Overview




Dependent demand
Master production schedule
Bill of materials
MRP





Time-phased product structure
Gross material requirements plan
Net requirements plan
Lot-sizing techniques
Extensions of MRP
Furniture Mfg.

Produces 3-types of chairs
Ladder-back chair
 Kitchen chair
 Desk chair

Master Production Schedule
April
1
Ladder-back chair
2
May
3
Aggregate
production plan
for chair family
5
150
6
7
8
150
Kitchen chair
Desk chair
4
120
200
200
670
120
200
200
670
Bill of Materials
• List of components & quantities needed
to make product
• Provides product structure (tree)
– Parents: Items above given level
– Children: Items below given level
Bill of Materials
Back
legs
Front
legs
Back slats
Seat cushion
Leg supports
Seat-frame
boards
A
Ladder-back
chair
Bill of Materials
A
Ladder-back
chair
Back slats
B (1)
Ladder-back
subassembly
C (1)
Seat
subassembly
G (4)
Back
slats
H (1)
Seat
frame
D (2)
Front
legs
Seat cushion
Leg supports
F (2)
Back
legs
Back
legs
Front
legs
J (4)
Seat-frame
boards
I (1)
Seat
cushion
A
Ladder-back
chair
E (4)
Leg
supports
Seat-frame
boards
Dependent vs. Independent Demand


Demand for chairs

A finished product

Independent
Demand for front legs
A component or subassembly
 Depends on the demand for chairs (parent)

Dependent vs. Independent Demand
Demand
Source
Material
Type
Method of
Estimating
Demand
Planning
Method
Materials With
Independent Demand
Materials With
Dependent Demand
Company Customers
Parent Items
Finished Goods
WIP & Raw Materials
Forecast & Booked
Customer Orders
EOQ & POQ
Calculated
MRP
Requirements for Effective Use of Dependent
Demand Inventory Models
master
production schedule
specifications
inventory
purchase
lead
or bills-of-material
availability
orders outstanding
times
Cooperstown Cars, Inc.

Bill of Materials for Toy Car
Produces toy
Toy Car
cars

Body

Axles (2)

Wheels (4)
Wheel
Assembly(2)
Axle (1)
Body
Wheels (2)
Cooperstown Cars, Inc.
Bill of Materials for Toy Car
- Each
component
has a known
lead time
Toy Car
LT = 1
Wheel
Assembly(2)
Body
LT = 2
LT = 1
Axle (1)
Wheels (2)
LT = 2
LT = 1
Cooperstown Cars, Inc.

Demand for Toy Car in Week 8 is 100

Schedule production for:





Toy car assembly
Wheel assembly
Body
Axle
Wheels
Time-Phased Product Structure
Time-Phased Product Structure
0
1
2
Time in Weeks
3
4
Time-Phased Product Structure
Toy
Car
1 w eek
0
1
2
Time in Weeks
3
4
Time-Phased Product Structure
Wheel
Assembly
Toy
Car
1 w eek
2 w eeks
Body
0
1
2
Time in Weeks
3
4
Time-Phased Product Structure
Wheel
Assembly
1 w eek
Toy
Car
1 w eek
2 w eeks
Body
0
1
2
Time in Weeks
3
4
Time-Phased Product Structure
Axles
2 w eeks
Wheel
Assembly
1 w eek
1 w eek
Wheels
Toy
Car
1 w eek
2 w eeks
Body
1
2
3
Time in Weeks
4
5
Gross Requirements Plan
1
Toy Car
Required Date
Order release data
Wheel assembly Required Date
Order release data
Body
Required Date
Order release data
Axle
Required Date
Order release data
Wheels
Required Date
Order release data
2
3
Week
4
5
6
7
8
Gross Requirements Plan
1
Toy Car
Required Date
Order release data
Wheel assembly Required Date
Order release data
Body
Required Date
Order release data
Axle
Required Date
Order release data
Wheels
Required Date
Order release data
2
3
Week
4
5
6
7
8
100
Gross Requirements Plan
1
Required Date
Order release data
Wheel assembly Required Date
Order release data
Body
Required Date
Order release data
Axle
Required Date
Order release data
Wheels
Required Date
Order release data
2
3
Week
4
5
6
7
Toy Car
100
8
100
Gross Requirements Plan
1
Required Date
Order release data
Wheel assembly Required Date
Order release data
Body
Required Date
Order release data
Axle
Required Date
Order release data
Wheels
Required Date
Order release data
2
3
Week
4
5
6
7
Toy Car
100
200
8
100
Gross Requirements Plan
1
Required Date
Order release data
Wheel assembly Required Date
Order release data
Body
Required Date
Order release data
Axle
Required Date
Order release data
Wheels
Required Date
Order release data
2
3
Week
4
5
6
7
Toy Car
100
200
200
8
100
Gross Requirements Plan
1
Required Date
Order release data
Wheel assembly Required Date
Order release data
Body
Required Date
Order release data
Axle
Required Date
Order release data
Wheels
Required Date
Order release data
2
3
Week
4
5
6
7
Toy Car
100
200
200
100
8
100
Gross Requirements Plan
1
Required Date
Order release data
Wheel assembly Required Date
Order release data
Body
Required Date
Order release data
Axle
Required Date
Order release data
Wheels
Required Date
Order release data
2
3
Week
4
5
6
7
Toy Car
100
200
200
100
100
8
100
Gross Requirements Plan
1
Required Date
Order release data
Wheel assembly Required Date
Order release data
Body
Required Date
Order release data
Axle
Required Date
Order release data
Wheels
Required Date
Order release data
2
3
Week
4
5
6
7
Toy Car
100
200
200
100
100
200
200
8
100
Gross Requirements Plan
1
Required Date
Order release data
Wheel assembly Required Date
Order release data
Body
Required Date
Order release data
Axle
Required Date
Order release data
Wheels
Required Date
Order release data
2
3
Week
4
5
6
7
Toy Car
100
200
200
100
100
200
200
400
400
8
100
Net Requirements Plan
Toy Car
Gross requirements
Scheduled receipts
Projected on-hand | 20
Planned order receipts
Planned order releases
1
2
20
20
Week
3
4
5
20
20
20
6
7
8
100
20
20
20
Net Requirements Plan
Toy Car
Gross requirements
Scheduled receipts
Projected on-hand | 20
Planned order receipts
Planned order releases
1
2
20
20
Week
3
4
5
20
20
20
6
7
8
100
20
20
20
80
Net Requirements Plan
Toy Car
Gross requirements
Scheduled receipts
Projected on-hand | 20
Planned order receipts
Planned order releases
1
2
20
20
Week
3
4
5
20
20
20
6
7
8
100
20
20
20
80
80
Net Requirements Plan
Gross requirements
Scheduled receipts
Projected on-hand | 20
Planned order receipts
Planned order releases
Wheel assembly Gross requirements
Scheduled receipts
Projected on-hand |10
Planned order receipts
Planned order releases
1
2
3
20
20
20
Week
4
5
6
7
8
100
20
20
20
80
Toy Car
20
20
80
160
Net Requirements Plan
Gross requirements
Scheduled receipts
Projected on-hand | 20
Planned order receipts
Planned order releases
Wheel assembly Gross requirements
Scheduled receipts
Projected on-hand |10
Planned order receipts
Planned order releases
1
2
3
20
20
20
Week
4
5
6
7
8
100
20
20
20
80
Toy Car
20
20
80
160
10
10
10
10
10
10
10
Net Requirements Plan
Gross requirements
Scheduled receipts
Projected on-hand | 20
Planned order receipts
Planned order releases
Wheel assembly Gross requirements
Scheduled receipts
Projected on-hand |10
Planned order receipts
Planned order releases
1
2
3
20
20
20
Week
4
5
6
7
8
100
20
20
20
80
Toy Car
20
20
80
160
10
10
10
10
10
10
150
10
150
Net Requirements Plan
Toy Car
Body
Gross requirements
Scheduled receipts
Projected on-hand | 20
Planned order receipts
Planned order releases
Gross requirements
Scheduled receipts
Projected on-hand |40
Planned order receipts
Planned order releases
1
2
20
20
Week
3
4
5
20
20
20
6
7
8
100
20
20
20
80
80
80
40
40
40
40
40
40
40
Net Requirements Plan
Toy Car
Body
Gross requirements
Scheduled receipts
Projected on-hand | 20
Planned order receipts
Planned order releases
Gross requirements
Scheduled receipts
Projected on-hand |40
Planned order receipts
Planned order releases
1
2
20
20
Week
3
4
5
20
20
20
6
7
8
100
20
20
20
80
80
80
40
40
40
40
40
40
40
40
40
Net Requirements Plan
Wheel assembly Gross requirements
Scheduled receipts
Projected on-hand |10
Planned order receipts
Planned order releases
Axles
Gross requirements
Scheduled receipts
Projected on-hand | 15
Planned order receipts
Planned order releases
1
2
Week
3
4
5
10
10
10 10 10
6
7
160
10 10
150
150
150
8
Net Requirements Plan
Wheel assembly Gross requirements
Scheduled receipts
Projected on-hand |10
Planned order receipts
Planned order releases
Axles
Gross requirements
Scheduled receipts
Projected on-hand | 15
Planned order receipts
Planned order releases
1
2
Week
3
4
5
10
10
10 10 10
10 10
150
150
150
15
15
15 15 15
15
135
6
7
160
8
Net Requirements Plan
Wheel assembly Gross requirements
Scheduled receipts
Projected on-hand |10
Planned order receipts
Planned order releases
Axles
Gross requirements
Scheduled receipts
Projected on-hand | 15
Planned order receipts
Planned order releases
Week
3
4
5
1
2
10
10
10
10
10
10 10
150
150
150
15
15
15
15
15
15
135
135
6
7
160
8
Net Requirements Plan
Wheel assembly Gross requirements
Scheduled receipts
Projected on-hand |10
Planned order receipts
Planned order releases
Wheels
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
1
2
Week
3
4
5
10
10
10 10 10
6
7
160
10 10
150
150
300
8
Net Requirements Plan
Wheel assembly Gross requirements
Scheduled receipts
Projected on-hand |10
Planned order receipts
Planned order releases
Wheels
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
1
2
Week
3
4
5
10
10
10 10 10
10 10
150
150
300
30
30
30 30 30
30
270
6
7
160
8
Net Requirements Plan
Wheel assembly Gross requirements
Scheduled receipts
Projected on-hand |10
Planned order receipts
Planned order releases
Wheels
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
Week
3
4
5
1
2
10
10
10 10
10
10 10
150
150
300
30
30
30 30
30
30
270
270
6
7
160
8
More complexity/Scheduled receipts
Net Requirements Plan
Wheels
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
1
150
2
3
Week
4
5
120
6
150
7
120
8
More complexity/Scheduled receipts
Net Requirements Plan
Wheels
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
1
150
200
2
3
Week
4
5
120
6
150
7
120
8
More complexity/Scheduled receipts
Net Requirements Plan
Wheels
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
1
150
200
2
3
Week
4
5
120
6
150
7
120
Explanation:
Gross requirements are the total demand for
wheels. Projected on-hand inventory in
week 1 is 30 + 200 – 150
8
More complexity/Scheduled receipts
Net Requirements Plan
Wheels
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
Projected on-hand
inventory balance at
end of week t
=
1
150
200
80
Inventory on
hand at end of
week t - 1
2
+
3
Week
4
5
120
Scheduled
or planned
receipts in
week t
–
6
150
7
120
8
Gross
requirements in
week t
More complexity/Scheduled receipts
Net Requirements Plan
Wheels
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
1
150
200
80
2
3
80
80
Week
4
5
120
80
6
150
7
120
8
Lot-Sizing Rules
When there is a net requirement, how much
should we order?
•Lot-for-lot – L4L
•Economic Order Quantity – EOQ
•Part Period Balancing - PPB
•Wagner-Whitin Algorithm
Lot-Sizing Rules: L4L
L4L- order the amount needed to fulfill requirements
Net Requirements Plan
Wheels
Lead time = 1 week
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
1
150
200
80
2
3
80
80
Week
4
5
120
80
6
150
7
120
8
Lot-Sizing Rules: L4L
Net Requirements Plan
Wheels
Lead Time = 1 week
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
1
150
200
80
2
3
80
80
40
Week
4
5
120
80
40
6
150
7
120
8
Lot-Sizing Rules: L4L
Net Requirements Plan
Wheels
Lead Time = 1 week
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
1
150
200
80
2
3
80
80
40
Week
4
5
120
80
40
0
150
6
150
0
150
7
120
8
Lot-Sizing Rules: L4L
Net Requirements Plan
Wheels
Lead Time = 1 week
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
1
150
200
80
2
3
80
80
40
Week
4
5
120
80
40
0
150
6
150
7
120
0
150
120
0
120
8
Lot-Sizing Rules: EOQ
EOQ- order the EOQ
Net Requirements Plan
Lead time = 1 week
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
Wheels
1
150
200
80
2
3
80
80
S  $100
H  $1 / unit / week  $52 / unit / year
D  (150  120  150  120) / 8  67.5units / wk  3510units / year
Q* 
2DS
2(3510)100

 116
H
52
Week
4
5
120
80
6
150
7
120
8
Lot-Sizing Rules: EOQ
EOQ- order the EOQ
Net Requirements Plan
Lead time = 1 week
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
Wheels
1
150
200
80
2
3
80
80
Week
4
5
120
80
116
116
D  (150  120  150  120) / 8  67.5units / wk  3510units / year
S  $100
H  $1 / unit / week  $52 / unit / year
Q* 
2DS
2(3510)100

 116
H
52
6
150
7
120
8
Lot-Sizing Rules: EOQ
EOQ- order the EOQ
Net Requirements Plan
Lead time = 1 week
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
Wheels
1
150
200
80
2
3
80
80
Week
4
5
120
80
116
6
150
7
120
76
116
80+116-120 = 76
D  (150  120  150  120) / 8  67.5units / wk  3510units / year
S  $100
H  $1 / unit / week  $52 / unit / year
Q* 
2DS
2(3510)100

 116
H
52
8
Lot-Sizing Rules: EOQ
EOQ- order the EOQ
Net Requirements Plan
Lead time = 1 week
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
Wheels
1
150
200
80
2
3
80
80
116
Week
4
5
120
6
150
80
116
76
116
76
116
D  (150  120  150  120) / 8  67.5units / wk  3510units / year
S  $100
H  $1 / unit / week  $52 / unit / year
Q* 
2DS
2(3510)100

 116
H
52
7
120
8
Lot-Sizing Rules: EOQ
EOQ- order the EOQ
Net Requirements Plan
Lead time = 1 week
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
Wheels
1
150
200
80
2
3
80
80
116
Week
4
5
120
80
116
76
116
D  (150  120  150  120) / 8  67.5units / wk  3510units / year
S  $100
H  $1 / unit / week  $52 / unit / year
Q* 
2DS
2(3510)100

 116
H
52
6
150
7
120
76
116
116
42
116
8
Lot-Sizing Rules: EOQ
EOQ- order the EOQ
Net Requirements Plan
Lead time = 1 week
Gross requirements
Scheduled receipts
Projected on-hand | 30
Planned order receipts
Planned order releases
Wheels
1
150
200
80
2
3
80
80
116
Week
4
5
120
80
116
76
116
D  (150  120  150  120) / 8  67.5units / wk  3510units / year
S  $100
H  $1 / unit / week  $52 / unit / year
Q* 
2DS
2(3510)100

 116
H
52
6
150
7
120
8
76
116
116
42
116
38
MRP II
MRP II
Customer orders
Forecasts
Master production schedule
Bills of materials
Routings
Time standards
MRP
explosion
Inventory records
Inventory transactions
MRP II
Customer orders
Forecasts
Master production schedule
Bills of materials
Routings
Time standards
MRP
explosion
Material requirements plan
Inventory records
Inventory transactions
MRP II
Customer orders
Forecasts
Master production schedule
Bills of materials
Routings
Time standards
MRP
explosion
Inventory records
Inventory transactions
Material requirements plan
Manufacturing resource plan
Cost and
financial data
MRP II
Customer orders
Forecasts
Master production schedule
Bills of materials
Routings
Time standards
MRP
explosion
Inventory records
Inventory transactions
Material requirements plan
Cost and
financial data
Manufacturing resource plan
Purchasing
reports
Financial/
accounting
reports
Sales and
marketing
reports
Human
resource
reports
Manufacturing
reports
Extensions to MRP
Enterprise Resource Planning
MRP II with ties to customers and suppliers
MRP and ERP
ERP @
BMW,
Spartanburg
Product

BMW X5 sport activity
vehicle

Application:
mySAP™ Automotive

Goal:



Tight supplier network in order
to ensure just-in-time
production
Compress Customer Order
Cycle
Improve Inventory Accuracy
Why use ERP

Automotive Industry is competitive

Global competition

Trend toward make-to-order manufacturing -- filling individual
customer requirements rather than make-to-stock new
demands on manufacturers and dealers

Potential cost reduction

Customers want what they want, when they want it.
Key success factors in the
Automotive Industry

Speed: speed in product development, speed in product assembly, and speed
in product delivery to dealers and customers.

Manufacturers must closely manage armies of suppliers and partners to
make certain that the correct systems and components are delivered where
and when they are needed.

Collaboration among all the industry players -- suppliers, OEMs, dealers, and
customers -- is essential.

Linking complex business processes into a logical flow, maximizing
efficiency and satisfying customers' expectations.
Business Benefits

End-to-end integration of SAP and non-SAP
products.

Offers a single data platform for
Engineering
 Planning
 supply chain management
 Procurement
 customer relationship management.

Business Benefits

Cost reduction of 3% to 6% per vehicle



by changing the supply chain from the traditional push
paradigm
New level of collaboration and efficiency.
Groups processes and functions by market segments

OEMs, suppliers and aftermarket, or sales and service.
How it works

mySAP™ Automotive generates delivery schedules to
meet assembly-line planning and sequencing directives.

Long-horizon forecasts and short-horizon J-I-T
delivery schedules are sent to suppliers.

Electronic Data Interchange (EDI)

mySAP™ Automotive Supplier Portal (Internet)
How it works

BMW gets an advance shipping notification


Exact information on part counts and delivery dates
Upon receipt parts are transferred directly to the
line
Additional benefits




Monitoring the production status in real time
Recording production confirmation and parts
consumption every 3 minutes and adjustment of
inventory
Costs are posted to calculate the value of work in
progress
Seamless collaboration between business partners
across the supply chain allows



Engineering
High-volume production
Highly customized products