13-1
MRP and ERP
Operations Management
William J. Stevenson
8th edition
13-2
MRP and ERP
CHAPTER
13
MRP and ERP
Operations Management, Eighth Edition, by William J. Stevenson
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
13-3
MRP and ERP
MRP
•
Material requirements planning (MRP):
Computer-based information system that
translates master schedule requirements for
end items into time-phased requirements for
subassemblies, components, and raw
materials.
13-4
MRP and ERP
Independent and Dependent Demand
Independent Demand
Dependent Demand
A
C(2)
B(4)
D(2)
E(1)
F(2)
D(3)
Independent demand is uncertain.
Dependent demand is certain.
13-5
MRP and ERP
Dependant Demand
13-6
•
Dependent demand: Demand for items that
are subassemblies or component parts to be
used in production of finished goods.
•
Once the independent demand is known,
the dependent demand can be determined.
MRP and ERP
Dependent vs Independent Demand
Stable demand
Demand
Demand
Figure 13.1
Time
Amount on hand
Amount on hand
Time
“Lumpy” demand
Safety stock
Time
Time
13-7
MRP and ERP
Figure 13.2
MRP Inputs
MRP Processing
MRP Outputs
Changes
Order releases
Master
schedule
Planned-order
schedules
Primary
reports
Bill of
materials
MRP computer
programs
Secondary
reports
Inventory
records
13-8
Exception reports
Planning reports
Performancecontrol
reports
Inventory
transaction
MRP and ERP
MPR Inputs
Master Production Schedule
• Time-phased plan specifying timing and
quantity of production for each end item.
• Material Requirement Planning Process
•
t
uc
od
Pr ee
Tr
13-9
re
c tu
u
r
St
L
im
dT
ea
es
MRP and ERP
Master Schedule
Master schedule: One of three primary
inputs in MRP; states which end items are
to be produced, when these are needed,
and in what quantities.
Cumulative lead time: The sum of the lead
times that sequential phases of a process
require, from ordering of parts or raw
materials to completion of final assembly.
13-10 MRP and ERP
Planning Horizon
Figure 13.4
Assembly
Subassembly
Fabrication
Procurement
1
2
3
4
5
6
7
8
9
10
13-11 MRP and ERP
Bill-of-Materials
Bill of materials (BOM): One of the three primary
inputs of MRP; a listing of all of the raw materials,
parts, subassemblies, and assemblies needed to produce
one unit of a product.
Product structure tree: Visual depiction of the
requirements in a bill of materials, where all
components are listed by levels.
13-12 MRP and ERP
Product Structure Tree
Figure 13.5
Level
0
1
Chair
Leg
Assembly
2 Legs (2)
3
Cross
bar
Seat
Back
Assembly
Side Cross
Back
Rails (2) bar Supports (3)
13-13 MRP and ERP
Inventory Records
•
•
One of the three primary inputs in MRP
Includes information on the status of each
item by time period
Gross requirements
Scheduled receipts
• Amount on hand
• Lead times
• Lot sizes
• And more …
•
•
13-14 MRP and ERP
Assembly Time Chart
Figure 13.7
Procurement of
raw material D Fabrication
of part E
Subassembly A
Procurement of
raw material F
Procurement of
part C
Final assembly
and inspection
Procurement of
part H
1
2
3
Subassembly B
Fabrication
of part G
Procurement of
raw material I
4
5
6
7
8
13-15 MRP and ERP
MRP Processing
•
Gross requirements
•
Schedule receipts
•
Projected on hand
•
Net requirements
•
Planned-order receipts
•
Planned-order releases
9
10
11
13-16 MRP and ERP
MPR Processing
•
Gross requirements
•
•
Scheduled receipts
•
•
Total expected demand
Open orders scheduled to arrive
Planned on hand
•
Expected inventory on hand at the
beginning of each time period
13-17 MRP and ERP
MPR Processing
•
Net requirements
•
•
•
Actual amount needed in each time period
Planned-order receipts
•
Quantity expected to received at the
beginning of the period
•
Offset by lead time
Planned-order releases
•
Planned amount to order in each time period
13-18 MRP and ERP
Updating the System
•
Regenerative system
•
•
Updates MRP records periodically
Net-change system
•
Updates MPR records continuously
13-19 MRP and ERP
MRP Outputs
•
Planned orders - schedule indicating the
amount and timing of future orders.
•
Order releases - Authorization for the
execution of planned orders.
•
Changes - revisions of due dates or order
quantities, or cancellations of orders.
13-20 MRP and ERP
MRP Secondary Reports
•
Performance-control reports
•
Planning reports
•
Exception reports
13-21 MRP and ERP
Other Considerations
•
•
Safety Stock
Lot sizing
Lot-for-lot ordering
Economic order quantity
• Fixed-period ordering
•
•
13-22 MRP and ERP
MRP in Services
•
•
Food catering service
•
End item => catered food
•
Dependent demand => ingredients for each
recipe, i.e. bill of materials
Hotel renovation
•
Activities and materials “exploded” into
component parts for cost estimation and
scheduling
13-23 MRP and ERP
Benefits of MRP
•
Low levels of in-process inventories
•
Ability to track material requirements
•
Ability to evaluate capacity requirements
•
Means of allocating production time
13-24 MRP and ERP
Requirements of MRP
•
Computer and necessary software
•
Accurate and up-to-date
•
Master schedules
Bills of materials
•
Inventory records
•
•
Integrity of data
13-25 MRP and ERP
MRP II
•
Expanded MRP with emphasis placed
on integration
•
Financial planning
•
Marketing
•
Engineering
•
Purchasing
•
Manufacturing
13-26 MRP and ERP
MRP II
Figure 13.14
Manufacturing
Master
production schedule
Marketing
Production
plan
MRP
Rough-cut
capacity planning
Capacity
planning
Adjust
production plan
Yes
Problems?
No
Requirements
schedules
No
Problems?
13-27 MRP and ERP
Capacity Planning
Capacity requirements planning: The process
of determining short-range capacity
requirements.
Load reports: Department or work center
reports that compare known and expected
future capacity requirements with projected
capacity availability.
Time fences: Series of time intervals during
which order changes are allowed or restricted.
Adjust master schedule
Market
Demand
Finance
Yes
13-28 MRP and ERP
Capacity Planning
Figure 13.15
Develop a tentative
master production
schedule
Use MRP to
simulate material
requirements
Convert material
requirements to
resource requirements
Revise tentative
master production
schedule
No
Is shop
capacity
adequate?
No
Can
capacity be
changed to meet
requirements
Yes
Firm up a portion
of the MPS
Yes
Change
capacity
13-29 MRP and ERP
ERP
•
Enterprise resource planning (ERP):
Next step in an evolution that began with
MPR and evolved into MRPII
• Integration of financial, manufacturing, and
human resources on a single computer
system.
•
13-30 MRP and ERP
ERP Strategy Considerations
High initial cost
High cost to maintain
• Future upgrades
• Training
•
•
13-31 MRP and ERP
CHAPTER
13
Additional PowerPoint slides
contributed by
Geoff Willis,
University of Central Oklahoma.
13-32 MRP and ERP
Bill of Materials – Part 1
A listing of all raw materials, parts, subassemblies, and
assemblies needed to produce one unit
Product structure Tree
Level
X
0
B(2)
D(3)
C
E
E(2)
1
F(2)
2
13-33 MRP and ERP
Bill of Materials – Part 2
How many more of each component is needed to make
15 Xs if there are 5 of each already in stock?
X
B(2)
D(3)
E
C
E(2)
F(2)