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MRP and ERP

Chapter 14. MRP and ERP. Transparency on aggregate to master plan. Independent Demand. Dependent Demand. A. C(2). B(4). D(1). E(1). D(3). F(2). Independent demand is uncertain. Dependent demand is certain. Dependant Demand.

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MRP and ERP

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  1. Chapter 14 MRP and ERP

  2. Transparency on aggregate to master plan

  3. Independent Demand Dependent Demand A C(2) B(4) D(1) E(1) D(3) F(2) Independent demand is uncertain. Dependent demand is certain.

  4. Dependant Demand • Dependent demand: Demand for items that are subassemblies or component parts to be used in production of finished goods. • Once the independent demand is known, the dependent demand can be determined.

  5. MRP • Material requirements planning (MRP): Computer-based information system that translates master schedule requirements for end items into time-phased requirements for subassemblies, components, and raw materials.

  6. 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. MRP Inputs MRP Processing MRP Outputs Changes Order releases Master schedule Planned-order schedules Primary reports Exception reports Bill of materials file Planning reports MRP computer programs Secondary reports Performance- control reports Inventory records file Inventory transaction MRP

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

  9. 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. Time fences: Series of time intervals during which order changes are allowed or restricted.

  10. 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.

  11. Chair Leg Assembly Back Assembly Seat Cross bar Side Rails (2) Cross bar Back Supports (3) Legs (2) Product Structure Tree Level 0 1 2

  12. Inventory Records • One of the three primary inputs in MRP • Includes information on the status of each item by time period • Gross requirements • Scheduled receipts • Amount on hand • Lead times • Lot sizes • And more …

  13. Other Considerations • Safety Stock • Lot sizing

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

  15. MPR Processing • Gross requirements • Total expected demand • Scheduled receipts • Open orders scheduled to arrive • Planned on hand • Expected inventory on hand at the beginning of each time period

  16. MPR Processing • Net requirements • Actual amount needed in each time period • Planned-order receipts • Quantity expected to received at the beginning of the period in which it is shown, reflecting the lot size • Planned-order releases • Planned amount to order in each time period; same as Planned-order receipts offset by lead time

  17. Inventory Requirements • Net requirements: • Available Inventory: Net Requirements = Gross Requirements – Available Inventory Available Inventory = Projected on hand– Safety stock – Inventory allocated to other items

  18. A Key MRP Output • Planned orders (referring to Planned Order Releases)- schedule indicating the amount and timing of future orders. It tells us how when to order and how much, assuring us a lower level of inventory than if we did not use MRP.

  19. Other MRP Outputs (MRP Secondary Reports) • Performance-control reports • Planning reports • Exception reports

  20. Capacity Planning Capacity requirements planning: The process of determining short-range capacity requirements. Load reports: Department or work center reports that compare known and expected future capacity requirements with projected capacity availability.

  21. Develop a tentative master production schedule Use MRP to simulate material requirements Convert material requirements to resource requirements Revise tentative master production schedule No Can capacity be changed to meet requirements Is shop capacity adequate? No Yes Yes Firm up a portion of the MPS Change capacity Capacity Requirements in MRP Planning

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

  23. Requirements of MRP • Computer and necessary software • Accurate and up-to-date • Master schedules • Bills of materials • Inventory records • Integrity of data

  24. MRP II or Manufacturing Resource Planning • Expanded MRP with and emphasis placed on integration • Financial planning • Marketing • Engineering • Purchasing • Manufacturing

  25. Market Demand Production plan Rough-cut capacity planning Requirements schedules Problems? MRP II Master production schedule Finance Manufacturing Marketing MRP Adjust master schedule Capacity planning Adjust production plan No Yes No Yes Problems?

  26. ERP • Enterprise resource planning (ERP): • Next step in an evolution that began with MPR and evolved into MRPII • Integration of financial, manufacturing, and human resources on a single computer system.

  27. ERP Software • ERP software provides a system to capture and make data available in real time to decision makers and other users in the organization • Provides tools for planning and monitoring various business processes • Includes • Production planning and scheduling • Inventory management • Product costing • Distribution

  28. MRP in Services • Service applications such as: • Professional services • Postal services • Retail • Banking • Healthcare • Higher education • Engineering • Logistical services • Real estate

  29. ERP Strategy Considerations • High initial cost • High cost to maintain • Future upgrades • Training

  30. The following slides are from a consultant who markets ERP systems. Please review the slides. As time permits.we can go through them in class. Note the reason for these slides is to illustrate a situation you might find yourself in if you are a manager in a company makinga decision to purchase an ERP system. It can be a veryintimidating process for your company when the sellerhas all the information about a complex system, and thebuyer is at the mercy of the seller’s knowledge and technical know-how.

  31. Basic Definitions

  32. End of slides for MRP/ERP

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