OPERATION MANAGEMENT (CASE: MRP AT A-CAT CORP.)

18th of May 2015

Operations Management For Competitive Advantage

Group 4

Azis Rizky Prawira 1406513344

Camelia Indah Murniwati 1406513376

Jejen Nugraha 1406589114

Muhammad Yuriansyah Putra 1406514100

Nasrul Nabil Sangadji 1406589303

Company Background of A-CAT Corp.

Problem Identification

Theory of MRP

Analysis

Conclusion & Lesson Learned

OUTLINE

Mid-sized manufacturer and distributor of domestic electrical

appliances.

Operated two medium-sized facilities in Vidarbha region of Maharashtra states of India.

Focus on the rural segment (low-income customers).

A-CATs manufacturing units had been in operation since 1986.

Annual sales of Rs6,000,000 US$120,000.

Had about 35 employees.

Manufactured electrical appliances for household use: television signal boosters, transformers, FM radio kits, electronic ballasts, battery chargers, voltage regulators, etc.

Company Background: A-CAT Corp.

Sunita Menon was assigned the task of preparing

the operation plan for the next eight weeks for the product P0110.

The basic problem Menon Faced was deciding how to produce economically.

After collecting the data (Bill of Materials, Product Structure Diagram, Master Schedule, On Hand Inventory, Costs Associated), Menon reached a different answer for every lot-sizing technique that she applied.

Problem Identification

MRP is a planning approach to material / material

that ignoring the past, but look to the demands or needs of future production.

MRP can be applied for planning materials / parts / components or sub-assemblies that depend on the product or inventory.

MRP is a computerized information system is built specifically to help manufacturers manage inventory and schedule of reservations / reception material / materials.

Theory of MRP

MRP Input

Inventory

transactions

Inventory

records

Other

sources

of demand

Authorized

master production

schedule

Bills of

materials

Engineering

and process

designs

Material

requirements

plan

MRP

explosion

Information for MRP

Bill of Materials (BOM) of all products for certain that consists of several levels (level).

Number parts / components are unique and permanent. The existence of Master Production Schedule (MPS) of production. The

final result contains the time and amount. The amount of material requirements / Notes Inventory (Inventory Record)

for each part / component products. Stock code number. Lead time for each part / component in an exact figure. The required amount equal to that of the production schedule.

BOM Sample

Master Production Scheduling

Master production schedule (MPS): Total aggregate production for all types of "family" seats

Inventory Record

Supply Notes : A record that shows an items lot-size policy, lead time, and various time-phased data.

Gross requirements : The total demand derived from all parent production plans.

Scheduled receipts are orders that have been placed but not yet completed.

projected on-hand inventory: An estimate of the amount of inventory available each week after gross requirements have been satisfied.

planned receipts : Orders that are not yet released to the shop or supplier.

planned order releases : An indication of when an order for a specified quantity of an item is to be issued.

Lot Sizing in MRP Systems

Lot sizes the part quantities issued in the planned order receipt and planned order release sections of an MRP schedule.

Based on the data (Bill of Materials, Product

Structure Diagram, Master Schedule, On Hand Inventory, Costs Associated), Lot Sizes will be determined by using Lot Sizing Strategies below:

1. Lot for Lot (L4L)

2. Economic Order Quantity (EOQ)

3. Least Total Cost (LTC)

4. Least Unit Cost (LUC)

Analysis

Bill of Material (BOM)

Level

0

1

2

(1)

(2)(2)

(4) (3)

(Quantity)

Dependent Demand

Independent Demand

Master Production ScheduleThe End Item: P0110

On Hand Inventory

Lot-for-Lot (L4L) is the most commont technique. It

Sets planned orders to exactly match the net requirements

Produces exactly what is needed each week with no inventory carroed over into future periods.

Minimizes carrying cost.

Does not take into account setup costs or capacity limitations.

1. Lot for Lot (L4L)

MRP Explosion Calculations

Item -4 -3 -2 -1 1 2 3 4 5 6 7 8

P0110 Gross requirement 400 350 300 450 300 450 225 525

Q L4L Scheduled receipts

LT 2 Projected available balance 240 240 240 240 0 0 0 0 0 0 0 0

OH 240 Net requirements 160 350 300 450 300 450 225 525

SS 0 Planned order receipts 160 350 300 450 300 450 225 525

Planned order release 160 350 300 450 300 450 225 525

Week


Item -4 -3 -2 -1 1 2 3 4 5 6 7 8

POX Gross requirement 320 700 600 900 600 900 450 1050


LT 1 Projected available balance 500 500 180 0 0 0 0 0 0 0




Week

Step 1: MRP Explosion Calculations


Item -4 -3 -2 -1 1 2 3 4 5 6 7 8

POY Gross requirement 320 700 600 900 600 900 450 1050


LT 1 Projected available balance 340 340 20 0 0 0 0 0 0 0




Week


Item -4 -3 -2 -1 1 2 3 4 5 6 7 8

P1X1 Gross requirement 2080 2400 3600 2400 3600 1800 4200


LT 1 Projected available balance 500 500 0 0 0 0 0 0 0

OH 500 Net requirements 1580 2400 3600 2400 3600 1800 4200

SS 0 Planned order receipts 1580 2400 3600 2400 3600 1800 4200

Planned order release 1580 2400 3600 2400 3600 1800 4200

Week


Item -4 -3 -2 -1 1 2 3 4 5 6 7 8

P1X2 Gross requirement 1560 1800 2700 1800 2700 1350 3150


LT 1 Projected available balance 600 600 0 0 0 0 0 0 0

OH 600 Net requirements 960 1800 2700 1800 2700 1350 3150

SS 0 Planned order receipts 960 1800 2700 1800 2700 1350 3150

Planned order release 960 1800 2700 1800 2700 1350 3150

Week

Step 2: Lot-for-Lot Run Size for an MRP Schedule

P0110

Week Net Requirements Production Quantity Ending Inventory Holding Cost Setup Cost Total Cost

1 160 160 0 0 500 500

2 350 350 0 0 500 1000

3 300 300 0 0 500 1500

4 450 450 0 0 500 2000

5 300 300 0 0 500 2500

6 450 450 0 0 500 3000

7 225 225 0 0 500 3500

8 525 525 0 0 500 4000

P0X


-1 520 520 0 0 400 400

1 600 600 0 0 400 800

2 900 900 0 0 400 1200

3 600 600 0 0 400 1600

4 900 900 0 0 400 2000

5 450 450 0 0 400 2400

6 1050 1050 0 0 400 2800

POY


-1 680 680 0 0 350 350

1 600 600 0 0 350 700

2 900 900 0 0 350 1050

3 600 600 0 0 350 1400

4 900 900 0 0 350 1750

5 450 450 0 0 350 2100

6 1050 1050 0 0 350 2450

P1X1


-2 1580 1580 0 0 430 430

-1 2400 2400 0 0 430 860

1 3600 3600 0 0 430 1290

2 2400 2400 0 0 430 1720

3 3600 3600 0 0 430 2150

4 1800 1800 0 0 430 2580

5 4200 4200 0 0 430 3010

P1X2


-2 960 960 0 0 400 400

-1 1800 1800 0 0 400 800

1 2700 2700 0 0 400 1200

2 1800 1800 0 0 400 1600

3 2700 2700 0 0 400 2000

4 1350 1350 0 0 400 2400

5 3150 3150 0 0 400 2800

Step 3: Total Cost Calculation for L4L

Item Cost

P0110 4,000

P0X 2,800

P0Y 2,450

P1X1 3,010

P1X2 2,800

Total Cost L4L 15,060

2. Economic Order Quantity (EOQ)

Step 1: EOQ Calculations

D = Annual DemandH = Annual Holding CostS = Setup Cost

Economic order quantity (EOQ) is the order quantity that minimizes total inventory holding costs and ordering costs. It is one of the oldest classical production scheduling models.

Step 2: MRP Explosion Calculations

Lv 0 (P0110)

LT :2 -2 -1 1 2 3 4 5 6 7 8

Gross requirement 400 350 300 450 300 450 225 525 D = 17940

schedule receipts H = 52

projected on hand 240 S = 500

net requirements 160 350 300 450 300 450 225 525 2DS/H = 345000

Planned order receipts 588 588 588 588 588 EOQ = 588

Planned Ending Inventory 428 78 366 504 204 342 117 180

Planned order releases 588 588 588 588 588 Total Cost : 4719

EOQ = 588

Lv 1 (POX)

LT :1 -3 -2 -1 1 2 3 4 5 6 7 8


schedule receipts H = 16.9


net requirements 676 1176 1176 1176 1176 2DS/H = 1655385

Planned order receipts 1287 1287 1287 1287 1287 EOQ = 1287

Planned Ending Inventory 611 722 833 944 1055

Planned order releases 1287 1287 1287 1287 1287 Total Cost : 3354

EOQ = 1287

Lv 1 (POY)

LT :1 -3 -2 -1 1 2 3 4 5 6 7 8





Planned order receipts 1665 1665 1665 1665 EOQ = 1665


Planned order releases 1665 1665 1665 1665 Total Cost : 2107

EOQ = 1665

Lv 2 (P1X1)

LT :1 -4 -3 -2 -1 1 2 3 4 5 6 7 8





Planned order receipts 10418 10418 10418 EOQ = 10418


Planned order releases 10418 10418 10418 Total Cost : 1766

EOQ = 10418

Lv 2 (P1X2)

LT :1 -4 -3 -2 -1 1 2 3 4 5 6 7 8

Gross requirement 3861 0 3861 3861 0 3861 0 3861 D = 121582.5




Planned order receipts 4994 4994 4994 4994 EOQ = 4994


Planned order releases 4994 4994 4994 4994 Total Cost : 2351

EOQ = 4994

Step 3: EOQ Run Size for an MRP ScheduleP0110


1 160 588 428 428 500 928

2 350 0 78 78 0 1006

3 300 588 366 366 500 1872

4 450 588 504 504 500 2876

5 300 0 204 204 0 3080

6 450 588 342 342 500 3922

7 225 0 117 117 0 4039

8 525 588 180 180 500 4719

P0X


-2 676 1287 611 199 400 599

-1 0 0 0 0 0 599

1 1176 1287 722 235 400 1233

2 1176 1287 833 271 400 1904

3 0 0 0 0 0 1904

4 1176 1287 944 307 400 2611

5 0 0 0 0 0 2611

6 1176 1287 1055 343 400 3354

POY


-2 836 1665 829 145 350 495

-1 0 0 0 0 0 495

1 1176 1665 1318 231 350 1076

2 1176 0 142 25 0 1101

3 0 0 0 0 0 1101

4 1176 1665 631 110 350 1561

5 0 0 0 0 0 1561

6 1176 1665 1120 196 350 2107

P1X1


-3 4648 10418 5770 144 430 574

-2 0 0 0 0 0 574

-1 5148 0 622 16 0 590

1 5148 10418 5892 147 430 1167

2 0 0 0 0 0 1167

3 5148 0 744 19 0 1186

4 0 0 0 0 0 1186

5 3861 10418 6014 150 430 1766

P1X2


-3 3261 4994 1733 130 400 530

-2 0 0 0 0 0 530

-1 3861 4994 2866 215 400 1145

1 3861 4994 3999 300 400 1845

2 0 0 0 0 0 1845

3 3861 0 138 10 0 1855

4 0 0 0 0 0 1855

5 3861 4994 1271 95 400 2351

Step 4: Total Cost Calculation for EOQ

ITEM COST (In Rs)

P0110 4719

POX 3354

POY 2107

P1X1 1766

P1X2 2351

TOTAL 14296

Total EOQ Cost

3. Least Total Cost (LTC)

Least Total Cost (LTC) is a dynamic lot-sizing technique that calculates the order quantity by comparing the carrying cost and the setup (or ordering) cost for various lot sizes and then selects the lot in which these are most nearly equal.

Step 1

Step 2

Level 0P0110

Week

1

2

3

4

5

6

7

8

300

450

225

525

Net Requirement

400

350

300

450

LTCWeek Quantity Ordered Carrying Cost Setup Cost Total Cost Different1 160 0 500 500 500

1-2 510 350 500 850 150

1-3 810 950 500 1450 450

1-4 1260 2300 500 2800 1800

1-5 1560 3500 500 4000 3000

1-6 2010 5750 500 6250 5250

1-7 2235 7100 500 7600 6600

1-8 2760 10775 500 11275 10275

Week Quantity Ordered Carrying Cost Setup Cost Total Cost Different

3 300 0 500 500 500

3-4 750 450 500 950 50

3-5 1050 1050 500 1550 550

3-6 1500 2400 500 2900 1900

3-7 1725 3300 500 3800 2800

3-8 2250 5925 500 6425 5425


5 300 0 500 500 500

5-6 750 450 500 950 50

5-7 975 900 500 1400 400

5-8 1500 2475 500 2975 1975


7 225 0 500 500 500

7-8 750 525 500 1025 25

Week Net Requirement Prod. Qty Ending Inv. Holding Cost Setup Cost Total Cost

1 160 510 350 350 500 850

2 350 0 0 0 0 850

3 300 750 450 450 500 1800

4 450 0 0 0 0 1800

5 300 750 450 450 500 2750

6 450 0 0 0 0 2750

7 225 750 525 525 500 3775

8 525 0 0 0 0 3775

Item Inventory

P0110 240

POX 500

POY 340

P1X1 500

P1X2 600

Item Cost/Unit Set Up Cost

P0110 200 500

POX 65 400

POY 35 350

P1X1 5 430

PIX2 15 400

Level 1P0X

LTCStep 1

Step 2

Item Inventory Qty

P0110 240 1

POX 500 2

POY 340 2

P1X1 500 4

P1X2 600 3

Week Tot. Req

1 1020

2 0

3 1500

4 0

5 1500

6 0

7 1500

8 0

750

0

750

0

Net Requirement

510

0

750

0


P0110 200 500

POX 65 400

POY 35 350

P1X1 5 430

PIX2 15 400


1 520 0 400 400 400

1-2 520 0 400 400 400

1-3 2020 975 400 1375 575

1-4 2020 975 400 1375 575

1-5 3520 2925 400 3325 2525

1-6 3520 2925 400 3325 2525

1-7 5020 5850 400 6250 5450

1-8 5020 5850 400 6250 5450


3 1500 0 400 400 400

3-4 1500 0 400 400 400

3-5 3000 975 400 1375 575

3-6 3000 975 400 1375 575

3-7 4500 2925 400 3325 2525

3-8 4500 2925 400 3325 2525


5 1500 0 400 400 400

5-6 1500 0 400 400 400

5-7 3000 975 400 1375 575

5-8 3000 975 400 1375 575


7 1500 0 400 400 400

7-8 1500 0 400 400 400


1 520 520 0 0 400 400

2 0 0 0 0 0 400

3 1500 1500 0 0 400 800

4 0 0 0 0 0 800

5 1500 1500 0 0 400 1200

6 0 0 0 0 0 1200

7 1500 1500 0 0 400 1600

8 0 0 0 0 0 1600

Level 1P0Y

LTC

Item Inventory Qty

P0110 240 1

POX 500 2

POY 340 2

P1X1 500 4

P1X2 600 3

Week Tot. Req

1 1020

2 0

3 1500

4 0

5 1500

6 0

7 1500

8 0

750

0

750

0

Net Requirement

510

0

750

0


P0110 200 500

POX 65 400

POY 35 350

P1X1 5 430

PIX2 15 400


1 680 0 350 350 350

1-2 680 0 350 350 350

1-3 2180 525 350 875 175

1-4 2180 525 350 875 175

1-5 3680 1575 350 1925 1225

1-6 3680 1575 350 1925 1225

1-7 5180 3150 350 3500 2800

1-8 5180 3150 350 3500 2800


5 1500 0 350 350 350

5-6 1500 0 350 350 350

5-7 3000 525 350 875 175

5-8 3000 525 350 875 175

Step 1

Step 2


1 680 2180 1500 263 350 613

2 0 0 1500 263 0 875

3 1500 0 0 0 0 875

4 0 0 0 0 0 875

5 1500 3000 1500 263 350 1487.5

6 0 0 1500 263 0 1750

7 1500 0 0 0 0 1750

8 0 0 0 0 0 1750

Level 2P1X1

LTC

Item Inventory Qty

P0110 240 1

POX 500 2

POY 340 2

P1X1 500 4

P1X2 600 3

Week Tot. Req

1 2080

2 0

3 6000

4 0

5 6000

6 0

7 6000

8 0

1500

0

1500

0

Net Requirement

520

0

1500

0


P0110 200 500

POX 65 400

POY 35 350

P1X1 5 430

PIX2 15 400


1 1580 0 430 430 430

1-2 1580 0 430 430 430

1-3 7580 300 430 730 130

1-4 7580 300 430 730 130

1-5 13580 900 430 1330 470

1-6 13580 900 430 1330 470

1-7 19580 1800 430 2230 1370

1-8 19580 1800 430 2230 1370


5 6000 0 430 430 430

5-6 6000 0 430 430 430

5-7 12000 300 430 730 130

5-8 12000 300 430 730 130

Step 1

Step 2Week Net Requirement Prod. Qty Ending Inv. Holding Cost Setup Cost Total Cost

1 1580 7580 6000 150 430 580

2 0 0 6000 150 0 730

3 6000 0 0 0 0 730

4 0 0 0 0 0 730

5 6000 12000 6000 150 430 1310

6 0 0 6000 150 0 1460

7 6000 0 0 0 0 1460

8 0 0 0 0 0 1460

Level 2P1X2

LTC

Item Inventory Qty

P0110 240 1

POX 500 2

POY 340 2

P1X1 500 4

P1X2 600 3

Week Tot. Req

1 1560

2 0

3 4500

4 0

5 4500

6 0

7 4500

8 0

1500

0

1500

0

Net Requirement

520

0

1500

0


P0110 200 500

POX 65 400

POY 35 350

P1X1 5 430

PIX2 15 400


1 960 0 400 400 400

1-2 960 0 400 400 400

1-3 5460 675 400 1075 275

1-4 5460 675 400 1075 275

1-5 9960 2025 400 2425 1625

1-6 9960 2025 400 2425 1625

1-7 14460 4050 400 4450 3650

1-8 14460 4050 400 4450 3650


5 4500 0 400 400 400

5-6 4500 0 400 400 400

5-7 9000 675 400 1075 275

5-8 9000 675 400 1075 275

Step 1

Step 2Week Net Requirement Prod. Qty Ending Inv. Holding Cost Setup Cost Total Cost

1 960 5460 4500 338 400 738

2 0 0 4500 338 0 1075

3 4500 0 0 0 0 1075

4 0 0 0 0 0 1075

5 4500 9000 4500 338 400 1813

6 0 0 4500 338 0 2150

7 4500 0 0 0 0 2150

8 0 0 0 0 0 2150

Step 3: Total Cost Calculation for LTC

Item Cost

P0110 3,775

P0X 1,600

P0Y 1,750

P1X1 1,460

P1X2 2,150

Total Cost 10,735

Least unit cost method a dynamic lot-sizing

technique that adds ordering and inventory carryingcost for each trial lot size and divides by the numberof units in each lot size, picking the lot size with thelowest unit cost.

4. Least Unit Cost (LUC)

Step 1

Step 2

Level 0P0110

LUCWeek Quantity Ordered Carrying Cost Setup Cost Total Cost Unit Cost

1 160 0 500 500 3.13

1-2 510 350 500 850 1.67

1-3 810 950 500 1450 1.79

1-4 1260 2300 500 2800 2.22

1-5 1560 3500 500 4000 2.56

1-6 1200 5750 500 6250 5.21

1-7 2235 7100 500 7600 3.40

1-8 2760 10775 500 11275 4.09

Week Quantity Ordered Carrying Cost Setup Cost Total Cost Unit Cost

3 300 0 500 500 1.7

3-4 750 450 500 950 1.3

3-5 1050 1050 500 1550 1.5

3-6 1500 2400 500 2900 1.9

3-7 1725 3300 500 3800 2.2

3-8 2250 5925 500 6425 2.9


5 300 0 500 500 1.7

5-6 750 450 500 950 1.3

5-7 975 900 500 1400 1.4

5-8 1500 2475 500 2975 2.0


7 225 0 500 500 2.2

7-8 750 525 500 1025 1.4


1 160 510 350 350 500 850

2 350 0 0 0 0 850

3 300 750 450 450 500 1800

4 450 0 0 0 0 1800

5 300 750 450 450 500 2750

6 450 0 0 0 0 2750

7 225 750 525 525 500 3775

8 525 0 0 0 0 3775

Step 1

Step 2

Level 1P0X


-1 0 0 0 0 0

-1-0 520 0 400 400 0.77

-1-1 1120 195 400 595 0.53

-1-2 2020 780 400 1180 0.58

-1-3 2620 1365 400 1765 0.67

-1-4 3520 2535 400 2935 0.83

-1-5 3970 3266.25 400 3666.25 0.92

-1-6 5020 5313.75 400 5713.75 1.14


2 900 0 400 400 0.44

2-3 1500 195 400 595 0.40

2-4 2400 780 400 1180 0.49

2-5 2850 1218.75 400 1618.75 0.57

2-6 3900 2583.75 400 2983.75 0.77


4 900 0 400 400 0.44

4-5 1350 146.25 400 546.25 0.40

4-6 2400 828.75 400 1228.75 0.51


6 1050 0 400 400 0.38


-1 0 0 180 58.5 0 58.5

0 520 1120 600 195 400 653.5

1 600 0 0 0 0 653.5

2 900 1500 600 195 400 1248.5

3 600 0 0 0 0 1248.5

4 900 1350 450 146.25 400 1794.75

5 450 0 0 0 0 1794.75

6 1050 1050 0 0 400 2194.75

Step 1

Step 2

Level 1P0Y


-1 0 0 0 0 0

-1-0 680 0 350 350 0.51

-1-1 1280 105 350 455 0.36

-1-2 2180 420 350 770 0.35

-1-3 2780 735 350 1085 0.39

-1-4 3680 1365 350 1715 0.47

-1-5 4130 1758.75 350 2108.75 0.51

-1-6 5180 2861.25 350 3211.25 0.62


3 600 0 350 350 0.58

3-4 1500 157.5 350 507.5 0.338

3-5 1950 315 350 665 0.341

3-6 3000 866.25 350 1216.25 0.41


5 450 0 350 350 0.78

5-6 1500 183.75 350 533.75 0.36


-1 0 0 20 3.5 0 3.5

0 680 2180 1500 262.5 350 616

1 600 0 900 157.5 0 773.5

2 900 0 0 0 0 773.5

3 600 1500 900 157.5 350 1281

4 900 0 0 0 0 1281

5 450 1500 1050 183.75 350 1814.75

6 1050 0 0 0 0 1814.75

Step 1

Step 2

Level 2P1X1

LUC


-1 780 0 430 430 0.55

-1-0 3580 70 430 500 0.14

-1-1 5980 190 430 620 0.10

-1-2 9580 460 430 890 0.093

-1-3 11980 700 430 1130 0.094

-1-4 15580 1150 430 1580 0.10

-1-5 17380 1420 430 1850 0.11

-1-6 21580 2155 430 2585 0.12


3 2400 0 430 430 0.18

3-4 3600 90 430 520 0.14

3-5 7800 180 430 610 0.078

3-6 11400 495 430 925 0.081


6 4200 0 430 430 0.10


-1 780 9580 8800 220 430 220

0 2800 0 6000 150 0 370

1 2400 0 3600 90 0 460

2 3600 0 0 0 0 460

3 2400 7800 5400 135 430 1025

4 3600 0 1800 45 0 1070

5 1800 0 0 0 0 1070

6 4200 4200 0 0 430 1500

Step 1

Step 2

Level 2P1X2

LUC


-1 360 0 400 400 1.11

-1-0 2460 157.5 400 557.5 0.23

-1-1 4260 427.5 400 827.5 0.19

-1-2 6960 1035 400 1435 0.21

-1-3 8760 1575 400 1975 0.23

-1-4 11460 2587.5 400 2987.5 0.26

-1-5 12810 3195 400 3595 0.28

-1-6 15960 4848.75 400 5248.75 0.33


2 2700 0 400 400 0.15

2-3 4500 135 400 535 0.12

2-4 7200 540 400 940 0.13

2-5 8550 843.75 400 1243.75 0.15

2-6 11700 1788.75 400 2188.75 0.19


4 2700 0 400 400 0.15

4-5 4050 101.25 400 501.25 0.12

4-6 7200 573.75 400 973.75 0.14


6 3150 0 400 400 0.13


-1 360 4260 3900 97.5 400 97.5

0 2100 0 1800 45 0 142.5

1 1800 0 0 0 0 142.5

2 2700 4500 1800 45 400 587.5

3 1800 0 0 0 0 587.5

4 2700 4050 1350 33.75 400 1021.25

5 1350 0 0 0 0 1021.25

6 3150 3150 0 0 400 1421.25

Step 3: Total Cost Calculation for LUC

Item Cost (Rs)

P0110 3,775

P0X 2,195

P0Y 1,815

P1X1 1,500

P1X2 1,421

TOTAL 10,706

Conclusion

Based on calculations, Total Cost for every lot-sizing Method as follows

Lot-Sizing Method Total Cost (Rs)

Lot-for-Lot (L4L) 15,060

Economic Order Quantity (EOQ) 14,296

Least Total Cost (LTC) 10,735

Least Unit Cost (LUC) 10,706

The lowest cost was obtained using the Least Unit Cost Method of Rs10,706.

Sunita Menon should choose the Least Unit Cost Method as Lot Sizing Strategy at A-Cat Corp.

MRP system determines detailed schedules that show exactly what

is needed over time. MRP is most useful in industries where standard products are

made in batches from common components and parts. The systems effectiveness depended on the inventory position and

policies, the bill of materials and the demand requirements for finished goods and components.

Lot sizes are the production (or purchasing quantities) that are used by the MRP system. The simplest case is when the system schedules exactly what is needed each period (known as lot-for-lot), but when there are significant cost (set up cost & carrying cost) lot-for-lot might not be the least costly method.

The advantage of the least unit cost method is that it is more complete analysis and would take into account ordering or setup costs that might change as the order sizes increases.

The lowest cost from the alternatives method of Lot Sizing can be a consideration for Lot Sizing.

Lesson Learned

Jacobs, F. Robert, and Richard B. Chase. Operations

and Supply Chain Management. 14th. Global Ed. New York: McGraw-Hill Companies Inc. 2014.

Material Requirements Planning at A-Cat Corp. 2012. Richard Ivey School of Business Foundation.

References

OPERATION MANAGEMENT (CASE: MRP AT A-CAT CORP.)

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Transcript of OPERATION MANAGEMENT (CASE: MRP AT A-CAT CORP.)