1. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-1 Material Requirements Planning (MRP)

2. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-2 Outline  Dependent Inventory Model Requirements  Master Production Schedule  Bills of Materials  Accurate Inventory records  Purchase Orders Outstanding  Lead Times for Each Component  MRP Structure

3. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-3 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)  Enterprise Resource Planning (ERP)

4. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-4 Outline - continued  MRP In Services  Distribution Resource Planning (DRP)  DRP Structure  Allocation

5. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-5 Inventory Process stage Demand Type Number & Value Other Raw Material WIP Finished Goods Independent Dependent A Items B Items C Items Maintenance Dependent Operating Inventory Classifications

6. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-6 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

7. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-7 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

8. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-8 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

9. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-9 The Planning Process Production Plan Execute Material Plans Master Production Schedule Material Requirements Plan Capacity Requirements Plan Execute Capacity Plans Realistic?? No Yes

10. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-10 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

11. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-11  List of components & quantities needed to make product Bill-of-Material

12. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-12 Figure from Example 1

13. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-13  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

14. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-14 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

15. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-15 Time-Phased Product Structure 1 2345678 D G 2 weeks 1 week F E 3 weeks 2 weeks A 1 week C B 2 weeks to produce E D Must have D and E completed here so production can begin on B 2 weeks 1 week Start production of D

16. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-16  Manufacturing computer information system  Determines quantity & timing of dependent demand items © 1995 Corel Corp. Material Requirements Planning (MRP)

17. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-17  Computer system  Mainly discrete products  Accurate bill-of-material  Accurate inventory status  99% inventory accuracy  Stable lead times © 1984-1994 T/Maker Co. MRP Requirements

18. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-18  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

19. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-19 Structure of the MRP System MRP by period report MRP by date report Planned orders report Purchase requirements Exception reports MRP Programs Master Production Schedule BOM Lead Times (Item Master File) (Bill-of-Material) Inventory Data Purchasing data

20. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-20 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

21. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-21 MRP Systems - Input and Output Master Production Schedule Bill of Materials Material Requirements Planning System Inventory Status Planned Order & Other Reports Item Master Purchasing Data

22. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-22  Shows items to be produced  End item, customer order, module  Derived from aggregate plan Master Production Schedule

23. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-23  Shows items to be produced  End item, customer order, module  Derived from aggregate plan Master Production Schedule Item/WeekOct 3Oct 10Oct 17Oct 24 Drills300200310300 Saws300450310330 Example

24. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-24 Derivation of Master Schedule Therefore, these are the gross requirements for B 10 40+10 = 50 40 50 20 15+30 = 45 1 2 3 4 5 6 7 8 Periods Gross requirements: B Periods 10 1 2 3 Master schedule for S sold directly 405015 A C B 5 6 7 8 9 10 11 Lead time = 4 for A Master schedule for A 402030 S B C 8 9 10 12 11 13 Lead time = 6 for S Master schedule for S

25. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-25 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

26. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-26 Extensions of MRP  Closed loop MRP  Capacity planning - load reports  MRP II - Material Resource Planning  Enterprise Resource Planning

27. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-27 Figure 14.8

28. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-28 Extensions to MRP Enterprise Resource Planning MRP II with ties to customers and suppliers

29. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-29 Figure 14.10

30. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-30 MRP in Services  Can be used when demand for service or service items is directly related to or derived from demand for other services  restaurant - rolls required for each meal  hospitals - implements for surgery  etc.

31. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-31 Figure 14.11

32. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-32 Distribution Resource Planning  DRP requires:  Gross requirements, which are the same as expected demand or sales forecasts  Minimum levels of inventory to meet customer service levels  Accurate lead times  Definition of the distribution structure