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Material Requirements Planning and Enterprise Resource Planning

Material Requirements Planning and Enterprise Resource Planning. Dr. Ron Lembke. Historical Perspective. ERP- Enterprise Resource Planning. MRP II – Manufacturing Resource Planning. mrp – material requirements planning . MRP Crusade (1975). Material Requirements Planning

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Material Requirements Planning and Enterprise Resource Planning

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  1. Material Requirements Planning and Enterprise Resource Planning Dr. Ron Lembke

  2. Historical Perspective ERP- Enterprise Resource Planning MRP II – Manufacturing Resource Planning mrp – material requirements planning

  3. MRP Crusade (1975) • Material Requirements Planning • Make sure you have enough parts when you need them • Take future demands, factor in lead times (time phase), compare to on hand, order • Determine order size and timing • Control and plan purchasing vs. OSWO inventory management

  4. Closed-Loop MRP • Capacity Consideration: • Part routings • Calculate loads on each work station • See if scheduled load exceeds capacity • Lead-time long enough to allow some shuffling to make plan feasible

  5. MRP II -- Manufacturing Resource Planning • “A method for the effective planning of all resources of a manufacturing company” (APICS def.) • Financial accounting incorporated • Sales • Operations Planning • Simulate capacity requirements of different possible Master Production Schedules • 1989, $1.2B MRPII sales in U.S., one third of total software sales

  6. Success? MRP Crusade Begins

  7. ERP differences • Material planning • Capacity planning • Product design • Information warehousing • All functions in the entire company operate off of one common set of data • Instantaneous updating, visibility

  8. ERP Sales • Y2K: Worldwide sales of top 10 vendors • 1995 $2.8 B • 1996 $4.2 B • 1997 $5.8 B $3.2 B SAP • Fortune survey: 44% reported spending at least 4 times as much on implementation as on software

  9. ERP Challenges • Modules assume “best practices:” • Change software to reflect company ($) • Change company to follow software (?) • Accuracy of data • Drives entire system • Ownership of / responsibility for • Ability to follow structure

  10. ERP Novel? • “Goal-like” novel • Hero learns more about ERP, deciding if it is right for his company • Company rushes through installation • General introduction to ERP systems, what they do, how different from MRP • SAP R/3 screen shots

  11. The Heart of the Matter - mrp • System for organizing WIP releases • Work in Process – work that has been started, but not yet finished • Consider Lead Time (LT)for each item • Look at BOM to see what parts needed • Bill of Materials – what goes into what • Release so they will arrive just as needed

  12. Bike Production Frame OCLV Carbon Drivetrain Wheels Assemble Parts Arrive Seat, Bars Due 1 14 7 21 4 11 28 18 Mar Apr

  13. Snow Shovels • Example – Snow Shovel • Order quantity is 50 units • LT is one week • Simple Bill of Materials - BOM

  14. MRP Table 6 units short

  15. MRP Table Order 50 units week earlier

  16. Ending Inventory Ending inventory

  17. Terminology • Projected Available balance • Not on-hand (that may be greater) • Tells how many will be available • Available to Promise – the units aren’t spoken for yet, we can assign them to a customer • Planned order releases ≠ scheduled receipts • Only when material has been committed to their production • Move to scheduled receipts as late as possible • Preserves flexibility

  18. 1605 Snow Shovel 1605 Snow Shovel 062 Nail (4) 13122 Top Handle Assy 048 Scoop-shaft connector 14127 Rivet (4) 314 scoop assembly 118 Shaft (wood)

  19. 314 scoop assembly 314 scoop assembly 019 Blade (steel) 14127 Rivet (6) 2142 Scoop (aluminum)

  20. 13122 Top Handle Assembly 13122 Top Handle Assembly 11495 Welded Top handle bracket Assembly 457 Top handle (wood) 1118 Top handle Coupling (steel) 129 Top Handle Bracket (steel) 082 Nail (2)

  21. BOM Explosion • Process of translating net requirements into components part requirements • Take into account existing inventories • Consider also scheduled receipts

  22. BOM Explosion Example • Need to make 100 shovels • We are responsible for handle assemblies.

  23. 13122 Top Handle Assembly 13122 Top Handle Assembly 11495 Welded Top handle bracket Assembly 457 Top handle (wood) 1118 Top handle Coupling (steel) 129 Top Handle Bracket (steel) 082 Nail (2)

  24. Net Requirements Sch Gross Net Part Description Inv Rec Req Req Top handle assy 25 -- 100 75 Top handle 22 25 Nail (2 required) 4 50 Bracket Assy 27 -- Top bracket 15 -- Top coupling 39 15

  25. Net Requirements Sch Gross Net Part Description Inv Rec Req Req Top handle assy 25 -- 100 75 Top handle 22 25 75 28 Nail (2 required) 4 50 150 96 Bracket Assy 27 -- 75 48 Top bracket 15 -- Top coupling 39 15

  26. 13122 Top Handle Assembly 13122 Top Handle Assembly 11495 Welded Top handle bracket Assembly 457 Top handle (wood) 1118 Top handle Coupling (steel) 129 Top Handle Bracket (steel) 082 Nail (2)

  27. Net Requirements Sch Gross Net Part Description Inv Rec Req Req Top handle assy 25 -- 100 75 Top handle 22 25 75 28 Nail (2 required) 4 50 150 96 Bracket Assy 27 -- 75 48 Top bracket 15 -- 48 33 Top coupling 39 15 48 --

  28. Timing of Production • This tells us how many of each we need • Doesn’t tell when to start • Start as soon as possible? • Dependent events (oh no, not that!)

  29. 13122 Top Handle Assy Order policy: Lot-for-lot

  30. 13122 Top Handle Assy-2 Order policy: Lot-for-lot

  31. 457 Top Handle One handle for Each assembly

  32. 457 Top Handle Order policy: Lot-for-lot

  33. 457 Top Handle Order policy: Lot-for-lot

  34. 082 Nail (2 required) Two nails for Each assembly

  35. 082 Nail (2 required)

  36. 11495 Bracket Assembly One bracket for Each assembly

  37. 11495 Bracket Assembly Order policy: Lot-for-lot

  38. 129 Top Bracket

  39. 129 Top handle bracket Order policy: Lot-for-lot

  40. 1118 Top handle coupling

  41. 1118 Top handle coupling Order policy: Lot-for-lot

  42. 1118 Top handle coupling

  43. Other considerations • Safety stock if uncertainty in demand or supply quantity • Don’t let available go down to 0 • Safety LT if uncertainty in arrival time • Place order earlier than necessary • Order quantities • EOQ – Economic Order Quantity, Fixed Size • If that’s not enough, order what you need, OR order two or more of the Fixed Size • Lot-For-Lot, Periodic Order quantity, others

  44. Summary • Demand for final products • Compute needs for it and • Dependent Demand for components • Look at all parts of the Bill of Materials • Complete the Table for each • Bottom row (Pl Order Releases) becomes top row (Gross Requirements) of input components (also called children) • Multiplied by # needed for each parent

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