Question

An end item’s demand forecasts for the next 6 weeks are 30 units, followed by forecasts of 25 units for weeks 7 through 10. The current on-hand inventory is 60 units. The order policy is to produce in lots of 80. The booked customer orders for the item, starting with week 1, are 22, 30, 15, 11, 0, 0, 9, 0, 0, and 0 units. The lead time is 2 weeks.

1. Develop an MPS for this end item. (50 points)

2. The marketing department has received six orders for this item in the following sequence:

3. Order 1 is for 40 units to be delivered in period 3

   Order 2 is for 60 units to be delivered in period 4

   Order 3 is for 35 units to be delivered in period 6

   Order 4 is for 30 units to be delivered in period 3

   Order 5 is for 20 units to be delivered in period 5

   Order 6 is for 75 units to be delivered in period 9

   Assuming that the prospective MPS you developed in part (a) does not change, which orders would you be able to accept based on the available to promise (ATP)? (10 points)

Answer 1

	Week 1	Week 2	Week 3	Week 4	Week 5	Week 6	Week 7	Week 8	Week 9	Week 10
Forecast	30	30	30	30	30	30	10	10	10	10
Orders	22	30	15	11	0	0	9	0	0	0
MPS Qty	0	0	80	0	80	0	0	0	0	0
PAB	38	8	58	28	78	48	38	28	18	8
ATP	8	0	32	0	69	0	0	0	0	0

PAB is Part Available Balance (Inventory in hand in that Week)

MPS for Week 1

Requirement (Week 1) = Max (forecast, orders) = Max (30, 22) = 30

Opening Inventory= 60 > Requirement (Week 1)

Hence, MPS = 0

MPS for any other week N:

Requirement = Max (forecast, orders)

If Part Available Balance (inventory) of Week N-1 > Requirement (Week N)

Then, MPS = 0

IF Requirement (Week N) > PAB (Week N-1),

then MPS = 80 for (Requirement - PAB) between 1 and 80

i.e. MPS will be in multiples of 80 for Requirement - PAB in ranges 1-80, 81-160.. and so on.

So, for example,

MPS (Week 3) = Requirement (Week 3) - PAB (Week 2)

MPS (Week 3) = 30 - 8 = 22 i.e. between 1 and 80

Hence, MPS (Week 3) = 80

PAB

PAB (Week N) = PAB (Week N-1) + MPS (Week N) - Requirement (Week N)

Where Requirement (Week N) = Maximum (Forecast, Orders)

We decide MPS basis Max(Forecast, Orders) for that week

For Example,

PAB (Week 5) = PAB (Week 4) + MPS (Week 5) - Requirement (Week 5)

PAB (Week 4) = 28

MPS (Week 5) = 80

Requirement (Week 5) = Maximum (30, 0) = 30

PAB (Week 5) = 28 + 80 - 30

PAB (Week 5) = 78

ATP

ATP for Week 1 = On Hand + MPS (Week 1) – Sum of customer orders starting at period 1 and up to but not including the period of the next MPS delivery

ATP for any other week N (other than week 1):

ATP (period N) = MPS (period N) – the sum of customer orders from period N up to but not including the period with the next MPS

Assuming that we do not change the MPS we developed earlier, we will be able to honor the following orders:

a) Because ATP for week 3 is 32 units, we can take orders up to 32 units extra in week 3 and week 4 combined

Hence, we can take order 4 for 30 units to be delivered in period 3.

b) Because ATP for week 5 is 69 units, we can take orders up to 69 units extra in weeks 5 up to 10 combined

Hence, we can take order 5 for 20 units to be delivered in period 5 and order 3 for 35 units to be delivered in period 6.

Hence, we will be able to take Orders 3, 4, and 5.