Materials Requirement Planning MRP Calculations Term Paper

Planning (mrp)

Material Requirement Planning

Selection of production has great impact on an organizational production process, and a production planning is critical to ensure smooth flow of production. Space Age Furniture is a company specializing in the manufacturing of cabinets and tables to hold televisions and microwaves. The paper analyzes the case of Space Furniture by exposing the implications of holding inventories within the company compared with the costs that the company incurs with overtime. The paper also recommends the solutions for the operation manager to solve the problems she is currently facing in order to improve the company image and derive satisfaction from the company key employer as well as attracting more customers to the company.

Introduction

Space Age Furniture Company specializes in manufacturing of cabinets and tables used to hold portable televisions and microwave ovens. The products are manufactured in different sizes and features, and the manufacturing process follows the same production and operation process. The subassemblies that the company uses in producing the Gemini and Saturn stands have the Part number 3079 made by a special lathe machines dedicated for the production process. Ed Szewczak is the company skilled machinist with a lot of working experience. Ed is dedicated in his work and the company rates him as a highly skilled professional machinist. However, the company has recently started using MRP system that assists in maintaining zero inventory record to avoid the costs of holding goods in the inventory.

To maintain zero inventory record, the company is obliged to force Ed Szewczak to work overtime continuously because of the increase and continuous demand for the Part (3079). The goal of the company is to adopt a zero finished goods inventory, however, the company now faces challenges on the next action to take because Ed Szewczak is unhappy and uncomfortable with persistence overtime work Ed is doing due to a great demand of Part 3079. Coral Snodgrass, an operational manager is now considering next course of action to implement to protect the company from losing Ed.

Based on the information in the case, the company has started using MRP system to assist in reducing inventories as well as improving on-time delivery. The system assists Space Age to transport finished goods straight to customer without necessarily incurring holding costs. Ed is working 8 hours in the regular working days and the company will be able to produce only 1,200 pieces of part per week.

Detailed study of demand for Part (no. 3079) must be study comprehensively to determine next course of action to do. The company must produce 2,000 units of Part 3,079 to meet the order of 1,000 sub-assemblies for Gemini 435 and 1,000 sub-assemblies for Saturn 257. The weekly master schedule for producing for Gemini and Saturn within the next six weeks is presented in the Table 1

Table 1:Master Schedule

1

2

3

4

5

6

Gemini

Saturn

The data in the Table 1 presents the weekly demand for the company products and the demand for Gemini is higher the demand for Saturn. The company could employ many strategies to solve the problem faced by Coral.

Recommendations to address Coral's problems

Major problem that Coral faces is the worry of losing an experience and dedicated machinist like Ed Szewczak based on the need to produce the Part 3079. The increase in the production of the Part 3079 used in the production of the subassemblies for the Saturn and Gemini stands necessitate the company to introduce overtime for Ed. The company needs to address the problem very fast because it will be very difficult to get a skilled and experience machinist such as Ed Szewczak.

Using Forecasting Technique

The first strategy is to employ sound production planning to manufacture number of units. The strategy will assist the company to efficiently allocate the resources and human labor. (Hill, 2003). The approach will also assist the company to eliminate the overtime since the company will only focus on the quantity demanded. The strategy will assist the company to fix Ed Szewczak working hours based on the required limit.

The company should use forecasting technique using the data in the Master Schedule for the production planning to estimate weekly demand of the company products. The strategy will assist the company to come up with appropriate product schedules. Demand forecasting involves using the past demand records to forecast the demand of the consequent weeks.Based on the data in the Table 1, the average demand for the Part for the past 6 weeks are as follows:

Table 2: Forecasting Technique

Gemini

Saturn

Demand

Moving Average

Demand

Moving Average

Week 1

Week 2

Week 3

Week 4

Week 5

Week 6

Average

Based on the past weekly demand for the Parts, it will be easy to forecast the demand for the consequently weeks. Thus, the paper provides the demand forecast for Gemini as 533.33 for the subsequent week based on the past data in the master schedule and 383.33 for Saturn. Thus, the project manager should desist from using zero stock policy where there will be no stock in the inventory until customer makes a command. (Potamianos, 2006). The project manager should use the data presented in the Table 2 to store the part that will only be demanded in the subsequent week. Using this strategy, the project manager will be able to fulfil the subsequent demand of the Part without necessary inconvenience Ed Szewczak with overtime. As being pointed out previously, the company will face challenges to get another skilled machinist. If Ed Szewczak decides to leave the company without notice, the production of the Part (3079) will be on the standstill and the company will lose large amount of money with inability to meet customer demand. Moreover, the company may lose its credibility from its customers and shareholder. (Potamianos, 2006).

Moreover, the company should carry out a total product maintenance aimed to reduce the breakdown and downtimes of equipment during production process and which could escalate using Ed Szewczak for overtime when production starts. To prevent the issue from happening, the company should carry out efficient maintenance of all the machines, conveyors, and other equipment used for the production of the Part. The maintenance decision will assist in ensuring smooth flow of operation in the production process. (Vieira, 2006). Moreover, the policy will assist the company to avoid the risks of delay in the production of the Part.

Another best option opened to the company is to look for another skilled machinist as soon as possible to serve as assistance to Ed Szewczak. Typically, it is very risky to rely on only one skilled machinist for the production process. Apart from the inconvenience produced by overtime, another serious problem is that Ed Szewczak may decide to leave the company. For example, Ed Szewczak may get another job from another company ready to pay higher wages. Another alternative left for the company is to train one of the staff to become a skilled machinist. While this option is good, the new trainee might not turn out to be as efficient as Ed was because Ed has already acquired years of experience in the job making him to be highly skilled and efficient in the production process.

The company should also employ a strategy to minimize costs. The company should look for more sophisticated technologies to make the flow of production process to become faster, which consequently increase the level automation that assist employees to work faster. The strategy will make the company to avoid the cases of overtime thereby eliminating the overtime costs and inconveniences associated with overtime. Moreover, the company should employ additional staff or use subcontractor during the peak season for the production of Part 3079 to save the specialized employee from overtime. However, the company should only source for additional workers during the peak season, the strategy will make the whole production process to be economical. The strategy will also boost the morale of the specialized employee, which will make the company to remain competitive.

"Reducing the minimum quantities of subassemblies"

One of the strategies to implement stock control is to hold minimum quantity of stock in the inventory during the production process. The company should keep the minimum quantities of subassemblies and certain quantities of stocks for the subassemblies to ensure that the company does not run out of stocks of subassemblies. When the quantities of subassemblies have reached the minimum quantities, the reorder level of the stock is attained and it is crucial for the company to produce another batch of stock. Part 3079 is an important component of subassemblies and if there is a reduction in the quantities of subassemblies, the quantity of Part 3079 will be automatically reduced in the same margin. The implication is.....