Chapter 15 MRP and ERP

MRP Material requirements planning (MRP): Computer-based information system for ordering and scheduling of dependent demand inventories

Dependant Demand Dependent demand: Demand for items that are subassemblies or component parts to be used in production of finished goods.

Dependent vs Independent Demand Time Demand Stable demand “Lumpy” demand Amount on hand Safety stock

Bill of materials Inventory records 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 transaction Primary Secondary

Master Production Schedule MPR Inputs Master Production Schedule Time-phased plan specifying timing and quantity of production for each end item. Material Requirement Planning Process Product Structure Tree Lead Times

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.

Planning Horizon Figure 14-4 1 2 3 4 5 6 7 8 9 10 Fabrication Assembly Procurement Fabrication Subassembly Assembly

Bill-of-Materials Bill of materials: 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.

Product Structure Tree Figure 15-5 Chair Seat Legs (2) Cross bar Side Rails (2) Back Supports (3) Leg Assembly Level 1 2 3

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

Typical MRP Matrix

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.

MRP Secondary Reports Performance-control reports Planning reports Exception reports

Other Considerations Safety Stock Lot sizing Lot-for-lot ordering Economic order quantity Fixed-period ordering Part-period model

resource requirements MRP 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 Revise tentative Change Yes No

MRP in Services Food catering service Hotel renovation End item => catered food Dependent demand => ingredients for each recipe, i.e. bill of materials Hotel renovation Activities and materials “exploded” into component parts

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

Computer and necessary software Accurate and up-to-date Requirements of MRP Computer and necessary software Accurate and up-to-date Master schedules Bills of materials Inventory records Integrity of data

MRP: Problem 1 Suppose you are to produce 100 units of product A in period 8 with the product structure shown below. If no stock is on hand or on order, determine when to release orders for each component and the size of each order. Product A with a lead time of 4 periods is made from components B and C with lead times of 3 and 2 periods, respectively; C is made from components D and E with a lead time of 1 period each.

MRP: Problem 1 Product Structure A B (1) C (2) D (1) E (2)

MRP: Problem 1 - Solution   Master Production Schedule (MPS)   Week 1 2 3 4 5 6 7 8 Demand  100  

MRP: Problem 1 - Solution (cont.) The following can be calculated in this problem since there is zero available-on-hand for item A and all of its components. End Item A Requirements: 100 Component B Requirements: 100 Component C Requirements: 200 Component D Requirements: 200 Component E Requirements: 400

MRP: Problem 1 – Solution (cont.) 100 Planned Order Release Gross Requirements A 4 8 7 6 5 3 2 1 Item Lead-Time

MRP: Problem 1 – Solution (cont.) 100 Planned Order Release Gross Requirements B 3 8 7 6 5 4 2 1 Item Lead-Time

MRP: Problem 1 – Solution (cont.) 200 Planned Order Release Gross Requirements C 2 8 7 6 5 4 3 1 Item Lead-Time

MRP: Problem 1 – Solution (cont.) 200 Planned Order Release Gross Requirements D 1 8 7 6 5 4 3 2 Item Lead-Time

MRP: Problem 1 – Solution (cont.) 400 Planned Order Release Gross Requirements E 1 8 7 6 5 4 3 2 Item Lead-Time

MRP: Problem 2 In the MRP table below, indicate the available on hand requirements, the planned order receipts, and the planned order releases. The lead-time is two periods. Available on hand are 20 units. Consider a) the lot size is the same as the net requirements {Lot-For-Lot (LFL) or lot size = 1} and b) lot size equals 15.

MRP: Problem 2

MRP: Problem 2 (a)- Solution

MRP: Problem 2 (a)- Solution

MRP: Problem 2 (a)- Solution

MRP: Problem 2 (a)- Solution

MRP: Problem 2 (a)- Solution

MRP: Problem 2 (a)- Solution

MRP: Problem 2 (a)- Solution

MRP: Problem 2 (a)- Solution

MRP: Problem 2 (a)- Solution

MRP: Problem 2 (a)- Solution

MRP: Problem 2 (b) - Solution

MRP: Problem 2 (b) - Solution

MRP: Problem 2 (b) - Solution

MRP: Problem 2 (b) - Solution

MRP: Problem 2 (b) - Solution

MRP: Problem 2 (b) - Solution

MRP: Problem 2 (b) - Solution

MRP: Problem 2 (b) - Solution

MRP: Problem 2 (b) - Solution

MRP: Problem 3 A company produces two products: Product A and Product Q. The owner has received an order from a customer of 103 units of product A for week 8 and 200 units of product Q for week 7. The product structures and other pertinent information are given below in the table as well as on top of each MRP table. Develop a materials requirements plan that will provide the customer the two products.

MRP: Problem 3

MRP: Problem 3 - Solution

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

MRP: Problem 3 – Solution (cont.)

Expanded MRP with and emphasis placed on integration MRP II Expanded MRP with and emphasis placed on integration Financial planning Marketing Engineering Purchasing Manufacturing

MRP II Market Demand Production plan Problems? Yes No Finance Rough-cut capacity planning Yes No Finance Marketing Manufacturing Adjust production plan Master production schedule MRP Capacity planning Requirements schedules Adjust master schedule

ERP Enterprise resource planning (ERP): An expanded effort to integrate standardized record-keeping that will permit information sharing throughout the organization

Expanded MRP with and emphasis placed on integration MRP II and ERP Systems Expanded MRP with and emphasis placed on integration Financial planning Marketing Engineering Purchasing Manufacturing Other Capabilities