Transcript PRODUCTIONS/OPERATIONS MANAGEMENT

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MRP & ERP
MRP, MRP II, and ERP
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MRP & ERP
Overview
• MRP, Material Requirements Planning
– Planning and scheduling technique used
for batch production of assembled items.
• MRP II, Manufacturing Resource
Planning
• ERP, Enterprise Resource Planning
– The extensive use of software to integrate
record keeping and information sharing
throughout an organization.
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MRP & ERP
Independent vs. Dependent Demand
• Independent demand: Demand of finished
goods.
• Dependent demand: Demand for items that
are subassemblies or component parts to be
used in the production of finished goods.
• The amount of dependent demand is the
function of the amount of independent
demand.
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MRP & ERP
Material Requirement Planning (MRP)
• Material requirements planning (MRP):
Computer-based information system for
ordering and scheduling of dependent
demand inventories.
– What to order
– When to order
– How much to order
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MRP & ERP
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
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MRP & ERP
MPR Inputs: Master Schedule
• Master Production Schedule
– which end items are to be produced,
– when they are needed, and
– in what quantities.
• Sources of quantities: customer orders,
forecasts, orders from warehouses, and
external demand.
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MRP & ERP
MPR Inputs: Master Schedule
Figure 14-4
Assembly
Subassembly
Fabrication
Procurement
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2
3
4
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9
10
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MRP & ERP
MRP Inputs: Bill-of-Materials
Bill of materials: 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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MRP Inputs: Bill-of-Materials
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MRP Inputs: Bill-of-Materials, Example
Example: Use the information
presented in the following
figure to do the following:
• Determine the quantities of B, Component
C, D, E, and F needed to
B
assemble one X.
C
• Determine the quantities of
D
these components that will be
required to assemble 10 Xs,
E
taking into account the
quantities on hand (i.e., in
inventory) of various
components.
On Hand
4
10
8
60
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MRP Inputs: Bill-of-Materials, Example
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MRP & ERP
MRP Inputs: Bill-of-Materials, Example
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MRP & ERP
MRP Inputs: Bill-of-Materials, Example
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MRP & ERP
MRP Inputs: Bill-of-Materials, Summary
• Many products have considerably more
components.
• Timing is essential (i.e., when must the
components be ordered or made).
• The amounts on hand must be netted
out (i.e., subtracted from the apparent
requirements) to determine the true
requirements.
• Accurate records are a prerequisite.
– complex and time-consuming
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MRP & ERP
MRP Inputs: Inventory Records
• Inventory records refer to standard
information on the status of each item by time
period.
– Gross requirements, scheduled receipts, and
expected amount on hand.
– Supplier, lead time, and lot size.
– Changes due to stock receipts and withdrawals,
canceled orders, and similar events.
• Like the bill of materials, inventory records
must be accurate.
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MRP Processing
• MRP processing takes the end item
requirements specified by the master
schedule and "explodes" them into timephased requirements for assemblies,
parts, and raw materials using the bill of
materials offset by lead times.
• The determination of the net
requirements (netting) is the core of
MRP processing.
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MRP Processing
Figure 15-8
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
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MRP & ERP
MRP Processing: Terminologies
• Gross requirements
• Schedule receipts
• Projected on hand
• Net requirements
• Planned-order receipts
• Planned-order releases
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MRP & ERP
MRP Processing: Example
• A firm that produces wood shutters and bookcases has
received two orders for shutters: one for 100 shutters
and one for 150 shutters.
– The 100-unit order is due for delivery at the start of week 4 of the
current schedule, and the 150-unit order is due for delivery at the
start of week 8.
– There is a scheduled receipt of 70 wood sections in (i.e., at the
beginning of) week 1.
• Each shutter consists of two frames and four slatted
wood sections. The wood sections are made by the firm,
and fabrication takes one week. The frames are ordered,
and lead time is two weeks. Assembly of the shutters
requires one week.
• Determine the size and timing of planned-order releases
necessary to meet delivery requirements under each of
these conditions:
– Lot-for-lot ordering (i.e., order size equal to net requirements).
– Lot-size ordering with a lot size of 320 units for frames and 70
units for wood sections.
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MRP Processing: Example
• Master Schedule
• Product Directory Tree
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MRP & ERP
MRP Processing: Example, Lot-for-Lot Ordering
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MRP Processing: Example, Lot-Size Ordering
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MRP & ERP
MRP Processing: Pegging
• Pegging is the process of identifying
the parent items that have generated a
given set of material requirements for
an item.
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MRP & ERP
MRP Processing: Pegging, Example
• For example, consider the two product structure
trees shown below.
• Suppose that there is a beginning inventory of
110 units of D on hand, and all items have lead
times of one week.
• A cancellation of 50 units of C will require the
pegging information in the following figure.
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MRP Processing: Pegging, Example
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MRP Processing: Regenerative vs. Net Change
• A regenerative system is updated periodically.
It is essentially a batch-type system.
– Stable system.
– Long lead time.
– Less processing load.
• A net change system is continuously updated.
Only the changes are explored through the
system, level by level; the entire plan would
not be regenerated.
– Frequent change.
– Up-to-date information for planning and control
purposes.
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MRP & ERP
MRP Primary Outputs
• Planned orders - schedule indicating
the amount and timing of future orders.
• Order releases - Authorization for the
execution of planned orders.
• Changes to planned orders - revisions
of due dates or order quantities, or
cancellations of orders.
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MRP Secondary Outputs
• Performance-control reports
– missed deliveries and stockouts, and
information for accessing cost performance.
• Planning reports
– purchase commitments and information for
future material requirements.
• Exception reports
– late and overdue orders, excessive scrap
rates, reporting errors, and nonexistent
parts.
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MRP: Other Considerations
• Safety Stock / Safety Time:
Maintain smooth operations.
• Lot sizing: Minimize the sum of
ordering cost (or setup cost) and
holding cost.
– Lot-for-lot ordering
– Economic order quantity
– Fixed-period ordering
– Part-period model
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MRP in Services
• MRP applications in services may
involve material goods that form a part
of the product-service package, or they
may involve mainly service
components.
• Examples: Food catering and largescale renovations such as sports
stadium or a major hotel.
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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
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MRP & 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
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MRP & ERP
Requirements of MRP
• Computer and necessary software
• Accurate and up-to-date
– Master schedules
– Bills of materials
– Inventory records
• Integrity of data
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MRP & ERP
MRP II
• Expanded MRP with and emphasis
placed on integration
– Financial planning
– Marketing
– Engineering
– Purchasing
– Manufacturing
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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
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ERP
• Enterprise resource planning (ERP): An
expanded effort to integrate
standardized record-keeping that will
permit information sharing throughout
the organization