TERM PROJECT (A BIG PICTURE!)

1. Problem:

a. Deals with manufacturing three primary (end) products A, B, and C over a planning horizon of approximately 6 months (27 weeks) in order to meet the forecasted demands for these products at specific time periods.

b. Takes into consideration the following:

i. Bill-of-materials for end products.

ii. Processing time requirements for end products and components on workcenters.

iii. On-hand inventories and lead times for end products, components, and raw material.

iv. Workcenter capacities and costs.

v. Production, inventory carrying, and backordering costs.

2. Analysis: a. Requires a demand driven approach be used to analyze the problem.

b. Both feasible and infeasible workcenter capacities have been considered.

Requires analyzing the problem using Material Requirements Planning (MRP-I or "little MRP') as well as Manufacturing Resources Planning (MRP-II) approaches.

c. Two different lot-sizing policies are considered, i.e., lot-for-lot (LFL) and fixed-lot.

There is a need to look at different "what if " scenarios, in order to select the best course of action.

3. Software:

Predominantly EXCEL for implementing the algorithms/techniques for evaluating the total costs with MRP I and MRP

ERM PROJECT

A manufacturing company produces three primary products A, B, and C. Relevant data gathered by the company for analyzing the problem are presented in Tables 1 through 5 on pages 3-5.

Following simplifying assumptions can be made.

Note that in order to get the MRP logic started, some time is needed at the beginning since MRP back loads the system. For simplicity, assume the forecasted demands are zero for weeks 1 through 3.

Also assume the starting inventory specified in Table 4 is available from week 1. For the forecasted demands, use only the end products A, B, and C. To modify production quantities, adjust only the end products A, B, and C. Do not adjust the quantities of D, E, F, G, H, and I. These should be linked so that changes in A, B, and C will automatically adjust them.

The planned order receipts (P.O.Rc.), equaling the net requirements, are realized at the beginning of each week. For instance, if the P.O.Rc. for the end product A during week 4 (02/01/16) is 1400 units, these 1400 units of A should have been produced during week 3 (as the lead time for A is 1 week) and made available at the beginning of week 4.

Also, each item (with the exception of raw material I as it is purchased from outside) requires two operations be performed on two work centers in the order shown in Table 3. For example, End Product A is first processed on work center 1, followed by work center 4.

Inventory carrying and back-order costs are given below, and are evaluated on the basis of ending inventory/backorder values.

Inventory carrying cost

End Products A, B, and C $2.00 per unit per week Components D, E, F, G, and H $1.50 per unit per week Raw Material I $1.00 per unit per week

Back-order cost

End Products A, B, and C $20.00 per unit per week Components D, E, F, G, and H $14.00 per unit per week Raw Material I $8.00 per unit per week

TO DO:

(a) Disregarding the work center capacity limitations, develop an MRP schedule (for all of the products, components, and raw material), and capacity profiles for the four work centers. What is the total cost of operation for the entire planning horizon of 27 weeks?

(b) Suppose that the available capacities on work centers are now limited. Work center capacities and costs are specified on a weekly basis in Table 1.

As the work center capacities are now limited, it is possible that the required capacity on one or more work centers at specific time periods (weeks) exceeds the available capacity. However, if the total required capacity over the planning horizon (27 weeks) on each work center is less than or equal to its total available capacity, you should be able to create a feasible schedule by adjusting the forecasted demands.

Use suitable heuristic decision rules to develop an algorithm that will create a feasible schedule (within the capacities of the work centers), and compute the relevant costs. Do this by adjusting the forecasted demands only. Minimize the total cost of operation for the 27 weeks. What total cost did you evaluate?

(c) Suppose that the end products and components had to be ordered in lots, which are in multiples of 500 units (as opposed to the lot-for-lot (LFL) policy used in (a) and (b) above) and raw materials in multiples of 1,000 units. How would this change your schedule? Evaluate the total cost: (i) when the work center capacities are not limited and (ii) when the work center capacities are limited. (Hint: You do not have to evaluate the total cost for (ii) if the total cost for (i) in part (c) is greater than that in part (b))

(d) Based on your analysis in parts (a), (b), and (c), which ordering policy (i.e., LFL or multiples of 500 and 1,000 units) should the company choose in each case (i.e., when work center capacities are (i) not limited and (ii) limited)?

Use Microsoft EXCEL to solve the problem.

You must turn in your answers in report form, with names of all teammates listed on the front cover page, using computer printouts as appendices.

Your report must be structured around the following sections:

• Introduction - A comprehensive introduction to the problem investigated and the motivation for selecting it.

• Problem Statement - A description of the problem in its entirety in your own words.

• Methodology - A description of the various methods used to analyze the problem in the order in which it is presented in the problem statement.

• Analysis - A description of the analysis performed by employing the various methods described above.

• Results - A description of the results obtained for the problem in the order in which it is presented. Note: Depending upon the nature of the problem, the sections on analysis and results can be combined into one section.

• Conclusions - Conclusions, while being succinct, must cover the entire scope of the problem.

• Recommendations - A description of the recommendations resulting from the investigation of the problem.

Use sections and subsections within a section as you deem appropriate in the write-up. The report must include a Table of Contents with page numbers of sections, subsections, and appendices listed.

References, if used, must be cited in the body of the report and listed in the back under References.

Remember that a collection of computer printouts as appendices without much by way of writing in the sections outlined above does not make a compelling report.

Make sure that your report is thorough and complete, addressing all of the questions above including relevant discussions.

Table 1. Work Center Capacities and Costs

Table 2. Bill of Materials for Products A, B, and C

End Product A                        End Product B                        End Product C

• A B C
• D(4) F(2) G(2)
• I(3) G(3) I(2)
• E(1) I(2) H(1)
• F(4)

Table 3. Work Center Routings for End Products and Components

Table 4. On-hand Inventory and Lead Time for Each Item on the Bill of Material at the Beginning of Week 1

Table 5. Forecasted Demand for Weeks 4-27

Date