Brunswick motors, inc

BRUSNSWICK MOTORS, INC - AN INTRODUCTORY CASE FOR MRP

1. BRUSNSWICK MOTORS, INC AN INTRODUCTORY CASE FOR MRP

2. Presented By Pravin P. Narwade Dr. V. N. Bedekar Institute Of Management Studies, Thane (University Of Mumbai)

3. BRUNSWICK MOTORS, INC - AN INTRODUCTORY CASE FOR MRP Recently , Phil Harris, the Production Control Manager at Brunswick read an article on time-phased requirements planning. He was curious about how this technique might work in scheduling Brunswick's engine assembly operations and decided to prepare an example to illustrate the of time-phased requirements planning . Phil's first step was to prepare a master schedule for one of the engine types produced by Brunswick, the Model 1000 engine. The schedule indicates the number of units of the Model 1000 engine to be assembled during each week over the next twelve weeks and is shown below. Next, Phil decided to simplify his requirements planning example by considering only two of the many components which are needed to complete the assembly of the Model 1000 engine. These two components, the Gear Box and the Input Shaft, are shown in the Product Structure Diagram. Phil noted that the Gear Box is assembled by the Sub-Assembly Department, and is subsequently sent to the main engine assembly line. The Input Shaft is one of several component parts manufactured by Brunswick that are needed to produce a Gear Box sub-assembly. Thus, levels 0, 1, and 2 are included in Product Structure Diagram to indicate the three manufacturing stages that are involved in producing an engine: The Engine Assembly Department, the Sub-Assembly Department, and the Machine Shop . The manufacturing lead times required to produce the Gear Box and the Input Shaft components are also indicated in the product structure diagram. Note that two weeks are required to produce a batch of Gear Boxes and that all of the Gear Boxes must be delivered to the assembly line parts stockroom before Monday morning of the week in which they are to be used. Likewise, it takes three weeks to produce a lot of Input Shafts, and all of the shafts that are needed for the production of Gear Boxes in a given week must be delivered to the Sub Assembly Department stockroom before Monday morning of that week . In preparing the MRP example, Phil planned to use the worksheets and to make the following assumptions : Seventeen Gear Boxes are on hand at the beginning of week 1 and five Gear Boxes are currently on order to be delivered at the start of week 2. Forty Input Shafts are on hand at the start of week 1 and 22 scheduled for delivery at the beginning of week 2 .

4. BURNSWICK MOTORS, INC - AN INTRODUCTORY CASE FOR MRP Assignment Initially, assume that Phil wants to minimize his inventory requirements. Assume that each order will be on the for what is required for a single period. Using the following forms, calculate the net requirement and planned order releases for the gearbox and input shafts. Assume that lot sizing is done using lot-for-lot. Phil would like to consider the cost that his accountants are currently using for inventory carrying and setup for the gearboxes and input shafts. These costs are as follows: Part Cost Gear Box Setup = $ 90/order Inventory carrying cost = $ 2 /unit/week Input Shaft Setup = $ 45/order Inventory carrying cost = $ 1 /unit/week Given the cost structure, evaluate the cost of schedule form (1). Assume inventory is valued at the end of each week. 3 . Calculate a schedule using least-total-cost lot sizing. What are the savings with this new schedule ? Week 1 2 3 4 5 6 7 8 9 10 11 12 Demand 15 5 7 10 15 20 10 8 2 16 Ref. Book : | Operations & Supply Management | 12 th Edition | Rechard B. Chase | Ravi Shankar | F. Robert Jacobs | Nicholas J. Aquilano TATA Mc Graw Hill Education Mc Graw Hill Education Model 1000 master schedule

5. Definitions Of Terms Item : Name or number for the item being scheduled Low level code : The lowest level of the item on the product structure file Lot size : Order multiplies of quantity Lead time : The time from when an order is placed to when it is required PD : Past due time or Bucket order behind schedule Gross requirement : Total expected demand for an item in a time period. Scheduled receipt : Material already ordered Projected available balance : Expected ending inventory. Net requirement : The actual amount needed in each time period. Planned order receipt : Quantity expected to be received by the beginning of the period or Net requirements adjusted for lot size. Planned order releases : Planned order receipts offset by lead time.

6. Formulae Gross requirement = Forecasted demand period by period Net requirement (t) = Gross requirement (t) – Projected inventory (t - 1) – Scheduled receipt (t) Projected inventory (t) = Projected inventory ( t - 1) + Scheduled receipt (t ) + Planned order receipt (t) – Gross requirement (t) Planned order releases (t - LT) = Planned order receipt (t) Total cost = Carrying cost + Setup cost (Carrying cost = Holding Cost, Setup cost = Ordering Cost) t = current . t -1 = previous . LT = lead time .

7. Input Shaft (2), LT = 3 Week Engine : Model 1000 Transmission Gearbox (1), LT= 2 Week Crank case Level 0 Level 1 Level 2 Product Structure

8. GEARBOX WEEKS PD 1 2 3 4 5 6 7 8 9 10 11 12 GROSS REQUIREMENT   15 5 7 10   15 20 10   8 2 16 SCHEDULED RECEIPT     5                     PROJECTED AVAILABLE BAL. 17 2 2 NET REUIREMENT   5 10 15 20 10 8 2 16 PLANNED ORDER R ECEIPT       5 10   15 20 10   8 2 16 PLANNED ORDER RELEASE   5 10   15 20 10   8 2 16     WEEKS PD 1 2 3 4 5 6 7 8 9 10 11 12 Quantity   15 5 7 10   15 20 10   8 2 16 INPUT SHAFT WEEKS PD 1 2 3 4 5 6 7 8 9 10 11 12 GROSS REQUIREMENT   10 20   30 40 20   16 4 32     SCHEDULED RECEIPT     22                     PROJECTED AVAILABLE BAL. 40 30 32 2     NET REUIREMENT           38 20   16 4 32     PLANNED ORDER RECEIPT           38 20   16 4 32     PLANNED ORDER RELEASE     38 20   16 4 32           2 Times 1 Time Engine assembly master schedule Q 1. Engine Assembly Master Schedule

9. Q 2. Cost Of Schedule Using Lot – For - Lot GEAR BOX WEEK   NET REQUIREMENT PLANNED ORDER ENDING INVENTORY HOLDING COST SETUP COST TOTAL COST 1     2 4   4 2     2 4   8 3 5 5     90 98 4 10 10     90 188 5           188 6 15 15     90 278 7 20 20     90 368 8 10 10     90 458 9           458 10 8 8     90 548 11 2 2     90 638 12 16 16     90 728 INPUT SHAFT WEEK NET REQUIREMENT Planned Order ENDING INVENTORY HOLDING COST SETUP COST TOTAL COST 1     30 30   30 2     32 32   62 3     32 32   94 4     2 2   96 5 38 38     45 141 6 20 20     45 186 7           186 8 16 16     45 231 9 4 4     45 276 10 32 32     45 321 11           321 12           321 TOTAL COST 728 + 321 $ 1049 Gear Box & Input Shaft

10. Q 3. Cost Of Schedule Using Least- Total- Cost lot sizing Week NR Qty. Order Carrying Cost Order Cost Total Cost 1 1=2 1=3 5 5 90 90 1=4 10 15 20 90 110 1=5 15 20 90 110 1=6 15 30 110 90 200 1=7 20 50 270 90 360 1=8 10 60 370 90 460 1=9 60 370 90 460 1=10 8 68 482 90 572 1=11 2 70 514 90 604 1=12 16 86 802 90 892 1=7 20 20 90 90 1=8 10 30 20 90 110 1=9 30 20 90 110 1=10 8 38 68 90 158 1=11 2 40 84 90 174 1=12 16 56 244 90 334 1=12 16 16 90 90 Week Net. Req. Qty. Order End Inventory   Holding Cost Setup Cost Total Cost 1 2   3 5 30 25 50 90 140 4 10 15 60   60 5 15 90   90 6 15   7 20 40 20 40 90 130 8 10 10 40   40 9 10 60   60 10 8 2 16   16 11 2   12 16 16 90 90   626 TOTAL COST FOR $ 626 Gear Box 10 Unit * $ 2 / Unit * Week 1 = $ 20

11. Q 3. cont.… TOTAL COST FOR $ 238 Week Net Requirement Qty. Order Carrying Cost Order Cost Total Cost 1 1=2 1=3 1=4 1=5 38 38 45 45 1=6 20 58 20 45 65 1=7 58 20 45 65 1=8 16 74 68 45 113 1=9 4 78 84 45 129 1=10 32 110 244 45 289 1=11 110 244 45 289 1=12 110 244 45 289 1=9 4 4 45 45 1=10 32 36 32 45 77 1=11 36 32 45 77 1=12 36 32 45 77 Week Net. Req. Qty. Order End Inventory   Holding Cost Setup Cost Total Cost 1 2   3   4   5 38 74 36 36 45 81 6 20 16 32   32 7 16 48   48 8 16   9 4 36 32 32 45 77 10 32   11   12     238 Input Shaft $ 68 + 4 Unit * $ 1 / Unit * Week 4 = $ 84

12. Conclusion Least T otal Cost Method (LTC) : a dynamic lot sizing technique that calculates the order quantity by comparing the carrying cost and the setup cost for various lot sizes and then selects the lot in which these are most nearly equal. Total cost using lot -- for – lot Gear Box = 728 Input Shaft = 321 Total Cost = 1049 Total cost using least total cost lot sizing Gear Box = 626 Input Shaft = 238 Total Cost = 864 Total Cost Saving $ 1049 $ 0864 $ 0185

13. Thank You