Materials Requirements Planning
Collins Industries
Largest manufacturer of ambulances in the world
International competitor
12 major ambulance designs
18,000 different inventory items
6,000 manufactured parts
12,000 purchased parts
MRP seems to be a good way to manage inventories: IBM’s
MAPICS system is used
Independent and Dependent Demand
Independent Demand
Dependent Demand
A
C(2)
B(4)
D(2)
E(1)
D(3)
F(2)
Independent demand is uncertain.
Dependent demand is certain.
Dependent Demand
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.
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
M T W Th F
M T W Th F
Stable demand
Demand
Demand
Dependent vs Independent Demand
Time
Amount on hand
Amount on hand
Time
“Lumpy” demand
Safety stock
Time
Time
Material Requirements Planning
Defined
Materials requirements planning (MRP) is a
computerized inventory planning and control system
for determining when (no earlier and no later) and how
many of each of the parts, components, and materials
should be ordered or produced.
It translates master schedule requirements fr end
items into time-phased requirements for
subassemblies, components and raw materials.
Dependent demand drives MRP
MRP is a software system
When to Use MRP
 Dependent and discrete items
 Complex products
 Job shop production
 Assemble-to-order environments
Material Requirements Planning System
Based on a master production schedule, a material
requirements planning system:
Creates schedules identifying the specific parts
and materials required to produce end items
Determines exact unit numbers needed
Determines the dates when orders for those
materials should be released, based on lead
times
10
Aggregate
production
plan
Firm orders
from known
customers
Engineering
design
changes
Master production
Schedule (MPS)
Bill of
material
file
Material
planning
(MRP
computer
program)
Forecasts
of demand
from random
customers
Inventory
transactions
Inventory
record file
Secondary reports
Primary reports
Planned order schedule for
inventory and production
control (work orders,
purchase orders),
rescheduling notices
Exception reports
Planning reports
Reports for performance
control
©The McGraw-Hill Companies, Inc., 2004
MRP System
MRP Inputs
MRP Processing
MRP Outputs
Changes
Order releases
Master
schedule
Planned-order
schedules
Primary
reports
Bill of
materials
Inventory
records
MRP computer
programs
Exception reports
Planning reports
Secondary
reports
Performancecontrol
reports
Inventory
transaction
MRP Inputs 1:
Master Production Schedule
 Drives MRP process with a schedule of finished products;
states which end items are to be produced, when these
are needed, and in what quantities
 Quantities may consist of a combination of customer
orders & demand forecasts
 Quantities represent what needs to be produced, not what
can be produced
Master Production Schedule (MPS)
Time-phased plan specifying how many and when the
firm plans to build each end item
Aggregate Plan
(Product Groups)
MPS
(Specific End Items)
Master Production Schedule
Shows items to be produced
Derived from aggregate plan
Example:
Item / Week
Clipboard
Lapdesk
Lapboard
Pencil Case
Oct 3 Oct. 10 Oct. 17 Oct.24 Oct. 31
85
95
120
100
100
0
50
0
50
0
75
120
47
20
17
125
125
125
125
125
MRP Inputs 2: 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.
Product Structure Tree: Example 1
Level
0
1
Chair
Leg
Assembly
2 Legs (2)
3
Cross
bar
Seat
Back
Assembly
Side Cross
Back
Rails (2) bar Supports (3)
Product Structure Tree: Example 2
Bicycle(1)
P/N 1000
Handle Bars (1)
P/N 1001
Frame Assembly (1)
P/N 1002
Wheels (2)
P/N 1003
Frame (1)
P/N 1004
Product Drawing: Example 3
Clipboard
Top clip (1)
Pivot (1)
Bottom clip (1)
Spring (1)
Rivets (2)
Finished clipboard
Pressboard (1)
Product Structure Tree ( Example 3)
Clipboard
Pressboard
(1)
Top Clip
(1)
Level 0
Clip Ass’y
(1)
Bottom Clip
(1)
Rivets
(2)
Pivot
(1)
Level 1
Spring
(1)
Level 2
MRP Inputs 3: Inventory Records File
One of the three primary inputs of MRP
Includes information on the inventory status of
each item by time period
Gross requirements
Scheduled receipts
Amount on hand
Lead times
Lot sizes
And more....
MRP Terminology (1 of 3)
Gross requirements
Scheduled receipts
Projected on hand
Net requirements
Planned-order receipts
Planned-order releases
MPR Terminology (2 of 3)
Gross requirements
Total expected demand
Scheduled receipts
Open orders scheduled to arrive
Projected on hand
Expected inventory on hand at the beginning
of each time period
MRP Processing Terminology (3 of 3)
Net requirements
Actual amount needed in each time period
Gross requirements – available inventory
Planned-order receipts
Quantity expected to be received at the beginning of the
period
Offset by lead time
Planned-order releases
Planned amount to be ordered in each time period
MRP Processing Logic:
Assembly Time Chart
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
Fabrication
of part G
Procurement of
raw material I
1
2
3
Subassembly B
4
5
6
7
8
9
10
11
Weeks
Calculation of Gross Requirements
A
S
C
B
10 11
15
8
B
Lead time = 4 for A
Master schedule for A
Periods
5
6 7
40
Periods
Gross requirements: B
8
50
9
1
2
10
40+10
= 50
C
Lead time = 6 for S
Master schedule for S
3
4
5
40 50 20
9 10 11 12 13
40
20
30
6
7
15+30
= 45
8
Master schedule
for S sold directly
1 2
10 10
3
Therefore, these are
the gross
requirements for B
Basic MRP Processes
1.
2.
3.
4.
Exploding the bill of material
Netting out inventory
Lot sizing
Time-phasing requirements
The MRP Matrix
ITEM NAME OR NO.
LLC - LOW LEVEL CODE
LOT SIZE QTY MADE IN
LY - LEAD TIME
Gross Requirements
Scheduled Receipts
Projected on Hand
Net Requirements
Planned Order
Receipts
Planned Order
Releases
Beg Inv
1
PERIOD
2
3
4
5
Derived from MPS or
planned order releases of the
parent
On order and scheduled to be
received
Anticipated quantity on hand
at the end of the period
Gross requirements net of
inventory and scheduled
receipts
When orders need to be
received
When orders need to be
placed to be received on time
MRP Processing:
Example 1-School Mate Products
Master Production Schedule
Clipboard
Lapdesk
1
2
3
85
0
95
60
120
0
4
5
100
60
100
0
Item Master File (ınventory record 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
School Mate Products
Product Structure Record
Clipboard
Level 0
Clip Ass’y
(1)
Pressboard
(1)
Rivets
(2)
Level 1
Lapdesk
Pressboard
(2)
Trim
(3’)
Level 0
Beanbag
(1)
Glue
(4 oz)
Level 1
School Mate Products
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
Net Requirements
Planned Order Receipts
Planned Order Releases
LT: 1
PERIOD
25
School Mate Products
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
Net Requirements
LT: 1
PERIOD
25
115
0
Planned Order Receipts
Planned Order Releases
(25 + 175) = 200 units available
(200 - 85) = 115 on hand at the end of Period 1
School Mate Products
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
Net Requirements
LT: 1
PERIOD
25
115
20
0
0
Planned Order Receipts
Planned Order Releases
115 units available
(115 - 85) = 20 on hand at the end of Period 2
School Mate Products
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
Net Requirements
LT: 1
PERIOD
25
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
School Mate Products
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
Net Requirements
LT: 1
PERIOD
25
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
School Mate Products
ITEM: LAPDESK
LLC: 0
LOT SIZE: MULT 50
LT: 1
Gross Requirements
Net Requirements
Planned Order Receipts
Planned Order Releases
1
2
0
Scheduled Receipts
Projected on Hand
PERIOD
20
60
3
4
0
60
5
0
School Mate Products
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
Net Requirements
20
Planned Order Receipts
Planned Order Releases
50
50
Following the same logic, the Lapdesk MRP matrix is
completed as shown
School Mate Products
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
1
2
PERIOD
3
4
100
100
100
2
PERIOD
3
4
5
4
5
50
50
1
PERIOD
3
2
5
School Mate Products
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
2
PERIOD
3
4
100
100
100
x1
x1
2
PERIOD
3
4
5
x1
1
50
x2
1
100
5
50
x2
PERIOD
2
3
4
100
200
100
5
0
School Mate Products
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
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
School Mate Products
Planned Order Report
PERIOD
ITEM
Clipboard
Lapdesk
Pressboard
1
50
100
2
3
4
100
100
50
100
100
150
5
MRP Processing:
Example 2
Item
X
A
B
C
D
X
A(2)
C(3)
B(1)
C(2)
On-Hand Lead Time (Weeks)
50
2
75
3
25
1
10
2
20
2
D(5)
Requirements include 95 units (80 firm orders and 15 forecast) of X
in week 10
X
A(2)
It takes
2 A’s for
each X
X
LT=2
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
Day:
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
1
2
3
4
5
6
7
8
9
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
20
40
45
10 10
10
10
35
25
10
35
35
40
40
40
100
20 20
20
20
20
80
20
20
80
80
25
20
20
X
LT=2
X
A(2)
B(1)
It takes
1 B for
each X
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
Day:
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
1
2
3
4
5
6
7
8
9
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
20
40
45
10 10
10
10
35
25
10
35
35
40
40
40
100
20 20
20
20
20
80
20
20
80
80
25
20
20
X
LT=2
X
A(2)
C(3)
It takes 3
C’s for
each A
B(1)
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
Day:
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
1
2
3
4
5
6
7
8
9
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
20
40
45
10 10
10
10
35
25
10
35
35
40
40
40
100
20 20
20
20
20
80
20
20
80
80
25
20
20
X
LT=2
X
A(2)
C(3)
B(1)
C(2)
It takes 2
C’s for
each B
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
Day:
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
1
2
3
4
5
6
7
8
9
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
20
40
45
10 10
10
10
35
25
10
35
35
40
40
40
100
20 20
20
20
20
80
20
20
80
80
25
20
20
X
LT=2
X
A(2)
C(3)
B(1)
C(2)
D(5)
It takes 5
D’s for each
B
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
Day:
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
1
2
3
4
5
6
7
8
9
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
20
40
45
10 10
10
10
35
25
10
35
35
40
40
40
100
20 20
20
20
20
80
20
20
80
80
25
20
20
MRP Outputs
 Planned orders (schedule indicating the amount and
timing of orders)
Work orders
Purchase orders
 Order releases (authorization for the execution of
planned orders)
 Changes to previous plans or existing schedules
(revision of due dates or order quantities, or
cancellations of orders)
Action notices
Rescheduling notices
Updating the MRP System
Regenerative system
Updates MRP records periodically
Net-change system
Updates MPR records continuously
MRP Secondary Reports
Performance-control reports
Planning reports
Exception reports
MRP Dynamics
Supports “replanning”
“Time fence” - allows a segment of the master
schedule to be designated as “not to be
rescheduled”
“Pegging” - tracing upward in the bill-of-materials
from the component to the parent item
That a manager can react to changes, doesn’t mean
he/ he should
Other Considerations
Safety Stock
Lot sizing
Lot-for-lot ordering (L4L)
Economic order quantity
Part Period Balancing
Wagner-Whitin algorithm
& others
Which one to use? The one that is least costly!
MRP in Services
Can be used when demand for service or service
items is directly related to or derived from demand
for other 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
Benefits of MRP
Reduced inventories without reduced customer service
Ability to track material requirements
Ability to evaluate capacity requirements
Means of allocating production time
Increased customer satisfaction due to meeting delivery
schedules
Faster response to market changes
Improved labor and equipment utilization.
Better inventory planning and scheduling
Requirements of MRP
Computer system and necessary software
Mainly discrete products
Stable lead times
Accurate and up-to-date
Master schedules
Bills of materials
Inventory status records
Integrity of data
Extensions of MRP
Extensions of MRP
 Closed loop MRP
 Capacity planning - load reports
 MRP II - Manufacturing Resources Planning
 Enterprise Resources Planning
MRP and The Production Planning
Process
Forecast &
Firm Orders
Aggregate
Production
Planning
Material
Requirements
Planning
Master
Production
Scheduling
Resource
Availability
No, modify MPS
Capacity
Requirements
Planning
Realistic?
Yes
Shop
Floor
Schedules
Closed Loop MRP
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.
Capacity Requirements Planning
(CRP)
 Computerized system that projects load from
material plan
 Creates load profile
 Identifies underloads and overloads
Capacity
Usually expressed as standard machine
hours or labor hours
Capacity = (no. machines or workers)
x (no. shifts) x (utilization)
x (efficiency)
Capacity Terms
 Load reports
Department or work center reports that compare known
and expected future capacity requirements with projected
capacity availability.
 Load profile
Compares released and planned orders with work center
capacity
 Capacity
Productive capability; includes utilization and efficiency
 Utilization
% of available working time spent working
More Capacity Terms
 Efficiency
Refers to how well a machine or worker porforms
compared to a standard output level
 Load
The standard hours of work assigned to a facility
 Load percent
The ratio of load to capacity
Load % = (load/capacity)x100%
Capacity Requirements Planning
MRP planned
order
releases
Routing
file
Capacity
requirements
planning
Load profile for
each machine center
Open
orders
file
Capacity Planning
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?
Yes
Firm up a portion
of the MPS
No
Can
capacity be
changed to meet
requirements
Yes
Change
capacity
Determining Loads and Capacities
2 copiers, 2 operators
5 days/wk, 8 hr/day
1/2 hr meals, 1/2 hr maintenance per day
The machines are new, so efficiency is estimated at 100%
Utilization
= 7/8 = 87.5%
Daily capacity
= 2 machines x 2 shifts
x 8 hours/shift x 100% efficiency
x 87.5% utilization
= 28 hours or 1,680 minutes
Determining Loads
and Capacities
JOB
NO.
NO. OF
COPIES
SETUP
TIME (MIN)
RUN TIME
(MIN/UNIT)
TOTAL TIME
10
20
30
40
50
500
1,000
5,000
10,000
2,000
5.2
10.6
3.4
11.2
15.3
0.08
0.10
0.12
0.14
0.10
5.2 + (500 x 0.08) =
45.2
10.6 + (1,000 x 0.10) = 110.6
3.4 + (5,000 x 0.12) = 603.4
11.2 + (10,000 x 0.14) = 1,411.2
15.3 + (2,000 x 0.10) = 215.3
2385.7 min
Load percent = 2,385.7 / 1,680 = 1.42 x 100% = 142%
Add another shift:
Daily capacity = 2 machines x 3 shifts x 8 hours/shift
x 100% efficiency x 87.5% utilization
= 42 hours or 2,520 minutes
Revised load percent = 2,385.7 / 2,520 = 0.9467 x 100% = 94.67%
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
Time (weeks)
5
6
Remedies for Underloads
1. Acquire more work
2. Pull work ahead that is scheduled for later time
periods
3. Reduce normal capacity
Remedies for Overloads










Eliminate unnecessary requirements
Reroute jobs to alternative machines or work centers
Change lot-sizing or safety stock requirements
Split lots between two or more machines
Send pieces to the second operation before the entire lot has
completed the first operation
Increase normal capacity
Subcontract
Increase the efficiency of the operation
Push work back to later time periods
Revise master schedule
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
Time (weeks)
Normal
capacity
5
6
Relaxing MRP Assumptions
 Material is not always the constraining resource
 Lead times can vary
 Not every transaction needs to be recorded
 JIT can be used with MRP
 The shop floor may require a more sophisticated
scheduling system
Manufacturing Resources Planning- MRP II
Expanded MRP with emphasis placed on integration of:
Financial planning
Marketing
Engineering
Purchasing
Manufacturing
Human resources
Manufacturing Resources Planning
(MRP II)
Goal: Plan and monitor all resources of a
manufacturing firm (closed loop):
manufacturing
marketing
finance
engineering
Simulate the manufacturing system
MRP II
Manufacturing
Master
production schedule
Marketing
Production
plan
MRP
Rough-cut
capacity planning
Capacity req.
planning
Adjust
production plan
Yes
Problems?
No
Requirements
schedules
No
Problems?
Adjust master schedule
Market
Demand
Finance
Yes
MRP II
Manufacturing Resource
Planning
(MRP II)
Customer
orders
Aggregate
production
plan
Forecast
No
Feasible?
Yes
Master production
schedule
Material requirements
planning
Capacity requirements
planning
No
Feasible?
Feedback
Yes
Purchase
orders
Work
orders
Inventory
Shop floor
control
Manufacture
Manufacturing
Resource Planning
(MRP II)
Aggregate
production
plan
Forecast
Customer
orders
Aggregate
production
plan
Forecast
No
Feasible?
Customer
orders
Yes
Master production
schedule
Material requirements
planning
No
Capacity requirements
planning
Feasible?
No
Feasible?
Feedback
Yes
Master
production
schedule
Yes
Purchase
orders
Work
orders
Inventory
Shop floor
control
Manufacture
Manufacturing
Resource Planning
(MRP II)
Master production
schedule
Customer
orders
Aggregate
production
plan
Forecast
No
Feasible?
Yes
Master production
schedule
Material requirements
planning
Material requirements
planning
Capacity requirements
planning
Capacity requirements
planning
No
Feasible?
Feedback
Yes
No
Feasible?
Yes
Purchase
orders
Work
orders
Inventory
Shop floor
control
Manufacture
Manufacturing
Resource Planning
(MRP
II)
Purchase
Work
orders
Customer
orders
Aggregate
production
plan
Forecast
No
Feasible?
Yes
Master production
schedule
orders
Material requirements
planning
Capacity requirements
planning
Shop floor
control
Inventory
No
Feasible?
Feedback
Yes
Purchase
orders
Work
orders
Inventory
Shop floor
control
Manufacture
Manufacture
Manufacturing
Resource Planning
(MRP II)
Customer
orders
Aggregate
production
plan
Forecast
No
Feasible?
Yes
Master production
schedule
Material requirements
planning
Capacity requirements
planning
No
Feasible?
Feedback
Yes
Purchase
orders
Work
orders
Inventory
Shop floor
control
Manufacture
Enterprise Resource Planning (ERP)
 The next step in the evolution that began with MRP
and evolved into MRP II
 ERP system is a computer system that integrates
application programs in accounting, sales,
manufacturing, human resources and other
functions in the firm.
 ERP provides a system to capture and make data
available in real time do decision makers and other
users in the organization
ERP
MRP II with ties to customers and suppliers
(connects with supply-chain and customer
management applications)
Integrates financial, manufacturing and human
resources on a single computer system.
Provides tools for planning and monitoring various
business processes
Enterprise Resource Planning (ERP)
 Attempts to integrate all departments and functions
across a company onto a single computer system that
can serve all those different departments’ particular needs
 Organizes and manages a company’s business
processes by sharing information across functional areas
 Standardized record-keeping permit information sharing
and communication throughout the organization
Enterprise Resource Planning - ERP
Such an integration is accomplished through a
database shared by all the application programs
ERP
ERP allows companies to:
1. Automate and integrate many of their business
processes
2. Share a common database and business
practices throughout the enterprise
3. Produce information in real time
ERP systems also include:
1. Supply Chain Management software and
2. Customer Relationship Management software
ERP Modules
ERP’s Central Database
Finance &
Accounting
Sales
&
Marketing
ERP Data
Repository
Human
Resources
Production &
Materials
Management
ERP Strategy Considerations
High initial cost
High cost to maintain
Future upgrades
Training