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Resource Planning

Resource Planning. OPIM 310-Lecture #7 Instructor: Jose Cruz. Enterprise Resource Planning (ERP). Organizes and manages a company’s business processes by sharing information across functional areas Connects with supply-chain and customer management applications. Finance & Accounting. Sales

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Resource Planning

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  1. Resource Planning OPIM 310-Lecture #7 Instructor: Jose Cruz

  2. Enterprise Resource Planning (ERP) • Organizes and manages a company’s business processes by sharing information across functional areas • Connects with supply-chain and customer management applications

  3. Finance & Accounting Sales & Marketing Production & Materials Management ERP Data Repository Human Resources ERP’s Central Database

  4. ERP and MRP • MRP (material requirements planning) was the precursor to ERP • Primarily a production planning and control system • MRP evolved to MRP II (manufacturing resource planning) • ERP and ERP II continue to extend the links through all business processes

  5. Authorized master production schedule Other sources of demand Engineering and process designs Inventory transactions Inventory records MRP explosion Bills of materials Material requirements plan Material Requirements Plan Output

  6. Back slats Seat cushion Leg supports Seat-frame boards Back legs Front legs A Ladder-back chair Bill of Materials Figure 16.3

  7. A Ladder-back chair B (1) Ladder-back subassembly C (1) Seat subassembly D (2) Front legs E (4) Leg supports F (2) Back legs G (4) Back slats H (1) Seat frame I (1) Seat cushion J (4) Seat-frame boards Bill of Materials Figure 16.3

  8. Material Requirements Planning • Computerized inventory control & production planning system • Schedules component items when they are needed - no earlier and no later

  9. When to Use MRP • Dependent and discrete items • Complex products • Job shop production • Assemble-to-order environments

  10. Independent demand Dependent demand 100 x 1 = 100 tabletops 100 x 4 = 400 table legs 100 tables Discrete demand Continuous demand 400 – 300 – 200 – 100 – 400 – 300 – 200 – 100 – No. of tables No. of tables 1 2 3 4 5 Week M T W Th F M T W Th F Demand Characteristics

  11. MRP Outputs • Planned orders • Work orders • Purchase orders • Changes to previous plans or existing schedules • Action notices • Rescheduling notices

  12. April May 1 2 3 4 5 6 7 8 Ladder-back chair 150 150 Kitchen chair 120 120 Desk chair 200 200 200 200 Aggregate production plan 670 670 for chair family Master Production Schedule

  13. 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 & demand forecasts • Quantities represent what needs to be produced, not what can be produced

  14. Item: C Description: Seat subassembly Lot Size: 230 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 0 0 120 0 150 120 0 Scheduled receipts 230 0 0 0 0 0 0 0 Projected on-hand inventory 37 Planned receipts Planned order releases Inventory Record

  15. Item: C Description: Seat subassembly Lot Size: 230 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 0 0 120 0 150 120 0 Scheduled receipts 230 0 0 0 0 0 0 0 Projected on-hand inventory 37 Planned receipts Explanation: Gross requirements are the total demand for the two chairs. Projected on-hand inventory in week 1 is 37 + 230 – 150 Planned order releases Inventory Record

  16. Item: C Description: Seat subassembly Lot Size: 230 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 0 0 120 0 150 120 0 Scheduled receipts 230 0 0 0 0 0 0 0 Projected on-hand inventory 37 117 Planned receipts Explanation: Gross requirements are the total demand for the two chairs. Projected on-hand inventory in week 1 is 37 + 230 – 150 = 117 units. Planned order releases Inventory Record

  17. Item: C Description: Seat subassembly Lot Size: 230 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 0 0 120 0 150 120 0 Scheduled receipts 230 0 0 0 0 0 0 0 Projected on-hand inventory 37 117 Planned receipts Planned order releases Inventory Record

  18. Item: C Description: Seat subassembly Lot Size: 230 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 0 0 120 0 150 120 0 Scheduled receipts 230 0 0 0 0 0 0 0 Projected on-hand inventory 37 117 Planned receipts Scheduled or planned receipts in week t Projected on-hand inventory balance at end of week t Inventory on hand at end of week t - 1 Gross requirements in week t = + – Planned order releases Inventory Record

  19. Item: C Description: Seat subassembly Lot Size: 230 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 0 0 120 0 150 120 0 Scheduled receipts 230 0 0 0 0 0 0 0 Projected on-hand inventory 37 117 117 117 – 3 – 3 –153 –273 –273 Planned receipts Scheduled or planned receipts in week t Projected on-hand inventory balance at end of week t Inventory on hand at end of week t - 1 Gross requirements in week t = + – Planned order releases Inventory Record

  20. Explanation: Without a new order in week 4, there will be a shortage of three units: 117 + 0 + 0 – 120 = – 3 units. Item: C Description: Seat subassembly Lot Size: 230 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 0 0 120 0 150 120 0 Scheduled receipts 230 0 0 0 0 0 0 0 Projected on-hand inventory 37 117 117 117 –3 – 3 –153 – 273 – 273 Planned receipts Planned order releases Planned Orders

  21. Item: C Description: Seat subassembly Lot Size: 230 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 0 0 120 0 150 120 0 Scheduled receipts 230 0 0 0 0 0 0 0 Projected on-hand inventory 37 117 117 117 Planned receipts Planned order releases Planned Orders

  22. Explanation: Adding the planned receipt brings the balance to 117 + 0 + 230 – 120 = 227 units. Item: C Description: Seat subassembly Lot Size: 230 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 0 0 120 0 150 120 0 Scheduled receipts 230 0 0 0 0 0 0 0 Projected on-hand inventory 37 117 117 117 227 Planned receipts 230 Planned order releases Planned Orders

  23. Explanation: Adding the planned receipt brings the balance to 117 + 0 + 230 – 120 = 227 units. Item: C Description: Seat subassembly Lot Size: 230 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 0 0 120 0 150 120 0 Scheduled receipts 230 0 0 0 0 0 0 0 Projected on-hand inventory 37 117 117 117 227 Planned receipts 230 Planned order releases Planned Orders

  24. Explanation: Offsetting for a two-week lead time puts the corresponding planned order release back to week 2. Item: C Description: Seat subassembly Lot Size: 230 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 0 0 120 0 150 120 0 Scheduled receipts 230 0 0 0 0 0 0 0 Projected on-hand inventory 37 117 117 117 227 Planned receipts 230 Planned order releases 230 Planned Orders

  25. Explanation: Offsetting for a two-week lead time puts the corresponding planned order release back to week 2. Item: C Description: Seat subassembly Lot Size: 230 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 0 0 120 0 150 120 0 Scheduled receipts 230 0 0 0 0 0 0 0 Projected on-hand inventory 37 117 117 117 227 Planned receipts 230 Planned order releases 230 Planned Orders

  26. Explanation: The first planned order lasts until week 7, when projected inventory would drop to – 43. Item: C Description: Seat subassembly Lot Size: 230 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 0 0 120 0 150 120 0 Scheduled receipts 230 0 0 0 0 0 0 0 Projected on-hand inventory –43 37 117 117 117 77 227 227 Planned receipts 230 Planned order releases 230 Planned Orders

  27. Explanation: Adding the second planned receipt brings the balance to 77 + 0 + 230 – 120 = 187. Item: C Description: Seat subassembly Lot Size: 230 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 0 0 120 0 150 120 0 Scheduled receipts 230 0 0 0 0 0 0 0 Projected on-hand inventory 37 117 117 117 77 227 227 Planned receipts 230 230 Planned order releases 230 Planned Orders

  28. Explanation: Adding the second planned receipt brings the balance to 77 + 0 + 230 – 120 = 187. Item: C Description: Seat subassembly Lot Size: 230 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 0 0 120 0 150 120 0 Scheduled receipts 230 0 0 0 0 0 0 0 Projected on-hand inventory 37 117 117 117 77 227 227 Planned receipts 230 230 Planned order releases 230 Planned Orders 187

  29. Explanation: The corresponding planned order release is for week 5. Item: C Description: Seat subassembly Lot Size: 230 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 0 0 120 0 150 120 0 Scheduled receipts 230 0 0 0 0 0 0 0 Projected on-hand inventory 187 37 117 117 117 77 227 227 Planned receipts 230 230 Planned order releases 230 230 Planned Orders

  30. Item: C Description: Seat subassembly Lot Size: 230 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 0 0 120 0 150 120 0 Scheduled receipts 230 0 0 0 0 0 0 0 Projected on-hand inventory 187 37 187 117 117 117 77 227 227 Planned receipts 230 230 Planned order releases 230 230 Planned Orders

  31. Lot-Sizing Rules • Fixed order Quantity (FOQ)- A rule that maintains the same order quantity each time an order is issued. • Periodic Order Quantity (POQ)- A rule that allows a different order quantity for each order issued but tends to issue the order at predetermined time intervals. • Lot For Lot (L4L)- A rule under which the lot size ordered covers the gross requirements of a single week

  32. Item: C Description: Seat subassembly Lot Size: P = 3 Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 120 150 120 Scheduled receipts 230 Projected on-hand inventory 37 117 117 117 Planned receipts Planned order releases Lot-Sizing Rules – POQ

  33. Item: C Description: Seat subassembly Lot Size: P = 3 Lead Time: 2 weeks POQ lot size Gross requirements for weeks 4, 5, and 6 Inventory at end of week 3 = – Week 1 2 3 4 5 6 7 8 Gross requirements 150 120 150 120 Scheduled receipts 230 Projected on-hand inventory 37 117 Planned receipts Planned order releases Lot-Sizing Rules – POQ 117 117

  34. Item: C Description: Seat subassembly Lot Size: P = 3 Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 120 150 120 Scheduled receipts 230 Projected on-hand inventory 37 117 Planned receipts Planned order releases Lot-Sizing Rules – POQ 117 117

  35. Item: C Description: Seat subassembly Lot Size: P = 3 Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 120 150 120 Scheduled receipts 230 Projected on-hand inventory 37 117 Planned receipts Planned order releases Lot-Sizing Rules – POQ (120 + 0 + 150) 117 117

  36. Item: C Description: Seat subassembly Lot Size: P = 3 Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 120 150 120 Scheduled receipts 230 Projected on-hand inventory 37 117 Planned receipts Planned order releases Lot-Sizing Rules – POQ (120 + 0 + 150) – 117 117 117

  37. Item: C Description: Seat subassembly Lot Size: P = 3 Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 120 150 120 Scheduled receipts 230 Projected on-hand inventory 37 117 Planned receipts Planned order releases Lot-Sizing Rules – POQ (120 + 0 + 150) – 117 = 153 units 117 117 153

  38. Item: C Description: Seat subassembly Lot Size: P = 3 Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 120 150 120 Scheduled receipts 230 Projected on-hand inventory 37 117 Planned receipts Planned order releases Lot-Sizing Rules – POQ (120 + 0 + 150) – 117 = 153 units 117 117 153

  39. Item: C Description: Seat subassembly Lot Size: P = 3 Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 120 150 120 Scheduled receipts 230 Projected on-hand inventory 37 117 Planned receipts Planned order releases Lot-Sizing Rules – POQ (120 + 0 + 150) – 117 = 153 units 150 117 117 153

  40. Item: C Description: Seat subassembly Lot Size: P = 3 Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 120 150 120 Scheduled receipts 230 Projected on-hand inventory 37 117 Planned receipts Planned order releases Lot-Sizing Rules – POQ (120 + 0 + 150) – 117 = 153 units 150 117 117 153 153

  41. Item: C Description: Seat subassembly Lot Size: P = 3 Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 120 150 120 Scheduled receipts 230 Projected on-hand inventory 37 117 Planned receipts Planned order releases Lot-Sizing Rules – POQ (120 + 0) – 0 = 120 units 150 0 0 0 150 117 117 153 120 153 120

  42. Item: C Description: Seat subassembly Lot Size: P = 3 Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 120 150 120 Scheduled receipts 230 Projected on-hand inventory 37 117 Planned receipts Planned order releases Lot-Sizing Rules – POQ 150 0 0 0 150 117 117 153 120 153 120

  43. Lot-Sizing Rules – POQ

  44. Item: C Description: Seat subassembly Lot Size: L4L Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 120 150 120 Scheduled receipts 230 Projected on-hand inventory 37 117 117 117 Planned receipts Planned order releases Lot-Sizing Rules – L4L

  45. Item: C Description: Seat subassembly Lot Size: L4L Lead Time: 2 weeks L4L lot size Gross requirements in week 4 Inventory balance at end of week 3 = – Week 1 2 3 4 5 6 7 8 Gross requirements 150 120 150 120 Scheduled receipts 230 Projected on-hand inventory 37 117 117 117 Planned receipts Planned order releases Lot-Sizing Rules – L4L

  46. Item: C Description: Seat subassembly Lot Size: L4L Lead Time: 2 weeks L4L lot size = 120 – 117 = 3 Week 1 2 3 4 5 6 7 8 Gross requirements 150 120 150 120 Scheduled receipts 230 Projected on-hand inventory 37 117 117 117 Planned receipts Planned order releases Lot-Sizing Rules – L4L

  47. Item: C Description: Seat subassembly Lot Size: L4L Lead Time: 2 weeks L4L lot size = 120 – 117 = 3 Week 1 2 3 4 5 6 7 8 Gross requirements 150 120 150 120 Scheduled receipts 230 Projected on-hand inventory 37 117 117 117 Planned receipts Planned order releases Lot-Sizing Rules – L4L 3

  48. Item: C Description: Seat subassembly Lot Size: L4L Lead Time: 2 weeks L4L lot size = 120 – 117 = 3 Week 1 2 3 4 5 6 7 8 Gross requirements 150 120 150 120 Scheduled receipts 230 Projected on-hand inventory 37 117 117 117 Planned receipts Planned order releases Lot-Sizing Rules – L4L 0 3 3

  49. Item: C Description: Seat subassembly Lot Size: L4L Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 120 150 120 Scheduled receipts 230 Projected on-hand inventory 37 117 117 117 Planned receipts Planned order releases Lot-Sizing Rules – L4L 0 0 0 3 3

  50. Item: C Description: Seat subassembly Lot Size: L4L Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 150 120 150 120 Scheduled receipts 230 Projected on-hand inventory 37 117 117 117 Planned receipts Planned order releases Lot-Sizing Rules – L4L 0 0 0 3 150 3 150

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