Operations Management

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13-1 MRP and ERP William J. Stevenson

Operations Management

8thedition 13-2 MRP and ERP CHAPTER

13

MRP and ERP

13-3 MRP and ERP

•Material requirements planning (MRP):

Computer-based information system that translates master schedule requirements for end items into time-phased requirements for subassemblies, components, and raw materials.

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Independent and Dependent Demand

Independent Demand

A

B(4) C(2)

D(2) E(1) D(3) F(2)

Dependent Demand

Independent demand is uncertain. Dependent demand is certain.

•Dependent demand: Demand for items that

are subassemblies or component parts to be used in production of finished goods.

•Once the independent demand is known,

the dependent demand can be determined.

Dependant Demand

Dependent vs Independent Demand

Time Time Time Time D e m a n d D e m a n d Stable demand “Lumpy” demand A m o u n t o n h a n d A m o u n t o n h a n d Safety stock Figure 13.1

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MRP Inputs MRP Processing MRP Outputs

Master schedule Bill of materials Inventory records MRP computer programs Changes Order releases Planned-order schedules Exception reports Planning reports Performance-control reports Inventory transaction Primary reports Secondary reports Figure 13.2 13-8 MRP and ERP

•Master Production Schedule

•Time-phased plan specifying timing and

quantity of production for each end item.

•Material Requirement Planning Process

Prod uct S tructu re Tree Lead Tim es

MPR Inputs

Master Schedule

Master schedule: One of three primary

inputs in MRP; states which end items are to be produced, when these are needed, and in what quantities.

Cumulative lead time: The sum of the lead

times that sequential phases of a process require, from ordering of parts or raw materials to completion of final assembly.

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13-10 MRP and ERP

Planning Horizon

1 2 3 4 5 6 7 8 9 10 Procurement Fabrication Subassembly Assembly Figure 13.4 13-11 MRP and ERP

Bill-of-Materials

Bill of materials (BOM): One of the three primary

inputs of MRP; a listing of all of the raw materials, parts, subassemblies, and assemblies needed to produce one unit of a product.

Product structure tree: Visual depiction of the

requirements in a bill of materials, where all components are listed by levels.

13-12 MRP and ERP

Product Structure Tree

Chair Seat Legs (2) Cross bar Side Rails (2) Cross bar Back Supports (3) Leg Assembly Back Assembly Level 0 1 2 3 Figure 13.5

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13-13 MRP and ERP

Inventory Records

•One of the three primary inputs in MRP •Includes information on the status of each

item by time period

•Gross requirements •Scheduled receipts •Amount on hand •Lead times •Lot sizes •And more … 13-14 MRP and ERP

Assembly Time Chart

1 2 3 4 5 6 7 8 9 10 11 Procurement of raw material D Procurement of raw material F Procurement of part C Procurement of part H Procurement of raw material I Fabrication of part G Fabrication of part E Subassembly A Subassembly B Final assembly and inspection Figure 13.7 13-15 MRP and ERP

MRP Processing

•Gross requirements •Schedule receipts •Projected on hand •Net requirements •Planned-order receipts •Planned-order releases

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13-16 MRP and ERP

MPR Processing

•Gross requirements

•Total expected demand

•Scheduled receipts

•Open orders scheduled to arrive

•Planned on hand

•Expected inventory on hand at the

beginning of each time period

13-17 MRP and ERP

MPR Processing

•Net requirements

•Actual amount needed in each time period

•Planned-order receipts

•Quantity expected to received at the

beginning of the period

•Offset by lead time

•Planned-order releases

•Planned amount to order in each time period

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Updating the System

•Regenerative system

•Updates MRP records periodically

•Net-change system

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13-19 MRP and ERP

MRP Outputs

•Planned orders - schedule indicating the

amount and timing of future orders.

•Order releases - Authorization for the

execution of planned orders.

•Changes - revisions of due dates or order

quantities, or cancellations of orders.

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MRP Secondary Reports

•Performance-control reports •Planning reports •Exception reports 13-21 MRP and ERP

Other Considerations

•Safety Stock •Lot sizing •Lot-for-lot ordering •Economic order quantity •Fixed-period ordering

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13-22 MRP and ERP

•Food catering service

•End item => catered food

•Dependent demand => ingredients for each

recipe, i.e. bill of materials •Hotel renovation

•Activities and materials “exploded” into

component parts for cost estimation and scheduling

MRP in Services

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Benefits of MRP

•Low levels of in-process inventories •Ability to track material requirements •Ability to evaluate capacity requirements •Means of allocating production time

13-24 MRP and ERP

Requirements of MRP

•Computer and necessary software •Accurate and up-to-date

•Master schedules •Bills of materials •Inventory records •Integrity of data

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13-25 MRP and ERP

•Expanded MRP with emphasis placed

on integration •Financial planning •Marketing •Engineering •Purchasing •Manufacturing

MRP II

13-26 MRP and ERP Market Demand Production plan Problems? Rough-cut capacity planning Yes No No Yes Finance Marketing Manufacturing Adjust production plan Master production schedule MRP Capacity planning Problems? Requirements schedules A d ju s t m a s te r s c h e d u le

MRP II

Figure 13.14 13-27 MRP and ERP

Capacity Planning

Capacity requirements planning:The process

of determining short-range capacity requirements.

Load reports:Department or work center

reports that compare known and expected future capacity requirements with projected capacity availability.

Time fences:Series of time intervals during

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13-28 MRP and ERP

Capacity Planning

Develop a tentative master production schedule Use MRP to simulate material requirements Convert material requirements to resource requirements Firm up a portion of the MPS Is shop capacity adequate? Can capacity be changed to meet requirements Revise tentative master production schedule Change capacity Yes No Yes No Figure 13.15 13-29 MRP and ERP

•Enterprise resource planning (ERP):

•Next step in an evolution that began with

MPR and evolved into MRPII

•Integration of financial, manufacturing, and

human resources on a single computer system.

ERP

13-30 MRP and ERP

ERP Strategy Considerations

•High initial cost •High cost to maintain •Future upgrades •Training

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13-31 MRP and ERP

Additional PowerPoint slides contributed by

Geoff Willis,

University of Central Oklahoma.

CHAPTER

13

13-32 MRP and ERP

Bill of Materials – Part 1

A listing of all raw materials, parts, subassemblies, and assemblies needed to produce one unit

Product structure Tree

X F(2) E(2) E D(3) C B(2) 0 1 2 Level 13-33 MRP and ERP

How many more of each component is needed to make 15 Xs if there are 5 of each already in stock?

X F(2) E(2) E D(3) C B(2)