You are the Operations and Planning Manager for your company. You have recruited a new employee to be part of the supply chain function. The employee has a bachelor's degree in mathematics but has no prior work experience in planning. You are required to train the new employee and she (Chitra) seems to be struggling with understanding the concept of how MRP works in practice. You have decided to draw up an example and take her through the working of an MRP. You decide to use the following data available to you. Please work out step by step and also. explain clearly and record the same so that it is available to Chitra for reference. Your company has only one plant with a co-located warehouse location. Plant code is Z01. SKU: AAA001; Material is in-house produced at plant Z01. This is a stock item that is normally forecasted and has safety stocks. Demand is forecasted monthly but is split into weekly buckets. For simplicity, assume there are only 28 days in a month and all days are working days. You construct the base scenario as follows. There is no forecast for this product (the demand planner forgot to put in the forecasts and safety stocks for the same), so it behaves like an MTO. Leadtime for production is instantaneous. Your production is flexible enough to allow any lot size to be produced and currently has enough available capacity to produce any requirements that come through asap. The only initial requirement is via customer orders as below. W1 refers to week 1. All requirements are assumed to be required at the start of the week. Customers require you to despatch the goods from your warehouse on the due date and are accepting of the leadtime it takes from the point of invoicing to the time it reaches them which can be almost 7 days. So a W1 order needs to be despatched on the first day of W1, so aligned to how MRP assumes the requirement to fall. We are currently at the start of W-3, L.e. 3 weeks before the start of the horizon for which we need to plan. There is no WO, Current week is W1 Initial Stock =0, Initial existing purchase orders =0, Initial open / pending production orders =0, Initial firm planned orders/ production orders (not released or confirmed) =0. Initially, you produce lot-for-lot. Customer sales orders Draw up a supply plan table and teach Chitra how MRP works. Currently assume production has no constraints so focus on unconstrained planning. Layer on the following step by step and redraw the supply plan at each step drawn up by MRP. Assume previous parameters added in previous steps stay). Draw key inferences on the impact of adding these new dimensions or restrictions at each step. 1. Lot size for supply planning/ frequency of supply =1 week 2. Safety stock =50 units of SKU AAAO01 3. Min lot size for production =50 units 4. Max Lot size for production (machine batch size constraint) =300 units 5. You reinstate the process of forecasting before reworking the planning. The forecasts after due analysis and discussions with the Commercial/ Sales team are given as below. The assumption here is that any customer order placed will clearly indicate the week for which it is required and it should only be considered against the forecast for that week. 6. Chitra is looking at your ERP screen for this product and asks you why there seem to be some production orders for this material. You suddenly realize that there are some previous production orders released to the shopfloor that have already been released but have not been completed but parked because of labour issues. You cannot therefore produce them earlier, but you expect to be able to complete them as follows (at the beginning of the respective weeks). You want to factor these into the MRP calculations. 7. While drawing these up, you also see a firmed up planned order (not converted to production order due to labour issues) and a couple of firmed up purchase requests (not converted to purchase orders, but drawn up as part of a discussion to buy some quantity from an external supplier to overcome temporary issues with labour availability) 8. As you are explaining some of these to Chitra, your boss happens to overhear you and walks in to make a comment. He says that in reality while we forecast monthly and split those into weekly forecasts based on commercial input, the weekly forecasts have lower accuracies than the monthly forecasts. In reality. there can be a slight difference in the timing of the actual orders coming from customers. At the broad level, the inaccuracy extends to one week behind and one week forwards. So he wants you to tweak the assumption an order vs forecast as follows. 8. As you are explaining some of these to Chitra, your boss happens to overhear you and walks in to make a comment. He says that in reality. while we forecast monthly and split those into weekly forecasts based on commercial input, the weekly forecasts have lower accuracies than the monthly forecasts. In reality. there can be a slight difference in the timing of the actual orders coming from customers. At the broad level, the inaccuracy extends to one week behind and one week forwards. So he wants you to tweak the assumption an order vs forecast as follows. a. Sales orders must first consume the forecasts for that week for which the order is requested for. b. If the actual orders exceed the forecasts, then one must assume it could be for the previous week and consume that forecast if available. c. If the actual orders exceed forecasts and there is no unconsumed forecast in either the same week or the previous week, then it should be assumed to be for the next week. d. All the sales orders come in chronological order, so the orders requested for W1 come in before the orders requested for W2. 9. You introduce Chitra to your colleague from manufacturing who decides to sit in on the training session. He points out that while the min and max lot sizes for production are ok, the input materials cannot be drawn in unit increments since the machine has multiples of ten attachments to process at the same time. So if we produce 11 units, 9 attachments will run empty. He suggests that you add a value of 10 units to round the production orders to the nearest 10 units to make it more efficient for manufacturing. 10. While you take on board his suggestions, he brings in a further complication. He says while the 10 unit increments used to work in the past because they had the same make/ type of machines, their machine park had undergone significant changes so to get the most efficiency, they had to produce in lot sizes that were not increments of the same size. You asked for data and he provided the table below. \begin{tabular}{|l|} \hline 50 \\ \hline 60 \\ \hline 80 \\ \hline 100 \\ \hline 150 \\ \hline 180 \\ \hline 240 \\ \hline 260 \\ \hline 300 \\ \hline \end{tabular} 11. Finally, you want to also take.into account the fact that production takes a week and is not instantaneous as you had assumed. So you want to give a plan to manufacturing to start production. While supply chain is focused on completion of orders to service a customer, manufacturing needs to know when to start production. 12. Procurement are interested in the production plan to know how to service the requirement for a key raw material that is purchased. The Procurement manager tells you that his department does not want to do these calculations on a spreadsheet but would rather have them from you through the state-ofthe-art ERP system. Manufacturing and Procurement provide you with the following data of the key raw material as ner the BOM for the finished qoods SKU AAA001 For Raw Material RM001, Current stock =0, Min lot size =20, Max lot size =1000, Increments for ordering =20 units, Procurement leadtime (all inclusive including goods receipt, quality inspection, etc.) =2 weeks Based on this, can you draw up a Procurement plan that gives a view of both when the goods are required in-house as well as when the purchase orders need to be placed. RM002 is not critical since it is just a label that is printed at need inhouse and therefore decide to not worry about it for now. 13. You want to now consider the current stocks available for both the FG and the key raw material RM001. Add current stock =200 units for FG AAA001 and Current stock =100 units for RM001. 14. Strategically, you are running out of space for manufacturing expansion at your current factory. Furthermore, your customers want to get goods from the state in which they are located to claim some local tax benefits. You are therefore working on an idea to move the warehouse closer to your customers. However, this means that the warehouse would not be co-located with your plant and there would be an additional leadtime of movement to the warehouse before the goods can be invoiced and sent to customers. Your factory is in East India and the warehouse location could move to Bhiwandi in West India, adding 7 days to the leadtime. The customers would then place orders on the Bhiwandi warehouse from where the goods need to be invoiced and shipped to the customers. Please remodel the entire supply chain to take this into account. You will have to show the MRP split for the two plants and show dependent requirements flowing from one to the other. 15. You have been asked to check if it would be cheaper to purchase the finished goods as opposed to producing it inhouse. You have a vendor in Pune (close to Bhiwandi) who can make the FG material for you and supply it. Procurement is working on the pricing from the vendor but you want to see how the picture of supply and inventory would change if you moved this to procurement. The key details that you have available with you are: Procurement leadtime =2 weeks Min lot size - Procurement wants you to work out two scenarios since a larger min lot size has savings on costs through a lower price. (1) Min lot size of 100 and increments of 100 (2) Min lot sizes of 250 and increments of 250