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202 CHAPTER 14 MAT ER I AL R
EQUIREMENTS P
L A N N I N G ( M R P )A N D ER P
C H A P T E R
Material Reqire!e"t# Pla""i"$ (MRP) a"%

ERP
DISCUSSI&N Q
UESTI&NS (b) A cons
consis
iste
tent
nt lack
lack of capa
capaci
city
ty sugge
suggeststss a capi
capita
tall
investment to increase capacity, add a shift, or develop
1. The difference between a gross requirements plan and a net
an outside source. Redesign of the product may also be
requirement plan is that a net plan adjusts for on-hand inventory
an alternative.
and scheduled receipts at each level.
9. The master schedule is expressed in terms of:
2. Once the MRP system is in place, it provides information to
assist decision makers in other functional areas such as the amounts (1) End items
items in a continuous
continuous (make-to-
(make-to-stock
stock)) company;
of labor required, cash needs, purchase
pu rchase requirements, and timing. (2) Cust
Custom
omer
er orde
orders
rs in a job job shop
shop (mak
(make-e-to
to-o
-orde
rder)
r)
company; and
3. The similarit
similarities
ies between
between material
material requiremen
requirements
ts planning
planning
(3) Modules in a repetitive (assemble-to-stock) company.
(MRP) and distribution resource planning (DRP) are that the
procedures and logic are analogous. 10. Virtually all functions of the firm impact an MRP system.
For instance, purchasing performance affects delivery, changes
4. The difference
difference between material
material requiremen
requirementsts planning
planning
in capac
capacity
ity (i.e.,
(i.e., labor,
labor, mainte
maintenan
nance
ce,, breakd
breakdown
owns)s) impact
impact
(MRP) and material resource planning
planning II (MRP II) is that MRP II
throughput, sales impact the master schedule as do financial
includes or integrates functions within the firm in addition to the
issues
issues such as capital
capital expenditure
expenditure for capacity
capacity,, engineerin
engineeringg
management
management of dependent
dependent demand
demand inventories
inventories.. Examples
Examples of
perfor
performan
mancece such
such as meetin
meeting
g schedu
schedules
les and prefer
preferenc
encee (or
these
these additi
additiona
onall functio
functions
ns includ
include:
e: Order
Order entry,
entry, invoic
invoicing
ing,,
flexibility) for particular approaches to design/processing.
billing, purchasing, production scheduling, capacity planning,
and warehouse management. 11. The rationa
rationalele for:
for: (a) A phanto
phantom
m bill
bill of materi
material
al is a
subass
subassemb
emblyly that
that exists
exists only
only on the product
production
ion line—s
line—sayay a
5. There is no one “ideal” lot sizing technique that should be
mixture/ glue that only exists a few minutes and then must be
used by all manufacturing organizations. Lot-for-lot is the goal
used
used or discar
discarded
ded.. Such
Such items
items are never invent
inventori
oried.
ed. (b) A
to be sought. However, where setup costs are significant and
planning bill of material may be used to issue a mixture of parts
demand is not particularly lumpy, EOQ is a simple method and
that only makes sense to reduce
reduce material
material handling—say
handling—say the
typically provides satisfactory results. Too much concern with
hardware for a washing machine assembly. (c) A pseudo bill of
lot sizing yields spurious results because of MRP dynamics.
material is another name for planning bill to meet the same
6. In a DRP system, inventory residing within the system is conditions.
moved within the system, rather than entering or leaving the
12. An effective MRP system requires:
system. Therefore, although effort should be made to reduce
total inventory to minimize overall carrying cost, carrying cost  A good schedule of what is to be made
per se does not have a significant effect on appropriate lot size.  An accurate BOM
 Accurate inventory records
7. MRP is usually a part of the overall production planning
 Accurate purchases data
process. Its most important capability is including the timing/
 Lead times that will be met
scheduling
scheduling factor in inventory
inventory planning. MRP II, of course,
course,
addresses the timing/scheduling of other resources in addition to 13. The benefits of ERP include:
inventory.  Provides integration of the production, supply chain,
8. (a) When a work center
center is only over
over capacity
capacity for one week and administrative functions.
(or a short time), the production planner has a number  Incr
Increa
ease
sess coll
collab
abor
orat
atio
ion
n betw
betwee
een
n funct
functio
ions
ns and
and
of options, including: locations
 Often has a common database
 Splitting an order to an earlier or later week
 Can
Can add effe effect
ctiv
iven
eneess and effi
effici
cien
ency
cy to the
the
 Requesting
Requesting overtime,
overtime, an alternate
alternate (perhaps more
organization.
expensive) production process
 Subcontracting 14. Distinctions between MRP, DRP, and ERP, are: MRP is a
set
set of softwa
software
re progra
programs
ms desig
designed
ned to sched
schedule
ule mate
materia
riall
requirem
requirements
ents.. These
These programs
programs include
include an integrat
integrated
ed set of
programs
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall.

20' CHAPTER 14 MAT ER I AL R
EQUIREMENTS P
that determine an item master for each part, a bill of material, an

CHAPTER 14 MATERIAL R
EQUIREMENTS P
L A N N I N G ( M R P )A N D ER P 204
204
explosion scheme, a lead-time file, an inventory status file, and Life-cycle collaborat
 collaboration
ion
vendor information. DRP is a time-phased stock-replenishment Quality management

 Environment
Environment health & safety
plan for all levels of the distribution network. Its focus is on
(See www.sap.com/solutions.)
retail and wholesale distribution network. On the other hand,
enterprise
enterprise resource
resource planning
planning (ERP) systems are systems
systems that 19. Moving toward JIT and kanban suggest that the traditional
often integrate MRP and a variety of other accounting systems, weekly “buckets” (or even daily buckets) in an MRP system
human resource management, and communication with vendors may be inadequate. MRP systems may need to move to hourly
and suppliers. buckets for some items. Some MRP systems now deliver to
“positions” in the production process—a “flow” criterion rather
15. In MRP, demand need not be constant. Also, in an MRP than a bucket criteria.
system, the demand for one item depends on the demand for Additionally, if tracking of small lots is necessary (and it may
others—in particular, the end item. (There are exceptions such not be) then not only will such “buckets” be necessary, but ease of
as spare parts and maintenance orders.) inputs via bar codes or other automated means may be necessary.
16. The disadvantages of ERP include:
ETHICAL D
ILEMMA
 Is very expensive to purchase and even more costly to
customize. ERP is going to cost more than expected.
 Implem
Implement
entati
ation
on may requir
requiree major
major change
changess in the What do you do? Certainly, any sense of fairness and decency
company and its processes. suggest
suggest that the customer must be told the truth. However,
 Is so complex that many companies cannot adjust to it. a sales representative can be expected to try to solve the problem
 Involv
Involves
es an ongoin
ongoing
g proces
processs for implem
implement
entat
ation
ion,, for his customer. This may mean that:
which may never be completed.  The first stop is the sales representative’s manager to see
 Expertise in ERP is limited, with staffing an ongoing if another customer or pending customer may have dealt
problem. with this problem and solved the problem or may be
17. (a) The Web
Web sites of
of most of the
the major
major ERP vendors
vendors will
will willing to share development costs.
include
include “successfu
“successfull solutions”
solutions” using their
their software.
software.  A second option is to ask the manager “Is there any
See Web pages of the major vendors: budget or pending budget for this type of enhancement or
American Software: www.amsoftware.com can we help the customer out by paying for part of the
JD Edwards: www.jdedwards.com enhancement?”
The Baan Company: www.baan.com The bottom line is that not telling the customer the truth and/or
Oracle: www.oracle.com selling the customer something that will not do the job is not
SAP: www.sap.com only unethical, but also probably bad business—certainly bad
IQMS: www.iqms.com business in the long run.
(b) The poor ERP efforts
efforts or installations
installations may take
take a little
more digging, but a look at www.CIO.com and www.
ACTIE M
&DEL E
ERCISE
ERCISE
Information Week.com should get students started. ACTIVE MODEL 14.1: Order Releases
18. (a)
(a) Peop
PeopleleSo
Soft
ft incl
includ
udes
es the
the foll
follow
owin
ing
g in itsits CRM
CRM 1. Suppose that item B must be ordered in multiples of dozens.
offerings (see Which items are affected by this change?
http://www.oracle.com/applica
http://www.oracle.com/applications/peoplesoft/
tions/peoplesoft/ Items D and E
CRM/ent/index.html):
2. Suppose that the minimum order quantity for item C is 200
Supplier Relationship Management Manage supplier units. Which items are affected by this change?
relationships including indirect and direct goods, as Items E, F, G, and D
well as services procurement with:
END*&+*CHAPTER P
R&,LEMS
R&,LEMS
 Partner relationship management solution
 Sales solution 14.1 An exploded bill yields the following:
 Service solution Item J: 200 units; Item K: 200 × 1 = 200 units; Item L: 200 × 4 =
 CRM analytics 800 units; Item M: 200 × 2 = 400 units.
 CRM industry solutions 14.2 The time-phased assembly plan for the gift bags is:
 Marketing solution
(b) SAP’s Supply Chain Management product includes:
 Supply strategy development
 Supplier qualification
 Supplier selection
 Contract negotiation and management
(c) SAP’s
SAP’s Produ
Product
ct Lifecy
Lifecycle
cle Manage
Manageme
ment
nt produc
productt
includes:
 Life-cycle data management
management
 Asset life-cycle
life-cycle management
management Someone should start on item M by noon.
 Program & project management

20- CHAPTER 14 MAT ER I AL R
EQUIREMENTS P
14.3 (a) Produc

Productt structur
structure:
e:
(b)
.ee/ Lea%
Ti!e
Ite 1 2 ' 4 -    (3ee/#)
!
W Gr
Gross req 120
O !ad 30
14.4 Gross material requirements plan: #e$ req %0 3
Order re&e'($ %0
.ee/
.e Lea% Orde
Orderr relea
release
se %0
Ti!e
X Gr
Gross req 60
Ite 1 2 ' 4 -    (3ee/#) O !ad 2)
! #e$ req 3) 1
S Gross req 100 Order re&e'($ 3)
Order 10 2 Order release 3)
release 0 Y Gross req
req 24
T Gross req
req 10 0
0 O !ad 24
Order 100 1 0
release #e$ req 0 2
U Gross req 20 Order re&e'($ 0
0 Order release
Order 20 2 Z Gross req 36
release 0 0
V Gr
Gross req 100 O !ad 40
Order 100 2 #e$ req 32 1
release 0
W Gross req 200 Order re&e'($ 32
Order 20 3 0
release 0 Order release 32
X Gr
Gross req 100 0
Order 10 1
release 0
Y Gross req
req 40
0 14.6 Gross material requirements plan, modified to include the
Order 40 .ee/ Le2a% 20 units of U required for maintenance purposes:
release 0 Ti!e
Ite
Z Gross req 1 2 60' 4 -    (3ee/#)
! 0
Order 600 1
S Gross req 100
release
O !ad 20
#e $ req
14.5 Net material requirements plan: *0 2
Order re&e'($ *0
Order release *0
T Gross req
req *0
O !ad 20
#e$ req 60 1
Order re&e'($ 60
Order release 60
U Gross req 160
O !ad 40
#e$ req 120 2
Order re&e'($ 120
Order release 12
0
V Gr
Gross req Copyright
60 © 2011 Pearson Education, Inc. publishing as Prentice Hall.
O !ad 30
EQUIREMENTS P
L A N N I N G ( M R P )A N D ERP 20
20
14.7 Net material requirements plan, modified to include the

20 units of U required for maintenance: .ee/ Lea%
Ti!e
.ee/ Lea% Ite 1 2 ' 4 -    (3ee/#)
Ti!e !
Ite 1 2 ' 4 -    (3ee/#)
S Gross req 100
!
Order release 100 2
S Gross req 100 T Gross req
req 100
O !ad 20 Order release 100 1
#e$ req *0 2
.ee/ Lea% U Gr
Gross req 200 20+
Order re&e'($ *0
Ti!e Order release 200 20 2
Order release *0
Ite 1 2 ' 4 -*0    (3ee/#) V Gr
Gross req 100
T Gross req
req
! O !ad Order release 100 2
20
U #Ger$osre
sqreq 166
00 20 1 W Gross req 20
Order re&e'($ 60 + 0
Order release 200 3
O !ad 40 0
#e$ req 120 20 2 X Gross req 10
Order 120 20 0
re&e'($ Order release 100 1
Order
*needed for maintenance. 1 20 20 Y Gross req
req 400 40
release Order release 400 40 2
V Gr
Gross req 60 Z Gross req 600 60
60
O !ad 30 Order release 600 60 1
#e$ req 30 2
Order 30
re&e'($
Level
Order 30 14.8 (a)
release 0
W Gross req 12
0
O !ad 30
#e$ req %0 3 1
Order %0
re&e'($
Order %0
release 2
X Gr
Gross req 60
O !ad 2)
#e$ req 3) 1
3
Order 3)
re&e'($
Order 3)
release (b) For 50 bracke
brackets
ts,, the gross
gross requir
requireme
ements
nts are for 50
Y Gross req
req 240 40
bases,
bases, 100 springs, 250 clamps,
clamps, 250 handles,
handles, 250
O !ad 240 0 castings, 100 housings, 200 bearings, and 100 shafts.
#e$ req 40 2 (c) For 50 brackets
brackets net requiremen
requirementsts are: 25 bases,
bases, 100
Order 40 springs, 125 clamps, 125 handles, 125 castings, 50
re&e'($ housings, 100 bearings, and 50 shafts.
Order 40
release
Z Gross req 360 60
60
O !ad 40 0
#e$ req 3 20 60 1
Order 3 20 60
re&e'($
Order 3 20 6 0
release
* To achieve these results in POM for Windows,

Windows, add Part U as a new
BOM line, level O, so that the software
software will recognize
recognize an additional
independent demand, not scheduled receipts.

20 CHAPTER 14 MAT ER I AL R
EQUIREMENTS P
L A N N I N G ( M R P )A N D ERP
14.9 (a) Time-phase

Time-phased
d product structure
structure for bracket with start
start 14.10 (a) Gross
Gross mater
material
ial requir
requireme
ements
nts pla
plan:
n:
times: Note
Note:: Elem
Elemen
ents
ts have
have been
been list
listed
ed in the
the gros
grosss mate
materi
rial
al
requirements plan in the order of level, and within a level, from
left to right as viewed in the product structure.
.ee/
Ite 1 2 ' 4 -     1 11 12
! 0
X 1 Gross )0
)0 20 10
req 0
Order rel ) 20
20 10
0 0
B1 Gross ) 20
20 10
req 0 0
Order rel )0 2 100
0
B2 Gross 10 40
40 20
req 0 0
Order rel 100 4 200
0
A1 Gross )0 2 100
req 0
Order rel ) 20 100
0
C Gross 200 * 400
req 0
Order rel 20 *0 400
0
, Gross 100 4 200
req 0
(b) Castings
Castings need
need to start
start in week
week 4. Order rel 1 00 40 200
E Gross 200 )0) 0 *0 2 400
400 100
100
req 0
Orde
Orderr rel
rel 20 )0 *0 20 400 100
0

EQUIREMENTS P
L A N N I N G ( M R P )A N D ERP 20
20
Le5el6 2 Pare"t6 ,2 Qa"tit86 1

Ite!6 D Lea% Ti!e6 1 L9t Si:e6 L4L
.ee/ N9; 1 2 ' 4 -     10 11 12
Gross req-'re.e$ 20 200
S&!ed-led re&e'($
O !ad 0 0
#e$ req-'re.e$ 20 200
Plaed order re&e'($ 20 200
Plaed order release 20 200
Le5el6 2<' Pare"t6 ,1 < D Qa"tit86 1 <

2
(b) Net material
material requirements I t e!
requirements (planned
(planned 6 E release)
order release) plan:Lea% Ti!e6 2 L9t Si:e6 L4L
.ee/ N9; 1 2 ' 4 -     10 11 12
Le5el6 0 Pare"t67 Qa"tit86
Gross req-'re.e$ 40 400 100
Ite!6 1 Lea% Ti!e6 1 L9t Si:e6 L4L
S&!ed-led re&e'($
.ee/ N9; 1 2 ' 4 -     10 11 12
O !ad 10 0 0
Gross #e$ req-'re.e$ 10 30 400 100
re
req-'re.e$ Plaed o)r0der re&
2e0'($ 100 30 400 100
S&!ed-led Plaed order release 30 400 100
re&e'($
O !ad )0 )0 0 0
#e$
re
req-'re.e$ 0 20 100
Plaed order
re
re&e'($ 20 100
.ee/
Plaed order Le5el6 1
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it186 11
2
re
release Ite!6 ,1 20 10Lea% Ti!e6 2 L9t Si:e6 L4L
A Gross req 0 100 )0 1)0
.ee/ N9; 1 2 ' 4 -     10 11 12
Order rel 100 )0 1)0
H Gross reS&!ed-led
q re&e'($ 100 )0
Order reO
l  !ad 20 100 )0 20 0
C #
Gross req e$ re q- 're. e $ 100 100 )0 )0
)0 1)
1 )0 0 100
Order reP
l laed order re&e'($ 100 100 )0 )0 1)0 100
Le5el6 0 Pare"t6 7 Qa"tit86

Ite!6 A Le5el6 1 Lea% Ti!e6 1 Pare"t6 1 L9t Si:e6 L4L Qa"tit86 2
.ee/ N9; Ite!6 ,1 2 2 ' 4Lea% -Ti!e
62 (b)   L190t Si:
1e16 L41L2
.ee/ N9; 1 2 ' 4 -     10 11 12
Gross req-'re.e$ 100 )0 1)0
S&!ed-led re&e'($Gross req-'re.e$ 40 200
O !ad S&!ed-led re&e'($ 0 0 0
#e$ req-'re.e$ O !ad 20 100 )0 12)00 0
Plaed order re&#
ee'($$req-'re.e$ 100 )0 12)00 200
Plaed order releaaseed order re&e'($
Pl 100 )0 1)0 20 200

Le5el6 2 Pare"t6 ,1 Qa"tit86 1
Ite!6 H Lea% Ti!e6 1 L9t Si:e6 L4L
Ite!6 A1 Lea% Ti!e6 1 L9t Si:e6 L4L
.ee/ N9; 1 2 ' 4 -     10 11 12
.ee/ N9; 1 2 ' 4 -     10 11 12
Gross req-'re.e$ 100 )0
Gross req-'re.e$ 100
S&!ed-led re&e'($
S&!ed-led re&e'($
O !ad 0 0
O !ad ) )
#e$ req-'re.e$ 100 )0
#e$ req-'re.e$ %)
Plaed order re&e'($ 100 )0
14.11 (a) Plaed order re&e'($ %)
Plaed order release 100 )0
Plaed order release %)
Le5el6 1 Le5el6 2 Pare"t6 A? Pare"t6 ,2 Qa"tit86 1 Qa"tit86 2

Ite!6 C H Lea% Ti!e6 1 L9t Si:e6 L4L
Ite!6 C .ee/ N9L;ea% Ti!e6 2 1 2 ' L9t Si-:e6 L4
4 L    10 11 12
.ee/ N9; 1 2 ' 4 -     10 11 12
Gross req-'re.eS&!ed-led
$ re&e'($ 100 100 )0 )0 1)0
S&!ed-led re&e'($O !ad 0 0
O !ad #e$ req-'re.e$ )0 0 0 400 0 400
#e$ req-'re.e$ PlaCopyright
)
)0
0ed orde©r 2011
re&e'($
Pearson )0 100
Education, Inc. publishing )
)00 4)0
as Prentice 0 1)0 400
Hall.
Plaed order re&Pel'a($ed order release )0 100 40 )0 )0 410)00
20 CHAPTER 14 MAT ER I AL R
EQUIREMENTS P

EQUIREMENTS P
L A N N I N G ( M R P )A N D ERP 210
210
14.12 (a) Net material requirements plan 
.ee/
I t e! 1 2 ' 4 -     10 11 12
12
A Gross req-'re.e$ 100 )0 1)0

O !ad  0 0 0 0
#e$ req-'re.e$ 100 )0 1)0
Order re&e'($ 100 )0 1)0
Order release 100 )0 1)0
H Gross req-'re.e$ 100 )0
O !ad  0 0 0
#e$ req-'re.e$ 100 )0
Order re&e'($ 100 )0
Order release 100 )0
 Gross req-'re.e$ 100 )0 1)0

O !ad 10
1 00 100 0 0
#e$ req-'re.e$ )0 1)0
Order re&e'($ )0 1)0
Order release )0 1)0
C Gr
G ross req-'re.e$ 100 100 )0 )0 1)0
O !ad )0 )0 0 0 0 0
#e$ req-'re.e$ )0 100 )0 )0 1)0
Order re&e'($ )0 100 )0 )0 1)0
Order release )0 100 )0 )0 1)0
 Gross req-'r
req-'re.e$
e.e$ 100 )0
O !ad 100 100 0
#e$ req-'re.e$ 0 )0
Order re&e'($ 0 )0
Order release )0
 Gross req-'re.e$ 100 )0

O !ad 100 100 0
#e$ req-'re.e$ 0 )0
Order re&e'($ 0 )0
Order release )0
, Gross req-'re.e$ )0 1)0

O !ad )0 )0 0
#e$ req-'re.e$ 1)0
Order re&e'($ 1)0
Order release 1)0
E Gr
Gross req-'re.e$ )0 100 1)0
O !ad 5) 5) 2) 0
#e$ req-'re.e$ 5) 1)0
Order re&e'($ 5) 1)0
Order release 5) 1)0
 Gross req-'re.e$ )0 100 )0 100 1)0

O !ad 5) 5) 2) 0 0 0
#e$ req-'re.e$ 5) )0 100 1)0
Order re&e'($ 5) )0 100 1)0
Order release 5) )0 100 1)0
G Gross req-'re.e$ )0 100 )0 100 1)0

O !ad 5) 5) 2) 0 0 0
#e$ req-'re.e$ 5) )0 100 1)0
Order re&e'($ 5) )0 100 1)0
Order release 5) )0 100 1)0

EQUIREMENTS P
(b)

EQUIREMENTS P
212
14.13 (a)
(b)
(c) Le5el6 0 Pare"t6 7 Qa"tit86

Ite!6 20 @a" Lea% Ti!e6 1 L9t Si:e6
.ee/ N9; 1 2 ' 4 -     10 11 12
S&!ed-led re&e'($
O !ad 100 100
#e$ req-'re.e$ %00
Plaed order re&e'($ %00
Plaed order release %00
Le5el6 1 Pare"t6 20 @a" Qa"tit86 1

Ite!6 9#i"$ Lea% Ti!e6 1 L9t Si:e6 L4L
3ee/
.ee/ N9; 1 2 ' 4 -     10 11 12
Gross req-'re.e$ %00
S&!ed-led re&e'($
O !ad 100 100
#e$ req-'re.e$ *00
Plaed order re&e'($ *00
Plaed order release *00

Ite!6 $rill# Lea% Ti!e6 2 L9t Si:e6 -00
3ee/#
.ee/ N9; 1 2 ' 4 -     10 11 12
Gross req-'re.e$ 17*00
S&!ed-led re&e'($
O !ad 200 200 400
#e$ req-'re.e$ 17600
Plaed order re&e'($ 27000
EQUIREMENTS P
Le5el6 1 = Pare"t6 20 Qa"tit86 1

@a"
Ite!
Ite!66 @a"
@a" a##e
a##e!B
!Bl8
l8 == Lea%
Lea% Ti!e
Ti!e66 ' L9t Si:e6 L4L
3ee/#
.ee/ N9; 1 2 ' 4 -     10 11 12
S&!ed-led re&e'($
O !ad 1)0 1)0
#e$ req-'re.e$ 5)0
Plaed order re&e'($ 5)0
Plaed order release 5)0

Ite!6 eletrial "it Lea% Ti!e6 1 3ee/ L9t Si:e6 L4L
.ee/ N9; 1 2 ' 4 -     10 11 12
S&!ed-led re&e'($
O !ad
#e$ req-'re.e$ %00
Plaed order re&e'($ %00
Le5el6 2 Pare"t6 9#i"$ Qa"tit86 1

Ite!6 @ra!e Lea% Ti!e6 2 L9t Si:e6 L4L
3ee/#
.ee/ N9; 1 2 ' 4 -     10 11 12
Gross req-'re.e$ *00
S&!ed-led re&e'($
O !ad
#e$ req-'re.e$ *00
Plaed order re&e'($ *00
Plaed order release *00

Ite!6 #9rt# Lea% Ti!e6 1 L9t Si:e6 100
3ee/
.ee/ N9; 1 2 ' 4 -     10 11 12
S&!ed-led re&e'($
O !ad )0
#e$ req-'re.e$ 17))0
Plaed order re&e'($ 17600
Plaed order release 17600

Ite!6 a"%le Lea% Ti!e6 1 L9t Si:e6 -00
3ee/
.ee/ N9; 1 2 ' 4 -     10 11 12
Gross req-'re.e$ *00
S&!ed-led re&e'($
O !ad 400 100
#e$ req-'re.e$ 400
Plaed order re&e'($ )00
Plaed order release )00
Le5el6 2 Pare"t6 @a" a##e!Bl8 Qa"tit86 1

Ite!6 B Lea% Ti!e6 1 L9t Si:e6 L4L
3ee/
.ee/ N9; 1 2 ' 4 -     10 11 12
Gross req-'re.e$ 5 )0
S&!ed-led re&e'($

EQUIREMENTS P
214
Le5el6 2 Pare"t6 @a" a##e!Bl8 Qa"tit86 -

Ite!6 Bla%e# Lea% Ti!e6 2 L9t Si:e6 100
3ee/#
.ee/ N9; 1 2 ' 4 -     10 11 12
Gross req-'re.e$ 375)0
S&!ed-led re&e'($
O !ad )0
#e$ req-'re.e$ 375)0
Plaed order re&e'($ 37*00
Plaed order
order release
release 37*00
Le5el6 2 Pare"t6 eletrial "it Qa"tit86 1

Ite!6 !9t9r Lea% Ti!e6 1 L9t Si:e6 L4L
3ee/
.ee/ N9; 1 2 ' 4 -     10 11 12
Gross req-'re.e$ % 00
S&!ed-led re&e'($
O !ad
#e$ req-'re.e$ %00
Plaed order re&e'($ % 00

Ite!6 #3it Lea% Ti!e6 1 L9t Si:e6 12
3ee/
.ee/ N9; 1 2 ' 4 -     10 11 12
S&!ed-led re&e'($
O !ad 20 20 *
#e$ req-'re.e$ **0
Plaed order re&e'($ * **
Plaed order release ***

Ite!6 /"9B Lea% Ti!e6 1 L9t Si:e6 2-
3ee/
.ee/ N9; 1 2 ' 4 -     10 11 12
S&!ed-led re&e'($ 200
O !ad 200 200 2 00
#e$ req-'re.e$
14.14 (a) Plaed order re&e'($ 5 00
Le5el C9!9"e"t Qa"tit8

0 A 1
1  1
2 C 1
2 , 1
3 E 1
1  1
2 G 1
2 H 1
3 E 1

EQUIREMENTS P
(b) L93
L9t Lea% &" Sa@et8 Le5el It
I t e! Peri9% (3ee/)
Si:e Ti!e Ha"% St9/ All9ate C9%e ID 1 2 ' 4 -   
%
8o$ 1 0   0 A Gr
9or S&!ed-led re&e'($
8o$ Pro:e&$ed o !ad 0
#e$ req-'re.e$ 10
Plaed re&e'($ 10
Plaed release 10
L93
%
8o$ 1 2   1  Gr
Gross req-'re.e$ 10A
8o$ Pro:e&$ed o !ad 2 2 2 2 2 2 2 0
#e$ req-'re.e$ *
Plaed re&e'($ *
Plaed release *
L93
%
8o$ 1 )   1  Gross req-'re.e$ 10A
8o$ Pro:e&$ed o !ad ) ) ) ) ) ) ) 0
#e$ req-'re.e$ )
Plaed re&e'($ )
Plaed release )
L93
%
8o$ 1 )   2 , Gross req-'re.e$ *
8o$ Pro:e&$ed o !ad ) ) ) ) ) ) 0 0
#e$ req-'re.e$ 3
L93
%
8o$ 3 1   2 G Gr
Gross req-'re.e$ )
8o$ Pro:e&$ed o !ad 1 1 1 1 1 1 0 0
#e$ req-'re.e$ 4
L93
%
8o$ 1 10   2 H Gr
Gross req-'re.e$ )

EQUIREMENTS P
21
L93
I te! Peri9% (3ee/)
%
8o$ 2 10   3 C Gr
G ross req-'re.e$ 0H *
8o$ Pro:e&$ed o !ad 10 10 10 10
10 10 10 2 2
#e$ req-'re.e$ 0 0
Plaed re&e'($ 0 0
Plaed release 0 0
L93
I te! Peri9% (3ee/)
%
8o$ 1 4   3 E Gr
Gross req-'re.e$
3H7,
8o$ Pro:e&$ed o !ad 4 4 4 4 4 1 1 1
#e$ req-'re.e$ 0
14.15 (a) Plaed re&e'($ 0
Ten units are required for production, and 10 each of B and F for field service repair
C9!9"e" Qa"tit8
t
A 10
 20
C 40
, 20
E 40
(b)  20
G 20
H 20
L93
I te! Peri9% (3ee/)
%
8o$ 1 0   0 A Gross req-'re.e$ 10
8o$ Pro:e&$ed o !ad 0 0 0 0 0 0 0 10
#e$ req-'re.e$ 10
L93
I te! Peri9% (3ee/)
%
8o$ 1 2   1  Gr
Gross req-'re.e$ 10; 10A
8o$ Pro:e&$ed o !ad 2 2 2 2 2 2 0 0
#e$ req-'re.e$ * 10

EQUIREMENTS P
L93
%
8o$ 1 )   1  Gr
Gross req-'re.e$ 10; 10A
8o$ Pro:e&$ed o !ad ) ) ) ) ) ) 0 0
#e$ req-'re.e$ ) 10
Plaed re&e'($ ) 10
Plaed release ) 10
L93
%
8o$ 1 )   2 , Gr
Gross req-'re.e$ * 10
8o$ Pro:e&$ed o !ad ) ) ) ) ) 0 0 0
#e$ req-'re.e$ 3 10
L93
%
8o$ 3 1   2 G Gr
Gross req-'re.e$ ) 10
8o$ Pro:e&$ed o !ad 1 1 1 1 1 0 0 0
#e$ req-'re.e$ 4 10
Note: M (in items B and F) means a repair or maintenance item.
L93
%
8o$ 1 10   2 H Gr
G ross req-'re.e$ ) 10
8o$ Pro:e&$ed o !ad 10 10 10 10
10 10
10 ) 0 0
#e$ req-'re.e$ )
Plaed re&e'($ )
Plaed release )
L93
%
8o$ 2 10   3 C Gross req-'re.e$ 13H7 10


8o$ Pro:e&$ed o !ad 10 10 10 10
10 10 0 0 0
#e$ req-'re.e$ 3 10
L93
%
8o$ 1 4   3 E Gross req-'re.e$ 3,

EQUIREMENTS P
21
14.16 (a) Only item

item G has changed
changed because
because it has no subasse
subassemm
blies or components.
(b)
(b) If week
week 1 on the produc
productition
on plan
plan is now,
now, then
then an
increase in the lead time for G means only one unit of
G will
will be avai
availa
labl
blee for
for comp
compon onen
entt F in week
week 5.
Therefore, F and consequently four units of “A” will
be delayed one week.
(c) As production
production planner, several
several options
options are possible:
possible:
 Tell the customer that the four units (which are
probably “spares”) are going to be delayed one
week.
 Ask the supplier
supplier of G to expedite production
production or
delivery.
 Reduce the production time for item F or A.
14.17 Lot-for-Lot Ordering Policy:

.ee/
1 2 ' 4 -     10 11 12
Gr req 30 40 30 50 20 10 *0 )0
e< '= 40 10 10 0 0 0 0 0 0 0 0 0
Ed '= 10 10 0 0 0 0 0 0 0 0 0 0
Ord r&($ 30 30 50 20 10 *0 )0
Ord rel 30 30 50 20 10 *0 )0
T = Order cost + holding cost = 7 orders × $150/order + 20 units × $2.50/unit/period = $1,100
C T
14.18 Economic order quantity:

2 DS 2 × 33 0 × 1 5 0
Q = = = 57.4, or 57 units
H 2.50 × 12
where D = period demand, S =
= setup or order cost, H =
= holding cost.
Reorder point:
330
Reorder point = Demand during lead time = units week × 1 week
12
= 27.5, or 28 units
Le5el6 Pare"t6 Qa"tit86

Ite!6 Lea% Ti!e6 1 L9t Si:e6 E&Q
.ee/ N9; 1 2 ' 4 -     10 11
11 12
12
Gross req-'re.e$ 30 40 30 50 20 10 *0 )0
S&!ed-led re&e'($
O !ad 40 40 10 10 25 25 )4 41 21 21 11 4) 4) )2
#e$ req-'re.e$ 0 30 3 16 6% )
Plaed order
re&e'($ )5 )5 )5 114 )5
Plaed order
release )5 )5 )5 114 )5
Setups: 5 × 150 = $750

Holding: (allowing for 12 time periods) 2.50 × 352 = $880
Setup + holding = total cost = $1,63 0
Theoretical total cost:

DS QH
C T = Orde
rder cos
costt + Holdi
olding
ng cos
costt = +
Q 2
33 0 × 1 50 57 × (12 × 2.50)
= +
57 2
= 868.42 + 855.00 = $1, 72
723.42

EQUIREMENTS P
Note: Order and carrying costs are not equal due to rounding of
the EOQ to a whole number. Actual total cost:
C T = Orde
rder cost
cost + Holdi
olding
ng cost
cost + Stoc
Stocko
kout
ut cost
cost
= 5 orders × $150 order + 454 un
units
× $2.50 unit period + 33 units × $10 unit stockout
= 750 + 1,135 + 330
= $2,215
Note: The actual cost of using the EOQ policy under this case of
varying demand is more than the theoretical cost. In addition, we
were forced to use backorders when stockouts occurred. The poor
perform
performanc
ancee with
with respec
respectt to stocko
stockout
ut is due to the fact that
that
“average demand during lead time” is not a particularly good
measure of the necessary reorder point.
Note that the present versions of the Excel OM and POM for
Windows software do not consider reorder points, stockouts, or
backorder costs.
You may wish to make u se of the following:
EOQ ordering
ordering policy,
policy, modified
modified for delayed placement :
delayed order placement
.ee/
1 2 ' 4 -     10 11
11 12
Gross req-'re.e$ 30 40 30 50 20 10 *0 )0
e<''< '=e$or> 40 0 65 25 *4 )4 ?16 21 5* 6* ?12 ?12
Ed'< '=e$or> 10 10 25 25 )4 ?16+ 21 21 6* ?12+ ?12 ?
)+
Order re&e'($s )5 )5 )5 )5 )5
Order release )5 )5 )5 )5 )5 )5
)5
Total inventory = 10 + 10 + 27 + 27 + 54 + 21 + 21 + 68 = 238

Actual total cost:
C T = Orde
rder cos
costt + Holdi
olding
ng cost
ost + Stoc
Stocko
kout
ut cost
cost
= 6 orders × $150 order + 238 units
× $2.
$2.50 unit
unit peri
period
od + 33 uni
units
ts × $10
$10 unit
unit stoc
stocko
kout
ut
= 900.00 + 595.00 + 330.00 = $1, 82
825.00
Thus, if we are able to “time” order placement in an optimal

fashio
fashion,
n, the EOQ ordering policy can be made more efficient.
Note
Note,, howe
howevever,
r, that
that this
this opti
optima
mall timi
timing
ng requ
requir
ires
es that
that we
accurately forecast demand—something that for varying demand
we are usually unable to do. Note, also, that this “optimal” timing
does not reduce the likelihood of a stockout and, by increasing the
customer “wait” period, may contribute to additional customer
dissat
dissatisf
isfact
action
ion.. The elimin
eliminati
ation
on of stocko
stockouts
uts can only
only be
accomplished by using a higher reorder point (reorder + safety
stock).
EOQ ordering
ordering policy,
policy, modified include safety stock :
modified to include
.ee/
1 2 ' 4 -     10 11 12
12
Gr req 30 40 30 50 20 10 *0 )0
e< '= 40 10 65 *4 *4 )4 41 5* 5* 6* 4) 102
Ed '= 10 65 *4 *4 )4 41 5* 5* 6* 4) 102 )2
Ord r&($ )5 )5 )5 )5 )5 )5
Ord rel )5 )5 )5 )5 )5 )5 )5

EQUIREMENTS P
220
Reorder when ending inventory <70 14.19 Solution with lead time = 1: Holding cost = $2.50; Setup
Combined reorder + safety stock: cost = $150. PPB ordering policy:
De!a"% .ee/
%ri"$ C!lati5e 1 2 ' 4 -     10
1 0 11 12
Lea% Ti!e +reqe"8 Pr9BaBilit8 Pr9BaBilit8
Gr req 30 40 30 50 20 10 *0
*0 )0
0 4 0@333 0@333 e< '= 40 10 10 30 30 0 30 10 10 0 )0 )0
10 1 0@0*3 0@415 Ed '= 10 10 30 30 0 30 10 10 0 )0 )0 0
20 1 0@0*3 0@)00 Ord r&($ 60 100 130
30 2 0@165 0@665 Ord rel 60 100 13
40 1 0@0*3 0@5)0 0
)0 1 0@0*3 0@*33
60 0 0@000 0@*33 Calculating EPP:
50 1 0@0*3 0@%15 Setup cost 150
*0 1 0@0*3 1@000 EPP = = = 60
Holding cost 2.50
To reduce the likelihood of a stockout to approximately 10%, we
must use a combined reorder point/safety stock of 70 units. Note Peri9%# C!lati5 C9#t#
that this “reorder” point is approximately two and one half times e
the reorde
reorderr point
point calcul
calculate
ated
d using
using the measur
measuree of “avera
“average
ge C9!Bi"e% Net Req; Part Peri9%# &r%er
demand over lead time.” H9l%
Actual total cost: 1 0 0  2)
17 2 0 0  2)
C T = Orde
rder cos
costt + Holdi
olding
ng cost
ost + Stoc
Stocko
kout
ut cost
cost
17 27 3 30 1)0  5)
= 6 orders × $150 order + 763 units 1 7 2 7 37 4 30 1)0  5)
× $2.50 unit period + 0 units × $10 unit stockout 1 7 2 7 37 4 7 ) + 60 30 × 0  30 × 2 B 60 1)0
17 27 37 47 )7 13130 30 × 0  30 × 2  50 × 3 B 1)0
= 900.00 + 1907.50 + 0 = $2, 807.50
6 250
* The part periods for an order encompassing periods 1, 2, 3, 4, and 5
Note that as we might expect, the holding cost has increased.
most nearly approximates the EPP of 60.
Note: (1) We have assumed that: (a) a product ordered during a
calendar week is available at the beginning o f the following week;
(b) shipments during a week take place at the beginning of the
week. (2) POM for Windows will produce the same answer. Excel
OM will produce the same answer when lead time is zero.
Peri9%# C!lati5e C9#t#

C9!Bi"e% Net Req; Part Peri9%# &r%er H9l%
6 50 50 × 0 B0 1)0  0
67 5 %0 50 × 0  20 × 1 B 20 )0
67 57 * %0 50 × 0  20 × 1 B 20 )0
67 57 *7 %+ 100 50 × 0  20 × 1  10 × 3 B )0 12)
67 57 *7 %7 10 1*0 50 × 0  20 × 1  10 × 3  *0 × 4 B
350
* The part periods for an order encompassing periods 6, 7, 8, and 9 most nearly approximates the EPP of 60.

C9!Bi"e% Net Req; Part Peri9%# &r%er H9l%
10 *0 *0 × 0 B 0 1)0  0
107 11 *0 *0 × 0 B 0 0
107 117 12+ 130 *0 × 0  )0 × 2 B 100 2)0
Calculate total cost:

C T = Orde
Orderr cos
costt + Hold
Holdin
ing
g cos
costt
× $2.5
$2.50
0 unit
unit peri
period
od
= $1,025.00

EQUIREMENTS P
14.20 Always order 100 units; fixed order quantity (FOQ) = 100
1 2 ' 4 -     10
10
Gross req-'re.e$ 3) 30 40 0 10 40 30 0 30 ))
S&!ed-led re&e'($
Pro:e&$ed o !ad 3) 3) 0 50 30 30 20 *0 )0 )0 20
#e$ req-'re.e$ 0 30 0 0 0 20 0 0 0 3)
Plaed order re&e'($ 100 100 100
Plaed order release 100 100 100
3 setups at $100 each + 350 units @ $1 = $650.
14.21 Periodic order quantity (POQ)—3 periods; Every three weeks, order for 3 wks ahead.
1 2 ' 4 -     10
10
Gross req-'re.e$ 3) 30 40 0 10 40 30 0 30 ))
S&!ed-led re&e'($
Pro:e&$ed o !ad 3) 3) 0 40 0 0 50 30 0 *) ))
#e$ req-'re.e$ 0 30 0 0 10 0 0 0 30 0
Plaed order re&e'($ 50 *0 *)
Plaed order release 50 *0 *)
3 setups each at $100 + 280 units @ $1 = 580
14.22 A modification of the part-period balancing shown in the text y ields the following costs:
1 2 ' 4 -     10
10
Gross req-'re.e$ 3) 30 40 0 10 40 30 0 30 ))
S&!ed-led re&e'($
Pro:e&$ed o !ad 3) 3) 0 )0 10 10 0 30 0 0 ))
#e$ req-'re.e$ 0 30 0 0 0 40 30 0 30 0
Plaed order re&e'($ *0 50 0 *)
Plaed order release *0 50 *)
3 setups each at $300 + 155 units @ $1 = $455
14.23 The firm has 22,500 minutes available to produce 330 units, which require 21,450 minutes of work. One
possible solution is:
Caa
Caai
it8
t8 Caa
Caaiit8
t8
Req
Reqir
ire%
e% A5ail
5ailaB
aBle
le &5er
&5er
.ee/ U"it# (Ti!e) (Ti!e) (U"%er) Pr9%ti9" S 
e%ler F#
F# A t
ti9"
1 0 0 272)0 272)0D
2 40 27600 272)0  3)0 8o$ s(l'$@ Use 3)0 .'-$es ' Fee 1@
3 30 17%)0 272)0 300D
4 40 27600 272)0 3)0 8o$ s(l'$@ Use 300 .'-$es ' Fee 3@ Use )0 .'-$es
o ao$!er .a&!'e or ' Fee 1 or )@
) 10 6)0 272)0 17600D
6 50 47))0 272)0 27300 8o$ s(l'$@ Use 1%00 .'-$es ' Fee 1@ O(era$'os s(l'$@
Use 400 .'-$es
.'-$es o ao$!er
ao$!er .a&!'e7
.a&!'e7 o=er$'.e7
o=er$'.e7 or
s-&o$ra&$@
5 40 27600 272)0 3)0 O=erla( o(era$'os so $!a$ eI$ o(era$'o &a e<'@
8o$ s(l'$@ Use 3)0 .'-$es ' Fee )@
* 10 6)0 272)0 17600D
% 30 17%)0 272)0 300D
10 60 37%00 272)0 176)0 8o$ s(l'$@ 12)0 .'-$es ' Wee * ad 300 .'-$es '
Fee %@ O(era$'os s(l'$@ 100 .'-$es o ao$!er
.a&!'e7 o=er$'.e7 or s-&o$ra&$@
There are other possible solutions.

EQUIREMENTS P
222
14.24
Caait Caait8
8
Reqire A5ailaBl &5er
% e
.ee/ U"it# (Ti!e) (Ti!e) (U"%er Pr9%ti9" Se%lerF# Ati9"
)
1 60 37%00 272)0 176)0 8o$ s(l'$@ ;o=e 300 .'-$es 4@3 -'$sD $o Fee 2 ad 13)0
.'-$es $o Fee 3@
2 30 17%)0 272)0 300D
3 10 6)0 272)0 17600
D
4 40 27600 272)0 3)0 8o$ s(l'$@ ;o=e 2)0 .'-$es $o Fee 3@ O(era$'o s(l'$@
;o=e
;o=e 100100 .'-
.'-$e
$es
s $o ao$
ao$!e
!err .a&!
.a&!' 'e7
e7 o=er
o=er$'
$'.e
.e77 or
s-&o$ra&$@
) 50 47))0 272)0 27300 8o$ s(
s(l'$@ ;o=e 1600 .'-$es $o
$o Fe
Fee 6@ O=erla( o(
o(era$'os
$o <e$ (rod-&$ o-$ door@ O(era$'os s(l'$@ ;o=e 500 .'-$es
$o ao$!er .a&!'e7 o=er$'.e7 or s-&o$ra&$@
6 10 6)0 272)0 17600
D
5 40 27600 272)0 300 8o$ s(l'$@ ;o=e 300 .'-$es $o Fee *@ O=erla( o(era$'os
$o <e$ (rod-&$ o-$ $!e door@
* 30 17%)0 272)0 300D
14.25 (a)
, 1 2 ' 4 -   
Gr
O !ad 30 30
#e
#e$ 60
P@
P@O@ re&e'($ 60
P@
P@O@ release 60
(b) + 1 2 ' 4 -   
Gr
Gross req-'re.e$ 1*0 40
O !ad 20 20 0
#e$ 160 40
P@
P@O@ re&e'($ 160 40
P@
P@O@ release 160 40
(c)
Steer 1 2 ' 4 -   
Gr
Gross req-'re.e$ )0
O !ad 20 20
#e
#e$ 30
P@
P@O@ re&e'($ 30
P@
P@O@ release 30
A 1 2 ' 4 -   
Gr
G ross req-'re.e$ 30
O !ad 10 10
#e
#e$ 20
P@
P@O@ re&e'($ 20
P@
P@O@ release 20

EQUIREMENTS P
14.26
Lea%
Ti!e
( 9@ L93*
L9t eri9% &" Sa@et8 All9* Le5el Ite!
Si:e #) Ha"% St9/ ate% C9%e ID Peri9% (%a8)
1 2 3 4 ) 6 5 *
8o$ 9or 1    0 Tale Gross req-'re.e$ 640 6 40
64 1 2*
12 1 2*
12
8o$ S&!ed-led re&e'($
Pro:e&$ed o !ad
#e$ req-'re.e$ 640 640 12* 12*
Plaed order re&e'($ 640 640 12* 12*
Plaed order release 640 640 12* 12*
8o$ 9or 1    1 To( Gross req-'re.e$ 640 640

64 1 2*
12 1 2*
12
#e$ req-'re.e$ 640 640 12* 12*
Plaed order re&e'($ 640 640 12* 12*
8o$ 9or 1    1 S$a' Gross req-'re.e$ *0 *0 16 16

8o$ <al@D S&!ed-led re&e'($
<allos #e$ req-'re.e$ *0 *0 16 16
Plaed order re&e'($ *0 *0 16 16
Plaed order release *0 *0 16 16
8o$ 9or 1    1 Gl-e Gross req-'re.e$ 40 40 * *

8o$ <al@D S&!ed-led re&e'($
Pro:e&$ed o !ad 100 100 100 100 100 60 20 12 4
<allos 1 00 #e$ req-'re.e$
Plaed order re&e'($
Plaed order release
8o$ 9or 1    1 ase Gross req-'re.e$ 640 64

640 12* 12
1 2*
#e$ req-'re.e$ 640 640 12* 12*
Plaed order re&e'($ 640 640 12* 12*
8o$ 9or 1    2 S!or$ Gross req-'re.e$ 172* 172*0 2)6 2)6

8o$ ra&e 0
S&!ed-led re&e'($
#e$ req-'re.e$ 172* 172*0 2)6 2)6
0
Plaed order re&e'($ 172* 172*0 2)6 2)6
0
Plaed order release 172* 172* 2)6 2)6

EQUIREMENTS P
224
8o$ 9or 1    2 8o< Gross req-'re.e$ 172* 172*0 2)6 2)6

8o$ ra&e 0
S&!ed-led re&e'($
#e$ req-'re.e$ 172* 172*0 2)6 2)6
0
Plaed order re&e'($ 172* 172*0 2)6 2)6
0
Plaed order release 172*0 172* 2)6 2)6
0
8o$ 9or 1    2 8e< Gross req-'re.e$ 27)6 27)60 )12 )12

8o$ 0
S&!ed-led re&e'($
#e$ req-'re.e$ 27)6 27)60 )12 )12
0
Plaed order re&e'($ 27)6 27)60 )12 )12
0
Plaed order release 27)60 27)6 )12 )12
0
14.27 Hr#
C9ee TaBle Reqire Lea%
Ma#ter Se%le % Ti!e Da8 1 Da8 2 Da8 ' Da8 4 Da8 - Da8  Da8  Da8 
640 640 12* 12*
Tale
Tale Asse.l>
Asse.l> 2 1 172*0 172*0 2)6 2)6
To(
To( Pre(ara$'o
Pre(ara$'o 2 1 172*0 172*0 2)6 2)6
Asse.le ase 1 1 640 6 40 12* 12*
8o< ra&e 2D 0@2) 1 320 320 64 64
S!or$ ra&e 2D 0@2) 1 320 320 64 64
8e< 4D 0@2) 1 640 640 12 * 12
*
To$al
To$al Ho-rs 0 172*0 37200 374)6 17%20 640 2)6
ADDIT&NAL H P
P
&ME.&R R&,LEMS
R&,LEMS
Here are solutions to additional homework problems 14.28–14.32 (c) .ee/ 1 2 ' 4 - 
that appear on our Web site, www.myomlab.com. Req-'red ,a$e 10
14.28 (a) Order Release 10 A
Req-'red ,a$e 30
Order Release 30 ,
Req-'red ,a$e 20
Order Release 20 
(b)

EQUIREMENTS P
14.29
Ite!6 A Lea% Ti!e6 1 3ee/ L9t Si:e6 L4L
.e
.ee/ N9; 1 2 ' 4 -     10
Gr
S&!ed-led re&e'($
O !ad 2 2 2 2 2 2 2
#e
# e$ req-'re.e$ *
Pl
Plaed order re&e'($ *
Pl
Plaed order release *
Le5el6 1 Pare"t6 A Qa"tit86 '

Ite!6 D Lea% Ti!e6 1 3ee/ L9t Si:e6 L4L
.e
.ee/ N9; 1 2 ' 4 -     10
Gr
S&!ed-led re&e'($
O !ad 4 4 4 4 4 4
#e
#e$ req-'re.e$ 20
Pl
P laed order re&e'($ 20
Pl
Le5el6 1 Pare"t6 A Qa"tit86 2

Ite!6 + Lea% Ti!e6 2 3ee/# L9t Si:e6
L4L
.e
.ee/ N9; 1 2 ' 4 -     10
Gr
S&!ed-led re&e'($
O !ad 0 0 0 0 0
#e
#e$ req-'re.e$ 16
Pl
P laed order re&e'($ 16
Pl
P laed order release 16
14.30 (a) 14.30 (c)

St
S teer 1 2 ' 4 -   
Gr
G ross req-'re.e$ )0
O !ad 20 20
#e
#e$ 30
P@
P@O@ re&e'($ 30
P@
P@O@ release 30
A 1 2 ' 4 -   
(b) Gr
O !ad 10 10
#e
#e$ 20
P@
P@O@ re&e'($ 20
P@
P@O@ release 20
, 1 2 ' 4 -   
Gr
O !ad 30 30
#e
#e$ 60
P@
P@O@ re&e'($ 60
P@
P@O@ release 60

EQUIREMENTS P
22
+ 1 2 ' 4 -    Theoretical total cost:

Gross 1*0 40 DS QH
C T = Orde
Orderr cos
costt + hold
holdin
ing
g cos
costt = +
req-'re.e$ Q 2
O !ad 20 20 0 275 × 50 105 × 0.25 × 10
#e
# e$ 160 40 = +
105 2
P@
P@O@ re&e'($ 160 40
= 130.95 + 131.25 = $262.20
P@
P@O@ release 16 0 4 0
Peri9%# Note:
C!Order
lati and carrying costs are not equal due to C9#t#
14.31 (a) Economic Order Quantity 5e the EOQ to a whole number.
rounding
C9
C9!Bi"e% Actual
Net R eq;
cost: Part Peri9%# &r%er H9l%
.ee/
N93 1 2 ' 4 -     10 1 C T = 3)derr cos
Orde
Or c0ostB
t +0hold
holdin
ing
g cost
cost )0 
0@00
Gr req 3) 30 4) 0 10 40 30 0 30 )) =3
17 2 6)or
order3s0× $50 order + 630 un
× 1 B 30
units 21@2)
e< '= 0 0 50 40 ?) 100 %0 )0 20 12) %)
17
17 27 3 ×10
1 $0.2
$0.25
53unit
un
0 ×it 1peri
pe
riod
od
4) × 2 B 120 13@5)
Ed '= 0+ 5 0 40 ?)+ 100 %0 )0 20+ 12
12 %
%)) 40
17
17 27 37 4 1 1 0 3 0 × 1  4) × 2  0 × 3 B 120
= 150 + 157.50 = $307.50
2@)0
)
17
17 27 37 47 )+ 120 30 × 1  4) × 2  10 × 4 B 160 2@)0
Or
Ord r&($ 10 10) 10
Note
Note:: If the
the five
five unit
unitss not produce
produced
d in period
period 3 17 27 37 47(b)
(b
)7) Lot
Lo1
t6for
fo0r Lot:
Lot:30 × 1  4) × 2  10 × 4  40 × )
(because of five-unit shortage) are produced in week 4, 6 B 360 .ee/
then actual inventory drops by five units (from 680 to Ti#
675). This analysis includes holding cost for the 40 3ee 1 2 ' 4 -     10
units held from period 10 for period 11. /
Orders are placed in the weeks with ending inventory Gr req 3) 30 4) 0 10 40 30 0 30 ))
below
below the reorder
reorder point
point (i.e.
(i.e. 27.5)
27.5) as noted
noted with
with e< '= 0 0 0 0 0 0 0 0 0 0 0
asterisks. Ed '= 0 0 0 0 0 0 0 0 0 0 0
Economic Order Quantity: Ord r&($ 3) 30 4) 10 40 30 30 ))
))
Ord rel 3) 30 4) 10 40 30 30 ))
2 DS 2 × 275 × 50
50 Calculating total cost:
Q = = = 104.9 or 105 units
H 0.25 × 10 C T = Orde
Orderr cos
costt + hold
holdin
ing
g cost
cost
where
where D = period
period demand,
demand, S = setup or order cost, = 8 orders
ders × $50 orde
rder + 0 (no holdin
ding cost)
H =
= holding cost. = $400.00
Reorder point: (c) Part-perio
Part-period
d balancing
balancing
Reorde
Reorderr point
point = demand
demand during
during lead
lead time
time .ee/
275 N93 1 2 ' 4 -     10
10
= uni
units peri
period
od × 1 perio
eriod
d
10 Gr req 3) 30 4) 0 10 404 0 30 0 30 ))
= 27.5 or 28 units
e< '= 0  0 *) )) 10 10 0 60 30 30 0
Ed '= 0 *) )) 10 10 0 60 30 30 0 0
Ord r&($ 120 100 ))
Ord rel 120 100 ))
Calculating EPP:
Order cost 50
EPP = = = 200
Holdin
ding cost 0.25
.25
Note: (1) We have assumed that: (a) a product ordered

during a calendar week is available at the beginning of
the following week; (b) shipments during a week take
place at the beginning of the week; (c) no carrying cost
occurs during the week the order is received.

EQUIREMENTS P
(2) The
The POM
POM for
for Wind
Window
owss progr
program
am is unab
unable
le to
handle the non-zero
non-zero lead-time
lead-time—thus
—thus will produce
produce a
different answer. Excel OM does not perform Part-
Period balancing.

C9!Bi"e% Net Req; Part Peri9%# &r%e H9l%
r
6 40 40 × 0 B )0  1)@
1)@00
00
67 5 50 40 × 0  30 × 1 B 30 5@)0
67 57 * 50 40 × 0  30 × 1 B 30 5@)0
67 57 *7 %+ 1 00 40 × 0  30 × 1  30 × 3 B 120
67 57 *7 %7 10 1)) 40 × 0  30 × 1  30 × 3  )) × 4 B
340
Calculating total cost:

C T = Orde
Orderr cos
costt + hold
holdin
ing
g cos
costt
× $0.2
$0.25
5 unit
unit peri
period
od
= 150.00 + 70.00 = $220.00
14.32
Ite! A
.e
.ee/ 1 2 ' 4 -     10 11 12 1' 14 1- 1
To$al req@ 10 10 )
O
O  !ad 3 3 3 3 3 3 3 3  
#e
# e$ req@ 5 10 )
Or
O rd re&@ 5 10 )
Or
Ord rel@ 5 10 )
Ite! ,
.e
.ee/ 1 2 ' 4 -     10 11 12 1' 14 1- 1
To
To$al req@ 10 5 10 ) 3
O
O !ad 2 2 2 2 2 2 2    
#e$ req@ * 5 10 ) 3
Ord re&@ * 5 10 ) 3
Or
Ord rel@ * 5 10 ) 3
Ite! C
.e
.ee/ 1 2 ' 4 -     10 11 12 1' 14 1- 1
To$al req@ 10 5 10 10 ) ) 3
O
O !ad 1
10
0 10
10 10 10 10      
#e
#e$ req@ 5 10 10 ) ) 3
Or
Ord re&@ 5 10 10 ) ) 3
Ord rel@ 5 10 10 ) ) 3
Ite! D
.e
.ee/ 1 2 ' 4 -     10 11 12 1' 14 1- 1
To$al req@ * 5 10 ) 3
O
O !ad ) ) ) ) )    
#e
#e$ req@ 3 5 10 ) 3
Or
O rd re&@ 3 5 10 ) 3
Or
Ord rel@ 3 5 10 ) 3

EQUIREMENTS P
22
Ite! E MRP system. When this is completed, everyone will

will be judged by
.e
.ee/ 1 2 ' 4 -     1corporate-based
0 11 12 performance
1' 14measures,
1- using
1 common information,
To
To$al req@ 3 % 20
in working toward
10
common3goals.
O
O !ad ) ) ) ) 2   
#e
# e$ req@ 5 20 10 3
Or
O rd re&@ 5 20 10 3
Or
Ord rel@ 5 20 10 3
Ite! +
.e
.ee/ 1 2 ' 4 -     10 11 12 1' 14 1- 1
To
To$al req@ 10 5 10 )
O !ad ) ) ) ) ) )   
#e$ req@ ) 5 10 )
Ord re&@ ) 5 10 )
Or
Ord rel@ ) 5 10 )
Ite! G
.e
.ee/ 1 2 ' 4 -     10 11 12 1' 14 1- 1
To$al req@ ) 5 10 )
O
O  !ad 1 1 1 1 1   
#e$ req@ 4 5 10 )
Ord re&@ 4 5 10 )
Or
O rd rel@ 4 5 10 )
Ite! H
.e
.ee/ 1 2 ' 4 -     10 11 12 1' 14 1- 1
To$al req@ ) 5 10 )
O
O !ad 10 10
10 10
10 10 10
1 0 )  
#e
#e$ req@ 2 10 )
Or
Ord re&@ 2 10 )
Ord rel@ 2 10 )
CASE S
TUDJ
TUDJ
HILL’S AUTOMOTIVE, INC.

In this case, each department argues that it is doing its job well
2. A properly used MRP system will provide the structure needed
—“the problem is with them.” The result is confusion and poor
at Hill’s Automotive; unneeded and excess inventory and poor bills
results for the company as a whole. Many of the problems relate to
of material will be evident, as will production schedules beyond
the classic MRP issues of (a) lack of master schedule; (b) lack of
the firm’s capabilities. Lead times, order release dates, shortages,
capaci
capacity
ty plannin
planning;g; and (c) few,
few, if any,
any, accura
accurate
te lead
lead times,
times, all
etc.
etc. will
will also
also be speci
specifie
fied.
d. Accura
Accuracy
cy and disci
discipli
pline
ne will
will be
resulting
resulting in poor scheduling and chaos in the assembly area. There
required.
seems also to be a question as to whether the various departments
The instructor may then want to discuss the problems one
are working
would encounter in implementing some of the changes discussed
toward
toward common
common goalsgoals and whether
whether appropr
appropriat
iatee measure
measuress of
above. As a beginning, one might consider that the individual
performa
performance
nce are in place.
place. The specif
specific
ic issues in a plan
plan would
departments appear to be operating in a relatively informal manner
include (a) introduction of corporate wide goals and performance
and as separate entities. The student might be asked to consider
measures for each function; (b) development of labor standards
how the persons employed within this organization will react to the
for the assembly,
assembly, and packaging operations;
operations; (c) developmen
developmentt of
changes suggested above, which, uniformly, result in increased
quality standards for all production and purchased items, to which
dema
demandndss on empl
employoyee
eess and
and incr
increa
ease
sed
d inte
integr
grat
atio
ion
n amon
amongg
suppl
supplie
iers
rs woul
would d adhe
adhere
re;; (d)
(d) impro
improve veme
ment
ntss in inve
invent
ntor
ory
y
departments.
management practices; (e) development of a capacity planning
procedu
procedurere (i.e.
(i.e.,, determ
determina
inatio
tion
n as to how many many units
units can
can be
produced
produced during what time periods); periods); (f ) implementa
implementation
tion of a IDE& C
ASE S
ASE TUDJ
TUDJ
master production schedule (which might encompass a relatively
short horizon due to the typical short production cycle); and, MRP AT WHEELED COACH
ultimately, proper use of an A 7-minute video, filmed specifically for this text, is available
from Prentice Hall and is designed to supplement the written case.

EQUIREMENTS P
1. Accurate inventory is an important issue at Wheeled Coach ADDITI&NAL C

ASE S
ASE K
TUDJ
TUDJ
because of the dynamic changes that occur in ambulances. Items
that are purchased
purchased but not used promptly
promptly often end up as excess
excess IKON’S ATTEMPT AT ERP
inventory and must be disposed of at distress prices. Moreover, 1. IKON
IKON needsneeds compre
comprehenhensiv
sivee market
marketing ing inform
informati
ation
on on
MRP doesdoes not work
work without
without accurate
accurate inventor
inventory.
y. As in any potent
potential
ial custom
customers
ers,, existi
existing
ng custom
customers ers,, and their
their copier
copier
dependent manufacturing process, shortage of a part may mean installations, and then a service history on each machine sold and
that the entire end unit, in this case an expensive ambulance, its
its owner
owner or leas leaseh
ehol
olde
der.
r. Addi
Additition
onal
ally
ly,, it need
needss the
the usua
usuall
cannot be assembled, completed, or delivered. Accurate inventory accounting
accounting informatio
information n on payables,
payables, receivabl
receivables,
es, assets,
assets, and
has cost implications for both the units in which the inventory is liabilities as well as good inventory information on copiers, parts,
to be installed (the ambulance) and as an asset. and supplies.
2. Exce
Excess
ss inve
invent
ntory
ory exis
exists
ts beca
becaus
usee of mini
minimu
mum m orde
orderr 2. The advantages of ERP software are that it is usually sold as
requiremen
requirements,
ts, BOM errors,
errors, customer-c
customer-change
hange orders,
orders, purchasing
purchasing an integrated system that ties HR, accounting, manufacturing, and
and suppliers together. Consequently, in theory, it provides for a high
receiving errors, etc. A plan for Wheeled Coach to deal with degree of timely, accurate information. Most of these systems
excess inventory is first to see what can be returned to the vendor deliver much less than the theory suggests.
for near full
full credit
credit;; second
second,, see what can be substi
substitut
tuted
ed on The disadvantage of any standard software product is that it
subsequent units for the items called out on the bills of material; may not (or will not) fit a given (in this case IKON’s) business.
and third, work at some sort of sale or scrap or supply to other IKON’s problem was complicated because many ERP systems are
auto dealers or truckers who may have n eed for the items. an outgrowth of manufacturing systems. This manufacturing base
3. Wheeled
Wheeled Coach will find it difficul
difficultt to dispose
dispose of excess
excess often means they are weak in the marketing,
marketing, customer tracking,
tracking,
inventory. It is hard to substitute excess components in units (and servic
service,
e, and repair
repair featur
features
es critic
critical
al to IKON’s
IKON’s compet
competitiitive
ve
their related bills of material) as units are being assembled. It takes advantage. A wide variety of special programs have been written
innovati
innovation
on on the part of the engineer
engineering
ing shop and inventory
inventory for customer sales and service tracking, but for SAP, like other
personnel to make this work and keep the bills of material, through vendors in the field, that was not an initial priority.
engineering changes notices, accurate. For those items that are 3. The
The betbet was
was that
that the
the pilo
pilott inst
instal
alla
lati
tion
on woul
wouldd work
work at
changed but are not critical, management
management instituted an effectivity reasonable cost and, not incidentally, do the job. This did not turn
date. That is a date that the change would be effective to the date in out to be the case. (It cost over $14 million to get the system
the production schedule that allowed all of the components in stock running,
to be used. Some material can be returned to the supplier, but $8 million paid to IBM for consulting
consulting and the remainder of the $25
most suppliers are not interested in taking old merchandise back, million paid in consulting fees since the system was turned on.)
so that is a difficult option. Finally, selling the items themselves 4. The project was canceled because of the expense, combined
proved a reasonable last resort. However, even this is expensive. with
with functio
functional
nality
ity gaps
gaps and the amountamount of intern
internal
al busine
business
ss
It requires cataloging, publicity, letter writing, phone calls, and procedures IKON would have to change.
follow-up.
follow-up. It is a real marketing
marketing challenge
challenge,, and Wheeled Coach
does
does this
this by having
having occasi
occasiona
onall sales
sales of excess
excess invent
inventory
ory on
Saturdays. All of these options are being used, and all do reduce
inventory ultimately.
* This case study appears on our Companion Web site,

www.pearsonhighered.com/heizer.

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202 CHAPTER 14 MAT ER I AL R

Material Reqire!e"t# Pla""i"$ (MRP) a"%

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall.

that determine an item master for each part, a bill of material, an

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall.

 Contract negotiation and management

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall.

14.3 (a) Produc

14.7 Net material requirements plan, modified to include the

* To achieve these results in POM for Windows,

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall.

14.9 (a) Time-phase

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall.

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14.12 (a) Net material requirements plan 

A Gross req-'re.e$ 100 )0 1)0

 Gross req-'re.e$ 100 )0 1)0

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 Gross req-'re.e$ )0 100 )0 100 1)0

G Gross req-'re.e$ )0 100 )0 100 1)0

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Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall.

(c) Le5el6 0 Pare"t6 7 Qa"tit86

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Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall.

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall.

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall.

9or S&!ed-led re&e'($

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall.

14.16 (a) Only item

14.17 Lot-for-Lot Ordering Policy:

14.18 Economic order quantity:

Le5el6 Pare"t6 Qa"tit86

Setups: 5 × 150 = $750

Theoretical total cost:

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall.

Total inventory = 10 + 10 + 27 + 27 + 54 + 21 + 21 + 68 = 238

Thus, if we are able to “time” order placement in an optimal

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall.

Peri9%# C!lati5e C9#t#

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Calculate total cost:

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall.

There are other possible solutions.

8o$ 9or 1    1 S$a' Gross req-'re.e$ 0 0 16 16