Chapter 14, Problem 16P

a)

Summary Introduction

To determine: The change in the items due to the change in the lead time of item G.

Introduction:

Net requirements plan:

The Net requirements plan is the plan which is established on the Gross requirements plan formed by deducting the stock on and the Scheduled receipts. If the total requirement is below the safety stock levels, a planned order is made based on the given lot sizing technique.

Answer to Problem 16P

The change will take place only with item G because it has no children. The Lead time of 4 weeks will preempt the Planned order release by 1 one week.

Explanation of Solution

Given information:

• 10 units for service and production department for B and F.
• 10 units of A at week 8.
• Lead time of G has been changed to 4 weeks.

Part	A	B	C	D	E	F	G	H
On hand	0	2	10	5	4	5	1	10

Product structure:

Net requirements plan:

Item A:

	Week
Item A	1	2	3	4	5	6	7	8
Gross requirements								10
Scheduled receipt
On-hand (0)								0
Net requirement								10
Planned order receipt								10
Planned order release							10

Week 8:

The gross requirement is 10 (1 assembly). The on-hand inventory is 0. Hence, the Net requirement is 10. The lead time is 1 week. Therefore, the Planned order release will be 10 in week 7 which will be the Planned order receipt in week 8.

Item B:

	Week
Item B	1	2	3	4	5	6	7	8
Gross requirements						10	10
Scheduled receipt
On-hand (2)						2	0
Net requirement						8	10
Planned order receipt						8	10
Planned order release					8	10

Week 6:

The gross requirement is 10 (1 assembly) derived from the Planned order release of A. The on-hand inventory is 2. Hence, the Net requirement is 8. The lead time is 1 week. Therefore, the planned order release will be 8 in week 5 which will be the planned order receipt in week 6.

Week 7:

The gross requirement is 10 (1 assembly) derived from the Planned order release of A. The on-hand inventory is 0. Hence, the Net requirement is 10. The lead time is 1 week. Therefore, the planned order release will be 10 in week 6 which will be the planned order receipt in week 7.

Item F:

	Week
Item F	1	2	3	4	5	6	7	8
Gross requirements						10	10
Scheduled receipt
On-hand (5)						5	0
Net requirement						5	10
Planned order receipt						5	10
Planned order release					5	10

Week 6:

The gross requirement is 10 (1 assembly) derived from the Planned order release of A. The on-hand inventory is 5. Hence, the Net requirement is 5. The lead time is 1 week. Therefore, the Planned order release will be 5 in week 5 which will be the Planned order receipt in week 6.

Week 7:

The gross requirement is 10 (1 assembly) derived from the Planned order release of A. The on-hand inventory is 0. Hence, the Net requirement is 10. The lead time is 1 week. Therefore, the Planned order release will be 10 in week 6 which will be the Planned order receipt in week 7.

Item D:

	Week
Item D	1	2	3	4	5	6	7	8
Gross requirements					8	10
Scheduled receipt
On-hand (5)					5	0
Net requirement					3	10
Planned order receipt					3	10
Planned order release				3	10

Week 5:

The gross requirement is 8 (1 assembly) derived from the Planned order release of B. The on-hand inventory is 5. Hence, the Net requirement is 3. The lead time is 1 week. Therefore, the Planned order release will be 3 in week 4 which will be the Planned order receipt in week 5.

Week 6:

The gross requirement is 10 (1 assembly) derived from the Planned order release of B. The on-hand inventory is 0. Hence, the Net requirement is 10. The lead time is 1 week. Therefore, the Planned order release will be 10 in week 5 which will be the Planned order receipt in week 6.

Item G (Lead Time = 3):

	Week
Item G	1	2	3	4	5	6	7	8
Gross requirements					5	10
Scheduled receipt
On-hand (1)					1	0
Net requirement					4	10
Planned order receipt					4	10
Planned order release		4	10

Week 5:

The gross requirement is 5 (1 assembly) derived from the Planned order release of F. The on-hand inventory is 1. Hence, the Net requirement is 4. The lead time is 3 weeks. Therefore, the Planned order release will be 4 in week 2 which will be the Planned order receipt in week 5.

Week 6:

The gross requirement is 10 (1 assembly) derived from the Planned order release of F. The on-hand inventory is 0. Hence, the Net requirement is 10. The lead time is 3 weeks. Therefore, the Planned order release will be 10 in week 3 which will be the Planned order receipt in week 6.

Item G (Lead Time = 4):

	Week
Item G	1	2	3	4	5	6	7	8
Gross requirements					5	10
Scheduled receipt
On-hand (1)					1	0
Net requirement					4	10
Planned order receipt					4	10
Planned order release	4	10

Week 5:

The gross requirement is 5 (1 assembly) derived from the Planned order release of F. The on-hand inventory is 1. Hence, the Net requirement is 4. The lead time is 4 weeks. Therefore, the Planned order release will be 4 in week 1 which will be the Planned order receipt in week 5.

Week 6:

The gross requirement is 10 (1 assembly) derived from the Planned order release of F. The on-hand inventory is 0. Hence, the Net requirement is 10. The lead time is 4 weeks. Therefore, the Planned order release will be 10 in week 2 which will be the Planned order receipt in week 6.

Item H:

	Week
Item H	1	2	3	4	5	6	7	8
Gross requirements					5	10
Scheduled receipt
On-hand (10)					10	5
Net requirement						5
Planned order receipt						5
Planned order release					5

Week 5:

The gross requirement is 5 (1 assembly) derived from the Planned order release of F. The on-hand inventory is 10. Hence, the Net requirement is 0. Therefore, there will be no Planned order release. The excess inventory will be available in week 6.

Week 6:

The gross requirement is 10 (1 assembly) derived from the Planned order release of F. The on-hand inventory is 5. Hence, the Net requirement is 5. The lead time is 1 week. Therefore, the Planned order release will be 5 in week 5 which will be the Planned order receipt in week 6.

Item C:

	Week
Item C	1	2	3	4	5	6	7	8
Gross requirements					13	10
Scheduled receipt
On-hand (10)					10	0
Net requirement					3	10
Planned order receipt					3	10
Planned order release			3	10

Week 5:

The gross requirement is 13 (1 assembly) derived from the Planned order release of B and H. The on-hand inventory is 10. Hence, the Net requirement is 3. The lead time is 2 weeks. Therefore, the Planned order release will be 3 in week 3 which will be the Planned order receipt in week 5.

Week 6:

The gross requirement is 10 (1 assembly) derived from the Planned order release of B and H. The on-hand inventory is 0. Hence, the Net requirement is 10. The lead time is 2 weeks. Therefore, the Planned order release will be 10 in week 4 which will be the Planned order receipt in week 6.

 Item E:

	Week
Item E	1	2	3	4	5	6	7	8
Gross requirements				3	15
Scheduled receipt
On-hand (4)				4	1
Net requirement					14
Planned order receipt					14
Planned order release				14

Week 4:

The gross requirement is 3 (1 assembly) derived from the Planned order release of D. The on-hand inventory is 4. Hence, the Net requirement is 0. Therefore, there will be no Planned order release. The excess inventory will be available in week 5.

Week 5:

The gross requirement is 15 (1 assembly) derived from the Planned order release of H. The on-hand inventory is 1. Hence, the Net requirement is 14. The lead time is 1 week. Therefore, the Planned order release will be 14 in week 4 which will be the Planned order receipt in week 5.

Hence, the change will take place only with item G because it has no children. The Lead time of 4 weeks will preempt the Planned order release by 1 one week.

b)

Summary Introduction

To determine: The implications of the production plan because of change in the lead time of item G.

Introduction:

Net requirements plan:

The Net requirements plan is the plan which is established on the Gross requirements plan formed by deducting the stock on and the Scheduled receipts. If the total requirement is below the safety stock levels, a planned order is made based on the given lot sizing technique.

Answer to Problem 16P

The production plan will be altered such that item F and four units of A will be delayed by 1 week.

Explanation of Solution

Given information:

• 10 units for service and production department for B and F.
• 10 units of A at week 8.
• Lead time of G has been changed to 4 weeks.

Part	A	B	C	D	E	F	G	H
On Hand	0	2	10	5	4	5	1	10

Product structure:

Net requirements plan:

Item A:

	Week
Item A	1	2	3	4	5	6	7	8
Gross requirements								10
Scheduled receipt
On-hand (0)								0
Net requirement								10
Planned order receipt								10
Planned order release							10

Week 8:

The gross requirement is 10 (1 assembly). The on-hand inventory is 0. Hence, the Net requirement is 10. The lead time is 1 week. Therefore, the Planned order release will be 10 in week 7 which will be the Planned order receipt in week 8.

Item B:

	Week
Item B	1	2	3	4	5	6	7	8
Gross requirements						10	10
Scheduled receipt
On-hand (2)						2	0
Net requirement						8	10
Planned order receipt						8	10
Planned order release					8	10

Week 6:

The gross requirement is 10 (1 assembly) derived from the Planned order release of A. The on-hand inventory is 2. Hence, the Net requirement is 8. The lead time is 1 week. Therefore, the Planned order release will be 8 in week 5 which will be the Planned order receipt in week 6.

Week 7:

The gross requirement is 10 (1 assembly) derived from the Planned order release of A. The on-hand inventory is 0. Hence, the Net requirement is 10. The lead time is 1 week. Therefore, the Planned order release will be 10 in week 6 which will be the Planned order receipt in week 7.

Item F:

	Week
Item F	1	2	3	4	5	6	7	8
Gross requirements						10	10
Scheduled receipt
On-hand (5)						5	0
Net requirement						5	10
Planned order receipt						5	10
Planned order release					5	10

Week 6:

The gross requirement is 10 (1 assembly) derived from the Planned order release of A. The on-hand inventory is 5. Hence, the Net requirement is 5. The lead time is 1 week. Therefore, the Planned order release will be 5 in week 5 which will be the Planned order receipt in week 6.

Week 7:

The gross requirement is 10 (1 assembly) derived from the Planned order release of A. The on-hand inventory is 0. Hence, the Net requirement is 10. The lead time is 1 week. Therefore, the Planned order release will be 10 in week 6 which will be the Planned order receipt in week 7.

Item D:

	Week
Item D	1	2	3	4	5	6	7	8
Gross requirements					8	10
Scheduled receipt
On-hand (5)					5	0
Net requirement					3	10
Planned order receipt					3	10
Planned order release				3	10

Week 5:

The gross requirement is 8 (1 assembly) derived from the Planned order release of B. The on-hand inventory is 5. Hence, the Net requirement is 3. The lead time is 1 week. Therefore, the Planned order release will be 3 in week 4 which will be the Planned order receipt in week 5.

Week 6:

The gross requirement is 10 (1 assembly) derived from the Planned order release of B. The on-hand inventory is 0. Hence, the Net requirement is 10. The lead time is 1 week. Therefore, the Planned order release will be 10 in week 5 which will be the Planned order receipt in week 6.

Item G (Lead Time = 3):

	Week
Item G	1	2	3	4	5	6	7	8
Gross requirements					5	10
Scheduled receipt
On-hand (1)					1	0
Net requirement					4	10
Planned order receipt					4	10
Planned order release		4	10

Week 5:

The gross requirement is 5 (1 assembly) derived from the Planned order release of F. The on-hand inventory is 1. Hence, the Net requirement is 4. The lead time is 3 weeks. Therefore, the Planned order release will be 4 in week 2 which will be the Planned order receipt in week 5.

Week 6:

The gross requirement is 10 (1 assembly) derived from the Planned order release of F. The on-hand inventory is 0. Hence, the Net requirement is 10. The lead time is 3 weeks. Therefore, the Planned order release will be 10 in week 3 which will be the Planned order receipt in week 6.

Item G (Lead Time = 4):

	Week
Item G	1	2	3	4	5	6	7	8
Gross requirements					5	10
Scheduled receipt
On-hand (1)					1	0
Net requirement					4	10
Planned order receipt					4	10
Planned order release	4	10

Week 5:

The gross requirement is 5 (1 assembly) derived from the Planned order release of F. The on-hand inventory is 1. Hence, the Net requirement is 4. The lead time is 4 weeks. Therefore, the Planned order release will be 4 in week 1 which will be the Planned order receipt in week 5.

Week 6:

The gross requirement is 10 (1 assembly) derived from the Planned order release of F. The on-hand inventory is 0. Hence, the Net requirement is 10. The lead time is 4 weeks. Therefore, the Planned order release will be 10 in week 2 which will be the Planned order receipt in week 6.

Item H:

	Week
Item H	1	2	3	4	5	6	7	8
Gross requirements					5	10
Scheduled receipt
On-hand (10)					10	5
Net requirement						5
Planned order receipt						5
Planned order release					5

Week 5:

The gross requirement is 5 (1 assembly) derived from the Planned order release of F. The on-hand inventory is 10. Hence, the Net requirement is 0. Therefore, there will be no Planned order release. The excess inventory will be available in week 6.

Week 6:

The gross requirement is 10 (1 assembly) derived from the Planned order release of F. The on-hand inventory is 5. Hence, the Net requirement is 5. The lead time is 1 week. Therefore, the Planned order release will be 5 in week 5 which will be the Planned order receipt in week 6.

Item C:

	Week
Item C	1	2	3	4	5	6	7	8
Gross requirements					13	10
Scheduled receipt
On-hand (10)					10	0
Net requirement					3	10
Planned order receipt					3	10
Planned order release			3	10

Week 5:

The gross requirement is 13 (1 assembly) derived from the Planned order release of B and H. The on-hand inventory is 10. Hence, the Net requirement is 3. The lead time is 2 weeks. Therefore, the Planned order release will be 3 in week 3 which will be the Planned order receipt in week 5.

Week 6:

The gross requirement is 10 (1 assembly) derived from the Planned order release of B and H. The on-hand inventory is 0. Hence, the Net requirement is 10. The lead time is 2 weeks. Therefore, the Planned order release will be 10 in week 4 which will be the Planned order receipt in week 6.

 Item E:

	Week
Item E	1	2	3	4	5	6	7	8
Gross requirements				3	15
Scheduled receipt
On-hand (4)				4	1
Net requirement					14
Planned order receipt					14
Planned order release				14

Week 4:

The gross requirement is 3 (1 assembly) derived from the Planned order release of D. The on-hand inventory is 4. Hence, the Net requirement is 0. Therefore, there will be no Planned order release. The excess inventory will be available in week 5.

Week 5:

The gross requirement is 15 (1 assembly) derived from the Planned order release of H. The on-hand inventory is 1. Hence, the Net requirement is 14. The lead time is 1 week. Therefore, the Planned order release will be 14 in week 4 which will be the Planned order receipt in week 5.

If this week is week 1 of the production plan, the increase in the lead time will make that only 1 assembly of G will be available for F in week 5. Hence, item F and consequently 4 units of item A will be delayed by a time of 1 week.

c)

Summary Introduction

To determine: The options the production manager has to manage these changes.

Explanation of Solution

Options the production manager has to manage these changes:

The production manager can do the following. They are:

• The production manager can inform the customer in advance that the 4 units will be delayed by a time of 1 week.
• The production manager can ask the supplier of item G to expedite the production or the delivery.
• The production manager can reduce the time take for production of item F or A.