Chapter 15
Resource Planning
Operations Management - 6th Edition
Roberta Russell & Bernard W. Taylor, III
Copyright 2009 John Wiley & Sons, Inc.
Beni Asllani
University of Tennessee at Chattanooga
Lecture Outline
 Material Requirements Planning (MRP)
 Capacity Requirements Planning (CRP)
 Enterprise Resource Planning (ERP)
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15-2
Resource
Planning for
Manufacturing
Copyright 2009 John Wiley & Sons, Inc.
15-3
Material Requirements
Planning (MRP)
 Computerized inventory control and
production planning system
 When to use MRP?





Dependent demand items
Discrete demand items
Complex products
Job shop production
Assemble-to-order environments
Copyright 2009 John Wiley & Sons, Inc.
15-4
Demand Characteristics
Independent demand
Dependent demand
100 x 1 =
100 tabletops
100 x 4 = 400 table legs
100 tables
Continuous demand
Discrete demand
400 –
300 –
No. of tables
No. of tables
400 –
200 –
100 –
1
2
3
Week
4
300 –
200 –
100 –
5
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M T W Th F
M T W Th F
15-5
Material
Requirements
Planning
Product
structure
file
Master
production
schedule
Material
requirements
planning
Item
master
file
Planned
order
releases
Work
orders
Copyright 2009 John Wiley & Sons, Inc.
Purchase
orders
Rescheduling
notices
15-6
MRP Inputs and Outputs
 Inputs



Master production
schedule
Product structure file
Item master file
 Outputs

Planned order
releases



Copyright 2009 John Wiley & Sons, Inc.
Work orders
Purchase orders
Rescheduling notices
15-7
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 and demand forecasts
 Quantities represent what needs to be
produced, not what can be produced
 Quantities represent end items that may or
may not be finished products
Copyright 2009 John Wiley & Sons, Inc.
15-8
Master Production Schedule
(cont.)
MPS ITEM
Pencil Case
Clipboard
Lapboard
Lapdesk
1
125
85
75
0
Copyright 2009 John Wiley & Sons, Inc.
PERIOD
2
3
4
125
95
120
50
125
120
47
0
125
100
20
50
5
125
100
17
0
15-9
Product Structure
Clipboard
Top clip (1)
Pivot (1)
Bottom clip (1)
Spring (1)
Rivets (2)
Finished clipboard
Pressboard (1)
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15-10
Product Structure Tree
Clipboard
Pressboard
(1)
Top Clip
(1)
Level 0
Clip Ass’y
(1)
Bottom Clip
(1)
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Rivets
(2)
Pivot
(1)
Level 1
Spring
(1)
Level 2
15-11
Multilevel Indented BOM
LEVEL
0----1----2---2---2---2--1---1---
ITEM
Clipboard
Clip Assembly
Top Clip
Bottom Clip
Pivot
Spring
Rivet
Press Board
Copyright 2009 John Wiley & Sons, Inc.
UNIT OF MEASURE
QUANTITY
ea
ea
ea
ea
ea
ea
ea
ea
1
1
1
1
1
1
2
1
15-12
Item Master File
DESCRIPTION
Item
Pressboard
Item no.
7341
Item type
Purch
Product/sales class
Comp
Value class
B
Buyer/planner
RSR
Vendor/drawing
07142
Phantom code
N
Unit price/cost
1.25
Pegging
Y
LLC
1
Copyright 2009 John Wiley & Sons, Inc.
INVENTORY POLICY
Lead time
Annual demand
Holding cost
Ordering/setup cost
Safety stock
Reorder point
EOQ
Minimum order qty
Maximum order qty
Multiple order qty
Policy code
1
5000
1
50
0
39
316
100
500
1
3
15-13
Item Master File (cont.)
PHYSICAL INVENTORY
On hand
Location
On order
Allocated
Cycle
Last count
Difference
150
W142
100
75
3
9/5
-2
USAGE/SALES
YTD usage/sales
MTD usage/sales
YTD receipts
MTD receipts
Last receipt
Last issue
1100
75
1200
0
8/25
10/5
CODES
Cost acct.
Routing
Engr
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00754
00326
07142
15-14
MRP Processes




Exploding the bill
of material
Netting out inventory
Lot sizing
Time-phasing
requirements
 Netting

 Lot sizing

Copyright 2009 John Wiley & Sons, Inc.
process of subtracting onhand quantities and
scheduled receipts from
gross requirements to
produce net requirements
determining the quantities
in which items are usually
made or purchased
15-15
MRP Matrix
Copyright 2009 John Wiley & Sons, Inc.
15-16
MRP: Example
Master Production Schedule
Clipboard
Lapdesk
1
2
3
4
5
85
0
95
60
120
0
100
60
100
0
Item Master File
On hand
On order
(sch receipt)
LLC
Lot size
Lead time
CLIPBOARD
25
175 (Period 1)
LAPDESK
20
0
PRESSBOARD
150
0
0
L4L
1
0
Mult 50
1
1
Min 100
1
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15-17
MRP: Example (cont.)
Product Structure Record
Clipboard
Level 0
Clip Ass’y
(1)
Pressboard
(1)
Rivets
(2)
Level 1
Lapdesk
Pressboard
(2)
Trim
(3’)
Copyright 2009 John Wiley & Sons, Inc.
Level 0
Beanbag
(1)
Glue
(4 oz)
Level 1
15-18
MRP: Example (cont.)
ITEM: CLIPBOARD
LLC: 0
LOT SIZE: L4L
1
2
3
4
5
Gross Requirements
85
95
120
100
100
Scheduled Receipts
175
Projected on Hand
LT: 1
PERIOD
25
Net Requirements
Planned Order Receipts
Planned Order Releases
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15-19
MRP: Example (cont.)
ITEM: CLIPBOARD
LLC: 0
LOT SIZE: L4L
1
2
3
4
5
Gross Requirements
85
95
120
100
100
Scheduled Receipts
175
Projected on Hand
LT: 1
PERIOD
25
Net Requirements
115
0
Planned Order Receipts
Planned Order Releases
(25 + 175) = 200 units available
(200 - 85) = 115 on hand at the end of Period 1
Copyright 2009 John Wiley & Sons, Inc.
15-20
MRP: Example (cont.)
ITEM: CLIPBOARD
LLC: 0
LOT SIZE: L4L
1
2
3
4
5
Gross Requirements
85
95
120
100
100
Scheduled Receipts
175
Projected on Hand
LT: 1
PERIOD
25
Net Requirements
115
20
0
0
Planned Order Receipts
Planned Order Releases
115 units available
(115 - 85) = 20 on hand at the end of Period 2
Copyright 2009 John Wiley & Sons, Inc.
15-21
MRP: Example (cont.)
ITEM: CLIPBOARD
LLC: 0
LOT SIZE: L4L
1
2
3
4
5
Gross Requirements
85
95
120
100
100
Scheduled Receipts
175
115
20
0
0
0
100
Projected on Hand
LT: 1
PERIOD
25
Net Requirements
Planned Order Receipts
Planned Order Releases
100
100
20 units available
(20 - 120) = -100 — 100 additional Clipboards are required
Order must be placed in Period 2 to be received in Period 3
Copyright 2009 John Wiley & Sons, Inc.
15-22
MRP: Example (cont.)
ITEM: CLIPBOARD
LLC: 0
LOT SIZE: L4L
1
2
3
4
5
Gross Requirements
85
95
120
100
100
Scheduled Receipts
175
115
20
0
0
0
0
0
100
100
100
100
100
100
100
100
Projected on Hand
LT: 1
PERIOD
25
Net Requirements
Planned Order Receipts
Planned Order Releases
100
Following the same logic Gross Requirements in Periods 4
and 5 develop Net Requirements, Planned Order Receipts, and
Planned Order Releases
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15-23
MRP: Example (cont.)
ITEM: LAPDESK
LLC: 0
LOT SIZE: MULT 50
LT: 1
Gross Requirements
PERIOD
1
2
0
60
3
4
0
60
5
0
Scheduled Receipts
Projected on Hand
20
Net Requirements
Planned Order Receipts
Planned Order Releases
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15-24
MRP: Example (cont.)
ITEM: LAPDESK
LLC: 0
LOT SIZE: MULT 50
LT: 1
Gross Requirements
PERIOD
1
2
3
4
5
0
60
0
60
0
20
10
10
0
0
0
40
50
50
50
Scheduled Receipts
Projected on Hand
20
Net Requirements
Planned Order Receipts
Planned Order Releases
50
50
Following the same logic, the Lapdesk MRP matrix is
completed as shown
Copyright 2009 John Wiley & Sons, Inc.
15-25
MRP: Example (cont.)
ITEM: CLIPBOARD
LOT SIZE: L4L
LLC: 0
LT: 1
1
Planned Order Releases
ITEM: LAPDESK
LOT SIZE: MULT 50
LLC: 0
LT: 1
Planned Order Releases
ITEM: PRESSBOARD LLC: 0
LOT SIZE: MIN 100
LT: 1
Gross Requirements
Scheduled Receipts
Projected on Hand
150
Net Requirements
Planned Order Receipts
Planned Order Releases
Copyright 2009 John Wiley & Sons, Inc.
1
2
PERIOD
3
4
100
100
100
2
PERIOD
3
4
5
4
5
50
50
1
PERIOD
3
2
5
15-26
MRP: Example (cont.)
ITEM: CLIPBOARD
LOT SIZE: L4L
LLC: 0
LT: 1
1
Planned Order Releases
ITEM: LAPDESK
LOT SIZE: MULT 50
1
Planned Order Releases
Copyright 2009 John Wiley & Sons, Inc.
4
100
100
100
x1
x1
2
PERIOD
3
4
5
x1
LLC: 0
LT: 1
ITEM: PRESSBOARD LLC: 0
LOT SIZE: MIN 100
LT: 1
Gross Requirements
Scheduled Receipts
Projected on Hand
150
Net Requirements
Planned Order Receipts
Planned Order Releases
2
PERIOD
3
50
x2
1
100
5
50
x2
PERIOD
2
3
4
100
200
100
5
0
15-27
MRP: Example (cont.)
ITEM: CLIPBOARD
LOT SIZE: L4L
LLC: 0
LT: 1
1
Planned Order Releases
ITEM: LAPDESK
LOT SIZE: MULT 50
LLC: 0
LT: 1
Planned Order Releases
ITEM: PRESSBOARD LLC: 0
LOT SIZE: MIN 100
LT: 1
Gross Requirements
Scheduled Receipts
Projected on Hand
150
Net Requirements
Planned Order Receipts
Planned Order Releases
Copyright 2009 John Wiley & Sons, Inc.
1
2
PERIOD
3
4
100
100
100
2
PERIOD
3
4
50
50
1
100
PERIOD
2
3
4
100
200
100
50
100
50
50
100
150
0
150
150
100
0
100
100
5
5
5
0
0
15-28
MRP: Example (cont.)
Planned Order Report
PERIOD
ITEM
Clipboard
Lapdesk
Pressboard
Copyright 2009 John Wiley & Sons, Inc.
1
50
100
2
3
4
100
100
50
100
100
150
5
15-29
CRP
MRP planned
order
releases
Routing
file
Capacity
requirements
planning
Open
orders
file
Load profile for
each process
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15-30
Calculating Capacity
 Maximum capability to produce
 Rated Capacity

Theoretical output that could be attained if a process were
operating at full speed without interruption, exceptions, or
downtime
 Effective Capacity

Takes into account the efficiency with which a particular
product or customer can be processed and the utilization of
the scheduled hours or work
Effective Daily Capacity = (no. of machines or workers) x
(hours per shift) x (no. of shifts) x (utilization) x ( efficiency)
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15-31
Calculating Capacity (cont.)
 Utilization

Percent of available time spent working
 Efficiency

How well a machine or worker performs compared to a
standard output level
 Load

Standard hours of work assigned to a facility
 Load Percent

Ratio of load to capacity
Load Percent =
load
x 100%
capacity
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15-32
Load Profiles
 graphical comparison of load versus
capacity
 Leveling underloaded conditions:



Acquire more work
Pull work ahead that is scheduled for later
time periods
Reduce normal capacity
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15-33
Reducing Over-load Conditions
1. Eliminating unnecessary requirements
2. Rerouting jobs to alternative machines,
workers, or work centers
3. Splitting lots between two or more machines
4. Increasing normal capacity
5. Subcontracting
6. Increasing efficiency of the operation
7. Pushing work back to later time periods
8. Revising master schedule
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15-34
Hours of capacity
Initial Load Profile
120 –
110 –
100 –
90 –
80 –
70 –
60 –
50 –
40 –
30 –
20 –
10 –
0–
Normal
capacity
1
2
3
4
5
6
Time (weeks)
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15-35
Hours of capacity
Adjusted Load Profile
120 –
110 –
100 –
90 –
80 –
70 –
60 –
50 –
40 –
30 –
20 –
10 –
0–
Pull ahead
Overtime
1
2
Work
an
extra
shift
3
Push back
Push back
4
Normal
capacity
5
6
Time (weeks)
 Load leveling

process of balancing underloads and overloads
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15-36
Relaxing MRP Assumptions
 Material is not always the most constraining
resource
 Lead times can vary
 Not every transaction needs to be recorded
 Shop floor may require a more sophisticated
scheduling system
 Scheduling in advance may not be appropriate
for on-demand production.
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15-37
Enterprise Resource Planning
(ERP)
 Software that organizes and manages
a company’s business processes by




sharing information across functional
areas
integrating business processes
facilitating customer interaction
providing benefit to global companies
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15-38
Organizational Data Flows
Source: Adapted from Joseph Brady, Ellen Monk, and Bret Wagner, Concepts in
Enterprise Resource Planning (Boston: Course Technology, 2001), pp. 7–12
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15-39
ERP’s Central Database
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15-40
Selected Enterprise Software
Vendors
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15-41
ERP Implementation
 Analyze business processes
 Choose modules to implement



Which processes have the biggest impact on
customer relations?
Which process would benefit the most from
integration?
Which processes should be standardized?
 Align level of sophistication
 Finalize delivery and access
 Link with external partners
Copyright 2009 John Wiley & Sons, Inc.
15-42
ERP and Software Systems
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15-43