1. Chapter 15
MRP and ERP

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

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

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

5. 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

6. 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

7. 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.

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

9. 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.

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

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

12. Typical MRP Matrix

13. 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.

14. MRP Secondary Reports
Performance-control reports
Planning reports
Exception reports

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

16. 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

17. 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

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

19. 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

20. 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.

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

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

23. 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

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

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

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

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

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

29. 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.

30. MRP: Problem 2

31. MRP: Problem 2 (a)- Solution

32. MRP: Problem 2 (a)- Solution

33. MRP: Problem 2 (a)- Solution

34. MRP: Problem 2 (a)- Solution

35. MRP: Problem 2 (a)- Solution

36. MRP: Problem 2 (a)- Solution

37. MRP: Problem 2 (a)- Solution

38. MRP: Problem 2 (a)- Solution

39. MRP: Problem 2 (a)- Solution

40. MRP: Problem 2 (a)- Solution

41. MRP: Problem 2 (b) - Solution

42. MRP: Problem 2 (b) - Solution

43. MRP: Problem 2 (b) - Solution

44. MRP: Problem 2 (b) - Solution

45. MRP: Problem 2 (b) - Solution

46. MRP: Problem 2 (b) - Solution

47. MRP: Problem 2 (b) - Solution

48. MRP: Problem 2 (b) - Solution

49. MRP: Problem 2 (b) - Solution

50. 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.

51. MRP: Problem 3

52. MRP: Problem 3 - Solution

53. MRP: Problem 3 – Solution (cont.)

54. MRP: Problem 3 – Solution (cont.)

55. MRP: Problem 3 – Solution (cont.)

56. MRP: Problem 3 – Solution (cont.)

57. MRP: Problem 3 – Solution (cont.)

58. MRP: Problem 3 – Solution (cont.)

59. MRP: Problem 3 – Solution (cont.)

60. MRP: Problem 3 – Solution (cont.)

61. MRP: Problem 3 – Solution (cont.)

62. MRP: Problem 3 – Solution (cont.)

63. MRP: Problem 3 – Solution (cont.)

64. MRP: Problem 3 – Solution (cont.)

65. MRP: Problem 3 – Solution (cont.)

66. MRP: Problem 3 – Solution (cont.)

67. MRP: Problem 3 – Solution (cont.)

68. MRP: Problem 3 – Solution (cont.)

69. MRP: Problem 3 – Solution (cont.)

70. MRP: Problem 3 – Solution (cont.)

71. MRP: Problem 3 – Solution (cont.)

72. MRP: Problem 3 – Solution (cont.)

73. MRP: Problem 3 – Solution (cont.)

74. MRP: Problem 3 – Solution (cont.)

75. MRP: Problem 3 – Solution (cont.)

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

77. 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

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

79. 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