Question 12.2: Preparing a Material Requirements Plan for Lot-for-Lot Order...
Preparing a Material Requirements Plan for Lot-for-Lot Ordering
and for Lot-Size Ordering
A firm that produces wood shutters and bookcases has received two orders for shutters: one for 100 shutters and one for 150 shutters. The 100-unit order is due for delivery at the start of week 4 of the current schedule, and the 150-unit order is due for delivery at the start of week 8. Each shutter consists of two frames and four slatted wood sections. The wood sections are made by the firm, and fabrication takes one week. The frames are ordered, and lead time is two weeks. Assembly of the shutters requires one week. There is a scheduled receipt of 70 wood sections in (i.e., at the beginning of) week 1. Determine the size and timing of planned-order releases necessary to meet delivery requirements under each of these conditions:
1. Lot-for-lot ordering (i.e., planned-order release equal to net requirements).
2. Lot-size ordering with a lot size of 320 units for frames and 70 units for wood sections.
a. Develop a master schedule:
| Week number | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
| Quantity | 100 | 150 |
b. Develop a product structure tree:
c. Using the master schedule, determine gross requirements for shutters. Next, compute net requirements. Using lot-for-lot ordering, determine planned-order receipt quantities and the planned-order release timing to satisfy the master schedule (see Figure 12.8).
The master schedule calls for 100 shutters to be ready for delivery, and no shutters are projected to be on hand at the start of week 4, so the net requirements are also 100 shutters.
Therefore, planned receipts for week 4 equal 100 shutters. Because shutter assembly requires one week, this means a planned-order release at the start of week 3. Using the same logic, 150 shutters must be assembled during week 7 in order to be available for delivery at the start of week 8.
The planned-order release of 100 shutters at the start of week 3 means that 200 frames (gross requirements) must be available at that time. Because none are expected to be on hand, this generates net requirements of 200 frames and necessitates planned receipts of 200 frames by the start of week 3. With a two-week lead time, this means that the firm must order 200 frames at the start of week 1. Similarly, the planned-order release of 150 shutters at week 7 generates gross and net requirements of 300 frames for week 7 as well as planned receipts for that time. The two-week lead time means the firm must order frames at the start of week 5.
The planned-order release of 100 shutters at the start of week 3 also generates gross requirements of 400 wood sections at that time. However, because 70 wood sections are expected to be on hand, net requirements are 400 — 70 = 330. This means a planned receipt of 330 by the start of week 3. Since fabrication time is one week, the fabrication must start (planned-order release) at the beginning of week 2.
Similarly, the planned-order release of 150 shutters in week 7 generates gross requirements of 600 wood sections at that point. Because no on-hand inventory of wood sections is projected, net requirements are also 600, and planned-order receipt is 600 units. Again, the one-week lead time means 600 sections are scheduled for fabrication at the start of week 6.
d. Under lot-size ordering, the only difference is the possibility that planned receipts will exceed net requirements. The excess is recorded as projected inventory in the following period. For example, in Figure 12.9, the order size for frames is 320 units. Net requirements for week 3 are 200; thus, there is an excess of 320 — 200 = 120 units, which become projected inventory in the next week. Similarly, net frame requirements of 180 units are 140 less than the 320 order size; again, the excess becomes projected inventory in week 8. The same thing happens with wood sections; an excess of planned receipts in weeks 3 and 7 is added to projected inventory in weeks 4 and 8. Note that the order size must be in multiples of the lot size; for week 3 it is 5 times 70, and for week 7 it is 9 times 70.
