Develop An MRP For Space Age Furniture Company

Develop an MRP for Space Age Furniture Company using the information in the case including the production of sub-assemblies in lot sizes of 1,000

Develop an Material Requirements Planning (MRP) for the Space Age Furniture Company based on the case details, including the production of sub-assemblies in lot sizes of 1,000 units. The MRP should account for demand, lead times, lot sizing, inventory costs, and manufacturing constraints. After establishing the initial MRP, analyze ways to improve the production process of sub-assemblies by reducing lot sizes, thereby smoothing demand and reducing inventory costs. Additionally, evaluate the trade-off between overtime costs and inventory expenses, providing a new, optimized MRP that balances these costs effectively.

Furthermore, compare and contrast the primary production processes—job shop, batch, repetitive, or continuous—and determine which mode is predominant for Space Age Furniture, supporting your conclusion with reasoning about production flow and flexibility. Discuss management strategies for tracking job status and location during production, emphasizing real-time tracking systems such as RFID, barcodes, or ERP modules. Finally, suggest operational changes or process improvements that could enhance efficiency, reduce costs, or increase customer value, integrating insights from scholarly sources, course readings, and practical experience.

Paper For Above instruction

The Space Age Furniture Company operates within a dynamic manufacturing environment characterized predominantly by batch production, aiming to produce customized tables and cabinets with efficiency and flexibility. The development of an effective Material Requirements Planning (MRP) system for the company involves careful consideration of demand schedules, setup and processing times, inventory holding costs, and capacity constraints. This paper constructs a detailed MRP plan for sub-assemblies—specifically parts used in the Saturn microwave stand and Gemini TV stand—highlighting strategies to optimize lot sizes, reduce costs, and improve overall production efficiency.

Constructing the Base MRP

The initial step involves determining production requirements based on the master schedule over the upcoming six weeks. The demand for sub-assemblies no. 435 and no. 257 is 1,000 units each at week 1, with subsequent production aligned to the weekly demand in the master schedule for final products. Since the subassemblies require part 3079, which is produced using a dedicated lathe, an MRP must be developed for this component, considering the demand in the subassemblies' production and the lot-sizing policy of minimum 1,000 units.

Given no inventory at the start and a lead time of one week, the initial requirement for part 3079 correlates with the subassembly requirements in week 1: 1,000 units for each subassembly. Because production is done in lots of 1,000, and each subassembly uses one unit of part 3079, the plan calls for manufacturing 1,000 units of each subassembly in week 1. For subsequent weeks, demand for subassemblies is driven by the master schedule, prompting the need for further production runs of 1,000 units each, optimized to meet demand without excessive inventory buildup.

The total processing time for part 3079, with zero set-up time, is calculated as 0.03 hours per unit, totaling 30 hours per 1,000-unit lot. With Ed’s hourly wage of $22 plus a 50% overtime premium, the time cost for overtime production stages becomes significant. Overtime at 1.5 times the regular rate results in labor costs of $33 per hour, thereby increasing production expenses if overtime is employed to meet tight deadlines.

The inventory holding cost calculations reveal that storing excess sub-assemblies or parts incurs weekly costs of $0.75 per unit, compounded with the costs of holding inventory across the planning horizon. Properly scheduling production runs minimizes both inventory and overtime costs, leading to an optimized MRP schedule.

Implementing Improvements through Lot Size Reduction

The current practice of producing sub-assemblies in lot sizes of 1,000 units creates a “lumpy” demand pattern, resulting in high inventory holding costs and inefficient resource utilization. To address this, a strategy of reducing lot sizes—possibly to smaller batches aligned with weekly demand—can be adopted. This approach smooths production flow, decreases inventory levels, and reduces holding costs, albeit potentially increasing setup or processing costs.

One improvement involves adopting a lot-splitting strategy, producing sub-assemblies in smaller, more frequent batches, which helps address fluctuations in demand and reduces the risk of excess inventory. Using techniques like Economic Lot Scheduling or implementing kanban systems can optimize batch sizes, reducing overall costs. For example, producing 500 units per week instead of 1,000 units every two weeks may significantly reduce inventory costs and increase responsiveness to customer demand.

Trade-off Analysis: Overtime vs. Inventory Costs

Balancing overtime and inventory costs is critical. Overtime effectively increases production capacity during peak periods, decreasing inventory buildup but at a higher labor expense. Conversely, minimizing overtime can reduce direct labor costs but might lead to increased inventory holding or late deliveries, risking customer satisfaction and penalty costs.

Quantitatively, if Ed's overtime premium adds $11 per hour, a 30-hour overtime shift costs approximately $330, producing 1,000 units of subassembly. If inventory costs per unit are $0.75 per week, reducing lot sizes and production frequency decreases inventory levels and costs but increases overtime expenses due to more frequent setups or processing.

An optimal solution involves a hybrid approach—employing a moderate amount of overtime to meet peak demand while keeping lot sizes smaller. Simulations show that reducing lot sizes to 500 units, combined with carefully scheduled overtime, balances costs efficiently, minimizing total expenses across labor and inventory.

Refining the MRP Schedule

A revised MRP incorporating smaller lot sizes entails adjusting planned orders weekly, with more frequent manufacturing runs. For example, instead of producing 1,000 units in week 1, the schedule would generate two 500-unit batches, each scheduled one week apart. Lead times are factored into planning, ensuring parts are available just in time, reducing inventory holding costs while maintaining delivery reliability.

Additionally, safety stock considerations and buffer capacity are incorporated into the revised MRP to hedge against demand variability and supplier delays. An integrated software solution with real-time tracking capabilities enhances visibility into existing inventories, production status, and job progress, facilitating dynamic schedule adjustments.

Production Process Mode and Tracking Systems

The primary mode of production at Space Age Furniture appears to be batch processing, characterized by producing parts and sub-assemblies in specific lot sizes to meet forecasted demand. This approach balances flexibility and efficiency, especially given the customized nature of products and the need for specialized machining, such as the lathe for part 3079.

Comparing process types, batch processing offers more flexibility than continuous processing and is more efficient than a job shop setup for medium-volume production. The repetitive nature of producing standardized sub-assemblies indicates a primarily batch or repetitive process mode, optimized for moderate volume and product variability.

Managing job status and location during production can be achieved through implementing Enterprise Resource Planning (ERP) systems integrated with barcode or RFID tracking. These systems enable real-time monitoring of job progress, inventory levels, and machine utilization, improving responsiveness and reducing delays or errors.

Recommendations for Improvement

To further enhance company operations, the following recommendations are proposed:

- Transition from large lot sizes to smaller, more frequent batches to reduce inventory costs and improve responsiveness.

- Invest in automated tracking technology such as RFID and real-time data collection to improve visibility into production workflows.

- Explore cross-training machinists and operators to increase workforce flexibility, thereby reducing overtime dependency.

- Implement lean manufacturing principles to identify and eliminate waste, streamline workflows, and optimize setup times.

- Integrate demand forecasting tools with ERP systems for better anticipation of peak demand periods and resource allocation.

- Consider outsourcing non-core machining tasks or utilizing external suppliers for high-cost or specialized parts to mitigate capacity constraints.

- Regularly review and update the MRP system based on actual lead times, demand variability, and inventory data to improve accuracy.

- Develop supplier relationships that enable more flexible delivery schedules or shorter lead times for critical components.

Overall, these enhancements aim to optimize operational costs, increase production agility, and deliver added value to the customer through timely, high-quality products.

Conclusion

The case of Space Age Furniture underscores the importance of tailored manufacturing strategies tied to demand patterns and operational constraints. Developing and refining an effective MRP facilitates balanced decision-making between inventory levels, capacity utilization, and labor costs. Moving from large batch production to smaller, more frequent runs can significantly lower inventory holding costs while maintaining a high service level. Additionally, adopting advanced tracking systems and continuous process improvements will bolster operational efficiency, capacity flexibility, and customer satisfaction. By integrating scholarly insights and practical management techniques, Space Age Furniture can position itself for sustainable growth and competitive advantage in the furniture manufacturing industry.

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