CHAPTER-14 MRP AND ERP MD. TAZIDUL ISLAM

2  Material Requirement Planning (MRP) is the concept of designing and developing information system to aid in managing resource requirement specially dependant demand inventory and scheduling replenishment orders.

3-Inputs to MRP 3 Inventory Transaction Inventory Records MRP Explosion Bills of Materials Engineering and Process designs Master Production Schedule Other Sources of Demand Material Requirement plan

MRP Explosion 4  A process that converts the requirements of various final products into a material requirements plan that specifies the replenishment schedules of all the subassemblies, components and raw material needed by the final products.

Concept of Bill of Material (BOM) 5  A BOM is a record of all the components of an item, the parent-component relationships and the usage quantities derived from engineering and process design.

Example: BOM 7 A Ladder-back chair B (1) Ladder-back subassembly F (2) Back Legs G (4) Back Stats C (1) Seat Subassembly H (1) Seat Frame I (1) Seat Cushion J (4) Seat frame board D (2) Front Legs E (4) Legs Support

Inventory Record 8  IR consists of:  Gross Requirements  Schedule Receipts  Projected on-hand Inventory  Planned Receipts  Planned Order release

Example: Inventory Record 9 Weeks Gross Requirements Schedule Receipts 230 Projected on- hand Inventory 117 Planned Receipts Planned Order release 37 Item: CLot Size: 230 Units Description: Seat SubassemblyLead time: 2 Weeks

Example: Inventory Record Gross Requirements Schedule Receipts 230 Projected on- hand Inventory Planned Receipts 230 Planned Order release 230

Planning Factors 11  Lead time  Lot-sizing  Safety Stock

Lot Sizing Rules 12  Fixed Order Quantity (FOQ)  Periodic Order Quantity (POQ)  Lot for Lot (L4L)

Periodic Order Quantity (POQ) 13 POQ lot size to arrive in week t=(Total gross requirements for P weeks, including week t)- (Projected on hand Inventory balance at the end of week t-1)

Example: Periodic Order Quantity (POQ) 14 Weeks Gross Requirements Schedule Receipts 230 Projected on- hand Inventory Planned Receipts Planned Order release Item: C Description: Seat SubassemblyLead time: 2 Weeks

L4L 15 L4L lot size to arrive in week t=(Gross requirements for week t)-(Projected on-hand inventory balance at the end of week t-1)

Example: L4L 16 Weeks Gross Requirements Schedule Receipts 230 Projected on- hand Inventory Planned Receipts Planned Order release Item: C Description: Seat SubassemblyLead time: 2 Weeks

Comparison of Lot-Sizing Rules 17  Average on hand Inventory (from W4-W8)  FOQ=181units  POQ=60 units  L4L=0 units  FOQ: Average on-hand inventory in very high, Sometimes ensure supply chain surplus, depending on machine capacity, discount etc.  POQ: Comparatively lower stock in hand.  L4L: Replenish orders more frequently therefore reduce the inventory cost but increases ordering and setup cost. Suitable for Make to Order and low volume items.

Classroom Exercise 18 The MPS for product A calls for the assembly dept. to begin final assembly according to the following schedule: 100u in W2; 200u in W4; 120u in W6; 180 in W7 and 60 in W8. Develop a Material Requirement Plan (MRP) for the next 8 weeks for item B following these information: No. of components require: 1 unit Lot-sizing rule: FOQ (LS=100) Lead time: 1 W Schedule Receipt: 30 Beginning (on-hand) inventory: 20

Solution 19 Weeks Gross Requirements Schedule Receipts Projected on- hand Inventory Planned Receipts Planned Order release Item: BPOQ Lead time: 1 Week

20 The product structure tree for an end item E follows. The manager wants to now the material requirements for ordered part R that will be needed t complete 120 units of E by the start of week 5. Lead times for items are one week for level 0 items, one week for level 1 items a two weeks for level 2 items. There is a schedule receipt of 60 units of M at the start of weeks 2 and 100 units of R at the start of week 1. Lot for lot ordering is used. Classroom Exercise

21 End item P is composed of three subassemblies: K, L and W. K is assembled using 3 Gs and 4Hs; L is made of 2 Ms and 2 Ns; and W is made of 3 Zs. On-hand inventories are 20 Ls, 40 Gs, and 200 Hs. Scheduled receipts are 10 Ks at the start of week 3, 30 Ks at the start of week 6, and 200 Ws at the start of week 3. One hundred Ps will be shipped at the start of week 6 and another 100 at the start of week 7. Lead times are two weeks for subassemblies and one week for components G, H and M. Final assembly of P requires one week. Include an extra 10 percent of scrap allowance in each planned order of G. The minimum order size for H is 200 units. Develop each of the following: A. A product structure tree. B. An assembly time chart C. MPS D. MRP a.

Determining Components Requirement 22 C (1) Seat Subassembly H (1) Seat Frame I (1) Seat Cushion J (4) Seat frame board FOQ (300 units) LT: 1 Week L4L LT: 1 Week FOQ (1500 units) LT: 1 Week

23 Weeks Gross Requirements Schedule Receipts 230 Projected on-hand Inventory Planned Receipts 230 Planned Order release 230 Item: CFOQ Description: Seat SubassemblyLead time: 2 Weeks Weeks Gross Requirements Schedule Receipts Projected on-hand Inventory Planned Receipts300 Planned Order release300 Item: HFOQ Description: Seat Frame (Lot size: 300)Lead time: 1 Week

24 Weeks Gross Requirements Schedule Receipts 230 Projected on-hand Inventory Planned Receipts 230 Planned Order release 230 Item: CFOQ Description: Seat SubassemblyLead time: 2 Weeks Weeks Gross Requirements Schedule Receipts Projected on-hand Inventory Planned Receipts Planned Order release Item: IL4L Description: Seat CushionLead time: 1 Week

25 Weeks Gross Requirements Schedule Receipts Projected on-hand Inventory Planned Receipts Planned Order release900 Item: JFOQ Description: Seat frame boards (Lot size: 1500)Lead time: 1 Week Weeks Gross Requirements Schedule Receipts Projected on-hand Inventory Planned Receipts300 Planned Order release300 Item: HFOQ Description: Seat FrameLead time: 1 Week

Classroom exercise 26 M1M2M3M4M5M6M7M8M9M M1M2M3M4M5M6M7M8M9M M1M2M3M4M5M6M7M8M9M

27 Further Information: Lot size: 500 P=3 LT=2 Weeks Schedule Receipt=200 U On-hand inventory=100 U Classroom exercise

Service Resource Planning 28  Hospital  Call Center  Bank  University  Hotel  Airline  Restaurant Bill of Resources (BOR)

Difference between manufacturing and service resource planning 29  Demand for service can be difficult to predict  Capacity availability can be difficult to predict  Labor flexibility can be an advantage in services  Service occur when they are rendered

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