.
Projected on-hand inventory: An estimate of the amount of
inventory available each week after gross requirements have
been satisfied.
Planned receipts: Orders that are not yet released to the shop
or supplier.
Planned order release: An indication of when an order for a
specified quantity of an item is to be issued.
Inventory Record
8-Period Worksheet
Inventory Record
Shows an items lot-size policy, lead time, and various time-phased data.
Lot Size: 230 units
Item: C
Description: Ladder-back Chair Seat subassembly Lead Time: 2 weeks
Week
1
Gross
requirements
150
120
150
120
Scheduled
receipts
230
Projected
on-hand 37
inventory
117
117
117
227
227
77
187
187
Planned
receipts
Planned order
releases
230
230
230
230
Projected
on-hand
inventory:
An
estimate
ofan
the
amount
of
Gross
requirements:
The
total
demand
derived
from
all
Planned
order
release:
An that
indication
ofyet
when
order
forparent
ashop
Scheduled
Receipts
(open
orders)
are
orders
that
have
been
Planned
receipts:
Orders
are
not
released
to
the
inventory
available
each
week
gross requirements have
specified
quantity
an item
is toafter
be issued.
placed
but
not
yetofcompleted.
production
plans.
or
the
supplier.
been satisfied.

Lot Size: 230 units

Item: C
Description: Ladder-back Chair Seat subassembly Lead Time: 2 weeks
Week
1
Gross
requirements
150
120
150
120
Scheduled
receipts
230
Projected
on-hand 37
inventory
117
117
117
227
227
77
187
187
Planned
receipts
Planned order
releases
230
230
230
230
The
first aplanned
until 4,
week
7, whenofprojected
inventory
would
Without
plannedreceipt
receiptlasts
in week
a shortage
3 units will
occur: 117
+ 0drop
+0
to
77 +=03
+ 0units.
120
= 43the
units.
Adding
the second
receipt
brings
120
Adding
planned
receipt
brings planned
the balance
to 117
+ 0the
+ 230
balance
to 77units.
+ 0 +Offsetting
230 120for= a187
units.lead
The time
corresponding
planned order
120 = 227
2-week
puts the corresponding
release
for week
5 (or
week
minus
plannedisorder
release
back
to 7week
2. 2 weeks).
Planning Factors
Planning lead time: An estimate of the time
between placing an order for an item and
receiving the item in inventory.
Setup time
Processing time
Materials handling time between
operations
Waiting time
Lot-sizing rules: A rule that determines the
timing and size of order quantities.
Lot Sizing Rules

Fixed Order Quantity (FOQ)
Fixed order quantity (FOQ): A rule that
maintains the same order quantity each time
an order is issued.
Dictated by
Equipment capacity limits
Quantity discount
Truckload capacity
Minimum purchase quantity
EOQ
H10-A Using FOQ

Application 15.2
H10-A Using FOQ

Application 15.2
Lot Sizing Rules

Periodic Order Quantity (POQ)
Periodic order quantity (POQ): A rule that
allows a different order quantity for each
order issued but tends to issue the order at
predetermined time intervals.
The order quantity equals the amount of the item
needed to covers P weeks worth of gross
requirements.
POQ lot size
to arrive in
week t
Total Gross requirements

for P weeks, including
week t
Projected on-hand
inventory balance
at end of week t-1
The POQ (P = 3) Rule for the

Ladder-back Chair Seat Subassembly
Item: C
Description: Ladder-back Chair Seat subassembly
Lot Size: P = 3
Lead Time: 2 weeks
Week
1
Gross
requirements
150
Scheduled
receipts
230
Projected
on-hand
inventory
37
117
120
150
120
(120 + 0 + 150) - 117 = 153

117
Planned
receipts
Planned order
releases
117
150
150
153
153
120
120
H10-A Using POQ

Application 15.3
H10-A Using POQ

Application 15.3
Lot-for-Lot
Lot-for-lot (L4L) rule: A rule under which the lot size
ordered covers the gross requirements of a single
week.
Thus P = 1, and the goal is to minimize inventory
levels.
The projected on-hand inventory combined with
the new order will equal zero at the end of week t.
L4L lot size
to arrive in
week t
Gross requirements
for week t
Projected on-hand
inventory balance at
end of week t-1
The Lot-for-Lot (L4L) Rule for the

Ladder-back Chair Seat Subassembly
Item: C
Description: Ladder-back Chair Seat subassembly
Week
L4L Rule
1
Gross
requirements
150
Scheduled
receipts
230
Projected
on-hand
inventory
Lot Size:
Lead Time: 2 weeks
37
117
120
150
120
(120 + 0 + 0) - 117 = 3
117
Planned
receipts
Planned order
releases
117
150
120
150
120
H10-A Using L4L

Application 15.4
H10-A Using L4L

Application 15.4
Comparing
Lot-Sizing Rules
FOQ, POQ, and L4L rules affect inventory costs and setup and
ordering costs. In the example, each rule took effect in week 4,
when the first order was placed.
A comparison of projected on-hand inventory averaged over weeks
4 through 8 of the planning horizon for the ladder-back chair seat
subassembly:
FOQ: (227+227+77+187+187)/5 = 181 units
POQ: (150+150+0+0+0)/5 = 60 units
L4L: (0+0+0+0+0)/5 = 0 units
FOQ generates high inventory because it creates remnants.

POQ reduces on-hand inventory because it does a better job of
matching order quantity to requirements.
L4L minimizes inventory investment but maximizes the number
of orders placed.
Safety Stock
The usual policy is to use safety stock for end items and
purchased items to protect against fluctuating customer orders
and unreliable suppliers of components but to avoid using it as
much as possible for intermediate items.
Schedule a planned receipt whenever the projected on-hand
inventory balance drops below the desired safety stock level.
Ladder-back Chair
Seat subassembly
MRP translates, or explodes, the MPS and other sources of demand

into the requirements needed for all of the subassemblies, components,
and raw materials the firm needs to produce parent items. This process
generates the material requirements plan for each component item.
MRP
explosion
Material requirements plan

Action notices
Releasing new orders
Adjusting due dates
Routings
and time
standards
Priority reports
Dispatch lists
Supplier schedules
Capacity reports
Capacity requirements planning
Finite capacity scheduling
Input-output control
Manufacturing resources plan

Performance reports

Cost and
price data
Material Requirements Plan
SEAT SUBASSEMBLY
Weeks
Gross Reqirements
Gross
Requirements
Scheduled Receipts
Projected on-hand: 37
Planned Receipts
Planned order Releases
1
150
230
117
117
117
4
120
On hand Inventory + Scheduled receipts Gross Requirements

5
LOT SIZE = 300

LEAD TIME = 1 Week
6
7
8
LOT SIZE = L4L

LEAD TIME = 1 week
6
7
8
Seat Frames
Weeks
Gross Reqirements
Gross
Requirements
Scheduled Receipts
Projected on-hand Inv. = 40
Planned Receipts
300
Seat Cushions
Weeks
Gross
Gross Reqirements
Requirements
Scheduled Receipts
Planned Receipts
Planned
Releases
2007
Pearsonorder
Education
LOT SIZE = 230 Units

LEAD TIME = 2 Weeks
6
7
8
150 120
SEAT SUBASSEMBLY

Weeks
Gross Requirements
Reqirements
Gross
Requirements
Scheduled Receipts
Planned Receipts
1
150
230
4
120
117
117
117
227
230
227
230
117 units is insufficient to meet gross requirements of 120 for

week
4, so
a planned order release of 230 must be scheduled.
Seat
Frames
Weeks
Gross Reqirements
Gross
Requirements
Scheduled Receipts
Planned Receipts
LOT SIZE = 300

LEAD TIME = 1 Week
6
7
8
LOT SIZE = L4L

LEAD TIME = 1 week
6
7
8
300
Seat Cushions
Weeks
Gross
Gross Reqirements
Requirements
Scheduled Receipts
Planned Receipts

LEAD TIME = 2 Weeks
6
7
8
150 120
SEAT SUBASSEMBLY

Weeks
Gross Reqirements
Gross
Requirements
Scheduled Receipts
Planned Receipts
1
150
230
4
120
117
117
117
227
230
227
Gross Reqirements
Gross
Requirements
Scheduled Receipts
Planned Receipts
Gross
Gross Reqirements
Requirements
Scheduled Receipts
Planned Receipts
187
230
187
LOT SIZE = 300

LEAD TIME = 1 Week
6
7
8
LOT SIZE = L4L

LEAD TIME = 1 week
6
7
8
300
Seat Cushions
Weeks
77
230
230
77 units is insufficient to meet gross requirements of 150 for

week
6, so
a planned order release of 230 must be scheduled.
Seat
Frames
Weeks

LEAD TIME = 2 Weeks
6
7
8
150 120
SEAT SUBASSEMBLY

Weeks
Gross Reqirements
Gross
Requirements
Scheduled Receipts
Planned Receipts
1
150
230
4
120
117
117
117
227
230
227
Gross Reqirements
Gross
Requirements
Scheduled Receipts
Planned Receipts
Gross Reqirements
Gross
Requirements
Scheduled Receipts
Planned Receipts
230
187
230
187
LOT SIZE = 300

LEAD TIME = 1 Week
6
7
8
230
230
300
Seat Cushions
Weeks
77
230
230
Seat Frames
Weeks

LEAD TIME = 2 Weeks
6
7
8
150 120
230
LOT SIZE = L4L

LEAD TIME = 1 week
6
7
8
SEAT SUBASSEMBLY
Weeks
Gross
Gross Reqirements
Requirements
Scheduled Receipts
Planned Receipts
1
150
230
117
117
117
4
120
227
230
227
Gross
Gross Reqirements
Requirements
Scheduled Receipts
Planned Receipts
40
77
187
230
187
230
230
Seat Frames
Weeks

LEAD TIME = 2 Weeks
6
7
8
150 120
230
300
110 110
LOT SIZE = 300

LEAD TIME = 1 Week
6
7
8
230
110
300
300
110
is on-hand
carried
inisinventory
untilprevious
week
when
more
isweek
needed.
40
on
hand
plus
300
in receipts
minus
demand
ofin230
= 110
Lot40
of
300 must
be
scheduled
to
start5production
4 and
carried
from
plan to
week
one.
LOT SIZE = L4L
arrives as planned receipt in week 5.
Seat Cushions
Weeks
Gross
Gross Reqirements
Requirements
Scheduled Receipts
Planned Receipts
230
230
LEAD TIME = 1 week

6
7
8
SEAT SUBASSEMBLY

Weeks
Gross Reqirements
Gross
Requirements
Scheduled Receipts
Planned Receipts
1
150
230
4
120
117
117
117
227
230
227
Gross Reqirements
Gross
Requirements
Scheduled Receipts
Planned Receipts
40
230
300
110
110
110
300
Gross Reqirements
Gross
Requirements
Scheduled Receipts
Planned Receipts
Planned
order
Releases
2007
Pearson
Education
230
187
230
187
LOT SIZE = 300

LEAD TIME = 1 Week
6
7
8
230
180 180
180 180
300
The
180 infor
inventory
carried
until
the next
On-Hand
week 5 is 300
+ 110
- 230
= 180gross
requirements.
Seat Cushions
Weeks
77
230
230
Seat Frames
Weeks

LEAD TIME = 2 Weeks
6
7
8
150 120
230
LOT SIZE = L4L

LEAD TIME = 1 week
6
7
8
SEAT SUBASSEMBLY

Weeks
Gross Reqirements
Gross
Requirements
Scheduled Receipts
Planned Receipts
1
150
230
117
117
4
120
117
227
230
227
Gross Reqirements
Gross
Requirements
Scheduled Receipts
Planned Receipts
40
230
300
110
110
110
300
180
Gross Reqirements
Gross
Requirements
Scheduled Receipts
Planned Receipts
Planned
order
Releases
2007
Pearson
Education
230
LOT SIZE = 300

LEAD TIME = 1 Week
6
7
8
180
180 180
LOT SIZE = L4L

LEAD TIME = 1 week
6
7
8
230
230
230
187
300
Seat Cushions
1
187
230
230
Planned
order
releases
are sized
gross
requirements.
Two
planned
order
releases
ofremains
230tounits
are
scheduled.
Projected
on-hand
inventory
at zero.
Weeks
77
230
230
Seat Frames
Weeks

LEAD TIME = 2 Weeks
6
7
8
150 120
230
230
SEAT SUBASSEMBLY

Weeks
Gross
Gross Reqirements
Requirements
Scheduled Receipts
Planned Receipts
1
150
230
117
4
120
117
117
227
230
227
230
Gross Reqirements
Gross
Requirements
Scheduled Receipts
Planned Receipts
40
2
230
300
110
77
187
230
187
230
Seat Frames
Weeks

LEAD TIME = 2 Weeks
6
7
8
150 120
0
5
230
110
110
180
300
LOT SIZE = 300

LEAD TIME = 1 Week
6
7
8
180
180
180
300
Gross requirements for seat-frame boards will be 1200 units

(or
4 x=300)
LOT
SIZE
L4L in
week
3.
Seat Cushions
LEAD TIME = 1 week
Weeks
Gross Reqirements
Gross
Requirements
Scheduled Receipts
Planned Receipts
Planned
order
Releases
2007
Pearson
Education
2
230
5
230
0
230
0
230
230
230
Other
Important Reports
Action notice: A computer-generated memo
alerting planners about releasing new orders and
adjusting the due dates of scheduled receipts.
Capacity requirements planning (CRP): A
technique used for projecting time-phased capacity
requirements for workstations; its purpose is to
match the material requirements plan with the
capacity of key processes.
Manufacturing resource planning (MRP II): A
system that ties the basic MRP system to the
companys financial system and to other core and
supporting processes.
Item As MPS and BOM

Application 15.5
Inventory Data
Application 15.5
Item D
Application 15.5
Item B
Application 15.5
Item C
Application 15.5
Drum-Buffer-Rope System
Drum-Buffer-Rope (DBR): A planning and control
system that regulates the flow of work-in-process
materials at the bottleneck or the capacity
constrained resource (CCR) in a productive system.
Drum-Buffer-Rope System with a Capacity Constrained Resource (CCR)
Market Demand
650 units/week
Drum-Buffer-Rope System
in Practice
The U.S. Marine Corps Maintenance Center in
Albany, Georgia, overhauls and repairs vehicles
used by the Corps.
Repairs to equipment can vary tremendously at the
U.S. Marine Corps Maintenance Center in Albany,
Georgia.
The center struggled to keep up with its repairs until
managers implemented the simplified form of a
drum-buffer-rope system.
The result? Repair times fell from 167 days to just
58 days, on average.
Resource Planning for

Service Providers
Dependent demand for services
Restaurant
Airlines
Hospitals
Hotels
Bill of Resources: A record of a firms
parent-component relationships and all of
the materials, equipment time, staff, and
other resources.
Level 1
Discharge
Bill of Resources (BOR)

A record of a service firms parent
component relationships and all of the
materials, equipment time, staff, and
other resources associated with them,
including usage quantities.
BORforTreatinganAneurysm
MD
(1 hr)

Therapy
(1 hr)
Bed
(24 hr)
Lab
(3 tests)
Level 3
Postoperative care
(Step down)
Level 4
Postoperative care
(Intensive)
Level 5
Surgery
Level 6
Preoperative care
(Angiogram)
Nurse
(6 hr)
Level 2
Intermediate care
Level 6
Preoperative care
(Angiogram)
Kitchen
(1 meal)
Pharmacy
(10
medicines)
Level 7
Preoperative care
(Testing)
Solved Problem 1
If there is no existing
inventory, how many
units of items G, E, and
D must be purchased to
produce five units of end
item A?
A
LT = 1
B (3)
C (1)
LT = 2
D (1)
E (2)
LT = 3
LT = 6
LT = Lead time
LT = 3
F (1)
LT = 1
G (1)
LT = 3
D (1)
LT = 3
5 units of item G
30 units of item E
20 units of item D
Solved Problem 3
A
The MPS for product A calls for the assembly

department to begin final assembly according
to the following schedule: 100 units in week 2;
200 units in week 4; 120 units in week 6; 180
units in week 7; and 60 units in week 8.
Develop a material requirements plan for the
next eight weeks for items B, C, and D.
DATA CATEGORY
Lot-sizing rule
Lead time
Scheduled receipts
Beginning (on-hand)
inventory
B
POQ (P=3)
1 week
None
20
ITEM
C
L4L
2 weeks
200 (week 1)
0
LT = 2
B (1)
LT = 1
D
FOQ = 500 units

3 weeks
None
425
C (2)
LT = 2
D (1)
LT = 3
Solved Problem 3
Item: B
Description:
Lot size: POQ (P = 3)

Lead time: 1 week
Week
1
Gross
requirements
200
100
120
180
60
240
60
10
Scheduled
receipts
Projected
on-hand 20
inventory
20
Planned
receipts
Planned
order
releases
200
200
280
280

360
360
Solved Problem 3
Item: C
Description:
Lot size: L4L

Lead time: 2 weeks
Week
1
Gross
requirements
200
Projected
on-hand 0
inventory
200
Planned
receipts
Planned
order
releases
400
200
Scheduled
receipts
400
400
240
360
240
360
120
240
360
120
120
10
Solved Problem 3
Item: D
Description:
Lot size: FOQ = 500 units

Lead time: 3 weeks
Week
1
Gross
requirements
400
240
360
120
285
425
305
500
500
10
305
305
360
305
Scheduled
receipts
Projected
on-hand 425
inventory
425
25
Planned
receipts
Planned
order
releases
500

500
25

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Resource Planning

2007 Pearson Education

How Resource Planning

2007 Pearson Education

Supply Chain Strategy

Resource Planning and

ERP Application Modules

2007 Pearson Education

Lumpy Dependent Demand Resulting

2007 Pearson Education

Products with many levels

Using system as catalyst for

of components, and more

control bottlenecks and

2007 Pearson Education

MRP explosion: A process that converts the requirements

Bill of materials (BOM): A record of all the components

Bill of Materials Terms

Part commonality: The degree to which a

2007 Pearson Education

2007 Pearson Education

2007 Pearson Education

Forecast exceeds booked

As new customer orders are accepted, the ATP

2007 Pearson Education

Item: Ladder-back chair

Order Policy: 150 units

MPS for Product A

2007 Pearson Education

MPS for Product A

2007 Pearson Education

2007 Pearson Education

2007 Pearson Education

Lot Size: 230 units

2007 Pearson Education

Lot Sizing Rules

H10-A Using FOQ

2007 Pearson Education

H10-A Using FOQ

2007 Pearson Education

Lot Sizing Rules

2007 Pearson Education

Total Gross requirements

The POQ (P = 3) Rule for the

(120 + 0 + 150) - 117 = 153

H10-A Using POQ

2007 Pearson Education

H10-A Using POQ

2007 Pearson Education

2007 Pearson Education

The Lot-for-Lot (L4L) Rule for the

H10-A Using L4L

2007 Pearson Education

H10-A Using L4L

2007 Pearson Education

FOQ generates high inventory because it creates remnants.

2007 Pearson Education

MRP translates, or explodes, the MPS and other sources of demand

Material requirements plan

Manufacturing resources plan

2007 Pearson Education

Material Requirements Plan

On hand Inventory + Scheduled receipts Gross Requirements