Davide Palumbo, Head of Operations, Supply Chain & Systems at Mitsubushi Heavy Industries spoke at the SCL Event UK 2013

1. Davide Palumbo
Bespoke MRP solutions

2. Personal Notes
• Name -> Davide (apparently unpronouncable in English)
• Surname -> Palumbo (better in this area, funnily enough)
• JOB Title -> Head of Operation @ Mitsubishi heavy industries
• Work history -> Sony [Supply Chain & Project Manager],
Mitsubishi (some say I am Japanese inside…)
• Personal traits -> moody… very!
• Nationality -> you guess!!!!!

3. Nationality
Until…

4. MRP / MRP II / ERP
• MRP - Material Requirement Planning
• MRP II - Manufacturing Resource Planning
• ERP - Enterprise Resource planning

5. Planning Cycle
 Rhythmical
cycle
 Constant review
 Seasonality
study
 Model Mix
 Special Projects
(B2B / B2G)

6. Planning Cycle
• The “Engine” of the planning cycle is the MRP
together with the human brain
• Forecast can be “proposed” by the system,
however final decision is ours
• The MRP is a tool, not an “all seeing eye” or a
“crystal ball”

7. Always Shown Forecast Line should be
MRP selectable from:
•Company Fcst
Daily Stock Information Sales Potential •Customer Fcst
Free On Hand
•Customer Orders
100 512
Reserved On Hand 10
Free In transit 100
Reserved In Transit 2
•PY Sales
overdue Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11
Gross Forecast 700 300 1,000 6,221 1,691 1,927
Net Forecast
S
200 300 1,000 6,221 1,691 1,927
S T
E
S
L
S
C
A
Distributor Orders 5,000
F
Actual Sales 500
ORIGINAL PO QTY 50 776 6,221 2,654
FIRM PO ETD 50 300 7,273 2,654
FIRM PO ETA 50 500 300 7,273 2,654
IN TRANSIT PO ETD 25
O
P
P
IN TRANSIT PO ETA 25 100
OF ETD 1,399 2,435 2,732
OF ETA 1,399 2,435
Targe t inve ntory 150 700 6,221 2,076 2,890 3,398
V
Projected Inventory 475 475 6,748 3,182 2,890 3,398
IN
I
D/S 35 14 39 53 45 51
0.5 0.7 1 1.2 1.5 1.7
Lines should be selectable (i.e. possibility to chose which line should be visible
All fields should have drop down menus to drill down
information

8. MRP
 The monthly planning is broken down into weekly
planning Se p/E Jan-11 Feb-11 Mar-11 Apr-11
Gross Forecast 700 1,051 525 6,221
Net Forecast
S
200 1,051 525 6,221
S T
E
S
L
S
C
A
Distributor Orders 5,000
F
Actual Sales 500
ORIGINAL PO QTY 1,076 776 6,221 2,654
FIRM PO ETD 500 300 7,273 2,654
FIRM PO ETA 500 300 7,273 2,654
IN TRANSIT PO ETD 100
O
P
P
IN TRANSIT PO ETA 100
OF ETD 1,675
OF ETA
Targe t inve ntory 526 368 6,221 2,076
V
Projected Inventory 500 475 -276 6,472 2,906
IN
I
D/S 5 14 -16 34 49
TPS 0.5 0.7 1 1.2
Zone 3 PO Zone 3 PO Zone 3 PO Zone 3 PO NO PO (other
Zone 1 PO (CIS & Zone 2 PO Zone 1 PO (CIS & Zone 2 PO Zone 1 PO (CIS & Zone 2 PO Zone 1 PO (CIS & Zone 2 PO
(Central/Western Safety stock (Central/Western Safety stock (Central/Western Safety stock (Central/Western Safety stock regions
Ukraine) (UK/Nordic/Baltics) Ukraine) (UK/Nordic/Baltics) Ukraine) (UK/Nordic/Baltics) Ukraine) (UK/Nordic/Baltics)
Europe) Europe) Europe) Europe) production)
Sep/E Week 01 Week 02 Week 03 Week 04 Week 05 Week 06 Week 07 Week 08 Week 09 Week 10 Week 11 Week 12 Week 13 Week 14 Week 15 Week 16 Week 17
Gross Forecast 250 350 100 500 400 151 200 125 200 3,500 1,221 1,500
Net Forecast
S
200 350 100 500 400 151 200 125 200 3,500 1,221 1,500
SA T
LE
S
S
FC
Distributor Orders 50 300
Actual Sales 50
OF ETD 95 30 580 396 76 200 125 100 100 3,500 611 2,111 1,252 2,505 3,985
PO
P
OF ETA 95 30 580 396 76 200 125 100 100 3,500 611 2,111 1,252 2,505
Target inventory 175 70 580 476 151 200 325 225 200 3,500 611 1,500 1,252 3,757
V
Projected Inventory 500 325 70 580 476 151 200 325 225 200 3,500 611 1,500 1,252 3,757
IN
I
D/S 12 28 21 30 36 45 60 60 60 45 60 30 30 15 90 60 45 45
TPS 0.5 0.7 1 1.2 1.5 1.7 2 2 1.5 1.5 1 1 0.5 1 1 1.5 1.5

9. Attachment Ratio
• What is it?
– It’s the percentage of Accessories sold for each product
– It can be derived by the sales of accessories for the previous years vs. the sales of units
– Common accessories sales can be compared vs. cumulative sales of main units
– This percentage can be used to define both inventory threshold (safety stock) and forecast
(linked to main units through the BOM)
Spare Parts (all) Sum of Quantity Main Units (all) Sum of Quantity A/R
Jan-10 2663 Jan-10 8294 32%
Feb-10 1575 Feb-10 20741 8%
Mar-10 2556 Mar-10 40224 6%
Apr-10 1512 Apr-10 26582 6%
May-10 2751 May-10 34270 8%
Jun-10
Jul-10
2327
3162
ROUGH ESTIMATION
Jun-10
Jul-10
37463
27529
6%
11%
Aug-10 2072 Aug-10 35247 6%
Sep-10 2753 Sep-10 44770 6%
Oct-10 1669 Oct-10 35793 5%
Nov-10 2692 Nov-10 23403 12%
Dec-10 2431 Dec-10 26385 9%
Grand Total 28163 Grand Total 360701 8%
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10. Reordering point
• Basics:
– Each material has a fixed inventory threshold or “safety stock”
level
– This threshold is decided based on the “Attachment Ratio”
– When the stock goes below the threshold, a replenishment
request is sent to the W/H
MHIE
orders replen request
safety
Spares Hub
stock inv
delivery
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11. Reordering point
• Attachment Ratio is also used for the planning:
Accessories Forecast = A/R*Main units Forecast
January Forecast 425
A/R 5%
PO for Spares 21
Monthly average
150 February Forecast 30
main units sales
A/R 5% A/R 5%
Safety Stock 8 PO for Spares 0
March Forecast 200
A/R 5%
PO for Spares 10
•If the PO quantity is lower than the safety stock we can order 0
•If the safety stock goes below threshold, replenishment qty is added to PO
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