Decision Support System (DSS) – Model 3
Like the other models proposed above, this model is designed to carry inventory to avoid delay in customers.
Methodology:
Forecasting: Weekly forecast is done on the basis of previous 20 weeks demand using linear regression method.
Master Production Scheduling
For main products alpha and beta, MPS for a given week have been designed taken into account the
MPS (week t) = Forecast demand (week t) – Projects in hand (week t-1) - Scheduled Receipts + Safety stock.
Thus, Planned Order Release (week t-1) = MPS (week t)
For example, planned order Release (POR) for week 21 is equate to the MPS calculated for week 22. This gives a fair idea on the number of components and therefore sub-component required for fulfilling the respective MPS requirements.
For MRP explosion, the gross requirement are linked to parent to Planned order release for that concerned week. We are also following the lot for lot order policy (assuming a lead time of one week)
However for full-fledged production of components like Delta & Epsilon, and order requirements of components Delta, Epsilon and Gamma, we have assumed that scheduled receipt for a given week in reflected in the opening inventory of the preceding week. Thus for a given week t,
Planned Order Receipt (t) = Maximum (Gross Requirements (t) – Projects in hand (t-1) + Safety Stock
The rationale is the inappropriate accounting of schedule receipts for calculation of MPS and to ensure sufficient inventory is built up from the start to minimize overtime requirements in the later period. Not taken
Capacity Requirements Planning
For capacity requirements, we have calculated the capacity (i.e. time required) using the processing time devoted towards the production process of each product or component. No sequencing has been considered in terms of waiting period.
Priority Scheduling
No priority is assigned to any product.
Steps for DSS 1. Initialize the game 2. Press Make/Alter decisions. 3. Then make decisions for order sizing using “Use MRP”. This will populate the order fields with appropriate numbers. 4. Do not assign priority other than the mentioned value of 1. 5. Observe the overtime field for any overtime requirement for the given week 6. The press “Release Order” and “Simulate” 7. Repeat the above steps from 1-7 and observe the different fields (Inventory position, financial performance etc.) in the main sheet
Different cases
Four different cases were considered based on whether 1. Safety stock is taken as 500 or calculated as per the customer service level and standard deviation in the demand. 2. The last period production takes care of the next week or not. (Assuming profit can be maximized by not producing in the last week) Case | Profit | 1. Safety Stock = 500; No prod. In last week | 859665 | 2. Safety Stock = 500; Regular prod. In last week | 918111.75 | 3. Safety Stock ≠ 500; No prod. In last week | 785737.25 | 4. Safety Stock ≠ 500; Regular prod. In last week | 704041.5 |
All figures are in dollars
Using safety stock values calculated at 95% service level for each component and main products, we observe the profit to be less compared to the situation where safety stock is maintained at 500 due to occasional unavailability of components for production of alpha and beta
Safety stock calculated: | Alpha | Beta | Comma | Delta | Epsilon | Gamma | Fi | Safety Stock | 179.6852 | 145.0756 | 359.3704 | 200.9335 | 300.9246 | 145.0756 | 788.8996 |