Overview
•
•
•
•
Dependent demand
Master production schedule
Bill of materials
MRP
– Time-phased product structure
– Gross material requirements plan
– Net requirements plan
• Lot-sizing techniques
• Extensions of MRP
Furniture Mfg.
Master Production Schedule
• Produces 3-types of chairs
– Ladder-back chair
– Kitchen chair
– Desk chair
April
1
2
May
3
4
5
6
7
8
Ladder-back chair
Kitchen chair
Desk chair
Aggregate
production plan
for chair family
Bill of Materials
670
Bill of Materials
• List of components & quantities needed
to make product
• Provides product structure (tree)
– Parents: Items above given level
– Children: Items below given level
Chapter 14 MRP
670
Back
legs
Front
legs
Back slats
Seat cushion
Leg supports
Seat-frame
boards
A
Ladder-back
chair
1
Bill of Materials
Dependent vs. Independent Demand
A
Ladder-back
chair
Back slats
B (1)
Ladder-back
subassembly
C (1)
Seat
subassembly
G (4)
Back
slats
H (1)
Seat
frame
• Demand for chairs
D (2)
Front
legs
Seat cushion
Leg supports
F (2)
Back
legs
Back
legs
Front
legs
J (4)
Seat-frame
boards
I (1)
Seat
cushion
E (4)
Leg
supports
Seat-frame
boards
Dependent vs. Independent Demand
Demand
Source
Material
Type
Method of
Estimating
Demand
Planning
Method
• Demand for front legs
– A component or subassembly
– Depends on the demand for chairs (parent)
A
Ladder-back
chair
Materials With
Independent Demand
– A finished product
– Independent
Materials With
Dependent Demand
Requirements for Effective Use of Dependent
Demand Inventory Models
• master production schedule
• specifications or bills-of-material
Company Customers
• inventory availability
Finished Goods
• purchase orders outstanding
Forecast & Booked
Customer Orders
• lead times
EOQ & POQ
Cooperstown Cars, Inc.
Cooperstown Cars, Inc.
Bill of Materials for Toy Car
• Produces toy
• Demand for Toy Car in Week 8 is 100
Toy Car
cars
• Schedule production for:
– Body
Wheel
Assembly(2)
– Axles (2)
Body
– Wheels (4)
Axle (1)
Chapter 14 MRP
Wheels (2)
–
–
–
–
–
Toy car assembly
Wheel assembly
Body
Axle
Wheels
2
Time-Phased Product Structure
Gross Requirements Plan
1
2
3
Week
4
5
6
7
Toy Car
Required Date
Order release data
Wheel assembly Required Date
Order release data
Body
Required Date
Order release data
Axle
Required Date
Order release data
Wheels
Required Date
Order release data
0
2
1
8
100
4
3
Time in Weeks
More complexity/Scheduled receipts
Net Requirements Plan
1
Toy Car
Gross requirements
Scheduled receipts
Projected on-hand | 20
Planned order receipts
Planned order releases
2
3
Week
4
5
Net Requirements Plan
6
7
8
100
Wheels
20
20
20
20
20
20
Lot-Sizing Rules
20
20
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
1
150
2
Week
4
5
120
3
6
150
7
120
8
Lot-Sizing Rules: L4L
L4L- order the amount needed to fulfill requirements
When there is a net requirement, how much
Net Requirements Plan
should we order?
•Lot-for-lot – L4L
•Economic Order Quantity – EOQ
Wheels
Lead time = 1 week
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
1
150
200
80
2
3
80
80
Week
4
5
120
6
150
7
120
8
80
•Part Period Balancing - PPB
•Wagner-Whitin Algorithm
Chapter 14 MRP
3
Lot-Sizing Rules: L4L
Lot-Sizing Rules: EOQ
EOQ- order the EOQ
Net Requirements Plan
Net Requirements Plan
Lead Time = 1 week
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
Wheels
1
150
200
80
2
3
80
80
Week
4
5
120
80
40
40
0
150
Lead time = 1 week
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
Wheels
6
150
7
120
0
150
120
0
120
8
S
$100
H
$1 / unit / week
Q*
MRP II
2
3
80
80
Week
4
5
120
6
150
7
120
8
80
$52 / unit / year
D (150 120 150 120) / 8 67.5units / wk
2 DS
H
1
150
200
80
3510units / year
2(3510)100
116
52
Extensions to MRP
Enterprise Resource Planning
Customer orders
Forecasts
Master production schedule
Bills of materials
Routings
Time standards
MRP
explosion
MRP II with ties to customers and suppliers
Inventory records
Inventory transactions
Material requirements plan
Cost and
financial data
Manufacturing resource plan
Purchasing
reports
Financial/
accounting
reports
Sales and
marketing
reports
Human
resource
reports
Manufacturing
reports
MRP and ERP
ERP @ BMW,
Spartanburg
Chapter 14 MRP
4
Product
• BMW X5 sport activity
vehicle
• Application:
mySAP™ Automotive
• Goal:
– Tight supplier network in
order to ensure just-in-time
production
– Compress Customer Order
Cycle
– Improve Inventory Accuracy
Key success factors in the
Automotive Industry
• Speed: speed in product development, speed in product assembly, and
speed in product delivery to dealers and customers.
• Manufacturers must closely manage armies of suppliers and partners to
make certain that the correct systems and components are delivered
where and when they are needed.
• Collaboration among all the industry players -- suppliers, OEMs, dealers,
and customers -- is essential.
• Linking complex business processes into a logical flow, maximizing
efficiency and satisfying customers' expectations.
Business Benefits
• Cost reduction of 3% to 6% per vehicle
– by changing the supply chain from the traditional push
paradigm
– New level of collaboration and efficiency.
• Groups processes and functions by market segments
– OEMs, suppliers and aftermarket, or sales and service.
Chapter 14 MRP
Why use ERP
• Automotive Industry is competitive
• Global competition
• Trend toward make-to-order manufacturing -- filling
individual customer requirements rather than make-tostock new demands on manufacturers and dealers
• Potential cost reduction
• Customers want what they want, when they want it.
Business Benefits
• End-to-end integration of SAP and non-SAP
products.
• Offers a single data platform for
– Engineering
– Planning
– supply chain management
– Procurement
– customer relationship management.
How it works
• mySAP™ Automotive generates delivery schedules to
meet assembly-line planning and sequencing
directives.
• Long-horizon forecasts and short-horizon J-I-T
delivery schedules are sent to suppliers.
– Electronic Data Interchange (EDI)
– mySAP™ Automotive Supplier Portal (Internet)
5
How it works
• BMW gets an advance shipping notification
– Exact information on part counts and delivery
dates
• Upon receipt parts are transferred directly to
the line
Chapter 14 MRP
Additional benefits
• Monitoring the production status in real time
• Recording production confirmation and parts
consumption every 3 minutes and adjustment of
inventory
• Costs are posted to calculate the value of work in
progress
• Seamless collaboration between business partners
across the supply chain allows
– Engineering
– High-volume production
– Highly customized products
6