Mrp process

Detailed Scheduling and Planning
Session 2 Inventory Management: Customer Service

Detailed Scheduling and Planning
Session 1: Inventory Management: Order Planning Session 2: Inventory Management: Customer Service Session 3: Information Used in the Material Planning Process Session 4: MRP Mechanics: The Basics Session 5: Using MRP Outputs Session 6: The Detailed Capacity Planning ProcessSession 7: Capacity Mechanics Session 8: Establishing Relationships with Suppliers Session 9: Supplier Relationships and Procurement Plans
Detailed Scheduling and Planning, ver. 2.0 – August 2001
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Objectives
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Describe safety-stock processes used to support customer service strategies Describe the importance of inventory valuation and how it affects inventoryinvestment Identify inventory accuracy methodologies used to improve and sustain part count and inventory investment accuracy
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Detailed Scheduling and Planning, ver. 2.0 – August 2001

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Definition of Safety Stock
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In general, a quantity of stock planned to be in inventory to protect against fluctuations in demand or supply.

Detailed Scheduling and Planning, ver. 2.0 – August2001

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Purpose of Safety Stock
Duration of Stockout

Q U A N T I Reorder T Point Y Ø TIME LT a LT b c

Q U A N T I T Reorder Y Point Ø

TIME

a

b

c

Point a: Point b: Point c:

A stockout occurs for some period of time without having safety stock. The part stocks out just as the replenishment order arrives. No safety stock is required; excess inventory occurs.Source: Adapted from CPIM Inventory Management Certification Review Course (APICS, 1998).

Detailed Scheduling and Planning, ver. 2.0 – August 2001

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Role of Safety Stock
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Usually, the only reason safety stock is planned for dependent-demand items is that the supply of the item is subject to variation, either in delivery from the supplier or fallout in the productionprocess. Parts subject to independent and dependent demand may also have safety stock for the independent portion.
– In this case, MRP will need to keep the two categories separate in terms of the requirements used to determine gross requirements.

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Detailed Scheduling and Planning, ver. 2.0 – August 2001

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The Meaning of Customer Service
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Orders shipped onschedule Line items of orders shipped on schedule Dollar volume shipped on schedule Ordering periods without a stock-out Backorders

Detailed Scheduling and Planning, ver. 2.0 – August 2001

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Opportunities for Stock-Out

OQ

Time

OQ

Time
Detailed Scheduling and Planning, ver. 2.0 – August 2001
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The Normal Distribution Model

-3

-2

-1

x


+1

+2

+3

Source: Adapted from CPIM Inventory Management Certification Review Course (APICS, 1998).

Detailed Scheduling and Planning, ver. 2.0 – August 2001

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MAD and Standard Deviation
MAD (mean absolute deviation) is the average of the absolute deviations
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calculated with only summary values from the previous month in combination with currentvalues

Standard deviation requires a longer history of forecast and demand

Detailed Scheduling and Planning, ver. 2.0 – August 2001

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Example
Week 1 2 3 4 5 6 7 8 9 10 Total Actual sales 4,900 5,000 5,100 5,400 5,300 4,800 5,200 5,000 4,900 5,200 50,800 Forecast 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 50,000 Deviation -100 0 100 400 300 -200 200 0 -100200 1,600 Deviation squared 10,000 0 10,000 160,000 90,000 40,000 40,000 0 10,000 40,000 400,000

Standard Deviation =

Sum of squared deviations 400,000 = = 211 Number of periods - 1 9
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MAD = Sum of Deviations /number of periods = 1600/10 = 160
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n and n-1 Comparison

n is used when there are more than 30...