Basic production algorithms and its main concepts
Ing.J.Skorkovský,CSc.
and various listed sources
Department of Corporate  Economy
Slides 2-18 –basic production theory and 29-48 practical NAV example
Comment : without basic production theory it is useless to model production in ERP

Main concepts
•MRP=Material Requirements Planning (push)
•MRP_II=Manufacturing Resource Planning (push)
•APS = Advanced Planning and Scheduling
•JIT = Just In Time (pull)
•TOC (Drum Buffer Rope) (push-pull->combined) – will be preseneted in another session of this
course
•
Work Order=Production order in MS Dynamics NAV

BOM=Bill Of Material (structure of the product)
A
100
300
400
200
B
500
300
600
100
300
400
Component
Product|Semiproduct
•Independent demand for products and semi-products and dependent for components
•Planning backwards from production schedule (independent) to dependent- demand components -without
statistically calculated Reorder Point (ROP)– see next lesson and next slide as well
•IF ROP is not taken into consideration – MRP is PUSH system -> it computes schedule of what should
be started (pushed) into system, that authorize production  as inventory is consumed (ROP will be
explained later in this session)
0,1,2,,..Low Level Codes

Push system
Supplier1
Supplier 2
MRP|ERP
Operation 1
Operation 2
Operation 3
Operation 4
Customer 1
Customer  2
FG warehouse
Component
warehouse
Forecast
Purchase orders
ROUTING
Take it !

PUSH and PULL
•PUSH : production jobs (production orders) are scheduled: MRP and MRP_II= Manufacturing Resource
Planning
–often not feasible plans are generated and problems are often  detected too late (rejects, lack of
components,..)
–used fixed lead times=LT (see next slide) do not depend on capacity utilization
–Having in mind , that production is random process, Lead Time is very pessimistic constant
–
–
•
•PULL :  production jobs (production orders) starts are triggered by completion of another job
(JIT-see later in this session)
Black box
t=start of the job
t+LT=end time of the job (where LT=constant)

Determination of the Reorder Point (ROP)
•ROP=expected demand during lead time + safety stock
20
50=ROP
50-20=30
LT =Lead time
Expected demand=30

Determination of the Reorder Point (ROP)
(home study)
•ROP = expected demand during lead time + z* σdLT
•    where  z = number of standard deviations and
•                     σdLT = the standard deviation of lead time demand  and z* σdLT =Safety Stock
•                     aan

Example
(home study- also Pareto analysis and ABC model simplified- PWP will be shown later)
•The manager of a construction supply house determined knows that demand for sand during lead time
averages is 50 tons.
•The manager knows, that demand during lead time could be described by a normal distribution that
has a mean of 50 tons and a Standard Deviation of 5 tons (σdLT )
•The manager is willing to accept a stock out risk of no more than 3 percent

Example-data
(home study)
•Expected lead time averages = 50 tons.
•σdLT = 5 tons
•Risk = 3 % max
•Questions :
•
–What value of z (number of standard deviations) is appropriate?
–How much safety stock should be held?
–What reorder point should be used?
–

Example-solution
(home study)
•Service level =1,00-0,03 (risk) =0,97 and from probability tables you will get   z= +1,88

–
–

See next slide with probability table

Probability table



Example-solution
(home study)
•Service level =1,00-0,03 =0,97 and from probability tables we have got : z= +1,88
•Safety stock = z * σdLT  = 1,88 * 5 =9,40  tons
•ROP = expected lead time demand + safety stock = 50 + 9.40 = 59.40 tons
•For z=1 service level =84,13 %
•For z=2 service level= 97,72 %
•For z=3 service level = 99,87% (see six sigma)

–

Schematic of MRP
BOM
On-hand inventory
Scheduled receipts
MPS
MPS=Master Production Schedule
Netting – Lot Sizing –Time Phasing –BOM Exploding
Production
Orders (jobs)
Purchase
orders
Exception and change notices
Net requirement =Gross requirement – Stock in hand – Purchases + Sales + Safety Stock
   Lot sizing= divide netted demand into appropriate lot sizes to form jobs (see LLC) and EOQ PWP
show (later)
Time Phasing = offset the due dates of the jobs with lead times to determine start times
(Due Date-Lead time  = Start of the job)

MRP matrix calculation (see related xls file in study material)
•Parameters
–Gross requirements
•Derivied from Master Production Scheduled or Planned order releases of the parent BOM (finished
good)
–Scheduled receipts
•On order (issued) and scheduled to be received
–Projected on hand = Stock in Hand
•Anticipated  quantity on hand at the end of the period
–Net requirement
•Net requirement =Gross requirement – Stock in hand – Purchases + Sales + Safety Stock
–Planned order receipts
•When order need to be received (documents are not issued)
–Planned order releases
•When order need to be placed to be received on time
•
•
(home study)

MRP matrix example 1
MRP basic calculations
Lot-for lot - ordering exact quntity needed
Lead Time =1 - time to get item from the moment the purchase order is issued or to make it
Master Production Schedule
Part A
Projected on hand
1
2
3
4
5
Gross Requirements

85
95
120
100
100
MRP
Part A

1
2
3
4
5
Gross Requirements

85
95
120
100
100
Scheduled Receipts
Is already issued
175




Projected on hand (POH)
25
115
20
0
0
0
Net requirements

0
0
100
100
100
Planned order receipts



100
100
100
Planned order releases


100
100
100


Period
Action
1
25+175-85=115=POH
2
POH=115-95=20
3
Cannot cover GR, so we have to release one PO for 100 one period earlier in order to get it in
period 3
3
Net req=120-20 =100, POH in period 3=120-20-100=0
4
Net req =100-0=100-POH=100, so we heave to release one PO one period earlier in order to cover
demand in period 4
5
Similar to period 4
(home study)
period
period

MRP matrix example 2
MRP
Part A

1
2
3
4
5
6
7
8
Gross Requirements

20
30
50
50
60
90
40
60
Scheduled Receipts
Is already issued

50






Projected on hand (POH)
40
20
40
40
40
30
0
10
0
Net requirements



10
10
20
60
40
50
Planned order receipts



50
50
50
60
50
50
Planned order releases

50
50
50
60
50
50



Period
Action
1
Can be covered from POH and new POH=40-20=POH-GR=20
2
 In period 2  GR can be covered by POH and SR, but next period where GR=50 will be not covered, so
POR must be released in per 1 (LT=2)
3
We have got 50, POH=40, so altogether we have 90 nad after demand is covered only 90-50=40=POH
3
Net req=50-40=10 in order to cover demand in period 4, but we can released only 50 or more, so in
period 2 another 50 is released
4
Demand is covered by receipt 50 and POH =10 but for the next period net req=60-40=20
5
Net req= 60-40=20, so demand in period 5 can be covered by POH=40+ quantity X, which have to be
ordered 2 period earlier
5
 Quantity X can 50 or more. So take it 50 as sufficient quantity, and POH =30=40+50-60
6
To cover demand in  period 6 we need at least 90 and we have only 30 in POH, so 90-POH=90-30=60
have to ordered 2 period earlier
6
POH-90-60-30=0;  Ner req=90-30=GR-POH=60 , which is reason why we have  ordered 60 two period
earlier
7
Net req= 40 because 40-0=GR-POH=40. To cover it we have to order two period earlier 50
8
and so on
(home study)

Benefits of MRP
•Low levels of in process inventories
•The Ability to keep track of material requirements
•A means of allocating production time
•The ability to easily determine inventory usage by back flushing (see explanation  below)
Process of determining the number of parts that must be subtracted from inventory records. This
number is computed by referring to the number of parts withdrawn from the inventory (and delivered
to the shop-floor) and the number of parts assumed (according to the BOM) to have been consumed in
a manufacturing  line at one or more deduct points- HOME STUDY

MRP_II =MRP + resource capacity planning
MPS
Demand
management
Rough-cut capacity planning
BOM
MRP
Scheduled
receipts
Job
Pool (planned)
Capacity requirement planning
Job  Release
Routings
(operations)
Job
Dispatch
MRP addresses the supply chain while MRPII includes manufacturing.
Dispatch=rozvrhování (na který stroj se dá která operace při dílenském řízení)

BOM in MS Dynamics NAV



Routings in MS Dynamics NAV



Capacity of resources in MS Dynamics NAV



•Toyota Motors and Taiichi Ohno
•Production based only on demand
•Lower inventory costs
•The concept behind it is that a company can save money on parts and components---by not have
having to store them--- if they are delivered to the assembly line just in time to be installed on
the car as it is being built.


•

Operation (Job1)
Authorization
to start Job 2

Controlling parameter
DOWNSTREAM
UPSTREAM
Operation (Job2)
Operation (JobN)
Components for Job N needed…
1 (kanban = card=signal)
2
Components for Job N produced and
Supplied (pulled)
1
Production
=kanban
The number of kanban cards in the system determines the WIP levels in the plant
Demand

JIT (manufacturing philosophy)
•Kanban is not JIT !!!
•JIT encompasses :
–kanban cards (kan=card, ban=signal)
–total quality control (TQM) – e.g. scrap loss not tolerated….
–setup reduction (snížení nastavovacích časů)
–worker participation
–lean production (low level of waste)
•Advantages of JIT philosophy :
–reduced WIP (Work in Progress)->higher Throughput (see Little´s law- will be presented later-not
for BPH_PIS2  2017_2018)
–shorter production times
–lower production costs
–greater customer responsiveness
–

Kanban principle
Resource :
(home study)

Some units
•Will be presented later in sections such as :
–Little´s law (LT=WIP*CT=WIP/Throughput)
–Theory of Constraint…
•Cycle Time (CT)– time to complete task (time/unit)
•Takt  Time  (TT) – rhythm in which we have to produce in order to satisfy customer  demand (demand
is 240 toaster ovens and we can produce these in 480 minutes ->TT= 480/240=2
•Lead Time (LT) – Number of minutes, hours, or days that must be allowed for the completion of an
operation or process, or must elapse before a desired action takes place –see next slide
•Comment : CT<>LT !!
(not for BPH_PIS2 2017_2018)

Lead time
The lead time is the time and not the effort. You may have a lead time of 100 days and only have to
work 1 hour to fix the bug. Sometime you start working on the bug. The cycle time is the time from
the start of the work until the bugfix is live.
Cycle time
Lead time
     Request
(bug reported)
     Priority of the task
               is  set
Start  work
Bug solved
8)
(not for BPH_PIS2 2017_201

Orders Tracking
Sales Order
Customer
Purchase Order

Sales Order Line




Planning production (MRP-II )
Tracking
Production Order
Bill of Material








Routing  (OP1-OP4)
Tracking

Requisition Worksheet (MRP)



Tracking
Tracking
Stock
Vendor
Tracking

Požadavek
Požadavek  (Prodejní objednávka) bude na prodej Předního náboje 1150 (na skladě 200),
jehož kusovník se  skládá ze dvou komponent 1151 (200 na skladě)
 a 1155 (200 na skladě).
Příprava dat pro příklad :  Změňte u obou komponent (1151 a 1155)
Způsob přiobjednání na Dávka-pro- dávku. Dále s pomocí deníku zboží prodejte 200 ks
výrobku 1150 a  jeho komponent 1151 a 1155. Pozor : komponenty i výrobek
nejsou uloženy na žádné lokaci. Dále změňte na záložkách Doplnění
u obou komponent dodavatel na 10000.
Výsledkem  požadavku bude naplánování Výrobní zakázky a její následné odhlášení
(komponenty do spotřeby a výrobek na sklad)

Prodejní objednávka na 100 ks 1150
Dostaneme upozornění, že podsestava kola 1150 není na skladě !! Reakce->ANO
Dále změňte Plánované datum dodávky na  datum 25.5. , tedy dostatečně daleko od pracovního data –
Důvod : aby plánovací algoritmus nezáplánoval počátek výroby na data před pracovním datem.
Prodejní řádek

Plánovací sešit
Plánované datum dodávky (viz prodejní řádek)
 je pro tuto databázi 4.5.2017. Do Čísla zboží  zavedeme ručně Jak číslo výrobku tak i čísla
komponent ->1150|1151|1155

Naplánovaný řádek (výrobní zakázka)
Viz karta zboží,
záložka Doplnění
a Zmetky %

Naplánovaný řádek (výrobní zakázka)



Vytvoření VZ (pevně plánované-bude vysvětleno)



Řádky nákupní objednávky



Výrobní zakázka (VZ)
Podívejte se na Sledování zakázky : vazby mezi výrobou, nákupem a prodejem
Najdete to na ikoně  Funkce v řádcích VZ

Sledování zakázky
VZ<->PO
NO<->PO

Zaúčtujte příjem komponent na NO



Výrobní zakázka-komponenty a TNG postup
(TNG= Technologický)
Řádek VZ->Komponenty
Řádek VZ->TNG postup

Statistika VZ (s pomocí F7)



Převedení do stavy VZ Vydaná (od plánovače do dílny)



Odhlášení spotřeby a zdrojů
V řádku VZ vydané, kde je ikona Funkce najdete Deník výroby
Zadejte odhadnutou dobu seřízení a zpracování včetně spotřeby materiálu.
Zadané hodnoty by  se neměly lišit od TNG postupu uvedeného pře několika snímky.
Na dalším obrázku to zobrazíme ještě jednou pro ulehčení zadávání hodnot do
Výrobního deníku. Zde se často používají dotykové obrazovky a BAR čtečky

Deník výroby po vyplnění
Záměrně byly některé časy změněny- reálné časy nemusí přesně odpovídat plánu.


Statistika VZ po zaúčtování deníku



Položky VZ po zaúčtování (VZ->Ctrl-F7)



Věcné položky po změně  stavu VZ- >Dokončená
Spotřeba a účtování NV (nedokončená výroba)


Věcné položky po změně  stavu VZ- >Dokončená
Naskladnění výrobku a deaktivace NV


Karta výrobku