Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Operations Management Material Requirements Planning (MRP) & ERP Chapter 14

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Outline  GLOBAL COMPANY PROFILE: COLLINS INDUSTRIES  DEPENDENT INVENTORY MODEL REQUIREMENTS  Master Production Schedule  Bills of Materials  Accurate Inventory records  Purchase Orders Outstanding  Lead Times for Each Component  MRP STRUCTURE

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Outline - Continued  MRP MANAGEMENT  MRP Dynamics  MRP and JIT  LOT-SIZING TECHNIQUES  EXTENSIONS IN MRP  Closed-Loop MRP  Capacity Planning  Material Requirements Planning II (MRP II)  MRP IN SERVICES

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Outline - Continued  DISTRIBUTION RESOURCE PLANNING (DRP)  ENTERPRISE RESOURCE PLANNING (ERP)  Advantages and Disadvantages of ERP System  ERP in the Service Sector

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Learning Objectives When you complete this chapter, you should be able to : Identify or Define :  Planning bills and kits  Phantom bills  Low-level coding  Lot sizing

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Learning Objectives - Continued When you complete this chapter, you should be able to : Describe or Explain:  Material requirements planning  Distribution requirements planning  Enterprise resource planning  How ERP works  Advantages and disadvantages of ERP systems

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Collins Industries  Largest manufacturer of ambulances in the world  International competitor  12 major ambulance designs  18,000 different inventory items  6,000 manufactured parts  12,000 purchased parts  MRP: IBM’s MAPICS

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Collins Industries  Collins requires:  Material plan must meet both the requirements of the master schedule and the capabilities of the production facility  Plan must be executed as designed  Effective “time-phased” deliveries, consignments, and constant review of purchase methods  Maintenance of record integrity

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Inventory Process stage Demand Type Number & Value Other Raw Material WIP Finished Goods Independent Dependent A Items B Items C Items Maintenance Operating Inventory Classifications

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Item Materials With Independent Demand Materials With Dependent Demand Demand Source Company CustomersParent Items Material Type Finished GoodsWIP & Raw Materials Method of Estimating Demand Forecast & Booked Customer Orders Calculated Planning Method EOQ & ROPMRP Dependent versus Independent Demand

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Requirements for Effective Use of Dependent Demand Inventory Models Effective use of dependent demand inventory models requires that the operations manager know the:  master production schedule  specifications or bills-of-material  inventory availability  purchase orders outstanding  lead times

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Inputs to the Production Plan Aggregate Production Plan Marketing Customer Demand Engineering Design Completion Management Return on Investment Capital Human Resources Manpower Planning Procurement Supplier Performance Finance Cash Flow Production Capacity Inventory

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J The Planning Process Change master production schedule? Execute material plans Execute capacity plans Detail capacity plan Material requirements plan Master production schedule Aggregate production plan Change requirements? Change capacity? Realistic No Yes Change production plan? Is capacity plan being met? Is execution meeting the plan?

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Aggregate Production Plan 1,2001,500 Aggregate Production Plan (shows the total quantity of amplifiers watt amplifier watt amplifier watt amplifier Master Production Schedule (Shows the specific type and quantity of amplifier to be produced Weeks FebruaryJanuaryMonths

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Typical Focus of the Master Production Schedule Make to Order (Process Focus) Assemble to Order or Forecast (Repetitive) Stock to Forecast (Product Focus) Schedule finished product Steel, Beer, Bread Light bulbs, Paper Print shop Machine shop Fine dining restaurant Examples: Number of end items Number of inputs Typical focus of the master production schedule Schedule orders Schedule modules Motorcycles, autos, TVs, fast-food restaurant

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J  List of components & quantities needed to make product  Provides product structure (tree)  Parents: Items above given level  Children: Items below given level  Shows low-level coding  Lowest level in structure item occurs  Top level is 0; next level is 1 etc. Bill-of-Material

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Product Structure for “Awesome” A

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J  Modular bills  Modules are final components used to make assemble-to- stock end items  Planning bills  Used to assign artificial parent  Reduces number of items scheduled  Phantom bills  Used for subassemblies that exist temporarily Special Bills-of-Material

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Bicycle(1) P/N 1000 Handle Bars (1) P/N 1001 Frame Assembly (1) P/N 1002 Wheels (2) P/N 1003 Frame (1) P/N 1004 Bill-of-Material Product Structure Tree

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Time-Phased Product Structure weeks F 2 weeks E A 1 week C G 2 weeks D 1 week E 2 weeks Start production of D D 1 week B 2 weeks to produce Must have D and E completed here so production can begin on B

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J  Manufacturing computer information system  Determines quantity & timing of dependent demand items © 1995 Corel Corp. Material Requirements Planning (MRP)

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J  Computer system  Mainly discrete products  Accurate bill-of-material  Accurate inventory status  99% inventory accuracy  Stable lead times © T/Maker Co. MRP Requirements

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J  Increased customer satisfaction due to meeting delivery schedules  Faster response to market changes  Improved labor & equipment utilization  Better inventory planning & scheduling  Reduced inventory levels without reduced customer service MRP Benefits

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Structure of the MRP System Master Production Schedule BOM Lead Times (Item Master File) Inventory Data Purchasing data MRP planning programs (computer and software) MRP by Period Report MRP by date report Planned order report Purchase advice Exception report

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Gross Material Requirements Plan for 50 “Awesome A” Speaker Kits

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Forecast & Firm Orders Material Requirements Planning Aggregate Production Planning Resource Availability Master Production Scheduling Shop Floor Schedules Capacity Requirements Planning Realistic? No, modify CRP, MRP, or MPS Yes MRP and The Production Planning Process

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J MRP Systems - Input and Output Inventory Purchasing Master Production Schedule Bill of Materials Material Requirements Planning System Status Planned Order & Other Reports Item Master Data

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J  Shows items to be produced  End item, customer order, module  Derived from aggregate plan Master Production Schedule Item/WeekOct 3Oct 10Oct 17Oct 24 Drills Saws Example

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Derivation of Master Schedule Therefore, these are the gross requirements for B Periods Master schedule for S sold directly A C B Lead time = 4 for A Master schedule for A S B C Lead time = 6 for S Master schedule for S = = Periods Gross requirements: B

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J MRP Dynamics  Supports “replanning”  Problem with system “nervousness”  “Time fence” - allows a segment of the master schedule to be designated as “not to be rescheduled”  “Pegging” - tracing upward in the bill-of-materials from the component to the parent item  That a manager can react to changes, doesn’t mean he/she should

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J MRP and JIT  MRP - a planning and scheduling technique with fixed lead times  JIT - a way to move material expeditiously  Integrating the two:  Small bucket approach and back flushing  Balanced flow approach

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J Lot-Sizing Techniques  Lot-for-lot  Economic Order Quantity  Part Period Balancing  Wagner-Whitin Algorithm

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J MRP Lot-Sizing Problem: Lot-for-Lot Techniques

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J MRP Lot-Sizing Problem: EOQ Technique

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J MRP Lot-Sizing Problem: PPB Technique