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CPIM Exam – Basics of Supply Chain Management Practice Study Sheet
Chapter Four – Master Requirements Planning
• Materials Requirements Planning has 2 major objectives1) determine requirements 2) keep priorities current
• Independent demand must be forecast; dependent demand is related to the demand for other items (higher level assemblies or products)
• Material Requirements Planning (MRP) drives Production Activity Control (PAC) and purchasing. MRP plans the release and receipt dates for orders. PAC and purchasing must plan and control the performance of orders to meet the due dates
• The Material Requirements Planning System has three inputs 1) master production schedule 2) inventory records 3) bills of materials
• Inventory records have 1) planning factors (header records) and 2) status of each item that changes with every transaction
• Bill of Material is “a listing of all the subassemblies, intermediaries, parts and raw materials that go into making the parent assembly showing the quantities of each required to make an assembly”. Three points
1. BOM shows all the parts required to make one item
2. Each part or item has only one part number
3. A part is defined by its form, fit or function. If any of these change, they become new, unique parts (i.e. if you paint something)
• Multilevel bills are formed as logical groupings of parts into subassemblies, based on the way the product is assembled (i.e. an auto has a frame, chassis, doors, windows and engine as subassemblies)
• Summarized parts list contains all the parts needed to make one assembly; produced by the product design engineer
• Planning bills are artificial groupings of components for planning purposes. They do not represent buildable products but an average product
• Where-used reports give the same information as a bill of material, but gives the parents for a component. Wheels might be used on several models of cars
• Pegging report is like a where used report but only shows parents for which there is an existing requirement (rather than all parents, even those with no current production)
• Bills of material are used for the following purposes
1. product definition – components to make a product
2. engineering change control – recording changes to design of a product
3. service parts – replacement parts needed to fix a broken component are determined from the bill of material
4. planning- define what materials are needed to create an end product
5. order entry – the order entry system usually automatically configures the order with parts and calculates the total extended price
6. manufacturing – provide a list of parts needed to make a product
7. costing – method of determining direct material and a structure for recording direct labor and distributing overhead
• Lead time is the amount of time needed to perform an operation – it includes order preparation, queuing, processing, moving receiving and inspecting
• Exploding is the process of multiplying the requirements by the usage quantity and recording the appropriate requirements throughout the product tree
• Offsetting is the process of placing the exploded requirements in their proper periods based on lead time
• The planned order release of the parent becomes the gross requirement of the component
• Releasing an order means that authorization is given to purchasing to buy the necessary material or to manufacturing to make the component (check component availability first)
• Scheduled receipts are orders place on manufacturing or on a vendor and represent a commitment to make or buy. Scheduled receipts on the MRP record are open orders on the factory . When the goods are received into inventory and available for use, the order is closed out, and the scheduled receipt moves into on-hand inventory
• Net Requirements = gross requirements – scheduled receipts – available inventory
• Low level code is the lowest level on which a part resides in all bills of material. Determined by starting at the lowest level of a bill of material and working up to the part
• Responsibility of planner is to 1) launch (release) orders to purchasing or manufacturing 2) reschedule due dates of open (existing) orders as required 3) reconcile errors and try to find their cause 4) solve critical material schedules by expediting or re-planning 5) coordinate with others
• Planned orders are automatically scheduled by the computer. Released orders are responsibility of the planner. Firm planned orders can be held against changes
• Exception messages advise the planner when something needs attention
• Transaction messages mean that the planner must tell the MRP software of all actions such as 1) release an order 2) schedule a receipt 3) change to the data
• Feedback to the plan comes from 1) suppliers actions through purchasing 2) early or late completion at the factory 3) management actions such as changing the master production schedule
• Reducing systems nervousness of constant changes through firm planned orders