VIETNAM NATIONAL UNIVERSITY – HO CHI MINH CITY
INTERNATIONAL UNIVERSITY
SCHOOL OF INDUSTRIAL ENGINEERING AND MANAGEMENT
MATERIAL REQUIREMENT PLANNING OF SAIGON SWAGGER
CASE STUDY
PROCUREMENT MANAGEMENT
Lecturer: Dr. Duong Vo Nhi Anh
Group Number: 09 - Class: Sat123
TEAM MEMBER
Student ID Member name % Contribution
IELSIU21014 Nguyễn Phạm Quý Dương 100%
IELSIU21094 Nguyễn Quốc Huy 100%
IELSIU21354 Trịnh Ái Nhung 100%
IELSIU21219 Phan Mỹ Nhân 100%
IELSIU22104 Phan Nguyễn Minh Thư 100%
IELSIU20358 Nguyễn Ngọc Kim Ngân 100%
IELSIU20354 Trương Nguyễn Khánh Minh 100%
IELSIU21064 Trương Ngọc Thảo Vy 100%
Ho Chi Minh City, Vietnam
June, 2024
TABLE OF CONTENT
1. Introduction to theory....................................................................................................................................
1.1. Material Requirements Planning (MRP)..................................................................................................
1.2. The functions of the MRP system............................................................................................................
1.3. Inputs and Outputs of MRP Systems.......................................................................................................
1.3.1. Inputs...............................................................................................................................................
1.3.2. Outputs............................................................................................................................................
1.4. MRP Process............................................................................................................................................
2. Introduction to Saigon Swagger Case Study:...............................................................................................
2.1. Saigon Swagger........................................................................................................................................
2.2. Problem statement....................................................................................................................................
3. Analyze:............................................................................................................................................................
3.1. Bill of material analysis...........................................................................................................................
3.2. Master production scheduling analysis....................................................................................................
3.3. Material requirement planning:................................................................................................................
3.3.1. Assumption.....................................................................................................................................
3.3.2. Logics for constructing a MRP.......................................................................................................
3.3.3. Procedure for constructing a MRP..................................................................................................
4. Improvement:..................................................................................................................................................
4.1. Integrating cost and risk factors into MRP..............................................................................................
4.2. Automation of MRP.................................................................................................................................
4.3. Improving forecast accuracy....................................................................................................................
5. Conclusion:......................................................................................................................................................
REFERENCES....................................................................................................................................................
APPENDIX..........................................................................................................................................................................
1. Introduction to theory
1.1. Material Requirements Planning (MRP)
Material requirements planning (MRP) is a computerized inventory control and production
planning system designed to maintain minimum inventory levels by scheduling component
availability precisely when needed. MRP handles raw materials, components, and finished
goods separately, planning purchasing, manufacturing, and delivery schedules. It's applicable
for dependent and discrete demand items, complex products, job shop production, and
assemble-to-order environments. MRP relies on accurate bills of materials (BOM) for each
final product, viewed as structural trees.
1.2. The functions of the MRP system
MRP functions by integrating several key elements to create a comprehensive production
plan. Here's a breakdown of its core functionalities:
● Material Identification: Leveraging the Master Production Schedule (MPS), MRP
identifies the materials required to fulfill customer orders.
● Quantity Calculation: Beyond identifying materials, MRP calculates the exact
quantities needed at each production stage. This helps optimize inventory levels,
preventing shortages and overstocking.
● Scheduling & Ordering: Considering lead times (the time it takes to receive
materials), MRP generates planned purchase orders to ensure materials arrive just in
time for production.
1.3. Inputs and Outputs of MRP Systems
1.3.1. Inputs
- Master Production Schedule (MPS): Detailed plan outlining end items, quantities,
and production timing.
Figure 1 . Materials Required Planning and diagram regulations
- Inventory Status Records: Provide stock quantity details, including SKU, quantity
on hand, lead time, and reorder points.
- Bill of Materials (BOM): Detailed list of all components and raw materials needed
for a finished product.
Figure 2. Material Requirements Planning (MRP) Flowchart
1.3.2. Outputs
- Production Orders: Instructions for in-house production, specifying items to be
produced and required resources.
- Purchase Orders: Binding agreements with suppliers on materials, prices, and
delivery terms.
- Rescheduling Notices: Real-time adjustments to the production plan due to material
shortages, delays, or changes in demand.
1.4. MRP Process
The Material Requirements Planning process includes 6 main steps:
- Demand Forecasting: Predicting future customer demand.
- Bill of Material (BOM) Breakdown: Determining material requirements using the
Bill of Material.
- Inventory Status Records: Identifying existing stock and additional material needs.
- Procurement and Production Planning: Generating production and purchase
orders.
- Execution and Monitoring: Tracking production progress and making necessary
adjustments.
- Feedback and Continuous Improvement: Analyzing data from each cycle to refine
forecasts and improve efficiency.
2. Introduction to Saigon Swagger Case Study:
2.1. Saigon Swagger
Saigon Swagger is a leading fashion brand based in Vietnam, renowned for its specialization
in the production and trading of backpacks and handbags. Founded with a vision for
innovation and a mission to honor beauty and modern lifestyle, Saigon Swagger has swiftly
risen to prominence within the fashion industry. The brand’s commitment to creativity,
quality, and style has set it apart, making it a go-to name for fashion-forward consumers.
Driven by a spirit of creativity and passionate dedication, Saigon Swagger consistently
delivers high-quality and unique products to the market. Each item, particularly their
backpacks, is meticulously designed to blend modern aesthetics with high functionality,
catering to the diverse needs of its customers. The brand’s adherence to its three core criteria
—Creativity, Quality, and Style—ensures that every product not only meets but exceeds
customer expectations.
2.2. Problem statement
This case study aims to investigate the Material Requirements Planning (MRP) system
utilized by Saigon Swagger specifically for their backpack product line. Understanding the
MRP system is crucial for comprehending how Saigon Swagger manages its production
processes, from planning and scheduling to inventory control and material procurement.
By exploring Saigon Swagger’s MRP system, this case study will:
1. Analyze the MRP Framework: Examine the structure and components of Saigon
Swagger’s MRP system, including how it integrates with other business functions.
2. Evaluate Production Planning: Understand how Saigon Swagger forecasts demand, plans
production schedules, and ensures that all necessary materials and components are available
when needed.
3. Identify Challenges and Solutions: Identify common challenges faced in the MRP process
and how Saigon Swagger addresses these issues to maintain efficiency and product quality.
This study will investigate the complexities of Saigon Swagger’s MRP system, particularly
noting the presence of five different levels of components. These components are intricately
interconnected, making the process lengthy and prone to errors. Through this focused
analysis, we aim to uncover the key factors behind the effective implementation of MRP at
Saigon Swagger and its impact on the company’s ability to produce high-quality backpacks
that meet market demands. This case study will provide valuable insights into the role of
MRP in enhancing production efficiency, reducing costs, and maintaining high standards of
product quality in the competitive fashion industry.
3. Analyze:
3.1. Bill of material analysis
The BOM of the Saigon Swagger backpack includes specific components and materials
necessary for assembling the product. Our finished backpack is made of three main parts: the
bag body, two rear shoulder straps, and two water bottle holder compartments on the side of
the bag. Each part is described in detail according to five levels, ranging from straps, various
fabrics, foam, zippers, and hanging pockets to water bottle compartments. This detailed
breakdown ensures that all necessary elements are accounted for in the manufacturing
process.
Figure 3. BOM of SaigonSwagger backpack
3.2. Master production scheduling analysis
The Master Production Schedule (MPS), also known as the master schedule, outlines the
specific end items or finished products that a firm plans to produce, the quantities required,
and the timeframes for production. In this project, the production quantities in the MPS are
aligned with and correspond to the demand forecast. The details MPS of Saigon Swagger
backpack are presented in the table below:
Table 1: MPS for Backpag of SaigonSwagger
MPS Period
W1 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4
- W2 - - - - - - - - - -
Jan - Jan Jan Jan Feb Feb Feb Feb Mar Mar Mar Mar
Backpack 451 411 433 441 446 433 448 431 426 444 436 437
3.3. Material requirement planning:
3.3.1. Assumption
The Material Requirement Planning for the Saigon Swagger backpack is based on the
following assumptions:
- Lot-sizing Rule: The Lot-for-Lot (L4L) rule is used, meaning that the exact quantity
required to achieve the net needs will be ordered each period.
- Lead Time: The lead time for ordering materials and components is set at one week.
- Planning Period: The planning period spans 13 weeks, from the 3rd week of
December to the 3rd week of March.
- Gross Requirements: The backpacks' weekly gross requirements are given out at
random. This represents real-world situations where customer orders may fluctuate by
reflecting the unpredictability and variety in demand.
- Projected On Hand: The beginning inventory levels are assigned at random.
Considering the stock currently on hand and may be utilized to satisfy initial
demands, this offers a practical starting point for inventory planning.
3.3.2. Logics for constructing a MRP
Material Requirements Planning (MRP) is a system that helps manufacturers plan and
schedule production processes efficiently. It identifies required materials, estimates
quantities, and determines when they're needed to meet production deadlines. The MRP
procedure involves key stages, including the Master Production Schedule, Bill of Materials,
and Inventory Data. Using this information, the MRP system calculates the net requirements
for each material and component, considering existing inventory and outstanding orders.
Based on these net requirements, the system generates planned orders for materials and
components, specifying the quantities and delivery dates
3.3.3. Procedure for constructing a MRP
Entries in the matrix include gross requirements, scheduled receipts, projected on hand, net
requirements, planned order receipts, and planned order releases. Gross requirements begin
the MRP process. They are given in the master production schedule (MPS) for end items and
derived from the parent for component items. Scheduled receipts are items on order that are
scheduled to arrive in future time periods. Projected on hand is inventory currently on hand or
projected to be on hand at the end of each time period as a result of the MRP schedule. Net
requirements are what actually needs to be produced after on-hand and on-order quantities
have been taken into account. Planned order receipts represent the quantities that will be
ordered and when they must be received. These quantities differ from net requirements by lot
sizing rules when production or purchasing is made in predetermined batches or lots.
Common lot sizing rules include ordering in minimum or multiple quantities, using an EOQ
or periodic order quantity, or ordering the exact quantities needed (called lot-for-lot or L4L).
4. Improvement:
After conducting a full material requirement planning process of Saigon Swagger, the spaces
for enhancement of this such system will belong to the cost optimality, uncertainties
management so that the all of the main goal of a business which is attaining a best amount of
profit can be achieved.
During our team’s work, the most time-consuming phrase is to fill the table of MRP for a
backpack across 5 different levels, especially in the span of distributing personnel, managing
predecessor constraints, and error management. Thus, an automation system is necessary for
companies like Saigon Swagger with complicated products’ BOM.
Lastly, another substantial aspect that poses a great impact on the efficiency of the MRP is
the forecast accuracy because with a wrong, unrealistics forecast, the master production
scheduling will also be incorrect. Subsequently, the MRP even if it is built correctly will still
be hard to follow and maintain as it has to change frequently in order that the production
schedule will be as close as possible to the reality. This makes the production adherence stay
low, which indicates an inefficient planning process.
4.1. Integrating cost and risk factors into MRP
Integrating cost and risk factors into Material Requirements Planning (MRP) enhances
decision-making by transitioning from the Lot-for-Lot (L4L) ordering policy to more optimal
options like Economic Order Quantity (EOQ), Periodic Order Quantity (POQ), or Fixed
Order Quantity (FOQ), safety stock level, etc. Although the L4L policy is simple and aligns
with Just-in-Time (JIT) principles, it is not always feasible due to supplier constraints on
minimum order quantities. Additionally, L4L's minimal inventory can lead to stockouts
during peak periods, increasing the risk of disruptions. L4L may cause ordering costs to rise,
negating savings from inventory reduction.
By incorporating cost considerations, businesses can optimize inventory levels, reduce
holding costs, and improve overall financial performance. Moreover, without considering the
uncertainties, the manufacturers will face a lot of risk since the supply chain landscape
nowadays is extremely unstable. For instance, the political instability around the world,
especially on the vital international transportation route may harm the process of material
transportation, reducing customer consumption power, etc. That means without a proper
governing of potential threats, not only the MRP is affected but the whole company’s
operation will also be at risk. Including risk factors enables companies to anticipate and
mitigate potential disruptions, such as supplier delays or market fluctuations, ensuring more
reliable production schedules.
This comprehensive approach allows for better decision-making, as it provides a holistic
view of the supply chain, balancing cost-efficiency with risk management. Consequently,
businesses can achieve greater operational stability, maintain customer satisfaction, and
improve profitability.
4.2. Automation of MRP
Incorporating an ERP (Enterprise Resource Planning) system, such as SAP, Oracle
appsheets., into Saigon Swagger's business operations can lead to substantial improvements
in accuracy and speed, delivering faster and more reliable results. These advanced systems
provide real-time updates and a high level of automation, which significantly enhance the
scheduling of production runs. This ensures the efficient use of machinery and labor,
optimizing resource utilization. By automating workflows, Saigon Swagger can reduce
manual interventions, minimize errors, and increase overall productivity.
Enhanced collaboration is another critical benefit of implementing an ERP system. These
systems facilitate seamless communication and coordination among various departments,
including sales, production, finance, and others. With real-time data sharing and centralized
information, all departments at Saigon Swagger can keep track of each other’s activities,
fostering a collaborative environment. This interconnectedness allows for better planning and
decision-making, as teams can quickly respond to changes and align their efforts towards
common goals.
Scalable and flexible features are also key advantages of using ERP systems. As Saigon
Swagger grows, an ERP system can handle increased data volume and complexity without
compromising performance. This scalability ensures that the system can support Saigon
Swagger's needs over time, adapting to changing requirements and market conditions.
Furthermore, ERP systems enable agile operations, allowing Saigon Swagger to make quick
adjustments to production schedules and inventory management. This agility is crucial for
responding promptly to market demands, reducing lead times, and maintaining a competitive
edge.
In summary, incorporating an ERP system like SAP or Oracle offers numerous benefits to
Saigon Swagger, including better resource utilization, enhanced collaboration, and increased
scalability and flexibility. These systems provide real-time updates and automation that
optimize production scheduling and resource use. They foster improved coordination and
communication across departments, leading to better planning and decision-making.
Additionally, the scalability and flexibility of ERP systems ensure they can grow with Saigon
Swagger and adapt to evolving market conditions, supporting agile and efficient operations.
4.3. Improving forecast accuracy
Improving demand forecasting significantly benefits Material Requirements Planning (MRP)
by reducing waste and enhancing operational efficiency. Accurate demand forecasts ensure
production aligns closely with market demand, preventing unnecessary or insufficient
resources distribution. This alignment supports not only Just-In-Time (JIT) inventory
practices, ensuring raw materials arrive exactly when needed and are used efficiently,
reducing scrap and rework but also the Just-in-case ideology by guaranteeing the production
team will understand what to come so that buffers or alternatives can be built.
Optimized resource allocation results from precise demand forecasts, improving labor
scheduling and machinery utilization, thus maximizing productivity and reducing costs.
Accurate forecasts also minimize holding costs by reducing the need for large storage
facilities and preventing spoilage and obsolescence of perishable goods.
Improved demand forecasting enhances supply chain coordination through more predictable
and streamlined ordering processes, reducing the risk of order errors and fostering better
relationships with suppliers. This coordination ensures timely availability of materials,
reducing lead times and further optimizing production.
Accurate demand forecasting supports sustainability initiatives by minimizing unnecessary
production and waste, leading to efficient resource utilization and lower environmental
impact. This contributes to cost savings, better resource use, and improved efficiency in
production and supply chain operations.
Additionally, accurate forecasts help identify potential risks and uncertainties in demand,
allowing for better contingency planning (Risk Mitigation). They enable MRP systems to
remain responsive to expected future demands, ensuring outputs fit reality more closely
(Increased Flexibility and Responsiveness). Good forecasting allows for comprehensive
MRP, improving production adherence and satisfying customer demand (Enhanced Customer
Satisfaction).
In brief, improving demand forecasting leads to significant waste reduction, cost savings,
enhanced sustainability, and improved overall efficiency.
5. Conclusion:
In this project, the importance of the MRP system to the manufacturing companies is created
by its effect on the firm’s operation, which leads to a vital impact on attaining profit. The
MRP process is applied with 2 vital factors which are the MPS and the BOM. Throughout 5
levels of components provided by the BOM , multiple MRPs for every component of a
backpack are made with the appropriate logic and accuracy. However, some drawbacks are
found with such a large amount of parts. They are the excessive amount of efforts for
distributing resources, time to complete just 1 level in the bill of materials, and the margin of
errors between the MRP tables are quite large, which requires many reviews to minimize
such faults. Therefore, the MRP process of this firm can be improved by applying automating
ERP systems, enhancing forecasting capacity and incorporating cost, risk aspects into the
selection of lot size.
REFERENCES
1. khushbu ag. (2021). Leenders−Johnson−Flynn−Fearon: Purchasing and
Supply Management, 13th Edition. Academia.edu.
https://www.academia.edu/30711954/Leenders_Johnson_Flynn_Fearon_Purchasing_
and_Supply_Management_13th_Edition
2. Wiley. (2011). Roberta S. Russell, Bernard W. Taylor: Operations Management, 7th
Edition. Google Books. https://books.google.com.vn/books?id=93iHSQAACAAJ
APPENDIX
MRP level 0:
MRP level 1:
MRP level 2:
MRP level 3:
MRP level 4:
MRP level 5:
