Part I: Theories and Techniques
Question: Explain how gross-to-net calculations are processed for material requirements planning (MRP). What specific input files would the company in the case study need to include in this process for a successful MRP? How would you use the MRP information to improve the operations as the manager of this company?
Answer: When an organization needs to develop a functional and realistic product structure that will help push sales and make profits both in the short-term and in the long-term, it is important to factor in building a gross and net requirement plans. As such, the material used in the planning process must meet those required in the schedule so that the company can maximize production while reducing the costs incurred (Drexl & Kimms, 2013). This puts the organization in a strategic position that enables them to make changes in the firm depending on the external market forces. It is also possible to meet customer demands, respond to their requests within the shortest time possible, and reduce the input of inventory used during the entire production process (Louly & Dolgui, 2013). The organization is in a position to forecast demand for their products as they use the quality and quantity of the product as they use the schedule to make the predictions. This justifies the need to have a master production roaster that specifies the material to be used as well as the amount of inventory available at the warehouses waiting for processing. It leads to better decision making when processing orders from customers and reduces the lead-time.
The production department identifies the material requirements planning schedule by taking the amounts of inventory, which is the order quantities, and deducting it from gross requirements (Olhager, 2010). Hence, MRP is taken to be one of the best tactics adopted when changes occur and in the improvement of a firm. For instance, MRP maximizes the Just in Time production method and enhances the entire manufacturing process as the inventories are taken as part of the planning process (Drexl & Kimms, 2013). A company that maximizes on MRP enjoys benefits such having detailed and systematic stages of production process, time, and materials needed which helps save resources. In addition, an organization focuses their attention on the customer needs which leads to satisfaction and brand loyalty, a production structure that has all necessary information of materials that will manufacture each product, and better decision-making process making for all managers (Louly & Dolgui, 2013).
Question: Explain the four primary priority rules for job sequencing: First Come, First Serve (FCFS), Shortest Processing Time (SPT), Earliest Due Date (EDD) and Longest Processing Time (LPT). In what instances at the company might each rule be most advantageous?
When would each rule be most disadvantageous? Support your claims with citations from your textbook or outside sources.
Answer: Every organization ensures that it maximizes its stock before it can go bad especially when it is perishable. Some of the methods adopted include the First Come, First Serve (FCFS), Shortest Processing Time (SPT), Earliest Due Date (EDD), and Longest Processing Time (LPT) techniques. Under the First Come, First Serve (FCFS), the production department ensures that it provides services and products to customers based on the time they arrive at the facilities. It helps increase customer satisfaction as clients get the services and leave immediately and assured that no form of favoritism comes into the delivery process (Olhager, 2010). On the other hand, an organization prioritizes a job based on the processing time (Drexl & Kimms, 2013). Jobs that have a short processing time will be a priority since they will reduce the workload allowing the production department focuses on other tasks that require more time. Further, jobs that are due within a short time are processed faster than those that require a longer period to complete. Jobs that require the longest processing time are sequenced to appear in the production process as the last ones since they have more time.Some of the instances when the company might use First Come, First Serve and be most advantageous include when customers are at the facilities and waiting for their orders to be completed so that they can leave (Louly & Dolgui, 2013). For instance, in a vehicle garage, motorists that arrive at the facilities will have their cars receive services based on their arrival time. On the other hand, the Shortest Processing Time (SPT) is used when a company has a workload and can separate the responsibilities based on the amount of time required to process them. It has an advantage since it allows the organization get most work out of the way and focus on other technical projects. Further, the Earliest Due Date (EDD) requires the firm to complete tasks that are required by their customers within a short time, and the advantage is that a company increases customer satisfaction while reducing the workload. However, the Longest Processing Time (LPT) is used when raw materials required to manufacture a product may last for long, and customers require their product in the long-term (Drexl & Kimms, 2013). The company may not be in a hurry to process the product and will have more time to focus on products that have a shorter processing time and required within a short time who due dates are earlier.
Part II: Data Analysis
Question: The Company believes that it might have some inefficiency in its inventory management process. Develop an ABC classification system (as known as ABC Analysis) for the following ten items. Based on this information, what do you recommend for improving inventory management?
Answer: The ABC analysis allows the organization to categorize its inventory based on their time schedules. It classifies them using those required within a short time to the longest time required of them. It also acts as a control technique for the management as it emphasizes on the keeping an updated list of inventory on stock keeping notice of the work-in-progress and those that are in the warehouse. Hence, in the first category A,' the inventory is more important compared to those in B' and C.' An organization chooses the criteria for grouping the items based on the type of industry and demand from customers as well as the market forces (Louly & Dolgui, 2013). However, most organizations give the first category about 20% of the entire inventory, while the second takes about 30%, and the last category takes the rest. An organization can organize the following information about their inventory schedule as:
Based on this information, the recommendations for improving inventory management includes focusing in items that have the lowest demand but will generate more incomes for the organization regarding profits both in the short-term and in the long-term. For instance, the annual demand of 300 units costs 1,500, which means that the organization will get about 450,000 in returns and can use the funds to expand the business operations. G3 is a priority based on the amount that the firm will get as well as the quantity of the demand. In addition, the firm will use complete the production process and focus on batches with more demand like in category C, which has a demand of 6,000 with a cost per unit of 10 (Louly & Dolgui, 2013). An improvement to the inventory requires meeting the shorter demands with an earlier processing time, which will help increase demand for its products from customers, as they perceive an organization to meet their requisitions on schedule (Olhager, 2010).
Drexl, A., & Kimms, A. (Eds.). (2013). Beyond Manufacturing Resource Planning (MRP II): advanced models and methods for production planning. Springer Science & Business Media.
Louly, M. A., & Dolgui, A. (2013). Optimal MRP parameters for a single item inventory with random replenishment lead time, POQ policy and service level constraint. International Journal of Production Economics, 143(1), 35-40.
Olhager, J. (2010). The role of the customer order decoupling point in production and supply chain management. Computers in Industry, 61(9), 863-868.
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