Prices often vary with each merchandise purchase made during the accounting cycle. This makes it difficult for the accountant to easily calculate the cost of goods sold and the cost of available goods. There are several methods that help the accountant determine the cost of ending inventory. It is recommended to select the one that gives the company the best way to measure the net profit for the economic period and the one that is most convenient for tax purposes.
There are two good systems for calculating inventories, the periodic system and the permanent system. In the periodic system, each time a sale is made, only the income earned is recorded; that is, no entry is made to credit the inventory or purchase account for the amount of merchandise that has been sold. Therefore, inventory can only be determined through a physical count or verification of existing merchandise at the close of the economic period. When merchandise inventories are determined only by physical checking at specified intervals, it is said to be a periodic inventory. This inventory system is the most appropriate for companies that sell a wide variety of items with high sales volume, and a relatively low unit cost; such as supermarkets, hardware stores,shoe stores, perfumeries, etc.
The permanent or continuous inventory system, unlike the newspaper, uses records to continuously reflect the value of inventories. Businesses that sell a relatively small number of products that have a high unit cost, such as computer equipment, vehicles, home and office equipment, etc., are most likely to use a permanent or continuous inventory system.
PRODUCT: SINGLE ACTING CYLINDER
The company Pneumatics and Associates for the design of automation parts, wants to prepare the material requirement plan for the month of September of the article: PNEUMATIC ACTUATOR, the article is composed of a body
PRODUCTION PROCESS:
Pneumatic working elements
The energy of the compressed air is transformed by means of cylinders in a linear back and forth movement, and by means of pneumatic motors, in a rotary movement.
Pneumatic elements of rectilinear movement
(pneumatic cylinders)
Generating a rectilinear motion with mechanical elements combined with electrical drives often involves considerable expense
1 Single-acting cylinders
These cylinders have a single compressed air connection. They cannot do work in more than one way. Air is needed only for a translational movement. The stem returns by the effect of a built-in spring or an external force.
The built-in spring is calculated so as to return the plunger to its initial position at a sufficiently high speed.
In single acting cylinders with built-in spring, the length of the spring limits the stroke. Therefore, these cylinders do not exceed a stroke of about 100 mm.
They are mainly used to clamp, eject, squeeze, lift, feed, etc.
Piston cylinder
The seal is achieved with a flexible material (perbunan), which covers the metallic or plastic piston. During the movement of the piston, the sealing lips slide on the inner wall of the cylinder.
Cylinder constitution
The piston cylinder consists of: tube, rear cover (bottom) and front cover with bearing (double cup sleeve), rod, bearing bushing and scraper ring; in addition to connecting pieces and gaskets.
The cylindrical tube (1) is manufactured in most cases from seamless drawn steel tube. To extend the life of the joints, the inner surface of the tube must be precision machined (burnished).
For special applications, the tube is constructed of aluminum, brass or steel tube with a chrome-plated running surface. These special versions are used when the cylinders are not operated frequently or to protect them from corrosive influences.
For the rear bottom (2) and front (3) covers, preferably cast iron material (aluminum or malleable) is used. The fixing of both caps on the tube can be done by means of tie rods, threads or flanges.
The stem (4) is preferably made of tempered steel. This steel contains a certain percentage of chromium that protects it from corrosion. Upon request, the piston undergoes a quenching treatment. Its surface is compressed in a rolling process between flat discs. The shank depth is 1mm. In general, the threads are rolled to prevent the risk of breakage.
For hydraulic cylinders a chrome (hard chrome) or hardened rod should be used.
To normalize the stem, a sealing collar (5) is mounted on the front cover. The rod guide is handled by a bearing bushing (6), which can be made of sintered bronze or a metal bushing with plastic coating.
A wiper ring (7) is located in front of the bearing sleeve. This prevents dust and dirt particles from getting inside the cylinder. Therefore, it is not necessary to use a bellows.
The double cup sleeve (8) seals the cylinder chamber.
O-rings or O-rings (9) are used for static sealing, because they must be present, and this causes high friction losses in dynamic applications.
CODING POLICY
- 2 digits for production level 3 digits for description 3 digits for consecutive
PRODUCT STRUCTURE
|
- List of material with inventory control policy
| Code | Description | NP | Factor | Type | Class | Qty Ask | TEA | Cant Fabr | TF | Disp. | Process |
| 00NEU001 | Actuator | 0 | one | PT | TO | - | - | 500 | 2 months | 300 | 200 |
| 01CUE002 | Cylindrical Body | one | one | SP | TO | - | - | 2000 | 2 months | 500 | 500 |
| 01TRI003 | Drive Ratchet | one | one | SP | TO | - | - | 2000 | 2 months | 300 | 300 |
| 01VAS004 | Stem | one | one | SP | TO | - | - | 2000 | 2 months | 300 | 300 |
| 01TAP005 | Back cover | one | one | SP | TO | - | - | 2000 | 2 months | 300 | 300 |
| 01VAL006 | XP valve | one | one | SP | TO | - | - | 2000 | 2 months | 300 | 300 |
| 02MAN007 | Hose | two | one | MP | TO | 1000 | 1 MONTH | - | - | 500 | 400 |
| 02SOP008 | Support | two | one | MP | TO | 1000 | 1 MONTH | - | - | 500 | 400 |
| 02TUB009 | 1/2 '' tube (radius) | two | two | MP | TO | 1000 | 1 MONTH | - | - | 500 | 400 |
| 02TUC010 | Cylinder Head Tube | two | one | MP | TO | 1000 | 1 MONTH | - | - | 500 | 400 |
| 02TOI011 | Interchangeable stops | two | two | MP | TO | 1000 | 1 MONTH | - | - | 500 | 400 |
| 02REM012 | Mini springs | two | two | MP | TO | 1000 | 1 MONTH | - | - | 500 | 400 |
| 02SOT013 | Rear Support | two | one | MP | TO | 1000 | 1 MONTH | - | - | 500 | 400 |
| 02RES014 | Choncho spring | two | one | MP | TO | 1000 | 1 MONTH | - | - | 500 | 400 |
| 02EMB015 | Plunger | two | one | MP | TO | 1000 | 1 MONTH | - | - | 500 | 400 |
| 02CAS016 | Bearing Bushing | two | two | MP | TO | 1000 | 1 MONTH | - | - | 500 | 400 |
| 02TOR017 | Screw XP | two | one | MP | TO | 2000 | 1 MONTH | - | - | 500 | 400 |
| 02ARA018 | XP washer | two | one | MP | TO | 2000 | 1 MONTH | - | - | 500 | 400 |
| 02ARO019 | Scratching Ring | two | one | MP | TO | 2000 | 1 MONTH | - | - | 500 | 400 |
| 02RUE020 | Cap Wheel P | two | two | MP | TO | 2000 | 1 MONTH | - | - | 500 | 400 |
| 02BOQ021 | XP nozzle | two | two | MP | TO | 2000 | 1 MONTH | - | - | 500 | 400 |
| 02BOT022 | G4 nozzle | two | two | MP | TO | 2000 | 1 MONTH | - | - | 500 | 400 |
| 02ANI023 | Ring | two | one | MP | TO | 1000 | 1 MONTH | - | - | 500 | 400 |
MRP
THE REASONS FOR MRP
MRP (Material Requirements Planning) is the most widely used manufacturing and purchasing planning system today. Most likely, your company will use it to generate your purchase orders or your work orders. Possibly your suppliers use it to plan the manufacturing of their orders. Even your customers generate the purchase orders that you receive through the MRP. Do you really know where MRP comes from, what it does and doesn't do? In the 1960s, IBM's Joseph Orlicky conducted the first experiments in what he called material requirements planning.or MRP. Although its beginnings were discreet, in 1972 the American Production and Inventory Control Society (APICS) adopted the methodology and promoted it through the so-called “MRP crusade”, which continues to this day. During the 80's, the MRP became the paradigm of production control in the United States and during the 90's it expanded strongly in Mexico and Latin America. In the words of its creator, the great advantage of MRP is that it "really works" (Orlicky, 1974). This is true, although not in all cases. Like any trend in manufacturing, its promoters assure that it is the best system and that it will bring you enormous advantages in operation and efficiency if your company adopts it. The objective of this article is to present a brief and objective description of what the MRP does and does not do. As discussed below,MRP makes a very valuable contribution to production control systems. However, it has serious implicit flaws in its logic that make it undesirable for some manufacturing environments. If we ask users and systems specialists about what the main contribution of MRP is, the answer, without fear of being wrong, would be the simplicity of its algorithm and the logical structure that facilitates its administration.it would be the simplicity of its algorithm and the logical structure that facilitates its administration.it would be the simplicity of its algorithm and the logical structure that facilitates its administration.
However, although that is its main advantage, it is not its main contribution to manufacturing systems. The concept behind the MRP is its great contribution: Separating the dependent demand from the independent, that is, planning the production of the dependent demand only to the extent that it is linked to the satisfaction of the independent demand. Within this play on words, the MRP recognizes that there is independent demand (it originates outside the system and its variability cannot be controlled) and dependent (demand for the components that assemble the final products) and, above all, emphasizes the relationship between both to try to reduce the system's own inventories as the reorder point. Thus, the MRP is a system called push, since its basic mechanics define production programs (or purchases) that must be pushed down the production line (or to the supplier) based on the demand for finished products.
BASIC FUNCTIONALITIES OF MRP
As mentioned above, the logic of MRP is simple, although its complexity lies in the number of items to be managed and the levels of material explosion that are available. MRP works based on two basic parameters of production control: times and quantities. The system must be capable of calculating the quantities of finished products to be manufactured, the necessary components and the raw materials to be purchased in order to satisfy the independent demand. Additionally, when doing this you must consider when to start processes for each item in order to deliver the full quantity on the committed date. To obtain production and purchasing schedules in terms of times and quantities, the MRP performs five basic functions:
- Net requirements calculation Lot size definition Time lag Explosion of materials Iteration
The following is a brief description of what each function consists of:
- Calculation of net requirements: The MRP considers the gross requirements, obtained from the Master Production Plan (MPS) for the finished products, and the requirements obtained from a previous MRP run for the components. They have the inventory available and any work in progress currently on the floor. Thus, the result is what the system really requires to produce and / or buy to satisfy the demand in the required time. A very common element used when obtaining net requirements is to consider a safety inventory to protect against variability in independent demand, which is not controllable. Although it may seem simple, the implications are great, as you are making something that you do not really know if it will be used or not. Per se,what is done is to deceive the system with a non-existent additional demand to maintain said safety inventory. Although this sounds logical and is included in any MRP system, it breaks with the foundation of the methodology by involving statistical and inventory elements in a system that claims to be free of them.
Definition of batch size: The objective of this function is to group the net requirements into economically efficient batches for the plant or the supplier. Some of the rules and algorithms used to define batches are:
Lot by lot e: each net requirement is a lot.
Fixed order period (FOP): groups the requirements of a fixed period (this period must be defined).
Fixed Quantity: Use EOQ or some variation of the model to calculate an optimal lot and adjust the net requirements to that lot.
Others: Some methods are Wagner-Whitin and Part-Period Balancing, however it is not our goal to explain them.
Time lag : It consists of lagging the requirements starting from their delivery date, using fixed leadtimes to determine their start date. As we will see later, this is one of the fundamental problems of the MRP and that calls into question the universality professed by its predecessors.
Explosion of materials: It is the structural part of the MRP that executes its fundamental concept: linking dependent demand with independent demand. It does this by means of the bill of materials for each finished product, by means of which all the components of an article are related in a logical order of assembly to form a finished product. Thus, each net requirement for a high-level item generates gross requirements for lower-level components.
Iteration: It consists of repeating the first four steps for each level of the list of materials until the requirements of each item and component are obtained. When executing the algorithm, that is, the five functionalities described, the MRP generates three types of output documents:
Planned orders: These are the work or purchase orders obtained from the MRP calculations. Typically, an order will include components from multiple orders or requirements, corresponding to multiple customers.
Change News: Indicates changes to existing job specifications, either in quantity or time.
Exception news: They indicate when there are requirements that cannot be met, as they needed to have started processing in the past. The production planner must make decisions about these requirements in order to expedite them or negotiate commitment dates with the client. What is described in this section is a brief summary of what the MRP does. Although there may be additional functionalities, the basic concept and logic of the system is based on these five functionalities and the three described outputs. The following describes what the MRP does not do, that is, its main problems.
MRP problems
MRP deficiencies can create systematic erroneous decision making, creating a production environment with high inventories out of control and extensive backlog, causing late deliveries and conflicts in floor control. However, this does not necessarily happen in all environments or in all manufacturing systems, but only in those in which there are circumstances that the MRP does not consider. Therefore, it is necessary to know and understand what the problems consist of and how they can be identified. The basic model on which the MRP algorithm is defined is that of an assembly line with fixed leadtimes s. This great assumption entails three great problems:
- Infinite capacity: the fixed leadtimes considered are not affected by the current load of the production line, so the MRP assumes that there is no capacity restriction. In other words, the MRP considers that there is an infinite production capacity. Currently there are modules that work in conjunction with the MRP to try to attack this problem. The most common and which are practically included in all current systems are RCCP (Rough-cut capacity planning) and CRP (Capacity requirements planning). Both modules seek to identify capacity problems and offer alternative solutions (delay or expedite). However, both processes are run once the orders have been captured and the backlog exists, that is, they do not eliminate the problem at its root and therefore do not offer a systematic solution.
- Long planned leadtimes:The assumption of fixed leadtimes, in addition to assuming finite capacity, also assumes constant leadtimes. However, in most manufacturing systems this is not true. On the contrary, leadtimes are variable and present a stochastic behavior that in many cases can be characterized by means of a random variable, that is, a mean, a variance and a probability distribution can be estimated. However, the MRP is not designed, for obvious computational reasons, to work with random variables, but with fixed numbers. As a consequence, planners typically assign longer leadtimes to "hedge" against any delay. This decision causes an increase in inventory levels, since one of the basic manufacturing rules is that the higher the leadtime, the higher the safety inventory.In addition, increasing leadtime increases inventory in process and production centers become saturated, so the ability to respond quickly to demand is lost (in other words, longer cycle times are induced).
- Nervousness in the system: Given the structure of the MRP algorithm, it is easy to induce drastic changes with very small variations in the gross requirements. For example, given a feasible MRP run, if demand changes slightly, an infeasible plan may be obtained. This problem is commonly solved by using frozen planning periods.
Conclusions
Throughout this article we have tried to objectively describe the functionalities of MRP and its underlying problems. Therefore, when evaluating whether MRP is best for planning and controlling your manufacturing system, consider the following:
- Does the production process resemble an assembly line? To the extent that each component comes from a production process with considerable variability, the model
MRP will not be the most recommended.
- How does the demand for the items to be managed behave? MRP, given the problems described, is best applied to articles with high movement, high frequency and low variability. However, this is not a sufficient condition, but rather a necessary condition for the MRP to function properly.
- How do the leadtimes of the production processes and suppliers behave? This is a question that very few companies can answer. It is rare to find a logistics, production or sourcing manager who keeps strict control of production leadtimes and their suppliers. This is puzzling, because as we have seen, a controlled leadtime has important implications for inventories and for the system's speed to react. So start measuring leadtimes today and see how constant and fixed they are. You will probably be surprised and understand why your MRP has not been working as expected.
- Is the installed capacity sufficient to meet the demand? The MRP will work properly and smoothly as long as the installed capacity in your process
restriction is considerably greater than the demand it meets. Otherwise, the basic assumption of infinite capacity is broken and the plans coming from an MRP hardly
will be feasible in reality. So if your company is about to implement MRP or has operated with it for a while and has not had the expected results, evaluate once again if it is what your manufacturing system needs to meet current market needs.
Bibliography
Hopp, Wallace J., Spearman, Mark L.
Factory Physics, Foundations of Manufacturing
Management
Chapter 3. The MRP Crusade.
TABLE OF REFERENCES
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