Production and Project Management

Course code: ChEg 5104

Credit Hours: 3

Aregawi G/Eyesus (Assistant Professor)

Email: aregawig1974@[Link] Cellphone: +251968925386

March 03, 2025

 Chapter 2:Operations Planning

3.1 Strategies for adjusting capacity

3.2 Aggregate Planning
3.3 Material Requirements Planning (MRP)
3.4 Scheduling
3.5 Capacity Requirements Planning (CRP)
3.6 Maintenance Planning and Scheduling
3.7 Enterprise Resource Planning (ERP)

2
Chapter three Learning Objectives
• Define the concepts of AP, MPS, CRP, MRP
and ERP.
• Understand the difference among the plans
(AP, MPS, CRP, MRP and ERP).
• Compute and develop plans of AP, MPS, CRP,
MRP and ERP.

3
3.1 Strategies for adjusting capacity
• Strategy is a plan of action designed to
achieve a long-term personal or organizational
goal or overall aim.

• Capacity is a maximum load attend in the

work center.
There are 3 types of adjusting capacity for
seasonal products

4
Adjusting capacity strategies for seasonal products
1. Leveling Strategy
Week Number
1 2 3 4 5 6 7 8 9 10 11 12
Forecast 5 5 5 5 5 5 15 15 15 15 15 15
Available 25 30 35 40 45 50 45 40 35 30 25 20
MPS 10 10 10 10 10 10 10 10 10 10 10 10
On hand 20

Leveling Strategy Used the same capacity (Leveled capacity) through out the year
2. Chase Strategy
Week Number
1 2 3 4 5 6 7 8 9 10 11 12
Forecast 5 5 5 5 5 5 15 15 15 15 15 15
Available 20 20 20 20 20 20 20 20 20 20 20 20
MPS 5 5 5 5 5 5 15 15 15 15 15 15
On hand 20
Chase Strategy Used the variable capacity through out the year
There are many alternative MPS plans between these two extreme
Lot sizing in the MPS
Week Number
1 2 3 4 5 6 7 8 9 10 11 12
Forecast 5 5 5 5 5 5 15 15 15 15 15 15
Available 15 10 5 30 25 20 5 20 5 20 5 20
MPS 30 30 30 30
On hand 20

• Manufacturing in batches produces inventories that last between

production runs. This inventory is called cycle stock.
Chase Strategy Used the lot or bulk capacity on upon time and null
or non some time in the year

April 2018
 Capacity or Work Loading
Capacity adjustment as per loading classified in to two:-
Infinite loading and finite loading

• Infinite loading: Ignores capacity

constraints, but helps identify
bottlenecks in a proposed
schedule to enable proactive
management

• Finite loading: Allows only as

much work to be assigned as can
be done with available capacity –
but doesn’t prepare for inevitable
slippage

7
 3.2 Aggregate Planning
Aggregate planning is a summative or Cumulative plan of production
Over all Planning Process
Production Marketing Finance
Capacity Customer Cash flow
Inventory demand

Procurement Human resources

Supplier Manpower
performance planning

Management Engineering
Return on Aggregate Design
investment production completion
Capital plan

Change
production
Master production plan?
schedule
 ……..Over all Planning Process

Master production
schedule Change
master
Change production
requirements? Material schedule?
requirements plan
Change
capacity? Capacity
requirements plan

No Is capacity Is execution
Realistic? plan being meeting the
met? plan?
Yes
Execute capacity
plans

Execute
material plans
Over all Planning Process by POM Software

10
Example of Cement Aggregate Production Plan

Months January February

Aggregate Production Plan 1,500 1,200
(Shows the total
quantity of cement)
Weeks 1 2 3 4 5 6 7 8
Master Production Schedule
(Shows the specific type and
quantity of Cement to be
produced)
PPC 100 100 100 100
OPC 500 500 450 450
PLC 300 100
 Master Production Schedule (MPS)
Can be expressed in any of the following terms:
 A customer order in a job shop (make-to-order) company
 Modules in a repetitive (assemble-to-order or forecast)
company
 An end item in a continuous (stock-to-forecast) company

MPS Examples for Cement Products

Gross Requirements for PPC
Day 1 2 3 4 5 6 7 8 9 and so on
Amount 50 10 14 16 10

Gross Requirements for OPC

Day 7 8 9 10 11 12 13 14 15 16 and so on
Amount 100 120 100 110 70
 The “MRP Explosion” Calculus
Lead Lot Sizing
BOM Times Policies

Planned
MPS
Order Releases
MRP
Current Priority
Availabilities Planning

Bills of Material (BOM)

 List of components, ingredients, and materials
needed to make product
 Provides product structure
 Items above given level are called parents
 Items below given level are called children
 BOM(50 A) Example
Level Product structure for “Speaker” (A)
0 A

1 B(2) Std. 12” Speaker kit C(3) Std. 12” Speaker kit w/
amp-booster

2 E(2) E(2) F(2) Std. 12” Speaker

booster assembly

Packing box and

3 D(2) installation kit of wire, G(1) D(2)
bolts, and screws

Amp-booster

12” Speaker 12” Speaker

 Determining Gross Requirements

 Starts with a production schedule for the end item – 50

units of Item A in week 8
 Using the lead time for the item, determine the week in
which the order should be released – a 1 week lead time
means the order for 50 units should be released in week 7
 This step is often called “lead time offset” or “time phasing”
 From the BOM, every Item A requires 2 Item Bs – 100 Item
Bs are required in week 7 to satisfy the order release for
Item A
 The lead time for the Item B is 2 weeks – release an order
for 100 units of Item B in week 5
 The timing and quantity for component requirements are
determined by the order release of the parent(s)
 BOM Example

Part B: 2 x number of As = (2)(50) = 100

Part C: 3 x number of As = (3)(50) = 150
Part D: 2 x number of Bs
+ 2 x number of Fs = (2)(100) + (2)(300) = 800
Part E: 2 x number of Bs
+ 2 x number of Cs = (2)(100) + (2)(150) = 500
Part F: 2 x number of Cs = (2)(150) = 300
Part G: 1 x number of Fs = (1)(300) = 300
 Time-Phased Product Structure

Must have D and E

Start production of D completed here so
production can
begin on B
1 week
2 weeks to
D produce
B
2 weeks
E
A
2 weeks 1 week
E
2 weeks 1 week
G C
3 weeks
F
1 week
D
| | | | | | | |
Figure 4
1 2 3 4 5 6 7 8
Time in weeks
 Gross Requirements Plan
Week
1 2 3 4 5 6 7 8 Lead Time
A. Required date 50
Order release date 50 1 week
B. Required date 100
Order release date 100 2 weeks
C. Required date 150
Order release date 150 1 week
E. Required date 200 300
Order release date 200 300 2 weeks
F. Required date 300
Order release date 300 3 weeks
D. Required date 600 200
Order release date 600 200 1 week
G. Required date 300
Order release date 300 2 weeks
 The process continues through the entire BOM one level at a time – often
called “explosion”
 By processing the BOM by level, items with multiple parents are only
processed once, saving time and resources and reducing confusion
 Low-level coding ensures that each item appears at only one level in the BOM
Net Requirements Plan
Net Requirements Plan
 Determining Net Requirements
 Starts with a production schedule for the end item – 50
units of Item A in week 8
 Because there are 10 Item As on hand, only 40 are actually
required – (net requirement) = (gross requirement - on-
hand inventory)
 The planned order receipt for Item A in week 8 is 40 units –
40 = 50 – 10
 Following the lead time offset procedure, the planned order
release for Item A is now 40 units in week 7
 The gross requirement for Item B is now 80 units in week 7
 There are 15 units of Item B on hand, so the net
requirement is 65 units in week 7
 A planned order receipt of 65 units in week 7 generates a
planned order release of 65 units in week 5
 Determining Net Requirements
 A planned order receipt of 65 units in week 7 generates a
planned order release of 65 units in week 5
 The on-hand inventory record for Item B is updated to
reflect the use of the 15 items in inventory and shows no
on-hand inventory in week 8
 This is referred to as the Gross-to-Net calculation and is
the third basic function of the MRP process

Net Requirements Plan

The logic of net requirements
Gross On Schedule Net
Allocations – + =
requirement + han d requiremen
s d receipts ts
Total Available inventory
requirements
MRP Planning Sheet
3.3. MATERIAL REQUIREMENT PLANNING
• MRP has become a centerpiece for all manufacturing systems.
• The key to successful production and operations management
in a manufacturing company is the balancing of requirements
and capacities.
• MRP is a computer based technique to determine the
quantity and timing for the acquisition of dependent demand
items needed to satisfy the master production schedule
(MPS) requirement.
• It is used for lumpy or erratic demands. Since the control of
purchasing depends on the order for the finished products,
the technique is said to be one of ‘dependent demand’.

April 2018
 MATERIAL REQUIREMENT PLANNING
1 Basic MRP Concepts
2 Terms Used in MRP
3. Factors Affecting the Computation of MRP
4. Objectives of MRP System
5. Prerequisites and Assumptions of MRP
6. Inputs to MRP
[Link] Outputs
8. MRP Logic in Brief
9. Limitations and Advantages of MRP
25
1 BASIC MRP CONCEPTS
• Material requirement planning is based on several basic concepts,
which are implicitly defined.
• These concepts are:
• Independent versus dependent demand
• Lumpy demand
• Lead time
• Common use item
• Time phasing.
Independent Demand
• It exists when a demand for a particular item is unrelated to a
demand for other item or when it is not a function of demand of
other inventory item.
• Independent demands are not derivable or calculable from the
demand of something else hence they must be forecast.
Dependent Demand
• It is defined as dependent if the demand of an item is directly
related to, or derived from the demand of another item or
product. This dependency may be:
– “vertical” such as when the component is needed in order to
build a subassembly or product, or
– “horizontal” as in the case of an attachment or owner’s manual
shipped with the product in most manufacturing businesses,
the bulk of the total inventory is in raw materials, component
parts, and subassemblies, all largely subjected to dependent
demand.
• Since such demand can be calculated, and precisely determined
from the demand for those items that are its sole causes, it need
not and should not, be forecast.
 Independent and Dependent Demand
Independent Demand

A Dependent Demand

B(4) C(2)

D(2) E(1) D(3) F(2)

Independent demand is uncertain.

Dependent demand is certain.
Lumpy Demand
• Manufacturing is frequently done on an intermittent basis in lots,
or models, of one type or another.
• The components of a finished product are needed only when the
product is being manufactured.
• Thus, there may be large demands on inventory at some times and
none at other times, making the demand ‘lumpy’.
• When the demand occurs in large steps, it is referred to as “lumpy
demand.”
• MRP is an appropriate approach for dealing with inventory
situations characterized by lumpy demand.
Lead Time of Item
• The lead-time for a certain job is the time that must be
allowed to complete the job from start to finish.
• In manufacturing, lead-time is divided into ordering lead-
time and manufacturing lead-time.
• An ordering lead time for an item is the time required from
initiation of the purchase requisition to receipt of the item
from the vendor.
• In this case if the item is raw material that is stocked by the
vendor, the ordering lead time should be relatively short.
• If the item must be fabricated by the vendor, the lead time
may be substantial, perhaps several months.
• Manufacturing lead time is the time needed to process the
part through the sequence of machines specified on the
route sheet.
• It includes not only the operation time but also the non-
productive time that must be allowed.
• In MRP, lead times are used to determine starting dates for
assembling final products and sub-assemblies, for
producing component parts and for ordering raw materials.
• The different individual lead times of inventory item that
makes up the product is also another factor that affect
material requirements because
– the component item order must be completed before the
parent item order that will consume it can be started
• The back-to-back lead times of order that the items
consume may be added up to find the cumulative lead
time.
Common Use Items
• In manufacturing, one raw material is often used to produce more
than one component type and a component type may be used on
more than one final product.
• For example if the product structure in Fig-1 is used to manufacture a
product X, a component A is required, which needs another
component B.
•Component B also requires other three components among which C
requires D and component D requires the other end component E
which may be a raw material.
• It is clearly seen from the other branch of the tree that the end item
E is also required to manufacture N, S and T.
• Hence E is required to manufacture two different components of the
finished product X. Similar relations can be shown between the
component P and X.
• MRP collects these common use items from different products to effect
economies in ordering the raw materials and manufacturing the components.
 X

A N Z

B I P
P Q R S

P M C
T U V W
D
E
E
Figure 1: Product structure for Product X
Time Phasing
• Time phasing means adding the time dimension to inventory
status data by recording and storing the information on either
specific dates or planning periods with which the respective
quantities are associated.
• The inventory status information was expanded by adding data on
requirements (demand) and “availability” (the difference
between the quantity required and the sum of on-hand and on-
order quantities).
• Using the classic inventory status equation we can write:
a+b–c=x
Where; a = quantity on hand
b = quantity on order
c = quantity required
x = quantity available (for future requirements)
• The quantity required (c) would be derived from customer
orders or a forecast, or a calculation of dependent demand.
• The quantity available (x) has to be calculated. Negative
availability signifies lack of coverage and the need to place a
new order.

• Generally, time phasing means developing the information on

timing to provide answers to questions like:
 When is the quantity on order due to come in, and is it a
single order or are there more than one?
 When will the stock run out?
 When should the replenishment order be completed?
 When should it be released?
• MRP calculates item demand and time-phases for all inventory.
2 Terms Used in MRP
 Gross Requirement
• It is the projected needs for raw materials, components,
subassemblies, or finished goods by the end of the period
shown.
• Gross requirement comes from the master schedule (for end
items) or from the combined needs of other items.
• But in MRP it is the quantity of item that will have to be
disbursed, i.e. issued to support a parent order (or orders),
rather than the total quantity of the end product.
 Scheduled Receipts
• They are materials already on order from a vendor or in-house
shop to be received at the beginning of the period.
• Put differently, they are open orders scheduled to arrive from
vendors or elsewhere in the pipeline.
On Hand or Available
• The expected amount of inventory that will be on hand at the
beginning of each time period.
• This includes amount available from previous period plus planned
order receipts and scheduled receipts less gross requirements.
On Hand = Scheduled receipt + Available from previous period – GR
 Net requirement
• The actual amount needed in each time period.
Net requirement = gross requirement – Scheduled receipt - on hand
NR = (GR – SR - OH)
 Planned order receipt
• The quantity expected to be received by the beginning of the
period in which it is shown under lot-for lot ordering; this quantity
will equal net requirement.
• Any excess is added to available inventory in next time period.
 Planned order release
• It indicates a planned amount to order in each
time period; equals planned-order receipts
offset by lead time.
• This amount generates gross requirements at
the next level in the assembly or production
chain.
• When an order is executed, it is removed from
the “planned order-receipt” and planned-
order-release row and entered in the
“scheduled receipt” row.
3. FACTORS AFFECTING THE COMPUTATION OF MRP
• The computation of material requirement is affected by the
following factors:
I. Product Structure
• Product structure imposes the principal constraint on the
computation of requirements, due to its content of several
manufacturing levels of materials, component parts, and
subassemblies.
• This computation, while arithmetically very simple, requires
that a rather involved procedure be followed.
• A procedure which clearly identifies the structure of the
product by using a bill of material with different levels or
using parent-child relationship.
• The product level or manufacturing level is related to the
way the product is structured i.e. manufactured.
• The product structure of making a truck may be represented as
shown in Figure 2 using parent component relationships concept.

Level 0 X Product (truck)

Level 1 A Assembly (Transmission)

Level 2 B Subassembly (Gear-box)

Level 3 C Gear

Semi finished part (forging

Level 4 D
blank)

Level 5 E Raw material (steel)

Figure 2: Product structure for a Truck
• The concept of the product level is usually associated with
relatively complex assembled products, which contains many
(typically six to ten) levels.
• The computation of net requirement proceeds in the direction
from top to bottom of the product structure.
• We note that this procedure is laborious but it can’t be cut
short.
• The net requirement on parent level must be determined
before the net requirement on the component item level can
be determined.
• The downward progression from one product level to another
is called an explosion.
• In executing the explosion, the task is to identify the
component of a given parent items and to ascertain the
location (address) from where they may be retrieved and
processed.
II. Lot Sizing
• It is the ordering of inventory items in quantities exceeding net
requirements, for the reason of economy, or convenience.
• In the example given above the parent items A, B, and C have been
assumed to be ordered in quantities equal to the respective net
requirements for these items.
• But in reality, the lot sizing, where ever employed, would invalidate
this assumption.
• It is because the gross requirement for a component derives directly
from the (planned) order quantity of its parent(s).
• To illustrate this concept, let us see the example such that gear C be
produced with an order quantities that must be a multiple of 5
(because of some consideration in the gear machining process), the
net requirement of 76 will have to be covered by a planned order for
80.
• This will increase the gross requirement for the forging blank D
correspondingly.
• This computation is illustrated below:
Gear C (Parent)
• Net requirement = 76
• Planned-ordered release = 80
• which is (76 + 4) to satisfy the condition that the order
quantity should be a multiple of 5.
Forging (Component)
• Gross requirement = 80
• Inventory = 46
• Net requirement = 34
Lot sizing is a particular technique used to determine the order
quantities for a given inventory item.
• The general rule of MRP logic states that:
– The mutual parent-component relationship of items on
contiguous product levels dictates that the net requirement on
the parent level, as well as its coverage by planned order, be
computed before the gross requirement on component level can
be correctly determined. An MRP system should include lot
sizing as a part of the procedure.
III. Recurrence of Requirements Within Planning Horizon
• The timing of end-item requirements across a planning horizon of
typically, a year span or longer, and recurrence of these
requirements within such a time span also affect the material
requirements.
• The planning horizon of the MRP usually covers a time span large
enough to contain multiple (recurring) requirements for a given
end item which also complicate the computation of component
requirements.
• For the truck that is considered assuming the inventory quantities
of all the component items involved are available for netting
against the gross requirements generated by the lot of 100
trucks, but there may be another lot (or several) of the same end
product (or of different end product using the same transmission)
that precedes the one for 100, in the master production
schedule.
 Lot no. 1 Lot no. 2
Transmission A
Gross requirements 12 100
Inventory 2 0
Net Requirements 10 100
Gear box B
Gross requirements 10 100
Inventory 15 5 (Available for no. 2)
Net Requirements -5 95
Gear C
Gross requirements 0 95
Inventory 0 7
Net Requirements 0 88
Planned order 0 90
Forging blank D
Gross requirements 0 90
Inventory 0 46
Net Requirements 0 44
• If that is the case, its net requirements must be accounted for
before the net requirements for the lot of 100 can be
determined.
• If there is preceding lot of 12 trucks X (lot no.1), the net
requirement for the respective lots (retaining the lot-sizing
rule for gear C) calculated as above:
• As can be seen, the existence of a preceding lot of 12 has
changed the net requirements for a lot of 100.
• The net requirements for the forging blank, for instance, have
increased from 34 (that we have seen in derivation of gross
requirement) to 44.
• Due to lot-sizing this increase of 10 doesn’t coincide with the
increase of 12 in the end-product requirements (order in
multiple of 5).
Example 1. An assembly of the end product, truck X with its product
structure in Figure 2 was scheduled for week 50, component-order release
dates and completion date could be calculated by successively subtracting
the lead time values from 50 as shown below:
 Complete order for item A ..................... Week 50
• Minus lead time of item A.................…....... 01
• Release order for item ................................ 49
 Complete order for item B ...................... Week 49
• Minus lead time of item B ........................... 02
• Release order for item ................................. 47
 Complete order for item C ................................. 47
• Minus lead time of item C ........................... 06
• Release order for item ................................. 41
 Complete order for item D ................................ 41
• Minus lead time of item D .......................... 03
• Release order for item ...................... Week 38
• Lead time values (or procedure for determining these values
based on order quantity) must be supplied to the MRP system,
which stores them for use in establishing a proper alignment
of requirements and planned-order data in the course of the
requirements explosion.
• Subtracting the lead time from the date of the net
requirement, i.e. positioning the planned-order release
forward of the timing of the net requirement it covers is called
offsetting for lead time.
4. OBJECTIVES OF MRP SYSTEM
• The primary objective of this system is to determine gross and
net requirements, i.e., discrete period-demand for each item
of inventory, so as to be able to generate information needed
for correct inventory order action—an action of new type or a
revision of previous action in procurement and shop orders.
• The essential data elements accompanying this action are:
 Item identity (part number)
 Order quantity
 Date of order release
 Date of order completion (due date)
• Taking the above data, an analysis is made by MRP system
for action that effect the system such as:
 Increase in order quantity
 Decrease in order quantity
 Order cancellation
 Advancement of order due date
 Deferment of order due date
 Order suspension (indefinite deferment).
•In any manufacturing operation, the questions of what
materials and components are needed, in what quantities,
and when-and the answer to these questions are vital. An
MRP system is designed to provide just these answers.
MRP provides the following:
 Inventory reduction: MRP determines how many of components
are needed and when, in order to meet the master schedule.
 Reduction in production and delivery lead time: MRP identifies
materials and components quantities, timings, availabilities, and
procurement and production actions required to meet delivery
deadlines.
 By coordinating inventories, procurement, and production
decisions; MRP helps to avoid delays in production.
 It prioritizes production activities by putting due dates on
customer job orders.
 If there is preceding lot of 12 trucks X (lot no.1), the net
requirement for the respective lots (retaining the lot-sizing
rule for gear C) will be calculated as follows.
5. PREREQUISITES AND ASSUMPTIONS OF MRP
• The main prerequisites and assumptions that are implied by MRP
system are discussed below:
I- Prerequisites
a) A master production schedule exists and can be stated in bill of
material terms: How many end items are to be produced and
when? MRP systems presuppose that the master production
schedule can, in its entirety, be stated in bill of material terms.
b) All inventory Items are uniquely identified: Each inventory item
should be unambiguously identified through a unit code or part
number.
c) A bill of material exists at planning time: The bill of material must
not merely list all the components of a given product, but must be
so structured as to reflect the way the product is actually made, in
steps from raw material to component part to subassembly to end
item.
d) Inventory records containing data on the status of every item are
available.
II. Assumptions
a) File data integrity: File data must be accurate, complete, and
up to date, if the MRP system is to prove successful or even
useful.
b) Individual item lead times are known: An MRP system
presupposes that lead times for all inventory items are
known and can be supplied to the system, at least as
estimates.
c) Every inventory item goes into and out of stock: An MRP system
assumes that every inventory item under its control goes into and
out of stock, i.e. there will be reportable receipts following which
the item will be in an “on-hand’ state and will eventually be
disbursed to support an order for an item.
• Or in short the progression of the manufacturing process from
one stage to the next will be monitored.
d) All components of an assembly are needed at the time of
assembly order release: In determining the timing of item gross
requirements planning procedure assumes that all components
of an assembly must be available at the time an order for that
assembly is to be released to the factory.
e) Discrete disbursement and usage of component material: for
instance, if fifty units of an item are required for a given
(fabrication or subassembly) order, MRP logic expects that
exactly fifty units will be consumed.
• Materials that come in continuous form (rolls of sheet metals, coils
of wire, etc.) do not meet this expectation cleanly and therefore
require that standard planning procedures be modified and the
system adopted to handle such inventory items properly.
f) Process independence of manufacturing items: This means that a
manufacturing order for any given inventory item can be started and
completed on its own and not be contingent on the existence, or
progress, of some other order for purpose of completing the process.
6. INPUTS TO MRP
• As described in preceding discussion, MRP is a
processor which processes inputs (relating data)
to give a time phased detailed schedule for raw
materials and components. These inputs are
shown in Figure 3.
Master production schedule (MPS)
Bill of material (BOM)
Inventory status file (ISF) which provides the
information such as: Inventory status,
Replenishment lead times, and Manufacturing
lead time.
 MPS

Inventory status MRP Processing

BOM file
file Logic

Order release Order rescheduling Planned

requirements (expedite, in order (future)
(orders to be expedite, cancel
released now) open orders)

Figure 3. MRP system

I. MASTER PRODUCTION SCHEDULE (MPS)
• One of the three principal inputs of MRP system, the master
production schedule, is a list of what end products are to be
produced, how many of each product is to be produced, and
when the products are to be ready for shipment.
• It is a driving input which an MRP system depends for its real
effectiveness and usefulness because it is the determinant of
future load, inventory investment, production, and delivery service.
• Product demand that makes up the master schedule can be
separated into three categories.
1. Customer order for specific products. These orders usually
include a specific delivery date, which has been promised to
the customer by the sales department.
2. Forecasted demand. Based on statistical techniques applied to
past demand, estimates provided by the sales staff, and other
sources, the firm will generate a forecast of demand for its
various product lines.
1. Demand for individual component parts, which will be used as
repair parts and are stocked by the firm’s service department.
The third category is excluded from the master schedule
because it doesn’t represent demands for end products.
• For the purpose of MRP, the time periods of the MPS must
be identical to those on which the MRP system is based.
• The period of time that the master production spans is the
planning horizon which may be divided in to a firm portion
and a tentative portion.
• The firm portion is determined by the cumulative
(procurement & manufacturing) lead time.
• Planning horizon, the broken down of the MPS for a tractor
producing company is shown as example below:
Figure 4: Master Production Schedule
• It is anticipated build schedule for manufacturing end products (or
product options)
• It is a statement of production, not a statement of market demand
• MPS takes into account capacity limitations, as well as desires to
utilize capacity fully
• Stated in product specifications – in part numbers for which bill of
material exist
• Since it is a build schedule, it must be stated in terms used to
determine component part needs and other requirements; not in
monetary or other global unit of measure
• Specific products may be groups of items such as models instead
of end items
 The exact product mix may be determined with Final
Assembly Schedule (FAS), which is not ascertained until the
latest possible moment
• If the MPS is to be stated in terms of product groups, we must create
a special bill of material (planning bill) for these groups
Tasks performed by a master production scheduler
 Construct and update the MPS:
• Involves processing MPS transactions, maintaining MPS records and
reports, having a periodic review and update cycle (rolling through
time), processing and responding to exception conditions, and
measuring MPS effectiveness on a routine basis
• On a day-to-day basis, marketing and production are coordinated
through the MPS in terms of Order Promising
• Order promising is the activity by which customer order requests
receive shipment dates
An effective MPS provides:
• Basis for making customer delivery promises
• Utilizing plant capacity effectively
• Attaining the firm’s strategic objectives as reflected in the
production plan and
• Resolving trade-off between manufacturing and marketing
• Since MPS is the basis for manufacturing budgets, the financial
budgets should be integrated with production planning/MPS
activities
• When MPS is extended over a time horizon, is a better basis for
capital budgeting
• Based on the production output specified in the MPS the day-
to-day cash flow can be forecasted
• The MPS should be realizable and not overstated
• When scheduled production exceeds capacity, usually some or
all of the following occur:
 Invalid priority
 Poor customer service (missed deliveries)
 Excess in-process inventories
 High expediting costs
 Lack of accountability
 Capacity Constraints

Forecasts What to Produce

Production Plan Master Scheduling When to Produce

How much to
Customer Order
Produce

Product lead time constraints

Figure 5: Master Production Schedule

Linkage to Other Company Activities
 The Demand Management
• Represents a company’s forecasting, order entry, order promising
and physical distribution activities
• Includes all activities that place demand on manufacturing capacities
• Demand may be actual and forecast customer orders, branch
warehouse requirements, interplant requirements, international
requirements and service part requirements
 The Production Plan
• Represents role of production in the strategic business plan of the
company
• Reflects the desired aggregate output from manufacturing necessary
to support the company game plan
• The aggregate plan constraints the MPS, since the sum of the
detailed MPS quantities must always equal the whole dictated by the
production plan
 The Rough-cut Capacity Planning
• Provides a rough evaluation of potential capacity problems from a
particular MPS Structured Approach to Master Scheduling
 Select the items and /or levels in the product structure to be
included in the master schedule
 Determine the time horizon and time fences for the master
schedule
 Obtain demand information for each item in the schedule over the
time horizon
 Prepare tentative master schedule
 Perform rough-cut capacity planning on the tentative master
schedule
 Revise the tentative master schedule so it is capacity feasible
 Note on Master Schedule stability
• Freezing and time fencing concepts are used for stability
• No changes (or changes only after tougher negotiations) incorporated
in certain number of recent periods of the schedule in the case of
freezing
• Frozen period provides a stable target for manufacturing to hit
• Time fences specify periods in which various types of
changes can be handled
• Two common fences are demand fence and planning
fence
• Demand fence is the shorter of the two
• Inside the demand fence, the forecast is ignored in
calculating the available
• Within the demand fence it is very difficult to change the
MPS
• Planning fence indicates the time at which the master
production scheduler should be planning more MPS
quantities
• Between the demand fence and the planning fence,
management trade-offs must be made to make changes
• Outside the planning fence, the master production
scheduler can make changes
DTF = Demand time fence; PTF = Planning time fence
Figure 6: Master Schedule Time Fences
Business Environment and MPS
• Encompasses the production approach used, the variety of products
produced, and the markets served by the company
• Based on the marketing environment the firms are classified as: Make-to-
stock, Make-to-order and Assemble-to-order
The MPS approach to this environment
• The choice between these alternatives is largely one of the unit (end items,
specific customer orders, or some group of end items and product options)
used for the MPS
1. Make-to-stock
• Produces in batches, carry finished goods inventories for most end items
• MPS is the production statement of how much of and when each end items is
to be produced
E.g.:- Consumer goods and supply items
• Many organizations tend to group end items into model grouping in the MPS
preparation
• The end item information is delayed until the latest possible time and the
end item schedule is available in the final assembly schedule.
• All product so grouped are run together in batches to achieve economical run
for component parts
2. Make-to-order
• Carry no finished goods inventory and builds each customer order
as needed
• Very large number of possible production configurations
• Small probability of anticipating a customer’s exact need
• Customers expect to wait for a large portion of the entire design
and manufacturing lead time
E.g.: - Special purpose machine tools
• MPS unit is typically defined as the particular end item or set of
items comprising a customer order
3. Assemble-to-order
• Limitless number of possible end item configurations, all made from
combination of basic components and subassemblies
• Customer delivery time is often shorter than total manufacturing
lead time
• Large number of end item possibilities makes forecasting exact end
item configurations extremely difficult and stocking end items very
risky
 Tries to maintain flexibility by starting basic components and
subassemblies into production and not starting final assembly
until a customer order is received
E.g.: - Dell computers
• The MPS unit is stated in planning bills of material
• The MPS unit (Planning bill) has its components a set of
common parts and options

Note
• Choice of MPS unit is somewhat open to definition by the firm
• Some firms may produce end items that are held in inventory,
yet still use assemble-to- order approaches
• Some firms use more than one of these approaches at the same
time
Master Production Scheduling Technique
• MPS record is time-phased record to show relationships between production
output, sales forecast, and expected inventory balance
Week Number
1 2 3 4 5 6 7 8 9 10 11 12
Forecast 10 10 10 10 10 10 10 10 10 10 10 10
Available 20 20 20 20 20 20 20 20 20 20 20 20
MPS 10 10 10 10 10 10 10 10 10 10 10 10
On hand 20
Available= On-hand + MPS - Forecast
A Time-phased MPS record

• The above record is a highly simplified example of master production schedule

involving an item with a beginning inventory of 20 units, sales forecast of 10
units per week, and MPS of 10 units per week as well.
• The MPS row states the timing for completion of units available to meet
demand.
• The details for starting production of the various components and assembly of
the product are taken care of by the MRP system.
• The “available” row represents the expected inventory position at the end
of each week
• Any negative values in the available row represent expected back orders
• Reason for carrying positive projected inventory balance
 Forecasts involve some degree of error, and the MPS is a plan for
production that may not be exactly achieved
 Projected inventory balance provides a tolerance for errors that
buffers production from sales variations
There are many alternative MPS plans between these two extreme Lot sizing in the
MPS
Week Number
1 2 3 4 5 6 7 8 9 10 11 12
Forecast 5 5 5 5 5 5 15 15 15 15 15 15
Available 15 10 5 30 25 20 5 20 5 20 5 20
MPS 30 30 30 30
On hand 20
Manufacturing in batches produces inventories that last between production
runs. This inventory is called cycle stock.
Available= On-hand + MPS - Forecast
Rolling Through Time
• This helps to update the record to reflect the actual conditions
• It is necessary not only to construct the MPS but also to process
actual transactions and modify the MPS
• Consider the above MPS record. The first week is over and the
following changes occurred: The actual sales were 10 units in the
first week instead of 5 units and a different forecast is available for
the next 12 week. The new forecast at the end of the first week is
for 10 units per week for the next 5 weeks and 15 units per week
for the following 7 weeks (7 through 13). The new 12-week
forecast incorporates 35 more units than the original 12-week
forecasts. The implication of this (without revised MPS) is available
in the table below
Using the revised forecast after one week
Week Number
2 3 4 5 6 7 8 9 10 11 12 13
Forecast 10 10 10 10 10 15 15 15 15 15 15 15
Available 0 -10 10 0 -10 -25 -10 -25 -10 -25 -10 -25
MPS 30 30 30 30
On hand 10
Available= On-hand + MPS - Forecast
MPS revised to accommodate revised forecast after one week
Week Number
2 3 4 5 6 7 8 9 10 11 12 13
Forecast 10 10 10 10 10 15 15 15 15 15 15 15
Available 30 20 10 30 20 5 20 5 20 5 20 5
MPS 30 30 30 30 30
On hand 10
• Identify the problems associated with revising the MPS

Order Promising
• For many products, customers do not expect immediate delivery,
but place orders for future delivery
• The delivery date (promise date) is negotiated through a cycle of
order promising, where the customer either asks when the order
can be shipped or specifies a desired shipment date
• If the company has a backlog of orders for future shipments, the
order promising task is to determine when the shipment can be
made
• The delivery rate promise procedure is explained with an MPS
record of an item shown below
MPS Record of an Item
Week Number
1 2 3 4 5 6 7 8 9 10 11 12
Forecast 5 5 5 5 5 5 15 15 15 15 15 15
Available 15 10 5 30 25 20 5 20 5 20 5 20
MPS 30 30 30 30
On hand 20

Available= On-hand + MPS – Forecast

• To decide the promise date the quantity available for promise is to
be known
 Available-to-promise (ATP) is the term used to represent this
quantity
Conventions used in the MPS record with order promise
• Forecast row shows the forecasting when items will be shipped
• There is a row labeled “Orders” represents the company’s backlog
of orders at the start of first week
• The frequently used convention in the case of available row is to
use the greater of forecast or booked orders in any period for
projecting the available inventory balance
• This is consistent with the concept that actual orders, “consume”
the forecast
• That is, we start out with an estimate (the forecast), and actual
orders come into consume (either partially, fully, or over the
estimate)
• Calculation procedure associated with available row is
Current period available = Previous period available + MPS –
(Greater of forecast or orders)
• An ATP value is calculated for each period in which there is an MPS
quantity
• To calculate the available to promise only the actual orders and
scheduled production are considered
• ATP calculation procedure
First period ATP = On-hand + any first-period MPS - (all orders
until the next MPS)
Later period ATP = MPS in that period - (all orders in that and
subsequent period until the next MPS)
Both of these rules, however, have to be modified to reflect
subsequent period ATP deficiencies
MPS Record with ATP and Actual Order
Week Number
1 2 3 4 5 6 7 8 9 10 11 12
Forecast 5 5 5 5 5 5 15 15 15 15 15 15
Orders 5 3 2 35
Available 15 10 5 30 25 20 5 20 15 20 5 20
ATP 10 30 25 0 30
MPS 30 30 30 30
On hand 20

• Note that the later customer orders are covered by the later MPS
quantities
 The 35 units order for week 10 could have been covered by 10
units in week 1 plus 25 units from the MPS of week 4.
 This would have left no units for promising from week 1 until
week 3, greatly reducing promise flexibility
• The convention is to preserve early promise flexibility by allocating units
to actual orders as late as possible
• The available row provides the master production scheduler with a
projection of the item availability throughout the planning horizon
• This is important information for managing the master production
schedule
• A negative available quantity at the end of the planning horizon is a
signal for more MPS
• During the planning horizon there is typically some length of time in
which changes are to be made only if absolutely essential, to provide
stability for planning and execution.
• At the end of this period, master production schedulers have maximum
flexibility to create additional MPS quantity
• Accurate order promising allows the company to operate with reduced
inventory levels
• That is, order promising allows the actual shipments to be closer to the
MPS
• Companies in effect buffer uncertainties in demand by their delivery date
promises
• Firms manage the delivery dates rather than carry safety stock to absorb
uneven customer order pattern.
2 BILL OF MATERIAL (BOM)
• Computation of the raw material and component requirements for
end products listed in the master schedule, is done by the product
structure. The product structure is specified by the bill of materials,
which is a listing of component parts and subassemblies that make
up each product. A file which lists all assemblies together is the
bill-of-materials file.
• The structure of an assembled product can be pictured by taking a
simple product in which a group of individual components make up
two subassemblies, which in turn make up the product (Figure 5).
The product structure is in the form of a pyramid in which lower
level feeding into the levels above the items at each successively
higher level are called the parents of the items in the level directly
below. For example, subassembly S1 is the parent of components
C1, C2 and C3.
• Product P1 is the parent of subassemblies S1 and S2. In the product
structure, the amount (number) of each item required for the
parent item is specified. This is indicated by a number in
parentheses to the right and below each block.

Figure 7. Product Structure for Product P1.

• For example subassembly S2 contains two of each components C4
and C5 and one of components [Link] other information contained
in the bill-of-material file are the part number, child parent
numbers, the date each child is to become effective or to be
removed from use in the bill (effective date control for schedule
engineering changes), dropout and yield percentages, shop floor
delivery destination, and engineering revision level.
• Users of MRP system can be classified by the type of BOM they
have as shown in Figure below.
 Process industry
 Assembly only
 Assembly and fabrication

Process Assembly and

Assembly Only
Industry Fabrication

Types of BOM
i. Process industry
• A given input is split into several different outputs. For
example: cracking and distillation of petroleum company, food
processing industry, etc.
ii. Assembly only
• In these companies, all parts are purchased, and the
company is not vertically integrated.
iii. Assembly and Fabrication
• It is a company which has a BOM of both assembly and
fabrication operations. This company-which might be a
machinery or appliance manufacturer-is vertically integrated
through all stages of manufacturing.
3 INVENTORY RECORD FILE
• It comprises the individual item inventory records containing the
status data required for the determination of net requirements.
This file is kept update by the position of inventory transactions
which reflect the various inventory events taking place. Each
transaction (stock receipt, disbursement, scrap, etc) changes the
status of the respective inventory item.
• In addition to the status data, the inventory records also contain so-
called planning factors used principally for the size and timing of
planned orders. Planning factors include item lead time, safety
stock (if any), scrap allowance, lot-sizing algorithms, etc. The item
lead time for raw materials, components and assemblies must be
established in the inventory record file in which the ordering lead
time can be determined from purchasing records and the
manufacturing lead time can be determined from the process route
sheets (or routing file).
• MRP depends on accurate inventory records to perform its planning
function. This is accomplished by utilizing a computerized inventory
system which maintains the inventory record file or item master
file. The types of data contained in the record for a given item
would typically include the categories shown in Figure 6. The file
contains three segments:
1. Item master data segment
2. Inventory status segment
3. Subsidiary data segment.
Figure 8. Inventory Record File
 The item master data segment
• It gives the item identification (by part numbers) and other data such as
lead time, cost, and order quantity.
 Inventory status segment
• It provides a time-purchased record of inventory status. In MRP it is
important to know not only the current level of inventory, but also the
future change that will occur against the inventory status. Therefore the
inventory status segment lists the gross requirements for the item,
scheduled receipts, on-hand status, and planned—order release.
 Subsidiary data segment
• It contains miscellaneous information pertaining to purchase orders, scrap
or rejects, engineering change actions, and so on.
• Generally the three segments in the inventory record file consists of Item
master data segment which has
 Item identity
 Item characteristics
 Planning factors
 Safety stocks
 Pointer to other files.
[Link] OUTPUTS
• The MRP program (system) generates a variety of outputs that can be
used in planning and management of the plant operation. The outputs of
MRP system can be divided into two main parts.
1. Primary Outputs
The primary outputs of the MRP system are the following:
• Order-release notice: calling for the planned orders.
• Rescheduled notice: calling for changes in open-ordered due dates.
• Reports: showing planned orders to be released in future periods.
• Cancellation notices, including cancellation of open order because of
changes in the master schedule.
• Reports on inventory status.
2. Secondary Outputs
The other type of output report that can be generated by MRP system is the
secondary output. It includes
• Performance reports of various types, indicating cost, item-usage,
actual versus planned lead time, and other measures of performance.
• Exception reports, showing deviations from schedule, orders that are
overdue, scrap, and so on.
3. Inventory Forecasts
• It indicating projected inventory levels (both aggregate inventories
and item inventory) in future periods. The MRP inputs and outputs
are summarized in the Table below for ready reference.

Inputs Outputs

MPS of the end items required Order release data to capacity

requirement planning (CRP) for load
profiles.
Inventory status file of on-hand and on- Orders to purchasing and in-house
order items, lot sizes, lead times, etc. production shops.
Product structure (BOM) file of what Rescheduling data to MPS
components and subassemblies go into
each end part
Management reports and inventory
updates
MRP Inputs MRP Processing MRP Outputs

Changes
Order releases
Master
schedule Planned-order
schedules
Primary
reports Exception reports
Bill of Planning reports
materials MRP computer Secondary
Performance-
programs reports control
reports

Inventory
records Inventory
transaction

Figure 9. Input and output of MRP

8. MRP LOGIC IN BRIEF
• The MRP program (a computer software) calculates the number of
each subassemblies and components required to produce a
specified number of end products.
• It does this by exploding the end product into successively lower
levels in the product structure.
• It calculates for each item in each product structure and for each
time period (typically one week) in the planning horizon:
– how many of that item are needed (gross requirement),
– how many units from inventory are already available,
– the net quantity that must be planned on receiving in new
shipments (planned order receipts or order due),
– when orders for the new shipments must be placed (planned
order releases)
So that all materials arrive just when needed.
If
• GR = Gross Requirement (the overall quantity of an item needed
during a time period to meet planned output levels).
• OD (SR)= Order Due (Scheduled receipt) or inventory in pipeline (
the quantity of an item that will be received at the beginning of a
time period from suppliers as a result of orders that have already
been placed).
• OH = On Hand stock or available quantity (the quantity of an item
expected to be available at the end of a time period for meeting
requirements in succeeding periods).
– OH = scheduled receipts + planned order receipts – GR +
amounts available from the previous period.
• SS = Safety Stock, then
• NR = Net Requirement = [GR – OD – OH + SS]
• POR = Planned Order Release
MRP Example 1

Item On-Hand Lead Time (Days)

X X 50 2
A 75 3
B 25 1
A(2) B(1) C 10 2
D 20 2

C(3) C(2) D(5)

Requirements include 95 units (80 firm orders and 15 forecast) of X

on 10th day.
 Day: 1 2 3 4 5 6 7 8 9 10
X Gross requirements 95
LT=2 Scheduled receipts
Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
X On- Net requirements 45
hand Planned order receipt 45
50 Planner order release 45
A Gross requirements 90
LT=3 Scheduled receipts
A(2) Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15
hand Planned order receipt 15
75 Planner order release 15
B Gross requirements 45
LT=1 Scheduled receipts
It takes Proj. avail. balance 25 25 25 25 25 25 25 25

2 A’s for On-

hand
Net requirements
Planned order receipt
20
20
each X 25
C
Planner order release
Gross requirements 45
20
40
LT=2 Scheduled receipts
Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40
hand Planned order receipt 35 40
10 Planner order release 35 40
D Gross requirements 100
LT=2 Scheduled receipts
Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80
hand Planned order receipt 80
20 Planner order release 80
 Day: 1 2 3 4 5 6 7 8 9 10
X Gross requirements 95
X LT=2 Scheduled receipts
Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45
hand Planned order receipt 45
50 Planner order release 45
A Gross requirements 90
A(2) B(1) LT=3 Scheduled receipts
Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15
hand Planned order receipt 15
75 Planner order release 15
B Gross requirements 45
LT=1 Scheduled receipts
It takes Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20
1 B for hand Planned order receipt 20
25 Planner order release 20
each X C Gross requirements 45 40
LT=2 Scheduled receipts
Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40
hand Planned order receipt 35 40
10 Planner order release 35 40
D Gross requirements 100
LT=2 Scheduled receipts
Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80
hand Planned order receipt 80
20 Planner order release 80
 Day: 1 2 3 4 5 6 7 8 9 10
X Gross requirements 95
X LT=2 Scheduled receipts
Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45
hand Planned order receipt 45
50 Planner order release 45
A Gross requirements 90
A(2) B(1) LT=3 Scheduled receipts
Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15
hand Planned order receipt 15
75 Planner order release 15
C(3) B Gross requirements 45
LT=1 Scheduled receipts
Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20
hand Planned order receipt 20
25 Planner order release 20
It takes 3 C
LT=2
Gross requirements
Scheduled receipts
45 40

C’s for On-

Proj. avail. balance
Net requirements
10 10 10 10 10
35 40
each A hand
10
Planned order receipt
Planner order release 35
35
40
40

D Gross requirements 100

LT=2 Scheduled receipts
Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80
hand Planned order receipt 80
20 Planner order release 80
 Day: 1 2 3 4 5 6 7 8 9 10
X Gross requirements 95
X LT=2 Scheduled receipts
Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45
hand Planned order receipt 45
50 Planner order release 45
A Gross requirements 90
A(2) B(1) LT=3 Scheduled receipts
Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15
hand Planned order receipt 15
75 Planner order release 15
C(3) C(2) B Gross requirements 45
LT=1 Scheduled receipts
Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20
hand Planned order receipt 20
25 Planner order release 20
It takes 2 C
LT=2
Gross requirements
Scheduled receipts
45 40

C’s for On-

Proj. avail. balance
Net requirements
10 10 10 10 10
35 40
each B hand
10
Planned order receipt
Planner order release 35
35
40
40

D Gross requirements 100

LT=2 Scheduled receipts
Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80
hand Planned order receipt 80
20 Planner order release 80
 Day: 1 2 3 4 5 6 7 8 9 10
X Gross requirements 95
X LT=2 Scheduled receipts
Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45
hand Planned order receipt 45
50 Planner order release 45
A Gross requirements 90
A(2) B(1) LT=3 Scheduled receipts
Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15
hand Planned order receipt 15
75 Planner order release 15
C(3) C(2) D(5) B Gross requirements 45
LT=1 Scheduled receipts
Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20
hand Planned order receipt 20
25 Planner order release 20
It takes 5 C
LT=2
Gross requirements
Scheduled receipts
45 40

D’s for each On-

Proj. avail. balance
Net requirements
10 10 10 10 10
35 40
B hand
10
Planned order receipt
Planner order release 35
35
40
40

D Gross requirements 100

LT=2 Scheduled receipts
Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80
hand Planned order receipt 80
20 Planner order release 80
 Example 2: Product Structure for Clipboard
Product Structure Record
Level 0
Clipboard

Pressboar Clip Rivets Level 1

d (1) Assembly( (2)
1)

Top Clip Bottom Pivot Spring Level 2

(1) Clip (1) (1) (1)
Example 3: Product Structure for Bicycle

Bicycle(1)
P/N 1000

Handle Bars (1) Frame Assy (1)

P/N 1001 P/N 1002

Wheels (2) Frame (1)

P/N 1003 P/N 1004
To produce an end item A component B/unit of end item is needed. It
takes two weeks to produce a batch of component B.
Stock on hand 170 units
50 unites will be completed at the beginning of week 2
Average Weekly Demand 100 units
Set-up Cost $90
Inventory Holding Cost $20%/unit/week

Week

1 2 3 4 5 6 7 8 9 10 11 12
Gross Requirement 150 50 70 100 0 150 200 100 0 80 20 160

On-hand 170 20 20
inventory

Scheduled receipts 50

Net requirements 50 100 0 150 200 100 0 80 20 160

Planned production
 LOT-FOR-LOT Method

Week
1 2 3 4 5 6 7 8 9 10 11 12
Gross 150 50 70 100 0 150 200 100 0 80 20 160
Requirement

On-hand 170 20 20 0 0 0 0 0 0 0 0 0 0
inventory

Scheduled 50 50 100 150 200 100 80 20 160

receipts

Net 50 100 0 150 200 100 0 80 20 160

requirements

Planned 50 100 0 150 200 100 0 80 20 160 0 0

production
 Economic Order Quantity (EOQ)
Week

1 2 3 4 5 6 7 8 9 10 11 12
Gross 150 50 70 100 0 150 200 100 0 80 20 160
Requirement

On-hand 170 20 20 250 150 150 0 100 0 0 220 200 40

inventory

Scheduled 50 300 300 300

receipts

Net 50 100 0 150 200 100 0 80 20 160

requirements

Planned 300 0 0 0 300 0 0 300 0 0 0 0

production
Economic Order Quantity (EOQ)
• Set-up cost
= 3 * $90 = $270
• Holding cost
= 1150 * $0.2 = $230
• Total incremental cost
= $270 + $230 = $500
 Example 5: Product structure for making a truck

(A) Transmission(1) (B) Gear Box (1) (C) Gear (1) (D) Forging Blank (5)
 (X) Truck (1)

(A) (B) (C) (D)

Transmission(1) Gear Box (1) Gear (1) Forging Blank(5)
Item On-Hand Lead Time
(Weeks)
Truck 10 1
Transmission 20 2
Gear Box 24 1
Gear 18 1
Forging Blank 40 2
Suppose we are to produce 40 trucks. What are the net requirements
for each component?
LT O Low Item
w n level Iden
ee ha code tif.
ks nd 1 2 3 4 5 6 7 8
Gross Requirement 50
Scheduled Receipts
Projected on hand 10 10 10 10 10 10 10 10 10
1 10 0 X
Net Requirement 40
Planned Order Receipts 40
Planned Order Releases 40
Gross Requirement 40
Scheduled Receipts
Projected on hand 20 20 20 20 20 20 20 20
2 20 1 A
Net Requirement 20
Planned Order Receipts 20
Planned Order Releases 20
LT O Low Item
w n level Iden
ee ha code tif.
ks nd 1 2 3 4 5 6 7 8
Gross Requirement 40
Scheduled Receipts
Projected on hand 24 24 24 24 24 24
1 24 2 B
Net Requirement 16
Planned Order Receipts 16
Planned Order Releases 16
Gross Requirement 40
Scheduled Receipts
Projected on hand 18 18 18 18 18
1 18 3 C
Net Requirement 22
Planned Order Receipts 22
Planned Order Releases 22
L O Lo Item
T n w Iden
w ha le tif.
e nd ve
e l
k co
s de 1 2 3 4 5 6 7 8
Gross Requirement 200
Scheduled Receipts
Projected on hand 40 40 40 40
2 40 4 D
Net Requirement 160
Planned Order Receipts 160
Planned Order Releases 160
Example of MRP Logic and Product Structure Tree
Given the product structure tree for “A” and the lead time and demand
information below, provide a materials requirements plan that defines
the number of units of each component and when they will be needed.
Product Structure Tree for Assembly A Lead Times
A 1 day
A B 2 days
C 1 day
D 3 days
B(4) C(2) E 4 days
F 1 day
Demand
D(2) E(1) D(3) F(2)
Day 10 50 A
Day 8 20 B (Spares)
Day 6 15 D (Spares
 113
This is what we want to develop, the final materials
requirements plan. Let’s see how we got to this …
Day: 1 2 3 4 5 6 7 8 9 10
A Required 50
LT=1 Order Placement 50
B Required 20 200
LT=2 Order Placement 20 200
C Required 100
LT=1 Order Placement 100
D Required 55 400 300
LT=3 Order Placement 55 400 300
E Required 20 200
LT=4 Order Placement 20 200
F Required 200
LT=1 Order Placement 200

A
Part D: Day 6
B(4) C(2) 40 + 15 spares

D(2) E(1) D(3) F(2)

 First, the number of units of “A” are scheduled
backwards to allow for their lead time. So, in the
materials requirement plan below, we have to
place an order for 50 units of “A” on the 9th day to
receive them in the 10th day.

Day: 1 2 3 4 5 6 7 8 9 10
A Required 50
Order Placement 50

LT = 1 day
Next, we need to start scheduling the components that make up “A”.
In the case of component “B” we need 4 B’s for each A.
Since we need 50 A’s, that means 200 B’s.
And again, we back the schedule up for the necessary 2 days of lead time.
Day: 1 2 3 4 5 6 7 8 9 10
A R e q u ire d 50
O rd e r P la c e m e n t 50
B R e q u ire d 20 200
O rd e r P la c e m e n t 20 200

LT = 2

A 4x50=200

B(4) C(2)

D(2) E(1) D(3) F(2)

Next, we need to start scheduling the components that make up “A”.
In the case of component “B” we need 4 B’s for each A.
Since we need 50 A’s, that means 200 B’s.
And again, we back the schedule up for the necessary 2 days of lead time.
Day: 1 2 3 4 5 6 7 8 9 10
A R e q u ire d 50
O rd e r P la c e m e n t 50
B R e q u ire d 20 200
O rd e r P la c e m e n t 20 200

LT = 2
Spares
A 4x50=200

B(4) C(2)

D(2) E(1) D(3) F(2)

 117
Finally, repeating the process for all components, we have
the final materials requirements plan:
Day: 1 2 3 4 5 6 7 8 9 10
A Required 50
LT=1 Order Placement 50
B Required 20 200
LT=2 Order Placement 20 200
C Required 100
LT=1 Order Placement 100
D Required 55 400 300
LT=3 Order Placement 55 400 300
E Required 20 200
LT=4 Order Placement 20 200
F Required 200
LT=1 Order Placement 200

A
2x50=100
Part D: Day 6
B(4) C(2) LT = 1 40 + 15 spares

D(2) E(1) D(3) F(2)

©The McGraw-Hill Companies, Inc., 2001
9. LIMITATIONS AND ADVANTAGES OF MRP

• An MRP system provides tight and accurate

control over many complex and interdependent
activities of the plant.
• All activities are synchronized such that parts
are being manufactured (or received from
vendors, if purchased) exactly when they are
needed for the next stage of production.
• This system avoids the problems of excess
work-in-process (WIP) inventory, unavailability
of components when needed, grossly uneven
utilization of resources, and so on.
 3.4 Scheduling
Scheduling Definitions
• Scheduling is the Allocation of jobs to work centers where the
types of jobs and work centers depend on the specific situation
• Works on combinatorial optimization conditions
• Maximize/minimize of objective
• Subject to constraints
• Considers the following conditions of jobs
– Routing
– Bottleneck
– Due date
– Slack
– Queue
 Terminology Definitions in Scheduling

• Routing: The operations to be performed, their sequence, the

work centers and the time standards

• Bottleneck: A resource whose capacity is less than the demand

placed on it

• Due date: When the job is supposed to be finished

• Slack: The time that a job can be delayed and still can be finished
by its due date

• Queue: A line where a job has to wait for its turn

120
Scheduling Operations

• Companies differ based on their product volume and product

variety

• Companies may have High-volume or Low-volume operations

• Differentiation affects how the company organizes its operations

• Each kind of company operation needs different scheduling

techniques

• Scheduling has specific definitions for routing, bottleneck, due

date, slack and queue

121
 Example of Scheduling Decisions

Organization Managers Must Schedule

• Hospital Operating room use

Patient admission
Nursing, security, maintenance staffs
Outpatient treatments

Classrooms and audiovisual

• University
equipment
Student and instructor schedules
Graduate and undergraduate courses
• Factory
Production of goods
Purchase of materials
Workers
 Example of Scheduling Decisions
Organization Managers Must Schedule

• Cafe Chefs, waiters,bartenders

Delivery of fresh foods
Entertainers
Opening of dining areas

• Airlines Maintenance of aircraft

Departure timetables
Flight crews, catering, gate, and
ticketing personnel
 Type of Work Scheduling
• Forward Scheduling: starts processing when a job is received
• Backward Scheduling: begin scheduling the job’s last activity so that the job is
finished on due date

Deals with timing of operations

Forward Scheduling Backward Scheduling

B E B E

Today Due Date Today Due Date 124

 Forward and Backward Scheduling
• Forward scheduling: begins the schedule as soon as
the requirements are known
– jobs performed to customer order
– Feasible schedule can be accomplished even if
due date is missed
– often causes buildup of WIP Now
Due
Date
• Backward scheduling: begins with the due date of
the final operation; schedules jobs in reverse order
– used in many manufacturing
environments, catering, scheduling surgery
• Resources may not be available to
accomplish the schedule Due
Now Date
 The Goals of Scheduling
• Minimize completion time
• Maximize utilization (make effective use of
personnel and equipment)
• Minimize WIP inventory (keep inventory levels low)
• Minimize customer wait time
• By scheduling effectively companies use assets more
effectively and create greater capacity per dollar invested,
which, in turn, lowers cost
• This added capacity and related flexibility provides faster
delivery and therefore better customer service
• Good scheduling is a competitive advantage which
contributes to dependable delivery
 Work Center Defined
• A work center is an area in a business in which
productive resources are organized and work is
completed.

• A work center can be a single machine, a group of

machines, or an area where a particular type of work
is done.
 Decision “Variables” in Scheduling

• Three basic types of decision variables in scheduling:

– Sequence: a permutation of the jobs

– Schedule: allocation of the jobs in a more

complicated setting of the environment

– Scheduling policy: determines the next job given the

current state of the system
 Work-Center Scheduling Objectives
• Meet due dates
• Minimize lead time
• Minimize setup time or cost
• Minimize work-in-process inventory
• Maximize machine utilization

Schedule Performance Measures

• Meeting due dates of customers or downstream operations.
• Minimizing the flow time (the time a job spends in the process).
• Minimizing work-in-process inventory.
• Minimizing idle time of machines or workers.
 Shop-Floor Control: Major Functions
1. Assigning priority of each shop order.
2. Maintaining work-in-process quantity information.
3. Conveying shop-order status information to the office.
4. Providing actual output data for capacity control
purposes.
5. Providing quantity by location by shop order for WIP
inventory and accounting purposes.
6. Providing measurement of efficiency, utilization, and
productivity of manpower and machines.
Master Production Scheduling Input & Output

Capacity Company Product Economic

Consts. Policies Charact. Considerations

Placed Orders Material Planning

Forecasted Demand When & How Much
Current and Planned MPS to produce for each
Availability, eg., product
•Initial Inventory,
•Initiated Production,
•Subcontracted quantities
Planning Time
Horizon unit
Capacity
Planning
 Principles of Work Center Scheduling
1. There is a direct equivalence between work flow and cash flow.
2. The effectiveness of any job shop should be measured by speed
of flow through the shop.
3. Schedule jobs as a string, with process steps back-to-back.
4. A job once started should not be interrupted.
5. Speed of flow is most efficiently achieved by focusing on
bottleneck work centers and jobs.
6. Reschedule every day.
7. Obtain feedback each day on jobs that are not completed at
each work center.
8. Match work center input information to what the worker can
actually do.
9. When seeking improvement in output, look for incompatibility
between engineering design and process execution.
10. Certainty of standards, routings, and so forth is not possible in a
job shop, but always work towards achieving it.
 Characteristics of High-Volume Operations
High-volume also called flow operations, like automobile assembly,
cement production, petroleum extraction etc can be repetitive
or continuous
– High-volume standard items; discrete or continuous with
smaller profit margins
– Designed for high efficiency and high utilization
– High volume flow operations with fixed routings
– Bottlenecks are easily identified
– Commonly use line-balancing to design the process around
the required tasks
Characteristics of Low-Volume Operations
• Low-volume, job shop operations, are designed for flexibility.
– Use more general purpose equipment
– Customized products with higher margins
– Each product or service may have its own routing (scheduling
is much more difficult)
– Bottlenecks move around depending upon the products being
133
produced at any given time
 Choosing a Scheduling Method
• Qualitative factors
– Number and variety of jobs
– Complexity of jobs
– Nature of operations

• Quantitative criteria
– Average completion time
– Utilization (% of time facility is used)
– WIP inventory (average # jobs in system)
– Customer waiting time (average lateness)
 Gantt Charts: Low-Volume Operations
• Developed in the early 1900’s by Henry Gantt
• Load charts illustrate the workload relative to the
capacity of a resource.

135
 Gantt Scheduling Chart
Start of an
activity
Day End of
Job Day Day Day Day Day Day Day
an
activity
1S 2 3T 4W 5T 6F 7S Scheduled
activity time
allowed
Job A
Actual
work
Job B Maintenance
progress

Non-
productio
Job C n time
Point in
time when
Now chart is
reviewed
 Gantt Chart cont’d
Progress charts:
– Illustrate the planned schedule compared to actual
performance
– Brackets show when activity is scheduled to be finished. Note:
design & pilot run both finish late; feedback has not started yet.

137
 Typical Scheduling and Control Functions
• Allocating orders, equipment, and personnel.
• Determining the sequence of order performance.
• Initiating the performing of scheduled work.
• Shop-floor control.
Input-Output Control
Work
Input Center Output
• Planned input should never exceed planned output.
• Focuses attention on bottleneck work centers.
 Monitoring Workflow: Input/Output Control
• I/O control is a capacity-control technique used to monitor work flow at
individual work centers
• Monitors how well available capacity is used and provides insight into process
problems
Actual input/output-planned input/output

139
 How to Sequence Jobs
Which of several jobs should be scheduled first?
• Techniques are available to do short-term planning of
jobs based on available capacity and priorities
• Priority rules: Decision rules to allocate the relative
priority of jobs at a work center
– Local priority rules: determines priority based only on
jobs at that workstation
– Global priority rules: also considers the remaining
workstations a job must pass through

140
Commonly Used Priorities Rules of Sequencing Jobs
• Specifies the order in which jobs will be
Performed at work centers
• Sequencing rules:
– First come, first served (FCFS)
– Shortest processing time (SPT)
– Earliest due date (EDD)
– Longest processing time (LPT)
– Critical ratio (CR)
 Priority Rules for Dispatching Jobs
First come, first served
FCFS The first job to arrive at a work center is processed first
Earliest due date
EDD The job with the earliest due date is processed first
Shortest processing time
SPT The job with the shortest processing time is processed first
Longest processing time
LPT The job with the longest processing time is processed first
Critical ratio
The ratio of time remaining to required work time
CR remaining is calculated, and jobs are scheduled in order of
increasing ratio.
Criteria to Evaluate Priority Rules
ΣFlow times
Average completion time 
# Jobs
Process times
Utilization 
Flow times

Flow times
Average number of jobs in the system 
Process times

 Late times
Average job lateness 
Number of jobs
Job Sequencing Example

Job Job Work Job Due Date

Processing (day)
time in days
A 6 8
B 2 6
C 8 18
D 3 15
E 9 23
 FCFS
Parameter Value Sequence

Average 15.4 days A

completion time
B
Utilization 36.4%
C
Average number 2.75 jobs
of jobs in the D
system E
Average job 2.2 days
lateness
 SPT
Parameter Value Sequence

Average 13 days B
completion time
D
Utilization 43.1%
A
Average number 2.32 jobs
of jobs in the C
system E
Average job 1.8 days
lateness
 EDD
Parameter Value Sequence

Average 13.6 days B

completion time
A
Utilization 41.2%
D
Average number 2.43 jobs
of jobs in the C
system E
Average job 1.2 days
lateness
 LPT
Parameter Value Sequence

Average 20.6 days E

completion time
C
Utilization 27.2%
A
Average number 3.68 jobs
of jobs in the D
system B
Average job 9.6 days
lateness
 Summary
Rule Average Utilizatio Average Average
Completion n (%) Number of Jobs Lateness
Time (days) in the System (Days)
FCFS 15.4 36.4 2.75 2.2
SPT 13.0 43.1 2.32 1.8
EDD 13.6 41.2 2.43 1.2
LPT 20.6 27.2 3.68 9.6

• SPT is best in this example due to least Average Completion

Time and Average Lateness and also high utilization.
• EDD is best in least Average Number of Jobs in the System.
 Critical Ratio (CR)
 Ratio of time remaining to work time remaining

Time remaining
CR =
Work daysremaining
Due date - Today's date
=
Work (lead
) time remaining
• Process job with smallest CR first
• Performs well on average lateness
 Critical Ratio Example
Currently Day 25
Due Workdays Priority
Job Date Remaining Critical Ratio Order

A 30 4 (30 - 25)/4 = 1.25 3

B 28 5 (28 - 25)/5 = .60 1

C 27 2 (27 - 25)/2 = 1.00 2

With CR < 1, Job B is late. Job C is just on schedule

and Job A has some slack time.
3.5 Capacity Requirements Planning (CRP)
 Capacity is the work that the system is capable of
doing in a period of time.
 It must be determined at different levels:
 Plant, Department and Work center.
 It is normally stated in standard hours of work.
 Capacity = (no. of machines or workers) x (no.
shifts) x (utilization) x (efficiency) (Russell & Taylor)

 Best operating level is the percent of capacity utilization

that minimizes average unit cost.
 Usually 80% with a 20% cushion (Protection against
Impact)
 Capacity Planning
 Capacity is the upper limit or ceiling on the load that
an operating unit can handle.
 The basic questions in capacity handling are:
 What kind of capacity is needed?, How much is needed?
When is it needed?
 Capacity is the maximum output rate of a facility
 Capacity planning is the process of establishing the output rate
that can be achieved at a facility:
 Capacity is usually purchased in “chunks”
 Strategic issues: how much and when to spend capital for
additional facility & equipment
 Tactical issues: workforce & inventory levels, & day-to-
153 day use of equipment
 Importance of Capacity Decisions
 Impacts ability to meet future demands
 Affects operating costs
 Major determinant of initial costs
 Involves long-term commitment
 Affects competitiveness
 Affects ease of management

154
 Utilization and Efficiency
 Utilization is the percent of available time spent working.
 Efficiency is how well a machine or worker performs compared to
a standard output level. (Russell and Taylor)

Actual Hours Charged

Utilization = Scheduled Available Hours
Standard Hours Earned
Efficiency = Actual Hours Charged
Actual output
Efficiency =
Effective capacity
Actual output
Utilization =
155 Design capacity
 Measuring Available Capacity
 Design capacity:
 Maximum output rate under ideal conditions
 A bakery can make 30 custom cakes per day
when pushed at holiday time

 Effective capacity:
 Maximum output rate under normal
(realistic) conditions
 On the average this bakery can make 20
custom cakes per day
156
 Example of Computing Capacity Utilization: In the bakery
example the design capacity is 30 custom cakes per day.
Currently the bakery is producing 28 cakes per day. What is the
bakery’s capacity utilization relative to both design and effective
capacity?

actual output 28
Utilization effective  (100%)  (100%)  140%
effective capacity 20

actual output 28
Utilization design  (100%)  (100%)  93%
design capacity 30
 The current utilization is only slightly below its design
capacity and considerably above its effective capacity
 The bakery can only operate at this level for a short period
of time
157
 Efficiency/Utilization Example for a Trucking Company
Design capacity = 50 trucks/day available
Effective capacity = 40 trucks/day, because 20% of
truck capacity goes through planned maintenance
Actual output = 36 trucks/day, 3 trucks delayed at
maintenance, 1 had a flat tire

Actual Output 36 units / day

Efficiency    90%
Effective Capacity 40 units / day
Actual Output 36 units / day
Utilization    72%
Design Capacity 50 units / day
158
Determinants of Effective Capacity/Output
 Facilities, layout
 Products or services, product mixes/setups
 Processes, quality
 Human considerations, motivation
 Operations, scheduling and synchronization problems
 Supply Chain factors, material shortages
 External forces, regulations

Caution: While discussing these the book considers effective

capacity almost synonymous to output.

159
 Measuring Capacity Examples
 There is no one best way to measure capacity
 Output measures like kegs per day are easier to
understand
 With multiple products, inputs measures work better

Input Measures of Output Measures

Type of Business
Capacity of Capacity
Car manufacturer Labor hours Cars per shift
Hospital Available beds Patients per month
Pizza parlor Labor hours Pizzas per day
Floor space in
Retail store Revenue per foot
square feet
160
 Calculating Capacity Utilization
 Measures how much of the available capacity is actually
being used:
 Measures effectiveness
 Use either effective or design capacity in
denominator

Utilization 
actual output rate
100%
capacity

161
 How Much Capacity Is Best?
 The Best Operating Level is the output that results in the
lowest average unit cost
 Economies of Scale:
 Where the cost per unit of output drops as volume of output
increases
 Spread the fixed costs of buildings & equipment over
multiple units, allow bulk purchasing & handling of material
 Diseconomies of Scale:
 Where the cost per unit rises as volume increases
 Often caused by congestion (overwhelming the process with
too much work-in-process) and scheduling complexity

162
 Economies of Scale
 Economies of scale is the best operating level.
 Economies of scale is the point where it costs less per
unit to produce high levels of output.
 Occurs when fixed costs are spread over large number
of units

Diseconomies of Scale
 Occurs at a certain level of output.
 When fixed costs increase with number of units being
produced, examples:
 Higher rework
 More equipment breakdown
163
 Best Operating Level and Size

 Alternative 1: Purchase one large facility, requiring one large

initial investment
 Alternative 2: Add capacity incrementally in smaller chunks as
164
needed
 Other Capacity Considerations
 Focused factories:
 Small, specialized facilities with limited objectives
 Plant within a plant (PWP):
 Segmenting larger operations into smaller operating
units with focused objectives
 Subcontractor networks:
 Outsource non-core items to free up capacity for what
you do well
Making Capacity Planning Decisions
The three-step procedure for making capacity planning
decisions is as follows:
 Step 1: Identify Capacity Requirements
 Step 2: Develop Capacity Alternatives
165
 Step 3: Evaluate Capacity Alternatives
 Identifying capacity requirements
 Long-term capacity requirements based on future
demand
 Identifying future demand based on forecasting
 Forecasting, at this level, relies on qualitative
forecast models
 Executive opinion
 Delphi method
 Forecast and capacity decision must included
strategic implications
 Capacity cushions
 Plan to underutilize capacity to provide
flexibility
166
 Evaluating Capacity Alternatives

 Many tools exist to assist in evaluating

alternatives
 Most popular tool is Decision Trees
 Decision Trees analysis tool is:
 a modeling tool for evaluating sequential
decisions which, identifies the alternatives
at each point in time (decision points),
estimate probable consequences of each
decision (chance events) & the ultimate
outcomes (e.g.: profit or loss)
167
 Capacity Requirements Planning
 Capacity Requirements Planning is a
computerized technique for projecting resource
requirements for critical work stations.
 Inputs:
 MRP Planned order releases
 Routing file
 Open orders file
 Outputs:
 Load Profile for each work center

168
 Capacity Requirements Planning

 A tool for:
 determining capacity that is available and
required.
 Alleviating bottleneck work centers.
 Helping planners make the right decisions on
scheduling before problems develop.
 Verifies that you have sufficient capacity available
to meet the capacity requirements for MRP
plans.

169
 Capacity Requirements Planning
MRP planned
order
releases

Capacity Open
Routing requirements orders
file planning file

Load profile for

each machine center

170
 Capacity Requirements Planning -
Adjusted Profile

Work an
Hours of extra shift
capacity
Overtime
Push back
Pull ahead
Push back

1 2 3 4 5 6

Time (weeks)

171
 Reason to use CRP

 Bottleneck Management -
 The throughput of all products processed is
controlled by bottlenecks.
 Work centers need to be scheduled at a rate to
prevent bottlenecks.
 To eliminate bottlenecks, a time buffer
inventory should be established.

172
 Basic Strategies for Timing Capacity
 CRP provides information to determine the
timing of capacity expansion.
 The basic strategies in relation to a steady
growth in demand (Basic strategies used for
timing capacity to prevent bottlenecks and to
ensure the work center is operating at maximum
capacity) are :
 Capacity Lead Strategy
 Capacity Lag Strategy
 Average Capacity Strategy
173
 Capacity Lead Strategy
 In anticipation of demand, capacity is increased.
 This is an aggressive strategy and is used to lure
customers away from competitors.
How much to increase capacity demands
depend upon a number of factors, including:
 Anticipated demand – volume & certainty
 Strategic objectives
 Costs of expansion and operation

174
 Capacity Lag Strategy
 Increase capacity after demand has increased.
 This is a conservative strategy and may result in lose of
customers.
 You assume customers will return after capacity has been
met.

Average Capacity Strategy

 Average expected demand is calculated and capacity is
increased accordingly.
 This is the most moderate strategy.

175
 Adjustments to Capacity
Increase capacity by:
 Adding extra shifts
 Scheduling overtime or weekends
 Adding equipment and/or personnel
Reduce load by:
 Reducing lot sizes
 Holding work in production control
 Subcontracting work to outside suppliers

176
 Adjustments to Capacity
Reduce capacity by:
 Temporarily reassigning staff
 Reducing the length of shifts
 Eliminating shifts
Increase load by:
 Releasing orders early
 Increasing lot sizes
 Making items normally outsourced

177
 What is CRP Used For?
 To determine the capability of a system or resource to produce a
quantity of output in a particular time period. For example:
 Should the hospital hire more registered nurses to care for the
projected patient load?
 Should the hospital build more rooms for patients?
 What is the projected finish time for the current projects?

CRP Produces Load Profile

 CRP uses the information to produce a load profile for each machine or
work center. A load profile:
 Compares released orders and planned orders with the capacity of
the work center.
 Identifies under loads and overloads.
178
 What is a load?
 Load refers to the standard hours of work assigned to a
facility.
 The load needs to be determined to calculate a load
percent.
 What is Load Percent?
 Load percent is the ratio of load to capacity.
Load percent = Load x 100%
Capacity
 When you know the load and capacity, you can find the
load percent by dividing the load by the capacity and
multiplying by 100.
 A load percent of 100 or less can be accomplished by
the work center.
 If the load percent is greater than 100, adjustments
would need to be made.
179
Russell and Taylor
 Summary of Capacity Requirements Planning

 To operate at maximum capacity, companies must use

the resources available. If resources under
underutilized, the profit margin will not be maximum.

 Using capacity requirements planning helps a company

identify potential problems, such as eliminating the
possibility of overworking the current staff, overloading
machines, losing customers because the work could not
be completed as scheduled, paying penalties for late
delivery.
180
 3.6 Maintenance Planning and Scheduling
 Maintain is defined as
The activities done to keep equipment and machine in
its existing state, preserve, and ensure it to continue
operating in good condition while at the same time
protecting it from potential damage.
Oxford Dictionary
Maintenance is :
The combination of all technical and administrative actions,
including supervision actions, intended to retain an item in, or
restore it to, a state in which it can perform a required
function.
EN 13306:2001, European Committee for Standardization.
 Maintenance Definition Cont.…
 Maintenance includes the engineering decisions and associated
actions that are necessary for the optimization of specified
equipment capability. Capability meaning the ability to perform
a specified function within a range of performance levels that
may relate to capacity, rate, quality, safety and responsiveness
Tsang et al., (1999).
 Maintenance is an engineering decisions and associated actions
necessary and sufficient for the optimization of specified
capability, It is about achieving the required asset capabilities
within an economic or business context.
Maintenance Engineering Society of Australia (MESA) (1995)
 Maintenance is a combination of all the technical and associated
administrative activities required to keep equipment,
installations and other physical assets in the desired operating
condition or to restore them to this condition
British Standards Institute(BSI), (1984)
182
 Maintenance activity is the systematic and scientific upkeep
of equipment for:
 Prolonging life of the equipment,
 Assuring instant operational readiness,
 Optimal availability for production at all times,
 Making sure that safety of human and machine is at no
time jeopardized
 Activities of maintenance function could be either repair
or replacement activities
 It is necessary for an item to reach its acceptable
productivity condition
 These activities should be carried out with a minimum
possible cost.
183
 Maintenance Planning

 Maintenance plan is needed to:

 Develop a rational basis for formulating a program of
preventive maintenance
 Provide guidelines for corrective maintenance by the
adoption of the proper maintenance policies for the
constituent items and components.

 Any rational maintenance plan should be related to the

production program of the plant.
 Planning decides what, how and time estimate for a
Maintenance job.

 Planning of a job should be done before Scheduling a job.

 Scheduling decides when, where and who will do the job.

184
 Production-Maintenance interrelation
PRODUCTION PREVENTIVE CORRECTIVE
PROGRAM MAINTENANCE MAINTENANCE
PLAN GUIDELINES

WORKLOAD WORKLOAD

MAINTENANCE
ORGANIZATION

 Reasons for introducing maintenance planning

 To maximize plant utilization with minimum downtime and
elongating the useful life of equipment.
 minimizes waste of spares and materials;
 ensures proper use of tools; and
 maximizes labor utilization. Thus, enables good control of
maintenance costs.
 ensures right distribution of technical information
 can help in establishing proper safety system.
 facilitates plant control; and
185  expedites evaluation of plant performance.
Maintenance Scheduling
Maintenance scheduling is a sequential arrangement of

maintenance jobs showing priorities.

A maintenance schedule shows
 the maintenance work to be done,
 frequency of the work,
 by whom the work has to be done, and
 estimated time required to complete the work.
The queuing of workload to be accomplished depends on
 priority set, and
 availability of spares, skilled labour and equipment.

186
  The maintenance schedule has to be prepared in collaboration
with production department.
 In setting up a maintenance schedule, guidelines must be provided
by the manufacturer.
 An example of a maintenance schedule is shown below.

Equipment Code Equipment Date

Equipment Location

Trade Frequency Detail of Maintenance Work Estimated Time

Maintenance scheduling card

187
 Equipment Description Specification no.
Equipment Code
Job Description Special Requirements Safety Needs

Maintenance Work Details Estimated Time Materials/ Trade

Spares Required

Services Needed
Tradesman Name Total Time Materials/ Labour Material Total
Taken Spares Cost Cost Cost

188
Maintenance work description card
 Maintenance Job Order

 A maintenance job order is a detailed and complete work

order by means of which a technician, a mechanic, an electrician
or any other skilled person is given the authority to attend to a
specific maintenance workload.

 In addition to the workload, the job order card lists the

equipment, spares, estimated time, skill required, etc.

 A typical job order card is shown in the figure below.

189
 Job Order no.
Equipment Code
Type of Job Name of Equipment Location Date
CM______
PM______
OH______
Priority

Details of Defect / Planned Work Breakdown Impact

a) Shutdown _________
b) Standby Reduction _________
c) Reduced Efficiency _________

Originator/ Signature Department Date Time

Planner

Description of Workload Manpower Required

Estimated Duration
Start of Maintenance
Date Time
Completion of Maintenance
Date Time
Ready for Operation
Date Time
Actual Duration

190
Maintenance job order card
 Defects analysis record card
 Upon completion of a maintenance task, defects analysis should
be done in order to assist further diagnostics on an equipment.
 Information on
 nature of the defect
 causes
 action taken are filled on defects analysis card.
Equipment Description Location Card no.
Equipment Code

Component Defect Cause Action Maintenance Total Maintenance

Date
Noticed Identified Taken Time Downtime Manager
Signature

Defects analysis record card

191
 The elements of Maintenance techniques and application in a
maintenance technology can be classified as:
Attendance (operation)
Servicing
Repair
1. Attendance(operation)
Attendance is the right way of avoiding mal-operation which
influences the damages and indirectly the maintenance.
 The fundamentals for the use of any technical means of production
are :
 proper use of operating instructions provided in operators
manuals;
 proper use of service instructions given in service instructions; and
 following proper maintenance procedures and instructions as
outlined in maintenance manuals
 Knowledge of these instructions is essential in attending the
machine.
 In this respect qualification of operators, maintenance personnel
and management is a requirement .
 Proper attendance avoids subjective damages and minimizes
192 objective damages.
 2. Servicing
Servicing of a machine is important in decelerating

wear of damage of machine parts.

Important measures to be taken is servicing are:

 Cleaning

Lubricating

Adjusting

In addition to this servicing operations, the following are

required periodically to keep an item in proper operating
condition: to preserve, to inspect, to drain, to paint, to replenish
193
fuel, and to change chemical fluids or gases.
 Cleaning
 Penetration of dust, dirt deposited, etc accelerate the wear

processes and corrosion of machine components.

 Hence cleaning makes the preliminary maintenance element.

 Cleaning should be done in short time intervals and the means

used for cleaning should not be corrosive and should not

damage paints, working surfaces etc.

 For cleaning processes detergents can be used, but

compatibility with working environment should be given due
attention.

 Accessories like water jet, steam jet or compressed air can be

194
used to assist cleaning of machinery.
 Lubrication
 A lubrication has the task of :-

 Reducing friction between mating surfaces with relative

motion,

 Transfer of heat generated and

 Prevention of dust and other materials from entering into the

working environment.

 Rules of lubrication includes :

 Use the right lubrication and specified amount;

 Cleanliness of lubricant is important

 Complete replacement of lubricant

195
 Avoiding contamination at the point of lubrication
Types of Lubricant

 Physical
 Liquid
 Typical lubricants are liquid/fluids
 Mineral oil or synthetic oils

 Solid
 Graphite

 Semi solid
 Greases

 Gases
 Atomised 2 stroke oils

196
 Types of Lubricant Cont…
 Application
Engine oils
Gear Oils
Turbine Oils
Hydraulic Oils
Metal working oils Heat Transfer Oils
 Cutting oils Heat Treatment Oils
 Forming Oils Quenching Oils
Rust preventives Tempering Oils
Refrigeration Oils
Rubber Process Oils
197
Ink process Oils
 3. Repair
 Repair is the totality of measures of restoration with the aim of
determined final state, or quality, or condition of equipment
 Classification of repair activities is based on various
considerations. These considerations are:
 time related to breakdown, number of elements involved in
the repair task, nature of repair activity
 territorial, or labour involved
Work Planning and Scheduling
 The objective of work planning and scheduling is to get the right

resources to the right place, to do the right job in the right way
and at the right time in order to carry out the maintenance
function at minimum overall cost.
198
 3.7 Enterprise Resource Planning (ERP)
 Enterprise Resource Planning is the overall
organizational resources planning such as Supply
management planning, Financial planning, Inventory
planning, Capacity planning, Marketing or Sales
planning, Procurement planning, Material planning,
Human resource planning, etc…

 It sophisticated and complex software which

activities the organizational resources.
End of Chapter Three