Chapter 14
Resource Planning
Operations Management - 5th Edition
Roberta Russell & Bernard W. Taylor, III
Copyright 2006 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)
Customer Relationship Management (CRM)
Supply Chain Management (SCM)
Collaborative Product Commerce (CPC)
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14-2
Resource
Planning for
Manufacturing
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14-3
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
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14-4
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
14-5
Material
Requirements
Planning
Product
structure
file
Master
production
schedule
Material
requirements
planning
Item
master
file
Planned
order
releases
Work
orders
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Purchase
orders
Rescheduling
notices
14-6
MRP Inputs and Outputs
Inputs
Master production schedule
Product structure file
Item master file
Outputs
Planned order releases
Work orders
Purchase orders
Rescheduling notices
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14-7
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
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14-8
Master Production Schedule
(cont.)
MPS ITEM
Clipboard
Lapdesk
Lapboard
Pencil Case
1
85
0
75
125
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PERIOD
2
3
4
95
50
120
125
120
0
47
125
100
50
20
125
5
100
0
17
125
14-9
Product Structure
Clipboard
Top clip (1)
Pivot (1)
Bottom clip (1)
Spring (1)
Rivets (2)
Finished clipboard
Pressboard (1)
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14-10
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
14-11
Intended BOM List
LEVEL
0----1----2---2---2---2--1---1---
ITEM
Clipboard
Clip Assembly
Top Clip
Bottom Clip
Pivot
Spring
Rivet
Press Board
Copyright 2006 John Wiley & Sons, Inc.
UNIT OF MEASURE
QUANTITY
ea
ea
ea
ea
ea
ea
ea
ea
1
1
1
1
1
1
2
1
14-12
Specialized BOMs
Phantom bills
Transient subassemblies
Never stocked
Immediately consumed in next stage
K-bills
Group small, loose parts under pseudo-item
number
Reduces paperwork
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14-13
Specialized BOMs (cont.)
Modular bills
Product assembled from major subassemblies and
customer options
Modular bill kept for each major subassembly
Simplifies forecasting and planning
X10 automobile example
3 x 8 x 3 x 8 x 4 = 2,304 configurations
3 + 8 + 3 + 8 + 4 = 26 modular bills
Time-phased bills
an assembly chart shown against a time scale
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14-14
Modular BOMs
X10
Automobile
Engines
(1 of 3)
Exterior color
(1 of 8)
Interior
(1 of 3)
Interior color
(1 of 8)
Body
(1 of 4)
4-Cylinder (.40)
Bright red (.10)
Leather (.20)
Grey (.10)
Sports coupe (.20)
6-Cylinder (.50)
White linen (.10)
Tweed (.40)
Light blue (.10)
Two-door (.20)
8-Cylinder (.10)
Sulphur yellow (.10)
Plush (.40)
Rose (.10)
Four-door (.30)
Neon orange (.10)
Off-white (.20)
Station wagon (.30)
Metallic blue (.10)
Cool green (.10)
Emerald green (.10)
Black (.20)
Jet black (.20)
Brown (.10)
Champagne (.20)
B/W checked (.10)
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14-15
Time-phased Bills
Forward scheduling: start at today‘s date and schedule forward to determine
the earliest date the job can be finished. If each item takes one period to
complete, the clipboards can be finished in three periods
Backward scheduling: start at the due date and schedule backwards to
determine when to begin work. If an order for clipboards is due by period three,
we should start production now
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14-16
Item Master File
DESCRIPTION
Item
Pressboard
Item no.
734
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
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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
3
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Item Master File (cont.)
PHYSICAL INVENTORY
On hand
Location
On order
Allocated
Cycle
Last count
Difference
100
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
14-18
MRP Processes
1. Exploding the bill of material
2. Netting out inventory
3. Lot sizing
4. Time-phasing requirements
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MRP Matrix
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14-20
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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MRP: Example (cont.)
Product Structure Record
Clipboard
Level 0
Clip Ass’y
(1)
Pressboard
(1)
Rivets
(2)
Level 1
Lapdesk
Pressboard
(2)
Trim
(3’)
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Level 0
Beanbag
(1)
Glue
(4 oz)
Level 1
14-22
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
Projected on Hand
LT: 1
PERIOD
25
Net Requirements
Planned Order Receipts
Planned Order Releases
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14-23
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
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14-24
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
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14-25
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
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14-26
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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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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14-28
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
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14-29
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
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1
2
PERIOD
3
4
100
100
100
2
PERIOD
3
4
5
4
5
50
50
1
PERIOD
3
2
5
14-30
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
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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
14-31
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
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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
14-32
MRP: Example (cont.)
Planned Order Report
PERIOD
ITEM
Clipboard
Lapdesk
Pressboard
Copyright 2006 John Wiley & Sons, Inc.
1
50
100
2
3
4
100
100
50
100
100
150
5
14-33
Lot Sizing in MRP Systems
Lot-for-lot ordering policy
Fixed-size lot ordering policy
Minimum order quantities
Maximum order quantities
Multiple order quantities
Economic order quantity
Periodic order quantity
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14-34
Advanced Lot Sizing Rules: L4L
Total cost of L4L = (4 X $60) + (0 X $1) = $240
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14-35
Advanced Lot Sizing Rules: EOQ
EOQ
2(30)(60
60 minimum order quantity
1
Total cost of EOQ = (2 X $60) + [(10 + 50 + 40) X $1)] = $220
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14-36
Advanced Lot Sizing Rules: POQ
POQ Q / d 60 / 30 2 periods worth of requirements
Total cost of POQ = (2 X $60) + (20 X $1) = $180
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14-37
Planned Order Report
Item
On hand
On order
Allocated
DATE
9-26
9-30
10-01
10-08
10-10
10-15
10-23
10-27
Key:
#2740
100
200
50
ORDER NO.
Date
Lead time
Lot size
Safety stock
SCHEDULED
GROSS REQS.
RECEIPTS
AL 4416
AL 4147
GR 6470
SR 7542
CO 4471
GR 6471
GR 6471
GR 6473
AL = allocated
CO = customer order
PO = purchase order
25
25
50
200
75
50
25
50
PROJECTED
ON HAND
50
25
0
- 50
150
75
25
0
- 50
9 - 25 - 05
2 weeks
200
50
ACTION
Expedite SR 10-01
Release PO 10-13
WO = work order
SR = scheduled receipt
GR = gross requirement
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14-38
MRP Action Report
Current date 9-25-05
ITEM
DATE
#2740
#3616
#2412
#3427
#2516
#2740
#3666
10-08
10-09
10-10
10-15
10-20
10-27
10-31
ORDER NO. QTY.
7542
200
7648
100
200
50
Copyright 2006 John Wiley & Sons, Inc.
ACTION
Expedite
Move forward
Move forward
Move backward
De-expedite
Release
Release
SR
PO
PO
PO
SR
PO
WO
10-01
10-07
10-05
10-25
10-30
10-13
10-24
14-39
Capacity Requirements
Planning (CRP)
Creates a load profile
Identifies under-loads and over-loads
Inputs
Planned order releases
Routing file
Open orders file
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14-40
CRP
MRP planned
order
releases
Routing
file
Capacity
requirements
planning
Open
orders
file
Load profile for
each machine center
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14-41
Leveling Under-load Conditions
1. Acquire more work
2. Pull work ahead that is scheduled
for later time periods
3. Reduce normal capacity
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14-42
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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14-43
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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14-44
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)
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14-45
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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14-46
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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14-47
ERP Modules
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14-48
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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14-49
Selected Enterprise
Software Vendors
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14-50
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
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14-51
Customer Relationship
Management (CRM)
Software that
Plans and executes business processes
Involves customer interaction
Changes focus from managing products to
managing customers
Analyzes point-of-sale data for patterns
used to predict future behavior
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14-52
Supply Chain Management
Software that plans and executes business
processes related to supply chains
Includes
Supply chain planning
Supply chain execution
Supplier relationships
Distinctions between ERP and SCM are
becoming increasingly blurred
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14-53
Collaborative Product Commerce
(CPC)
Software that
Incorporates new product design and
development and product life cycle
management
Integrates customers and suppliers in the
design process though the entire product life
cycle
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14-54
ERP and Software Systems
Customer Relationship
Management (CRM)
Collaborative
Design
Collaborative
Product
Commerce
(CPC)
Product
Design
Collaborative
Manufacture
DFMA
Collaborative
Design
Manufacture
&
Delivery
Collaborative
Manufacture
Enterprise
Resource
Planning
(ERP)
Time to Customer
Time to Market
Customers
Suppliers
Supply Chain
Management (SCM)
Source: Adapted from George Shaw, “Building the Lean Enterprise: Reducing Time to Market.” Industry Week
(Webcast, June 14, 2001), http://www.industryweek.com/Events/TimeToMarket/ pent0614.html
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14-55
Connectivity
Application programming interfaces
(APIs)
give other programs well-defined ways of
speaking to them
Enterprise Application Integration (EAI)
solutions
EDI is being replaced by XML
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14-56
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14-57
