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Unformatted text preview: Chapter 14 - MRP and ERP CHAPTER 14: MRP AND ERP Answers to Discussion and Review Questions 1. Independent demand refers to demand for end items; dependent demand refers to usage of subassemblies and component parts which is dependent on demand for a parent item. Independent demand is often random and therefore somewhat unpredictable; dependent demand is derived from demand for end items. 2. MRP is appropriate when requirements planning must be accomplished for items with derived demand. It is best suited to situations in which demand is lumpy rather than continual, and where lead times are fairly well known. 3. a. A master schedule specifies the quantity and timing planned for finished goods. b. A bill of materials indicates the components and their quantities needed to make and/or assemble one unit of an end item. c. An inventory status file maintains a record of inventories on-hand and on-order as well as other information concerning suppliers, lead times, order sizes, and so on. d. The gross requirement for an end item or component indicates how much of that item will be needed. e. The net requirement for an item is its gross requirement minus the quantity of that item expected to be on-hand. f. A time-phased plan is essentially a product-tree with the various components displayed on a time-scale utilizing lead times. 4. Safety stock is not normally needed for dependent demand items below the end- item level because the usage of these items are calculated from the quantities established for the end item in the master schedule. However, in practice, there are a number of reasons to carry safety stock in an MRP system. Some of these reasons include scrap, defective units, late deliveries due to longer than expected production time of components or late deliveries of parts from the suppliers. Maintaining safety stock is important for multi-level items because a shortage for a lower level item in the BOM will cause a shortage for the end-item. However, if safety stock is carried for all dependent demand items, the main advantage of MRP will be lost. 5. The need for safety stock arises when variability exists in usage and/or lead time. With derived demand, the causes of variability in lead time can be related to vendor deliveries or variabilities in internal processing (e.g., due to scheduling problems, machine breakdowns, material shortages, etc.). Usage variabilities may be due to excessive scrap or increases in order sizes (say, related to independent demand for certain items). 6. Because of the pyramid relationship that exists for components in an MRP system, it is not realistic to attempt to provide safety stock at all levels because this would result in huge carrying costs. Moreover, because shortage at any level will mean shortages from that point up to the top of the tree, safety stock at lower levels provides only minimal protection. Instead, on items subject to lead time variability, orders are submitted a bit earlier than needed, thereby gaining some safety time to compensate for the possibility of increased lead time....
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This note was uploaded on 02/29/2012 for the course BUSINESS 100 taught by Professor Allprofessor during the Spring '12 term at Virginia College.
- Spring '12