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
 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

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

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
Success?
MRP Crusade
Begins
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

ERP Sales

Y2K: Worldwide sales of top 10 vendors
1995 $2.8 B
 1996 $4.2 B
 1997 $5.8 B


$3.2 B SAP
Fortune survey: 44% reported spending
at least 4 times as much on
implementation as on software
ERP Challenges

Modules assume “best practices:”
Change software to reflect company ($)
 Change company to follow software (?)


Accuracy of data
Drives entire system
 Ownership of / responsibility for


Ability to follow structure
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
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
Bike Production
Frame
OCLV Carbon
Drivetrain
Wheels
Seat, Bars
1
Mar
7
14
21
28
4
Apr
Assemble
Parts
Due
Arrive
11
18
Snow Shovels

Example – Snow Shovel



Order quantity is 50 units
LT is one week
Simple Bill of Materials - BOM
MRP Table
1
Gross Requirements
3
10
Scheduled receipts (begin)
Projected Available
Balance (ending)
2
4
5
40 10
50
4 54 44 44 4
Net Requirements
6
Planned Order Receipts
Planned Order Releases
6 units short
MRP Table
1
Gross Requirements
10
Scheduled receipts (begin)
Projected Available
Balance (ending)
2
3
4
5
40 10
50
4 54 44 44 4
Net Requirements
6
Planned Order Receipts
Planned Order Releases
Order 50 units week earlier
50
50
Ending Inventory
1
Gross Requirements
10
Scheduled receipts (begin)
Projected Available
Balance (ending)
2
3
4
5
40 10
50
4 54 44 44 4 44
Net Requirements
6
Planned Order Receipts
Planned Order Releases
Ending inventory
50
50
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
1605 Snow Shovel
1605
Snow Shovel
314 scoop assembly
118 Shaft (wood)
14127
Rivet (4)
048
Scoop-shaft
connector
062 Nail (4)
13122
Top Handle
Assy
314 scoop assembly
314 scoop assembly
019 Blade (steel)
2142 Scoop (aluminum)
14127 Rivet (6)
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)
BOM Explosion

Process of translating net requirements
into components part requirements
Take into account existing inventories
 Consider also scheduled receipts

BOM Explosion Example
Need to make 100 shovels
 We are responsible for handle
assemblies.

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)
Net Requirements
Part Description
Top handle assy
Top handle
Nail (2 required)
Bracket Assy
Top bracket
Top coupling
Inv
25
22
4
27
15
39
Sch Gross
Rec Req
-100
25
50
--15
Net
Req
75
Net Requirements
Part Description
Top handle assy
Top handle
Nail (2 required)
Bracket Assy
Top bracket
Top coupling
Inv
25
22
4
27
15
39
Sch
Rec
-25
50
--15
Gross
Req
100
75
150
75
Net
Req
75
28
96
48
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)
Net Requirements
Part Description
Top handle assy
Top handle
Nail (2 required)
Bracket Assy
Top bracket
Top coupling
Sch
Inv
25
22
4
27
15
39
Gross
Rec Req
-100
25 75
50 150
-75
-48
15 48
Net
Req
75
28
96
48
33
--
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!)

13122 Top Handle Assy
Order policy: Lot-for-lot
13122 Top handle
LT = 2
Gross Req
1
2
20
3
25 25
5
5
4
10
Sch receipts
Proj. Avail Bal
(ending)
Net Req
5
Planned Order Receipt
Planned Order Release
5
5
5
6 7
20 5
8
9 10
35 10
13122 Top Handle Assy-2
Order policy: Lot-for-lot
13122 Top handle
LT = 2
Gross Req
1
2
20
3
4
10
5
6 7
20 5
8
9 10
35 10
25 25
5
5
0
5
0
0 0
20 5
0
0 0
35 10
Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
Pl Order Rel
5
5
20
20 5
5
35 10
35 10
457 Top Handle
13122 Top handle
LT = 2
Gross Req
1
2
20
3
4
10
5
6 7
20 5
8
9 10
35 10
25 25
5
5
0
5
0
0 0
20 5
0
0 0
35 10
Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
5
Pl Order Rel
One handle for
Each assembly
LT = 2
Gross Req
5
1
Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
Pl Order Rel
2
5
3
25
22 22
20 5
20
5
4
20
5
5
35 10
35 10
6
7 8
35 10
9
10
457 Top Handle
Order policy: Lot-for-lot
LT = 2
Gross Req
1
2
5
Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
Pl Order Rel
3
25
22 22 17
4
20
5
5
6
7 8
35 10
9
10
457 Top Handle
Order policy: Lot-for-lot
LT = 2
Gross Req
Sch receipts
Proj. Avail Bal
(ending)
Net Req
1
2
5
3
7 8
35 10
9
10
22 17 17 0 0
18 10
0
0
4
20
5
5
6
25
22 22 17 42
18 10
Pl Order Rec
Pl Order Rel
18 10
082 Nail (2 required)
13122 Top handle
LT = 2
Gross Req
1
2
20
3
4
10
5
6 7
20 5
8
9 10
35 10
25 25
5
5
0
5
0
0 0
20 5
0
0 0
35 10
Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
5
Pl Order Rel
Two nails for
Each assembly
5
LT = 1
Lot Size = 50
Gross Req
1
Sch receipts
50
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
Pl Order Rel
4 54
2
10
20
3
20 5
5
4 5
40 10
35 10
35 10
6
7 8
70 20
9
10
082 Nail (2 required)
LT = 1
Lot Size = 50
Gross Req
1
Sch receipts
50
Proj. Avail Bal
(ending)
Net Req
2
10
3
4 54 44 44
4 5
40 10
4
Pl Order Rec
Pl Order Rel
6
44 44 24
6
26
50
50
7 8
70 20
50
50
4
9
10
4
4
11495 Bracket Assembly
13122 Top handle
LT = 2
Gross Req
1
2
20
3
4
10
5
6 7
20 5
8
9 10
35 10
25 25
5
5
0
5
0
0 0
20 5
0
0 0
35 10
Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
5
Pl Order Rel
One bracket for
Each assembly
5
LT = 2
Gross Req
1
Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
Pl Order Rel
27
2
5
3
20 5
20
5
4
20
5
5
35 10
35 10
6
7 8
35 10
9
10
11495 Bracket Assembly
Order policy: Lot-for-lot
LT = 2
Gross Req
1
2
5
3
4
20
5
5
6
7 8
35 10
9
10
27 27 22 22
2
0
3
0
0 0
35 10
0
0
Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
Pl Order Rel
3
3
35 10
35 10
129 Top Bracket
LT = 2
Gross Req
1
2
5
3
4
20
5
5
6
7 8
35 10
9
10
Sch receipts
Proj. Avail Bal
(ending)
Net Req
27
22 22
2
Pl Order Rec
Pl Order Rel
3
LT = 1
Gross Req
1
Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
Pl Order Rel
15
2
3
3
3
35 10
3
35 10
35 10
4
5 6 7
35 10
8
9
10
129 Top handle bracket
Order policy: Lot-for-lot
LT = 1
Gross Req
1
2
3
3
4
5 6 7
35 10
Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
Pl Order Rel
15 15 15 12 12
23 10
23 10
23 10
8
9
10
1118 Top handle coupling
LT = 2
Gross Req
1
2
5
3
4
20
5
5
6
7 8
35 10
9
10
Sch receipts
Proj. Avail Bal
(ending)
Net Req
27
22 22
2
Pl Order Rec
Pl Order Rel
3
LT = 3
Safety Stock = 20
Gross Req
1
Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
Pl Order Rel
39
2
3
35 10
3
35 10
35 10
3
3
4
5
6
35 10
7
8
9
10
1118 Top handle coupling
Order policy: Lot-for-lot
LT = 3
Safety Stock = 20
1
2
Gross Req
Sch receipts
Proj. Avail Bal
(ending)
Net Req
4
5 6 7
35 10
15
39 39 54 51 51 16
4
Pl Order Rec
Pl Order Rel
3
3
4
4
8
9
10
1118 Top handle coupling
LT = 3
Safety Stock = 20
Gross Req
Sch receipts
Proj. Avail Bal
(ending)
Net Req
1
2
3
3
5 6 7
35 10
8
9
10
15
39 39 54 51 51 20 20 20 20 20 20
4 10
Pl Order Rec
Pl Order Rel
4
4
4
10
10
Other considerations

Safety stock if uncertainty in demand or supply
quantity


Safety LT if uncertainty in arrival time


Don’t let available go down to 0
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
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
