22-04-2014, 12:50 PM
DEVELOPMENT OF MATERIAL REQUIREMENT PLANNING, A CASE STUDY IN METAL INDUSTRY
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ABSTRACT
This study was conducted at SMI companies which produced metal product. This
company has a problem to determine when and how much the quantities of materials,
components and parts ordered or to be schedule for production, and also maintaining
their records on inventory. The study has developed a Material Requirement
Planning (MRP) program based on Microsoft Access and Microsoft Excel. This
program function is to provide a plan for production in the company and also help
the current inventory system more accurate and efficient. To develop the MRP
systems, the project start with identifying and constructing product structure or Bill
of Material (BOM), develop data base of inventory which content information for
each part, component and finish product, then develop the exploding program. The
latest will provide the management a production plan. The scope of this project was
focus on four main products that produced at this manufacturing company.
INTRODUCTION
Background
In the manufacturing business now, the competition not only how many products can
be producing, but on how competitive is a product on regard to cost delivery, quality,
and time. There is no point to produce many of products but in the end the product
cannot be sold. When these problems occur, it will cause the loss for company
because of the fail in inventory management system. The situation become a key
point mentioned about how important inventories nowadays in organization. For
example Batesville Casket Company produced and distributed high-quality caskets
and memorial products and is a leader in the North American funeral products
industry. The company was challenged to effectively schedule production, manage
inventory, and deliver product in a timely fashion. The company implemented
proprietary finished goods storage system and barcode scanning devices. That system
has played an important role in enabling to improve their business processes with a
simpler way to gather and process the inventory data in real-time in the enterprise
application. Every unit in the system is packaged, labeled, and stored. To fill an open
order, the system automatically selects a unit, and moves it into the conveyor control
applications, and completes the shipment. As a result, the company knows the status
of in-transit items, as well as counts for products on hold. Inventory accuracy for this
company has increased to over 99.9%. Other than that, they also reduced misplaced
inventory to less than 10 units per year and reduced time required for cycle count.
Inventory
Every current operations management textbook contains a chapter with a title like
“inventory management” (Heizer and Render, 2006), or “inventory planning and
control” (Slack et al., 2004). An inventory is basically about stock of item kept by an
organization to meet internal or external customer demand. Inventory is a vital part
of an organization. This is because inventory represent 45% to 90% of all expenses
for the organization business to make sure that they have the right goods on hand to
prevent from stock-out, shrinkage and provide proper accounting plan. For many
companies, inventory management represents a key success factor; as Silver et al.
(1998) suggest, a company’s fate depends on how it manages its inventory. Inventory
is a complex problem area owing to the diversity of real life situations. Successful
inventory management requires sophisticated methods to cope with the continuously
changing environment. Inventory is also to keep balance between the lost due to non-
availability of an item and cost of carrying the stock item. These decisions are about
how much to order, when to order to replenish inventory to an optimal level in order
to get customers satisfaction in term of punctuality in delivering order and lead time
(time to wait after ordering until the product deliver to customer).
Material Requirement Planning (MRP)
Material Requirement Planning (MRP) has been the most widely implemented large-
scale production management system since the early 1970s, with several thousand
MRP type systems implemented in industry around the world. MRP define as
computerized materials/production planning and control system for production only
(Sung and Yang, 1993). MRP is a time series analysis tool which used to plan
purchasing and production to meet customer demand. The majority of Egypt
companies indicate that the MRP system is regarded as a tool for planning and
control production (Salaheldin I and Arthur Francis, 1998). This tool is really helpful
because it will determine the entire components at a right time, right part and right
quantity. Furthermore MRP also will provide a time schedules to order a parts or raw
material. This is complete MRP system as shown in Figure 2.1 that consist input,
process and output. From Seyed - Mahmoud (2003), he divides MRP main
components into five which is the Master Production Scheduling (MPS), Bill of
Material (BOM), inventory available, purchase order and lead-times. Usually MRP
system has three main inputs which are Master Production Scheduling (MPS), Bill of
Material (BOM) and inventory master computer record (Salaheldin I and Arthur
Francis, 1998).
MRP Inputs
MRP also have their main output that is the desired things by doing this system.
According to Seyed - Mahmoud (2003) and Heizer J., and Render B., (2006), MRP
main components have been divides into five which is the Master Production
Scheduling (MPS), Bill of Material (BOM), inventory available, purchase order and
lead-times. Usually MRP system has three main inputs which are Master Production
Scheduling (MPS), Bill of Material (BOM) and inventory master computer record
(Salaheldin: Francis, 1998, Sriskandarajah C. 2008 and Ramba F.).