Chapter 14
MRP and ERP
1
Transparency on aggregate to master plan
2
Independent Demand
Dependent Demand
A
C(2)
B(4)
D(1)
E(1)
D(3)
F(2)
Independent demand is uncertain. Dependent demand is certain.
3
Dependant 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.
4
MRP
• Material requirements planning (MRP):
Computer-based information system
that translates master schedule
requirements for end items into timephased requirements for
subassemblies, components, and raw
materials.
5
• Master Production Schedule
• Time-phased plan specifying timing and
quantity of production for each end item.
• Material Requirement Planning Process
6
MRP
MRP Inputs
MRP Processing
MRP Outputs
Changes
Order releases
Master
schedule
Planned-order
schedules
Primary
reports
Bill of
materials
file
Inventory
records
file
MRP computer
programs
Exception reports
Planning reports
Secondary
reports
Performancecontrol
reports
Inventory
transaction
7
Planning Horizon
Assembly
Subassembly
Fabrication
Procurement
1
2
3
4
5
6
7
8
9
10
Weeks
8
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.
Time fences: Series of time intervals during which
order changes are allowed or restricted.
9
Bill-of-Materials
Bill of materials: 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.
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Product Structure Tree
Level
0
1
Chair
Leg
Assembly
2 Legs (2)
Cross
bar
Seat
Back
Assembly
Side
Cross
Back
Rails (2) bar Supports (3)
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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 …
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Other Considerations
• Safety Stock
• Lot sizing
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MRP Processing
• Gross requirements
• Schedule requirements
• Projected on hand
• Net requirements
• Planned-order receipts
• Planned-order releases
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MPR Processing
• Gross requirements
– Total expected demand
• Scheduled receipts
– Open orders scheduled to arrive
• Planned on hand
– Expected inventory on hand at the
beginning of each time period
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MPR Processing
• Net requirements
– Actual amount needed in each time period
• Planned-order receipts
– Quantity expected to received at the
beginning of the period in which it is
shown, reflecting the lot size
• Planned-order releases
– Planned amount to order in each time
period; same as Planned-order receipts
offset by lead time
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Inventory Requirements
• Net requirements:
Net Requirements =
Gross Requirements
– Available Inventory
• Available Inventory:
Available Inventory =
Projected on hand
– Safety stock
– Inventory allocated to other items
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T14-1: MRP - Example
Clear
Master Schedule
Week Number
for Shutters: Quantity
1
2
3
Shutters:
Gross requirements
Scheduled receipts
Projected on hand
Net requirements
Planned-order receipts
Planned-order releases
0
0
0
0
0
0
0
0
0
0
0
Gross requirements
Scheduled receipts
2 Projected on hand
2 Net requirements
320 Planned-order receipts
Planned-order releases
0
Quantity =
LT =
Lot Size =
Frames:
Quantity =
LT =
Lot Size =
Wood sections:
1
1
1
Gross requirements
Scheduled receipts
Quantity =
4 Projected on hand
LT =
1 Net requirements
Lot Size = 70 Planned-order receipts
Planned-order releases
Note: Use Lot Size = 1 for lot-for-lot ordering.
4
100
5
6
7
8
150
100
0
0
0
150
0
0
0
100
0
100
100
0
0
0
0
0
0
0
0
0
0
0
0
150
0
150
150
0
0
200
0
0
0
300
0
0
0
0
320
0
0
0
0
0
200
320
0
120
0
0
0
120
0
0
320
120
0
0
0
120
180
320
0
140
0
0
0
0
70
70
0
0
0
0
400
0
0
0
600
0
70
0
0
350
70
330
350
0
20
0
0
0
20
0
0
0
20
0
0
630
20
580
630
0
50
0
0
0
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A Key MRP Output
• Planned orders (referring to Planned
Order Releases)- schedule indicating
the amount and timing of future
orders. It tells us how when to order
and how much, assuring us a lower
level of inventory than if we did not
use MRP.
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Other MRP Outputs (MRP Secondary Reports)
• Performance-control reports
• Planning reports
• Exception reports
20
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.
21
Capacity Requirements in MRP 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
22
Benefits of MRP
• Low levels of in-process inventories
• Ability to track material requirements
• Ability to evaluate capacity
requirements
• Means of allocating production time
23
Requirements of MRP
• Computer and necessary
software
• Accurate and up-to-date
–
Master schedules
–
Bills of materials
–
Inventory records
• Integrity of data
24
MRP II or Manufacturing Resource Planning
• Expanded MRP with and
emphasis placed on integration
–
Financial planning
–
Marketing
–
Engineering
–
Purchasing
–
Manufacturing
25
MRP II
Manufacturing
Master
production schedule
Marketing
Production
plan
MRP
Rough-cut
capacity planning
Capacity
planning
Adjust
production plan
Yes
Problems?
No
Requirements
schedules
No
Problems?
Adjust master schedule
Market
Demand
Finance
Yes
26
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.
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ERP Software
– ERP software provides a system to capture
and make data available in real time to
decision makers and other users in the
organization
– Provides tools for planning and monitoring
various business processes
– Includes
•
•
•
•
Production planning and scheduling
Inventory management
Product costing
Distribution
28
MRP in Services
• Service applications such as:
– Professional services
– Postal services
– Retail
– Banking
– Healthcare
– Higher education
– Engineering
– Logistical services
– Real estate
29
ERP Strategy Considerations
•
•
•
•
High initial cost
High cost to maintain
Future upgrades
Training
30
The following slides are from a consultant who markets
ERP systems. Please review the slides. As time permits.
we can go through them in class. Note the reason for
these slides is to illustrate a situation you might find
yourself in if you are a manager in a company making
a decision to purchase an ERP system. It can be a very
intimidating process for your company when the seller
has all the information about a complex system, and the
buyer is at the mercy of the seller’s knowledge and
technical know-how.
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Basic Definitions
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End of slides for MRP/ERP
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