Lecture 4

BUSS211

OM

Lecture 4
Lean Operations
MRP vs. JIT
Professor Kihoon Kim

Lean Operations

Slide 1

Outline
 Independent demand vs. dependent demand

 MRP (Push) vs. JIT (Pull)
 How MRP works?
 How JIT works?

 Lean Operations Tactics

Lean Operations

Slide 2

Independent vs. Dependent Demand


Independent

Dependent

1. End or finished items

1. Subassemblies,
Components/Materials

2. May be uniform demand

2. Lumpy demand

3. Few items - carefully monitored

3. Many items – less emphasis

Lean Operations

Slide 3

Material Requirements Planning for Components


EOQ analysis for Finished Goods

1. For items with independent demand
Deterministic demand
Probabilistic demand




Standard EOQ
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

Lean Operations

Slide 4

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.

Lean Operations

Slide 5

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.

Lean Operations

Slide 6

Advantages of MRP and JIT
 Main Advantage of MRP over JIT: MRP takes forecasts for end