CASE: XYZ PRODUCTS COMPANY

SUBMITTED BY:
ZARA, ICAH FINNELE
GAMIDO, ROSEMAR
CASTILLO, PAUL
DANGANAN, HARRIETTE
ACORDA, OLIVER
MARCELO, KENT

SUBMITTED TO:
DR. ROWEL ANTONIO

SUBMITTED ON:
MARCH 6, 2015

I. Time Context March 6, 2015

II. View Point Manager of XYZ Company

III. Statement of the problem The problem in the case is to contemplate installing a Materials Requirement Planning (MRP) System to the XYZ Company. The most pertinent questions in the problem are, How will it be done?, How much will be its cost? And what action will be needed to lead this project into success?

IV. Objectives Short-range Objective - To set up the new system in order to have a smooth flow of production and avoid interruption. Long-range Objective – To be able to upgrade equipment which will help fit to the new system.

V. SWOT Analysis STRENGTHS | WEAKNESSES | * Has workers with expertise in using company’s equipment & following the system * High availability of raw materials * Near to target market | * Poor manufacturing system * Inefficient use of resources * Higher percentage of employee turnover & scrap/waste | OPPORTUNITIES | THREATS | * Possible development of the production system * Affordability in the cost of production | * Breakdown of existing system * Competitors build stronger relationship with other customers |

VI. Alternative Courses of Action * ACA# 1: Execute Materials Requirement Planning System.
Advantages: Reduce the levels of inventory. Minimize the holding cost
Disadvantages: Execution of the system will be at high cost.
. High risk on the accuracy rate of information. There will be increase in training cost.

* ACA# 2: Replacement of the whole system.
Advantages: Production capacity will increase. There is an opportunity for a larger market. There will be an efficient use of resources.

Disadvantages: The idea of replacing the whole system might be at high cost. There is the possibility of failure with the production using the new system. A part of the production will be temporarily stopped.

* ACA# 3: Retaining and maintaining the system.
Advantages: Employees are highly knowledgeable to the existing system. There will be no interruption in production. The cost that might be used for the implementation of MRP system or system replacement can be added to the buffer fund.
Disadvantages: System breakdown has a higher chance to occur. Production rate is still the same and it might end up not reaching the quota. Inefficient use of company’s resources will continue.

VII. Recommendation
Our group recommends that ACA# 1 is the best alternative action in the case. Execution of MRP System concentrates on eliminating the idle time of milling machine, maintaining the lowest possible level of inventory, process of production and motivating workers to produce in full volume.
Overview of Material Requirements Planning (MRP) System
Material Requirements Planning (MRP) System is a computer-based production planning and inventory control system. MRP is concerned with both production scheduling and inventory control. It is a material control system that attempts to keep adequate inventory levels to assure that required materials are available when needed. MRP is applicable in situations of multiple items with complex bills of materials. MRP is not useful for job shops or for continuous processes that are tightly linked. The major objectives of an MRP system are to simultaneously:
1. Ensure the availability of materials, components, and products for planned production and for customer delivery 2. Maintain the lowest possible level of inventory 3. Plan manufacturing activities, delivery schedules, and purchasing activities.
MRP is especially suited to manufacturing settings where the demand of many of the components and subassemblies depend on the demands of items that face external demands. Demand for end items are independent. In contrast, demand for components used to manufacture end items depend on the demands for the end items. The distinctions between independent and dependent demands are important in classifying inventory items and in developing systems to manage items within each demand classification. MRP systems were developed to cope better with dependent demand items. The three major inputs of an MRP system are the master production schedule, the product structure records, and the inventory status records. Without these basic inputs the MRP system cannot function.
Source: www.columbia.edu/~gmg2/4000/pdf/lect_06.pdf

Source: http://www.adi.pt/docs/innoregio_mrp-en.pdf

VII. Action Plan OBJECTIVE | ACTIVITIES | TIME FRAME | PERSONSRESPONSIBLE | EXPECTED OUTCOME | Effectivity and efficiency of the new system. | Retraining of workersPurchasing of new components &equipment | Within a year prior to installing the new system | Manager of XYZ Company, Engineer | Improve and control the rate of production using the new systemReduce the percentage of scrap rate |

The cost of Material Requirements Planning (MRP) System is P 2,400,000.

General & Administrative Expenses | Amount | Research, study & analyzation | P 730,000 | Installation and Assembly cost | 558, 000 | Cost of testing whether the asset installed is functioning properly | 479, 000 | Implementation cost of MRP | 385, 000 | Miscellaneous expenses | 248, 000 | TOTAL | P 2,400,000 |