Incorporating lot sizing into MRP Lot sizing rule applied in MRP can lead into Lumpy demand structure as we go down in BOM Lumpy demand structure can cause serious capacity and inventory problems.

Problems in MRP 1 Capacity Infeasibility 2 Biased long lead times MRP assumes fixed lead times regardless of the lot sizes, this implies infinite capacity. 2 Biased long lead times MRP assumes constant lead time Production control managers gives lead times much longer than average manufacturing time to hedge against uncertainties. Result is large amount of inventories 3 Ignored uncertainties Demand, supply, and internal uncertainties.

W.J. Hope and M.L. Spearman, Factory Physics Problems in MRP 4 Rolling horizon effects The MRP is implemented for the first period and the planning is redone at the beginning of the next period after adding one more period to the panning horizon The decisions implemented may not be the best after adding the next period to the planning horizon 5 System nervousness The changes in the schedules due to the change in master production schedule (forecast updates, late delivery of raw material and parts, equipment failures, unpredictable yields). Frozen zones (firm orders); Not to allow any changes in some initial periods (e.g. 3 weeks) in MPS W.J. Hope and M.L. Spearman, Factory Physics

Capacity Constraints Often, capacity constraints prohibit implementation of a lot-sizing solution Example Demand: 108 148 150 98 65 300 Optimal Solution: 256, 0, 313, 0, 0, 300 What if our maximum capacity is 300 units per period? We assume that we have to meet demand

Capacity Solution First check overall feasibility considering capacity. Sum of requirements over a number of periods can never be bigger than the sum of capacity over those same periods. If it is bigger, then we cannot meet demand.

Capacity Solution- feasibility check 1 2 3 4 5 6 Total Req. Total Cap. 108 148 150 98 65 300 869 1800 569 1500 504 1200 406 900 256 600

Solution to Capacity Problem Simple procedure: Determine which periods will be over capacity and move the requirements backward in time preferable to the closest production period where there is enough capacity preferably as a complete lot if possible. Try to improve the solution; eliminatee some lots and shift their production backward, completely. Better procedure: Incorporate capacity constraints into algorithms.

Manufacturing Resources Planning (MRPII) In addition to MRP logic, MRPII considers Adjusting Master Production Scheduling (MPS) Rough Cut Capacity Planning (RCCP) Quick check of the capacity of a few key resources to ensure the feasibility of MPS Capacity Requirements Planning (CRP) Detailed check of the capacity using the schedules produced by MRP. If a work center is overloaded, over loading is solved by shifting the lot to earlier/later periods, lot splitting, rerouting etc. W.J. Hope and M.L. Spearman, Factory Physics

MRP II Planning Hierarchy Long-term planning Demand Forecast Aggregate Production Planning Master Production Scheduling Material Requirements Job Pool Release Dispatching Capacity Requirements Rough-cut Capacity Resource Routing Data Inventory Status Bills of Material Closed-loop MRP Intermediate- term planning Short-term control From : http://www.factory-physics.com

Solving capacity problems Overlapping Sends part of the work to following operations before the entire lot is complete, this reduces lead times. Order or lot splitting Breaking up the order into smaller lots and running some parts earlier (or later) in the schedule Operations splitting Sends the lot to two different machines for the same operation Shorter throughput time but increased setup costs Rerouting the operation Selecting another work-center for the operation

Capacity planning;order splitting Split and shift the lot forward, make sure that due date is met Shift the lot backward Capacity of a work center in hours 1 2 3 4 5 6 7 1 2 3 4 5 6 7 Period (weeks) Period (weeks)

Extensions of MRPII Enterprise Resource Planning In addition of MRP, ERP involves supply chain management, customer relationship management, Human resource management, Finance and accounting. Distribution resource planning MRP implementation in multi level supply chain, considering all levels. It is a time phased stock replenishment plan for all levels in a supply chain.

Enterprise Resource Planning (ERP) An extension of the MRP system to tie in customers and suppliers Allows automation and integration of many business processes from supplier evaluation to customer invoicing. Shares common data bases and business practices Produces/uses information in real time Allows collection of key performance indicators and generations of many reports.

ERP Modules http://www.esds.co.in/blog/basic-modules-of-erp-system/#sthash.NAbW25yp.dpbs

ERP and MRP

SAP’s ERP Modules