1. Copyright 2006 John Wiley & Sons, Inc. Beni Asllani University of Tennessee at Chattanooga Resource Planning Operations Management - 5 th Edition Chapter 14 Roberta Russell & Bernard W. Taylor, III

2. Copyright 2006 John Wiley & Sons, Inc.14-2 Lecture Outline   Material Requirements Planning (MRP)   Capacity Requirements Planning (CRP)   Enterprise Resource Planning (ERP)

3. Copyright 2006 John Wiley & Sons, Inc.14-3 Resource Planning for Manufacturing

4. Copyright 2006 John Wiley & Sons, Inc.14-4 Material Requirements Planning (MRP)   Computerized inventory control and production planning system   When to use MRP? Dependent demand items Discrete demand items Complex products Job shop production Assemble-to-order environments

5. Copyright 2006 John Wiley & Sons, Inc.14-5 Demand Characteristics 12345 Week 400 400 – 300 300 – 200 200 – 100 100 – No. of tables Continuous demand M T W Th F M T W Th F 400 400 – 300 300 – 200 200 – 100 100 – No. of tables Discrete demand Independent demand 100 tables Dependent demand 100 x 1 = 100 tabletops 100 x 4 = 400 table legs

6. Copyright 2006 John Wiley & Sons, Inc.14-6 Material Requirements Planning Material requirements planning Planned order releases Work orders Purchase orders Rescheduling notices Item master file Product structure file Master production schedule

7. Copyright 2006 John Wiley & Sons, Inc.14-7 MRP Inputs and Outputs  Inputs Master production schedule Master production schedule Product structure file Product structure file Item master file Item master file  Outputs Planned order releases Planned order releases Work orders Work orders Purchase orders Purchase orders Rescheduling notices Rescheduling notices

8. Copyright 2006 John Wiley & Sons, Inc.14-8 Master Production Schedule  Drives MRP process with a schedule of finished products  Quantities represent production not demand  Quantities may consist of a combination of customer orders and demand forecasts  Quantities represent what needs to be produced, not what can be produced   Quantities represent end items that may or may not be finished products

9. Copyright 2006 John Wiley & Sons, Inc.14-9 Master Production Schedule (cont.) PERIOD MPS ITEM12345 Clipboard8595120100100 Lapdesk0500500 Lapboard75120472017 Pencil Case125125125125125

10. Copyright 2006 John Wiley & Sons, Inc.14-10 Product Structure Top clip (1)Bottom clip (1) Pivot (1)Spring (1) Rivets (2) Finished clipboardPressboard (1) Clipboard

11. Copyright 2006 John Wiley & Sons, Inc.14-11 Product Structure Tree Clipboard Level 0 Level 1 Level 2 Spring (1) Bottom Clip (1) Top Clip (1) Pivot (1) Rivets (2) Clip Ass’y (1) Pressboard (1)

12. Copyright 2006 John Wiley & Sons, Inc.14-12 Time-phased Bills Forward scheduling: start at today‘s date and schedule forward to determine the earliest date the job can be finished. If each item takes one period to complete, the clipboards can be finished in three periods Backward scheduling: start at the due date and schedule backwards to determine when to begin work. If an order for clipboards is due by period three, we should start production now

13. Copyright 2006 John Wiley & Sons, Inc.14-13 Item Master File DESCRIPTIONINVENTORY POLICY ItemPressboardLead time1 Item no.734Annual demand5000 Item typePurchHolding cost1 Product/sales classCompOrdering/setup cost50 Value classBSafety stock 0 Buyer/plannerRSRReorder point39 Vendor/drawing07142EOQ316 Phantom codeNMinimum order qty100 Unit price/cost1.25Maximum order qty500 PeggingYMultiple order qty LLC1Policy code3

14. Copyright 2006 John Wiley & Sons, Inc.14-14 Item Master File (cont.) PHYSICAL INVENTORYUSAGE/SALES CODES On hand100YTD usage/sales1100 LocationW142MTD usage/sales75 On order100YTD receipts1200 Allocated75MTD receipts0 Cycle3Last receipt8/25 Last count9/5Last issue10/5 Difference-2 Cost acct.00754 Routing00326 Engr07142

15. Copyright 2006 John Wiley & Sons, Inc.14-15 MRP Processes 1.Exploding the bill of material 2.Netting out inventory 3.Lot sizing 4.Time-phasing requirements

16. Copyright 2006 John Wiley & Sons, Inc.14-16 MRP Matrix

17. Copyright 2006 John Wiley & Sons, Inc.14-17 Lot Sizing in MRP Systems   Lot-for-lot ordering policy   Fixed-size lot ordering policy   Periodic order quantity

18. Copyright 2006 John Wiley & Sons, Inc.14-18 Planned Order Report Item#2740Date9 - 25 - 05 On hand100Lead time2 weeks On order200Lot size200 Allocated50Safety stock50 SCHEDULEDPROJECTED DATEORDER NO.GROSS REQS.RECEIPTSON HANDACTION 50 9-26AL 44162525 9-30AL 4147250 10-01GR 647050- 50 10-08SR 7542200150Expedite SR 10-01 10-10CO 44717575 10-15GR 64715025 10-23GR 6471250 10-27GR 647350- 50Release PO 10-13 Key:AL= allocatedWO= work order CO= customer orderSR= scheduled receipt PO= purchase orderGR= gross requirement

19. Copyright 2006 John Wiley & Sons, Inc.14-19 MRP Action Report Current date 9-25-05 ITEMDATEORDER NO.QTY.ACTION #274010-087542200ExpediteSR10-01 #361610-09Move forwardPO10-07 #241210-10Move forwardPO10-05 #342710-15Move backwardPO10-25 #251610-207648100De-expediteSR10-30 #274010-27200ReleasePO10-13 #366610-3150ReleaseWO10-24

20. Copyright 2006 John Wiley & Sons, Inc.14-20 Capacity Requirements Planning (CRP)   Creates a load profile   Identifies under-loads and over-loads   Inputs Planned order releases Routing file Open orders file

21. Copyright 2006 John Wiley & Sons, Inc.14-21 CRP MRP planned order releases Routing file Capacity requirements planning Open orders file Load profile for each machine center

22. Copyright 2006 John Wiley & Sons, Inc.14-22 Leveling Under-load Conditions 1.Acquire more work 2.Pull work ahead that is scheduled for later time periods 3.Reduce normal capacity

23. Copyright 2006 John Wiley & Sons, Inc.14-23 Reducing Over-load Conditions   Eliminating unnecessary requirements   Rerouting jobs to alternative machines, workers, or work centers   Splitting lots between two or more machines   Increasing normal capacity   Subcontracting   Increasing efficiency of the operation   Pushing work back to later time periods   Revising master schedule

24. Copyright 2006 John Wiley & Sons, Inc.14-24 Initial Load Profile Hours of capacity 123456123456123456123456 Time (weeks) Normalcapacity 120 120 – 110 110 – 100 100 – 90 90 – 80 80 – 70 70 – 60 60 – 50 50 – 40 40 – 30 30 – 20 20 – 10 10 – 0 0 –

25. Copyright 2006 John Wiley & Sons, Inc.14-25 Adjusted Load Profile Hours of capacity 123456123456123456123456 Time (weeks) Normalcapacity 120 120 – 110 110 – 100 100 – 90 90 – 80 80 – 70 70 – 60 60 – 50 50 – 40 40 – 30 30 – 20 20 – 10 10 – 0 0 – Pull ahead Push back Overtime Work an extra shift

26. Copyright 2006 John Wiley & Sons, Inc.14-26 Enterprise Resource Planning (ERP)   Software that organizes and manages a company’s business processes by sharing information across functional areas integrating business processes facilitating customer interaction providing benefit to global companies

27. Copyright 2006 John Wiley & Sons, Inc.14-27 ERP Modules

28. Copyright 2006 John Wiley & Sons, Inc.14-28 Organizational Data Flows Source: Adapted from Joseph Brady, Ellen Monk, and Bret Wagner, Concepts in Enterprise Resource Planning (Boston: Course Technology, 2001), pp. 7–12

29. Copyright 2006 John Wiley & Sons, Inc.14-29 Selected Enterprise Software Vendors

30. Copyright 2006 John Wiley & Sons, Inc.14-30 ERP Implementation   Analyze business processes   Choose modules to implement Which processes have the biggest impact on customer relations? Which processes have the biggest impact on customer relations? Which process would benefit the most from integration? Which process would benefit the most from integration? Which processes should be standardized? Which processes should be standardized?   Align level of sophistication   Finalize delivery and access   Link with external partners