2. Overview Dependent demand Dependent demand Master production schedule Master production schedule Bill of materials Bill of materials MRP MRP Time-phased product structure Time-phased product structure Gross material requirements plan Gross material requirements plan Net requirements plan Net requirements plan Lot-sizing techniques Lot-sizing techniques Extensions of MRP Extensions of MRP

3. Furniture Mfg. Produces 3-types of chairs Produces 3-types of chairs Ladder-back chair Ladder-back chair Kitchen chair Kitchen chair Desk chair Desk chair

4. Master Production Schedule 200 Ladder-back chair Kitchen chair Desk chair 12 AprilMay 670 345678 200 150 120 200 150 200 120 Aggregate production plan for chair family 670

5. Bill of Materials List of components & quantities needed to make productList of components & quantities needed to make product Provides product structure (tree)Provides product structure (tree) –Parents: Items above given level –Children: Items below given level

6. Bill of Materials Seat cushion Seat-frame boards Front legs A Ladder-back chair Back legs Leg supports Back slats

7. Bill of Materials Back slatsSeat cushion Seat-frame boards Leg supports Front legs Back legs A Ladder-back chair J (4) Seat-frame boards C (1) Seat subassembly D (2) Front legs B (1) Ladder-back subassembly E (4) Leg supports ALadder-backchair I (1) Seat cushion H (1) Seat frame G (4) Back slats F (2) Back legs

8. Dependent vs. Independent Demand Demand for chairs Demand for chairs A finished product A finished product Independent Independent Demand for front legs Demand for front legs A component or subassembly A component or subassembly Depends on the demand for chairs (parent) Depends on the demand for chairs (parent)

9. 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 & POQMRP Dependent vs. Independent Demand

10. Requirements for Effective Use of Dependent Demand Inventory Models master production schedule master production schedule specifications or bills-of-material specifications or bills-of-material inventory availability inventory availability purchase orders outstanding purchase orders outstanding lead times lead times

11. Cooperstown Cars, Inc. Produces toy cars Produces toy cars Body Body Axles (2) Axles (2) Wheels (4) Wheels (4)

12. Cooperstown Cars, Inc. - Each component has a known lead time

13. Cooperstown Cars, Inc. Demand for Toy Car in Week 8 is 100 Demand for Toy Car in Week 8 is 100 Schedule production for: Schedule production for: Toy car assembly Toy car assembly Wheel assembly Wheel assembly Body Body Axle Axle Wheels Wheels

14. Time-Phased Product Structure

43. More complexity/Scheduled receipts

45. Explanation: Gross requirements are the total demand for wheels. Projected on-hand inventory in week 1 is 30 + 200 – 150

46. More complexity/Scheduled receipts Projected on-hand inventory balance at end of week t Inventory on hand at end of week t - 1 Gross requirements in week t Scheduled or planned receipts in week t =+–

47. More complexity/Scheduled receipts

48. Lot-Sizing Rules When there is a net requirement, how much should we order? Lot-for-lot – L4L Economic Order Quantity – EOQ Part Period Balancing - PPB Wagner-Whitin Algorithm

49. Lot-Sizing Rules: L4L L4L- order the amount needed to fulfill requirements

50. Lot-Sizing Rules: L4L

53. Lot-Sizing Rules: EOQ EOQ- order the EOQ

54. Lot-Sizing Rules: EOQ EOQ- order the EOQ

55. Lot-Sizing Rules: EOQ EOQ- order the EOQ 80+116-120 = 76

56. Lot-Sizing Rules: EOQ EOQ- order the EOQ

57. Lot-Sizing Rules: EOQ EOQ- order the EOQ

58. Lot-Sizing Rules: EOQ EOQ- order the EOQ

59. Extensions of MRP Closed loop MRP Closed loop MRP Capacity planning - load reports Capacity planning - load reports MRP II - Material Resource Planning MRP II - Material Resource Planning Enterprise Resource Planning Enterprise Resource Planning

60. Extensions of MRP: Capacity Planning Tactics for smoothing the load and minimizing the impact of changed lead time include: Tactics for smoothing the load and minimizing the impact of changed lead time include: Overlapping - reduces the lead time, entails sending pieces to the second operation before the entire lot has completed the first operation Overlapping - reduces the lead time, entails sending pieces to the second operation before the entire lot has completed the first operation Operations splitting - sends the lot to two different machines for the same operation Operations splitting - sends the lot to two different machines for the same operation Lot splitting - breaking up the order and running part of it ahead of the schedule Lot splitting - breaking up the order and running part of it ahead of the schedule

61. MRP II

62. Inventory records Inventory transactions Bills of materials Routings Time standards MRPexplosion Master production schedule Customer ordersForecasts MRP II

63. Material requirements plan Inventory records Inventory transactions Bills of materials Routings Time standards MRPexplosion Master production schedule Customer ordersForecasts MRP II

64. Material requirements plan Inventory records Inventory transactions Bills of materials Routings Time standards MRPexplosion Master production schedule Manufacturing resource plan Cost and financial data Customer ordersForecasts MRP II

65. Material requirements plan Inventory records Inventory transactions Bills of materials Routings Time standards MRPexplosion Master production schedule Manufacturing resource plan Cost and financial data Purchasing reports Financial/ accounting reports Sales and marketing reports Human resource reports Manufacturing reports Customer ordersForecasts MRP II

66. Extensions to MRP Enterprise Resource Planning MRP II with ties to customers and suppliers

67. MRP and ERP

68. ERP @ BMW, Spartanburg

69. Product BMW X5 sport activity vehicle Application: mySAP™ Automotive Goal: Tight supplier network in order to ensure just-in-time production Compress Customer Order Cycle Improve Inventory Accuracy

70. Why use ERP Automotive Industry is competitive Automotive Industry is competitive Global competition Global competition Trend toward make-to-order manufacturing -- filling individual customer requirements rather than make-to-stock  new demands on manufacturers and dealers Trend toward make-to-order manufacturing -- filling individual customer requirements rather than make-to-stock  new demands on manufacturers and dealers Potential cost reduction Potential cost reduction Customers want what they want, when they want it. Customers want what they want, when they want it.

71. Key success factors in the Automotive Industry Speed: speed in product development, speed in product assembly, and speed in product delivery to dealers and customers. Speed: speed in product development, speed in product assembly, and speed in product delivery to dealers and customers. Manufacturers must closely manage armies of suppliers and partners to make certain that the correct systems and components are delivered where and when they are needed. Manufacturers must closely manage armies of suppliers and partners to make certain that the correct systems and components are delivered where and when they are needed. Collaboration among all the industry players -- suppliers, OEMs, dealers, and customers -- is essential. Collaboration among all the industry players -- suppliers, OEMs, dealers, and customers -- is essential. Linking complex business processes into a logical flow, maximizing efficiency and satisfying customers' expectations. Linking complex business processes into a logical flow, maximizing efficiency and satisfying customers' expectations.

72. Business Benefits End-to-end integration of SAP and non-SAP products. End-to-end integration of SAP and non-SAP products. Offers a single data platform for Offers a single data platform for Engineering Engineering Planning Planning supply chain management supply chain management Procurement Procurement customer relationship management. customer relationship management.

73. Business Benefits Cost reduction of 3% to 6% per vehicle Cost reduction of 3% to 6% per vehicle by changing the supply chain from the traditional push paradigm by changing the supply chain from the traditional push paradigm New level of collaboration and efficiency. New level of collaboration and efficiency. Groups processes and functions by market segments Groups processes and functions by market segments OEMs, suppliers and aftermarket, or sales and service. OEMs, suppliers and aftermarket, or sales and service.

74. How it works mySAP™ Automotive generates delivery schedules to meet assembly-line planning and sequencing directives. mySAP™ Automotive generates delivery schedules to meet assembly-line planning and sequencing directives. Long-horizon forecasts and short-horizon J-I-T delivery schedules are sent to suppliers. Long-horizon forecasts and short-horizon J-I-T delivery schedules are sent to suppliers. Electronic Data Interchange (EDI) Electronic Data Interchange (EDI) mySAP™ Automotive Supplier Portal (Internet) mySAP™ Automotive Supplier Portal (Internet)

75. How it works BMW gets an advance shipping notification BMW gets an advance shipping notification Exact information on part counts and delivery dates Exact information on part counts and delivery dates Upon receipt parts are transferred directly to the line Upon receipt parts are transferred directly to the line

76. Additional benefits Monitoring the production status in real time Monitoring the production status in real time Recording production confirmation and parts consumption every 3 minutes and adjustment of inventory Recording production confirmation and parts consumption every 3 minutes and adjustment of inventory Costs are posted to calculate the value of work in progress Costs are posted to calculate the value of work in progress Seamless collaboration between business partners across the supply chain allows Seamless collaboration between business partners across the supply chain allows Engineering Engineering High-volume production High-volume production Highly customized products Highly customized products