{"id":12093,"date":"2018-11-01T22:30:05","date_gmt":"2018-11-01T22:30:05","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/?post_type=chapter&#038;p=12093"},"modified":"2024-05-07T16:56:44","modified_gmt":"2024-05-07T16:56:44","slug":"materials-planning-and-inventory-control","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/chapter\/materials-planning-and-inventory-control\/","title":{"raw":"Materials Planning and Inventory Control","rendered":"Materials Planning and Inventory Control"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Explain materials-requirement planning (MRP)<\/li>\r\n \t<li>Explain just-in-time inventory control (JIT)<\/li>\r\n<\/ul>\r\n<\/div>\r\nAfter the facility location has been selected and the best layout has been determined,\u00a0the next stage in production planning is to determine production material requirements.\r\n<h2><strong>Material-Requirements Planning (MRP)<\/strong><\/h2>\r\nMany manufacturing companies have adopted computerized systems to control the flow of resources and inventory. <strong>Materials requirement planning (MRP)<\/strong> is one such system. MRP uses a master schedule to ensure that the materials, labor, and equipment needed for production are at the right places in the right amounts at the right times. The schedule is based on forecasts of demand for the company\u2019s products. It says exactly what will be manufactured during the next few weeks or months and when the work will take place. Sophisticated computer programs coordinate all the elements of MRP. The computer comes up with materials requirements by comparing production needs to the materials the company already has on hand. Orders are placed so items will be on hand when they are needed for production, while maintaining the lowest possible amount of materials and product to remain in house. MRP helps ensure a smooth flow of finished products.\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Question<\/h3>\r\nhttps:\/\/assess.lumenlearning.com\/practice\/8397f501-7ba6-4f6b-9b01-e89d4a22c551\r\n\r\n<\/div>\r\nSome manufacturing firms have moved beyond MRP systems and are now using enterprise resource planning (ERP) systems. ERP systems provides an integrated and continuously updated view of core business processes using shared\u00a0databases\u00a0maintained by a\u00a0database management system. ERP systems track business resources\u2014cash,\u00a0raw materials,\u00a0production capacity\u2014and the status of business commitments\u2014orders,\u00a0purchase orders, and\u00a0payroll. The applications that make up the system share data from and between various departments (e.g., manufacturing, purchasing, sales,\u00a0accounting, etc.).\u00a0ERP facilitates information flow between all business functions and manages connections to outside\u00a0stakeholders.\r\n\r\nEven with the implementation of highly integrated planning software, operations managers still need to plan for and control inventory.\r\n<h2><strong>Just-in-Time (JIT) Manufacturing<\/strong><\/h2>\r\n<strong>Just-in-time (JIT) manufacturing <\/strong>is strategy that companies employ to increase efficiency and decrease waste by receiving goods only when\u00a0they are needed in the production process, thereby reducing inventory costs. In theory, a JIT system would have parts and materials arriving on the warehouse dock at the exact moment they are needed in the production process. To make this happen, manufacturers and suppliers must work together closely to prevent just-in-time from becoming \"just-isn\u2019t-there\". Operations managers must accurately forecast the need for materials, since even the slightest deviation can result in a slowdown of production.\r\n<div class=\"textbox tryit\">\r\n<h3>PRactice Question<\/h3>\r\nhttps:\/\/assess.lumenlearning.com\/practice\/dbcef688-ac53-40db-8d94-d0ac85a57d0c\r\n\r\n<\/div>\r\nUnexpected events like the shutdown of ports due to Hurricane Harvey and the devastation and flooding caused by Hurricane Maria in Puerto Rico can cause chaos in the supply chains of manufacturers, resulting in problems for firms relying on\u00a0<mtext>JIT<\/mtext>. But if employed properly, and in spite of these risks, a\u00a0<mtext>JIT<\/mtext>\u00a0system can greatly reduce inventory-holding costs and smooth production highs and lows.","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Explain materials-requirement planning (MRP)<\/li>\n<li>Explain just-in-time inventory control (JIT)<\/li>\n<\/ul>\n<\/div>\n<p>After the facility location has been selected and the best layout has been determined,\u00a0the next stage in production planning is to determine production material requirements.<\/p>\n<h2><strong>Material-Requirements Planning (MRP)<\/strong><\/h2>\n<p>Many manufacturing companies have adopted computerized systems to control the flow of resources and inventory. <strong>Materials requirement planning (MRP)<\/strong> is one such system. MRP uses a master schedule to ensure that the materials, labor, and equipment needed for production are at the right places in the right amounts at the right times. The schedule is based on forecasts of demand for the company\u2019s products. It says exactly what will be manufactured during the next few weeks or months and when the work will take place. Sophisticated computer programs coordinate all the elements of MRP. The computer comes up with materials requirements by comparing production needs to the materials the company already has on hand. Orders are placed so items will be on hand when they are needed for production, while maintaining the lowest possible amount of materials and product to remain in house. MRP helps ensure a smooth flow of finished products.<\/p>\n<div class=\"textbox tryit\">\n<h3>Practice Question<\/h3>\n<p>\t<iframe id=\"assessment_practice_8397f501-7ba6-4f6b-9b01-e89d4a22c551\" class=\"resizable\" src=\"https:\/\/assess.lumenlearning.com\/practice\/8397f501-7ba6-4f6b-9b01-e89d4a22c551?iframe_resize_id=assessment_practice_id_8397f501-7ba6-4f6b-9b01-e89d4a22c551\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:300px;\"><br \/>\n\t<\/iframe><\/p>\n<\/div>\n<p>Some manufacturing firms have moved beyond MRP systems and are now using enterprise resource planning (ERP) systems. ERP systems provides an integrated and continuously updated view of core business processes using shared\u00a0databases\u00a0maintained by a\u00a0database management system. ERP systems track business resources\u2014cash,\u00a0raw materials,\u00a0production capacity\u2014and the status of business commitments\u2014orders,\u00a0purchase orders, and\u00a0payroll. The applications that make up the system share data from and between various departments (e.g., manufacturing, purchasing, sales,\u00a0accounting, etc.).\u00a0ERP facilitates information flow between all business functions and manages connections to outside\u00a0stakeholders.<\/p>\n<p>Even with the implementation of highly integrated planning software, operations managers still need to plan for and control inventory.<\/p>\n<h2><strong>Just-in-Time (JIT) Manufacturing<\/strong><\/h2>\n<p><strong>Just-in-time (JIT) manufacturing <\/strong>is strategy that companies employ to increase efficiency and decrease waste by receiving goods only when\u00a0they are needed in the production process, thereby reducing inventory costs. In theory, a JIT system would have parts and materials arriving on the warehouse dock at the exact moment they are needed in the production process. To make this happen, manufacturers and suppliers must work together closely to prevent just-in-time from becoming &#8220;just-isn\u2019t-there&#8221;. Operations managers must accurately forecast the need for materials, since even the slightest deviation can result in a slowdown of production.<\/p>\n<div class=\"textbox tryit\">\n<h3>PRactice Question<\/h3>\n<p>\t<iframe id=\"assessment_practice_dbcef688-ac53-40db-8d94-d0ac85a57d0c\" class=\"resizable\" src=\"https:\/\/assess.lumenlearning.com\/practice\/dbcef688-ac53-40db-8d94-d0ac85a57d0c?iframe_resize_id=assessment_practice_id_dbcef688-ac53-40db-8d94-d0ac85a57d0c\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:300px;\"><br \/>\n\t<\/iframe><\/p>\n<\/div>\n<p>Unexpected events like the shutdown of ports due to Hurricane Harvey and the devastation and flooding caused by Hurricane Maria in Puerto Rico can cause chaos in the supply chains of manufacturers, resulting in problems for firms relying on\u00a0JIT. But if employed properly, and in spite of these risks, a\u00a0JIT\u00a0system can greatly reduce inventory-holding costs and smooth production highs and lows.<\/p>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-12093\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Materials Planning and Inventory Control. <strong>Authored by<\/strong>: Linda Williams and Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><li>Practice Questions. <strong>Authored by<\/strong>: Robert Danielson. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>Achieving World-Class Operations Management. <strong>Provided by<\/strong>: OpenStax CNX. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"http:\/\/cnx.org\/contents\/4e09771f-a8aa-40ce-9063-aa58cc24e77f@8.5\">http:\/\/cnx.org\/contents\/4e09771f-a8aa-40ce-9063-aa58cc24e77f@8.5<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by-sa\/4.0\/\">CC BY-SA: Attribution-ShareAlike<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":17,"menu_order":12,"template":"","meta":{"_candela_citation":"[{\"type\":\"cc\",\"description\":\"Achieving World-Class Operations Management\",\"author\":\"\",\"organization\":\"OpenStax CNX\",\"url\":\"http:\/\/cnx.org\/contents\/4e09771f-a8aa-40ce-9063-aa58cc24e77f@8.5\",\"project\":\"\",\"license\":\"cc-by-sa\",\"license_terms\":\"\"},{\"type\":\"original\",\"description\":\"Materials Planning and Inventory Control\",\"author\":\"Linda Williams and Lumen Learning\",\"organization\":\"\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"original\",\"description\":\"Practice Questions\",\"author\":\"Robert Danielson\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"36935488-1d9d-42ab-b373-4baba4e26c6f, bb86d203-c38d-4fe2-8574-42880266c6b0, eb290e84-2290-4c1e-b464-1667c25cd37f","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-12093","chapter","type-chapter","status-publish","hentry"],"part":91,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/pressbooks\/v2\/chapters\/12093","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/wp\/v2\/users\/17"}],"version-history":[{"count":6,"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/pressbooks\/v2\/chapters\/12093\/revisions"}],"predecessor-version":[{"id":15536,"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/pressbooks\/v2\/chapters\/12093\/revisions\/15536"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/pressbooks\/v2\/parts\/91"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/pressbooks\/v2\/chapters\/12093\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/wp\/v2\/media?parent=12093"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/pressbooks\/v2\/chapter-type?post=12093"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/wp\/v2\/contributor?post=12093"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-introductiontobusiness\/wp-json\/wp\/v2\/license?post=12093"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}