Page 295 -

Master Data 277

for the top-level items in the BOM. Companies use MPS for the most critical
fi nished goods to ensure that resources and capacity are available for these
materials before they plan for other materials. MPS is an optional step in the
planning process and is usually followed by MRP, which completes the plan-
ning process for the remaining materials.

Lot Size Key
A lot size is the quantity of material that is specifi ed in the procurement pro-
posals generated by the material planning process. The lot size key specifi es
the procedure that is used to determine the lot size. A variety of procedures for
determining lot size are available. The most basic procedures are static lot-siz-
ing procedures, which specify a fi xed quantity based on either a predetermined
value (fi xed lot size) or the exact quantity required (lot-for-lot). For example,
when using the lot-for-lot procedure, if the calculated requirement for seats is
100, then the proposed order quantity is also 100. Period lot-sizing procedures
combine the requirements from multiple time periods, such as days or weeks,
into one lot. Optimum lot-sizing procedures take into account the costs of order-
ing and storing materials using techniques such as the economic order quantity
and economic production quantity calculations. For example, if the calculated
requirement for seats is 100, the proposed order quantity may be 500 if it is more
economical to purchase the seats in larger quantities. GBI uses the lot-for-lot
procedure to determine the lot size for all of its materials.

Scheduling Times
One task that must be performed by the planning process is to estimate the
time needed to procure the necessary materials. This calculation is based on
estimates of the time required to complete the various tasks that are included in
the material master and the product routing. Common time estimates include:
• In-house production time, which is the time needed to produce the
material in house.

• Planned delivery time, which is the time needed to obtain the mate-
rial if it is externally procured.
• GR (goods receipt) processing time, which is the amount of time required
to place the received materials in storage so that they are ready for use.
In-house production time and the GR processing time are used to deter-
mine procurement time for internally procured materials. For externally pro-
cured materials, the planned delivery time and the GR processing time are used.
In-house production time is further divided into three time elements:
setup, processing, and interoperation. Recall the discussion of some of these
elements from Chapter 6.
• Setup time is the time required to set up the work centers used in
production.
• Processing time is the time required to complete operations in the
work centers.

• Interoperation time is the time required to move materials from one
work center to another.

31/01/11 6:42 AM
CH008.indd 277 31/01/11 6:42 AM
CH008.indd 277