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MRP Material Requirements Planning or More Ragged Progress

MRP Material Requirements Planning or More Ragged Progress Material Requirements Planning MRP — Material Requirements Planning hours spent. The standard hour forecasts are generated or More Ragged Progress? through the product forecasts and manufacturing routings and are supplemented by moving averages of hours sold to produce special products. This, together with a comparable William H. Hoffman report on purchased parts and materials, provides some­ thing close to complete control of these basic resources. MRP is the 'only way to go' in industries characterised by batch production of broad and complex product lines. A William H. Hoffman holds a B.I.E. from N.C. State mixture of standards and specials, common parts, and University and an M.B.A. from the University of Chicago. standard parts used in special products or sold for replace- He began his career in 1951 as an industrial engineer with ment further complicate the picture and increase the value IBM and was Corporate Manager of Systems and Planning of properly designed MRP systems. for Warner Electric prior to founding Computer-Based Business Systems Inc. in 1969. Bill is author of Computer- However, MRP systems generally do not work nearly as Based Inventory & Production Planning & Control which well as they could due to faulty decision rules built into describes a fully automated and integrated system from them and other inadequacies in key areas. The most signif­ forecasting and order entry to load leveling and shop floor icant of these can be summarised as follows: control, successfully combining planning and day-to-day 1.Exponential smoothing is a poor method of forecasting control to maximise use of resources. if more than 60% of sales occur in the highest six months of The full text of this present contribution is available from the year due to seasonal influences, but seasonal factors the author. Please write to William H. Hoffman, President, cannot be a common situation. Projecting sales from last Computer-Based Business Systems, 1105 Main Street, year's comparable quarter, factored to reflect expected Menomonie, Wisconsin 54751, U.S.A. enclosing £1.75 or changes in demand, is a much more accurate method under $3. these conditions. 2.'Tracking signals' used in most systems to detect when a forecast needs adjustment do not work well in practice, producing false signals or failing to report real problems early enough. And the 'tracking signal' does not apply where forecasts are set by means other than a statistical forecasting method and average deviations are not maintained. As an alternative, a report summarising the significant offenders in terms of percentage and dollar deviations from forecast is much more effective. 3.In an MRP system, safety stocks should always be expressed and used as time rather than quantity, build quantities must be held fixed through total lead times, and the system must adapt to minor shortages without creating unnecessary rush orders and/or expedite signals. Safety stock quantitites do not match the batch produc­ tion plans in an MRP system and therefore cannot be used economically—if at all—to produce product. The net result is that safety stock quantities simply sit there, serving no purpose and bloating inventory, while the build plan awaits arrival of the larger quantities needed. But if safety time is incorporated in the system, it allows the plan to stretch out or compress somewhat like a rubber band to accommodate fluctuations in demand and the right quantities will be there to satisfy the modular plan. To bypass minor shortages, such as those caused by excessive scrap, the system should use a rule that depresses a shortage signal if, say, 80% of a requirement generated from a forecast can be filled. The system 'remembers' the deficit amount, but planned delivery of material is delayed until the next requirement in the planning record. A similar rule adjusts actual production orders to be issued down as low as 70% of planned quantity to accommodate parts shortages at that point. 4.The best laid and executed plan has little meaning if delivery promise dates for incoming sales orders are not based on available inventory or real capacity to produce. The sales orders, then, must 'reserve' production capacity and purchased materials as part of the delivery promise mechanism. Visualise an up-to-date report, needed in almost every manufacturing company but available in almost none: Quarter-to-date standard hours forecast, produced, and sold by machine and assembly group together with actual http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Management Research News Emerald Publishing

MRP Material Requirements Planning or More Ragged Progress

Hoffman, William H.
Management Research News , Volume 4 (3): 1 – Feb 1, 1982
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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0140-9174
DOI
10.1108/eb027789
Publisher site
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Abstract

Material Requirements Planning MRP — Material Requirements Planning hours spent. The standard hour forecasts are generated or More Ragged Progress? through the product forecasts and manufacturing routings and are supplemented by moving averages of hours sold to produce special products. This, together with a comparable William H. Hoffman report on purchased parts and materials, provides some­ thing close to complete control of these basic resources. MRP is the 'only way to go' in industries characterised by batch production of broad and complex product lines. A William H. Hoffman holds a B.I.E. from N.C. State mixture of standards and specials, common parts, and University and an M.B.A. from the University of Chicago. standard parts used in special products or sold for replace- He began his career in 1951 as an industrial engineer with ment further complicate the picture and increase the value IBM and was Corporate Manager of Systems and Planning of properly designed MRP systems. for Warner Electric prior to founding Computer-Based Business Systems Inc. in 1969. Bill is author of Computer- However, MRP systems generally do not work nearly as Based Inventory & Production Planning & Control which well as they could due to faulty decision rules built into describes a fully automated and integrated system from them and other inadequacies in key areas. The most signif­ forecasting and order entry to load leveling and shop floor icant of these can be summarised as follows: control, successfully combining planning and day-to-day 1.Exponential smoothing is a poor method of forecasting control to maximise use of resources. if more than 60% of sales occur in the highest six months of The full text of this present contribution is available from the year due to seasonal influences, but seasonal factors the author. Please write to William H. Hoffman, President, cannot be a common situation. Projecting sales from last Computer-Based Business Systems, 1105 Main Street, year's comparable quarter, factored to reflect expected Menomonie, Wisconsin 54751, U.S.A. enclosing £1.75 or changes in demand, is a much more accurate method under $3. these conditions. 2.'Tracking signals' used in most systems to detect when a forecast needs adjustment do not work well in practice, producing false signals or failing to report real problems early enough. And the 'tracking signal' does not apply where forecasts are set by means other than a statistical forecasting method and average deviations are not maintained. As an alternative, a report summarising the significant offenders in terms of percentage and dollar deviations from forecast is much more effective. 3.In an MRP system, safety stocks should always be expressed and used as time rather than quantity, build quantities must be held fixed through total lead times, and the system must adapt to minor shortages without creating unnecessary rush orders and/or expedite signals. Safety stock quantitites do not match the batch produc­ tion plans in an MRP system and therefore cannot be used economically—if at all—to produce product. The net result is that safety stock quantities simply sit there, serving no purpose and bloating inventory, while the build plan awaits arrival of the larger quantities needed. But if safety time is incorporated in the system, it allows the plan to stretch out or compress somewhat like a rubber band to accommodate fluctuations in demand and the right quantities will be there to satisfy the modular plan. To bypass minor shortages, such as those caused by excessive scrap, the system should use a rule that depresses a shortage signal if, say, 80% of a requirement generated from a forecast can be filled. The system 'remembers' the deficit amount, but planned delivery of material is delayed until the next requirement in the planning record. A similar rule adjusts actual production orders to be issued down as low as 70% of planned quantity to accommodate parts shortages at that point. 4.The best laid and executed plan has little meaning if delivery promise dates for incoming sales orders are not based on available inventory or real capacity to produce. The sales orders, then, must 'reserve' production capacity and purchased materials as part of the delivery promise mechanism. Visualise an up-to-date report, needed in almost every manufacturing company but available in almost none: Quarter-to-date standard hours forecast, produced, and sold by machine and assembly group together with actual

Journal

Management Research News – Emerald Publishing

Published: Feb 1, 1982

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