Reference no: EM132224620

MRP systems are the preferred method for managing dependent inventories. This means that when demand is known, firms, including Wheeled Coach, use MRP. Wheeled Coach builds thousands of different and constantly changing configurations of its products. The custom nature of the product means lots of options and special designs—and a potential scheduling and inventory nightmare. With IBM’s MRP software, called MAPICS, on an IBM AS/400 computer, Wheeled Coach addresses such problems and succeeds in solving many of them. Material requirements planning also has an application in many other businesses, including restaurants, hospitals, and floral wholesalers—provided the following five pieces of information are assembled. Master production schedule. The master production schedule shows what is to be produced and when. It is not a forecast; it is a schedule to be met. Master production schedules are often presented in terms of what is to be produced each week, but they can be done in terms of months or days. Bill of Material (BOM). A Bill of Materials, which may take the form of formulas or menus, state the quantities of what is needed to produce the product. MRP inventory availability. Accurate inventory helps prevent overstock and shortages. Purchase orders outstanding (what is on order and when it will arrive). Purchase orders outstanding tell the system what material is expected and when. Lead time (how long will it take to make each item). Lead time for each phase of production or assembly is necessary to make the schedule for component parts. All five elements of the input information are critical to make an MRP system a success. Many MRP systems are not a success because one or more data sources are inaccurate. Flow chart illustrating the flow of information for an MRP system. Wheeled Coach’s experience of MRP is not unusual. Once computerized Bills of Material were implemented, a “where used” report determined the items that should be in inventory. Many items in inventory were not listed on any of the BOMs. This led to a double-checking of the BOMs. With renewed BOM accuracy, effort returned to assuring inventory accuracy. Some of the excess inventory items were the result of the rapid changes in ambulance technology. Some items were in inventory because of customer changes in specifications after orders were placed. This inventory excess occurs because many items have a longer lead-time than the 17 days required for ambulance production at Wheeled Coach. Plans were made for eliminating the excess inventory. ABC analysis and cycle counting were implemented to increase inventory accuracy. With added emphasis on BOM accuracy, the frequency of Engineering Change Notices (ECNs) at Wheeled Coach was reduced. Then the focus moved to the purchasing system and improvement in order quantities and part number accuracy. Discussion questions Answer the following questions. Be specific in your suggestions for reducing inventory and how to implement them.

Why is accurate inventory such an important issue at Wheeled Coach? Do you agree with the plan for dealing with excess inventory at Wheeled Coach? Comment on their action.