MRP vs. JIT
Professor Kihoon Kim
Independent demand vs. dependent demand
MRP (Push) vs. JIT (Pull)
How MRP works?
How JIT works?
Lean Operations Tactics
Independent vs. Dependent Demand
1. End or finished items
2. May be uniform demand
2. Lumpy demand
3. Few items - carefully monitored
3. Many items – less emphasis
Material Requirements Planning for Components
EOQ analysis for Finished Goods
1. For items with independent demand
EOQ with safety stock
2. Answers one question: How much is needed
MRP for Components
1. For inventory systems with dependent demand
2. Answers two questions: How much & When
MRP vs. JIT
MRP. (Materials Requirements Planning). MRP is the basic
process of translating a production schedule for an end product (MPS or Master Production Schedule) to a set of requirements for all of the subassemblies and parts needed to make that item. JIT. Just-in-Time. Derived from the original Japanese Kanban
system developed at Toyota. JIT seeks to deliver the right amount of product at the right time. The goal is to reduce WIP (work-inprocess) inventories to an absolute minimum.
Push vs. Pull
MRP is the classic push system. The MRP system computes
production schedules for all levels based on forecasts of sales of end items. Once produced, subassemblies are pushed to next
level whether needed or not.
JIT is the classic pull system. The basic mechanism is that
production at one level only happens when initiated by a request at the higher level. That is, units are pulled through the system by request.
Advantages of MRP and JIT
Main Advantage of MRP over JIT: MRP takes forecasts for end
product demand into account. In an environment in which
substantial variation of sales are anticipated (and can be
forecasted accurately), MRP has a substantial advantage.
Main Advantage of JIT over MRP: JIT reduces inventories to a
minimum. In addition to saving direct inventory carrying costs, there are substantial side benefits, such as improvement in
quality and plant efficiency.
The MRP system starts with the MPS or Master Production
Schedule. This is the forecast for the sales of the end item over the planning horizon. The data sources for determining the MPS include:
– Firm customer orders
– Forecasts of future demand by item
– Safety stock requirements
– Seasonal variations
– Internal orders from other parts of the organization.
The Explosion Calculus
The explosion calculus is a set of rules for converting the master production schedule to a requirements schedule for all subassemblies, components, and raw materials necessary to produce the end item. Work backward from finished goods production schedule (assumed fixed)
Each finished good has its Bill of Materials
– Each component has quantity multiplier & lead time
There are two basic operations comprising the explosion calculus: •
Time phasing: Requirements for lower level items must be shifted backwards by the lead time required to produce the items
• Multiplication: A multiplicative factor must be applied when more than one subassembly is required for each higher level item.
– Given how much is ordered, determine when inputs are needed – Determine when you would run out of the input given the fixed production schedule
Typical Product Structure Diagram (Bill of Materials)
Developing a Materials Requirements Plan...
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