Operations and Supply Chain Management The Core

MATERIAL REQUIREMENTS PLANNING chapter 9 289
Notes:
1. For item A, start by calculating the projected available balance through week 2. In week 3,
there is a net requirement for 17 units, so we plan to receive an order for 20 units. Projected
available balance for week 3 is three units and a net requirement for five in week 4, so we
plan another order to be received in week 4. Projected available balance for week 4 is 15
units, with three in week 5 and a net requirement for 19 in week 6. We need to plan one more
order for receipt in week 6.
2. The gross requirements for B are based on two times the planned order releases for A. We
need to account for the scheduled receipt in week 1 of 32 units, resulting in a projected available
balance of 52 at the end of week 1.
3. The gross requirements for C are based on the planned order releases for items A and B, since
C is used in both items. The projected available balance is calculated by subtracting out the
safety stock since this inventory is kept in reserve. In week 1, for example, projected available
balance is 70 units on-hand − 40 units gross requirements − 10 units safety stock = 20 units.
LO9–4 SOLVED PROBLEM 4
Consider the following data relevant to an MRP lot-sizing problem:
Item cost per unit $25
Setup cost $100
Inventory carrying cost per year 20.8%
WEEKLY NET REQUIREMENTS
1 2 3 4 5 6 7 8
105 80 130 50 0 200 125 100
Use the four lot-sizing rules in the chapter to propose an MRP schedule under each rule. Assume
there is no beginning inventory.
Solution
Lot-for-Lot
The lot-for-lot rule is very commonly used because it is so simple and intuitive. The planned-order
quantities are equal to the net requirements each week.
WEEK
REQUIREMENTS
NET
PRODUCTION
QUANTITY
ENDING
INVENTORY
HOLDING
COST
SETUP
COST
TOTAL
COST
1 105 105 0 $0.00 $100.00 $100.00
2 80 80 0 0.00 100.00 200.00
3 130 130 0 0.00 100.00 300.00
4 50 50 0 0.00 100.00 400.00
5 0 0 0 0.00 100.00 500.00
6 200 200 0 0.00 100.00 600.00
7 125 125 0 0.00 100.00 700.00
8 100 100 0 0.00 100.00 800.00
Economic Order Quantity
We need D, S, and H in the EOQ formula. We will estimate annual demand based on average
weekly demand over these 8 weeks.
D = Annual demand = _______________________________
105 + 80 + 130 + 50 + 0 + 200 + 125 + 100
​ ​ × 52 = 5,135
8
H = Annual holding cost = 0.208 × $25.00 = $5.20
​
S = Setup cost = $100 (given) ​
____
EOQ = ​ √
​ ____ 2DS
____________
H ​ = ​ √
​ ___________
2(5135)(100) ​ = 444
5.20
​