2. 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.

3. 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.

4. 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

5. Capacity Constraints
Often, capacity constraints prohibit implementation of a lot-sizing solution
Example
Demand:
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

6. 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.

7. Capacity Solution- feasibility check1 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

8. 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.

9. 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

10. 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 :

11. 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

12. 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
Period (weeks)
Period (weeks)

13. 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.

14. 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.

15. ERP Modules

16. ERP and MRP

17. SAP’s ERP Modules