Resource Planning Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 15 – 1

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Transcript Resource Planning Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 15 – 1

Resource Planning

15 – 1

Resource Planning

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At the heart of any organization

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Starts with sales and operations plans and plans the input requirements

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A process relative to the firm’s competitive priorities and an important part of managing supply chains

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Enterprise Resource Planning

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What an ERP system does

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Integrating the firm’s functional areas

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Used by many different types of organizations

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How ERP systems are designed

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Single comprehensive database Managers to monitor all of the company’s products at all locations and at all times Information is automatically updated in the all applications when transactions occur Streamlines the data flows throughout the organization Requires a careful analysis of major processes Significant changes in ERP systems - interoperability 15 – 3

Enterprise Resource Planning

Back-Office Processes Manufacturing

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Material requirements planning

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Scheduling Human Resources

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Benefits

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Payroll Accounting and Finance

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Accounts payable and receivable

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General ledgers

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Asset management Figure 15.1 – ERP Application Modules

Data Analysis

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Product costing

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Job costs ERP System Supply-Chain Management

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Forecasting

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Purchasing

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Distribution Front-Office Processes

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Sales and Marketing Sales orders Pricing system Customer Service

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Field service

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Quality 15 – 4

Materials Requirements Planning

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MRP is a computerized information system to manage dependent demand inventory and schedule orders

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Translates the master production schedule (MPS) into requirements for all subassemblies, components, and raw materials through the MRP explosion

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Dependent demand

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Quantity required varies with the production plans of other items

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Component

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Parent

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MRP Inputs

Authorized master production Schedule (MPS) Other sources of demand Inventory transactions Inventory records MRP explosion Bills of materials Engineering and process designs Material requirements plan (MRP) Figure 15.2 – Material Requirements Plan Inputs

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Demand Patterns

2000 – 1500 – 1000 – Order 1000 on day 3 2000 – Order 1000 on day 8 1500 – 1000 – 500 – 500 – 0 | 1 | Reorder point | | | 5 Day | | (a) Parent inventory | | | 10 0 | 1 | | | | 5 Day (b) Component demand | | | | | 10 Figure 15.3 – Lumpy Dependent Demand Resulting from Continuous Independent Demand

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Bill of Materials

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A record of all components of an item Shows the parent-component relationship The usage quantities are derived from engineering and process design

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Five common terms End items Intermediate items Subassemblies Purchased items Part commonality (sometimes called standardization of parts or modularity)

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Bill of Materials

Back slats Seat cushion Back legs Front legs Leg supports A Ladder-back chair Seat-frame boards Figure 15.4 – BOM for a Ladder-Back Chair

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Bill of Materials

A Ladder-back chair B (1) Ladder-back subassembly C (1) Seat subassembly D (2) Front legs E (4) Leg supports F (2) Back legs G (4) Back slats H (1) Seat frame I (1) Seat cushion Figure 15.4 – BOM for a Ladder-Back Chair

J (4) Seat-frame boards 15 – 10

Master Production Schedule (MPS)

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Details how many end items will be produced within specified periods of time It breaks the sales and operations plan into specific product schedules Create a prospective MPS and test whether it meets the schedule with available resources Sums of quantities must equal sales and operational plan Production must be allocated efficiently over time Capacity limitations and bottlenecks may be determined

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Master Production Schedule (MPS)

Ladder-back chair Kitchen chair Desk chair Aggregate production plans for chair family 1 150 2 April 670 3 200 200 4 120 5 200 6 150 May 7 120 670 8 200 Figure 15.5 – MPS for a Family of Chairs

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Master Production Schedule (MPS)

Authorized production plan Material planning Prospective master requirements production schedule Authorized master production schedule Are resources available?

Yes No Figure 15.6 – Master Production Scheduling Process

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Developing a MPS

Step 1: Calculate projected on-hand inventories Projected on-hand inventory at end of this week = On-hand inventory at end of last week + MPS quantity due at start of this week – Projected requirements this week where: Projected requirements = max(Forecast, Customer orders booked) Inventory = 55 chairs currently in stock + MPS quantity (0 for week 1) – 38 chairs already promised for delivery in week 1 = 17 chairs

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Developing a MPS

Item: Ladder-back chair Quantity on Hand: 55 1 Forecast Customer orders (booked) Projected on-hand inventory 30 38 17 2 30 27 April –13 MPS quantity 0 0 MPS start Explanation: Forecast is less than booked orders in week 1; projected on-hand inventory balance = 55 + 0 – 38 = 17.

Explanation: Forecast exceeds booked orders in week 2; projected on-hand inventory balance = 17 + 0 – 30 = –13. The shortage signals a need to schedule an MPS quantity for completion in week 2.

Figure 15.7 – Master Production Schedule for Weeks 1 and 2 15 – 15

Developing a MPS

Step 2: Determine the timing and size of MPS quantities

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The goal is to maintain a nonnegative projected on-hand inventory balance As shortages are detected, MPS quantities should be scheduled to cover them Inventory = 17 chairs in inventory at the end of week 1 + MPS quantity of 150 chairs – Forecast of 30 chairs = 137 chairs

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Application 15.1

Determine the MPS for Product A that has a 50-unit policy and 5 units on hand. The demand forecast and booked orders are shown in the partially completed plan given in the Student Notes. The lead time is one week. Here is the completed plan. You might want to ask a question or two on how they would respond to a customer request for a specific week and order quantity.

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Application 15.1

SOLUTION Item: Product A Quantity on Hand 5 1 Forecast Customer orders (booked) Projected on-hand inventory MPS quantity 20 30 MPS start Available-to promise (ATP) inventory 2 10 20 3 40 4 10 5 8 5 0 0 6 Order Policy: 50 units Lead Time: 1 week 7 8 9 10 0 30 20 40 20 2 0 0 0 0

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Application 15.1

SOLUTION Item: Product A Quantity on Hand 5 1 Forecast Customer orders (booked) Projected on-hand inventory MPS quantity 20 30 25 50 MPS start Available-to promise (ATP) inventory 5 2 10 20 5 50 3 40 5 15 50 35 4 10 8 5 5 5 0 0 6 0 2 Order Policy: 50 units Lead Time: 1 week 7 8 9 10 30 0 50 20 0 40 0 50 20 0 3 23 3 13 50 50 50 50 50 43 50 50

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Master Production Schedule (MPS)

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Available-to-promise (ATP) inventory

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The quantity of an end item that marketing can promise to deliver on specific dates

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It is the difference between customer orders already booked and the quantity that operations is planning to produce

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Freezing the MPS

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Reconciling the MPS with sales and operations plans

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Master Production Schedule (MPS)

Item: Ladder-back chair Quantity on Hand: Forecast Customer orders booked 55 Projected on-hand inventory 1 30 38 17 2 April 30 27 137 3 30 24 107 4 30 8 77 5 35 Order Policy: 150 units Lead Time: 1 week May 6 35 7 35 8 35 0 42 0 7 0 122 0 87 MPS quantity 0 150 0 0 0 0 150 0 MPS start 150 0 0 0 0 150 0 0 Explanation: The time needed to assemble 150 chairs is 1 week. The assembly department must start assembling chairs in week 1 to have them ready by week 2.

Explanation: On-hand inventory balance = 17 + 150 of 30 – 17 = 13 chairs in week 2.

– 30 = 137. The MPS quantity is needed to avoid a shortage Figure 15.8 – Master Production Schedule for Weeks 1–8

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Master Production Schedule (MPS)

Item: Ladder-back chair Quantity on Hand: Forecast Customer orders booked 55 Projected on-hand inventory 1 30 38 17 2 April 30 27 137 3 30 24 107 4 30 8 77 5 35 Order Policy: 150 units Lead Time: 1 week May 6 35 7 35 8 35 0 42 0 7 0 122 0 87 MPS quantity 0 150 0 0 0 0 150 0 150 0 0 0 0 150 0 0 MPS start Available-to promise (ATP) inventory 17 91 150 Explanation: The total of customer orders booked until the next MPS receipt is 38 units. The ATP = 55 (on-hand) + 0 (MPS quantity) – 38 = 17.

Explanation: The total of customer orders booked until the next MPS receipt is 27 + 24 + 8 = 59 units. The ATP = 150 (MPS quantity) – 59 = 91 units..

Figure 15.9 an ATP Row – MPS Record with 15 – 22

MRP: Inventory Record

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Inventory transactions are the basic building blocks of up-to-date records

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Transactions include releasing new orders, receiving scheduled receipts, adjusting due dates for scheduled receipts, withdrawing inventory, canceling orders, correcting inventory errors, rejecting shipments, and verifying losses and stock returns

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Inventory records divide the future into time periods called time buckets

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Keep track of inventory levels and component replenishment needs

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Inventory Record

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The time-phase information contained in the inventory record consists of:

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Gross requirements

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Scheduled receipts

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Projected on-hand inventory

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Planned receipts

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Planned order releases Projected on-hand inventory balance at end of week

= Inventory on hand at end of week

–1 + Scheduled or planned receipts in week

– Gross requirements in week

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Example 1: L4L Planned receipt not in the projected balance: Lead time = 1, initial inventory I 0 = 20 1 2 30 3 4 Gross requirements (given) Scheduled receipts (given) Projected balance (20) Planned order releases 25 5 6 22 32

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Example 2. L4L Planned receipt in the projected balance: Lead time = 1, initial inventory I 0 = 20 Gross requirements (given) Scheduled receipts (given) Projected balance (20) Planned order releases 1 2 3 4 5 6 30 22 32 25

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Example 3. FOQ Fixed order quantity = 25 and planned receipt in projected balance: Lead time = 1, initial inventory I 0 = 20 1 2 3 4 5 6 30 22 32 Gross requirements (given) Scheduled receipts (given) Projected balance (20) Planned order releases 25

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Example 4. FOQ Fixed order quantity and planned receipt in projected balance: Lead time =2, initial inventory I 0 = 190 0 1 2 3 4 5 Gross (given) requirements Scheduled receipts 80 120 90 100 90 Projected balance (given) 190 110 120 30 60 100 Planned order releases

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Planning Factors

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Planning lead time

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For purchased items planning lead time is the time allowed for receiving a shipment from the supplier

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For manufactured the planning lead time consists of estimates for

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Setup time

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Processing time

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Materials handling time between operations

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Waiting time

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Lot-sizing rules

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Fixed order quantity (FQO) rule maintains the same order quantity each time an order is issued. Could be determined by quantity discounts, truckload capacity, minimum purchases, or EOQ

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Periodic order quantity (POQ) rule allows a different order quantity for each order issue but tends to issue the order at predetermined time intervals POQ lot size to arrive in week

= Total gross requirements for

week, including week

– Projected on-hand inventory balance at end of week

–1

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Lot-for-lot (L4L) rule where the lot size covers the gross requirements of a single week L4L lot size to arrive in week

= Gross requirements for week

– Projected on-hand inventory balance at end of week

–1

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Planning Factors

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Lot sizes affect inventory costs and setup and ordering costs

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The FOQ rule generates a high level of average inventory because it creates inventory remnants

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The POQ rule reduces the amount of average on-hand inventory because it does a better job of matching order quantity to requirements

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The L4L rule minimizes inventory investment, but it also maximizes the number of orders placed

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Planning Factors

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Safety stock for dependent demand items with lumpy demand (gross requirements) is helpful only when future gross requirements, the timing or size of scheduled receipts, and the amount of scrap that will be produced are certain

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Safety stock is used for end items and purchased items to protect against fluctuating customer orders and unreliable suppliers

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Outputs from MRP

MRP explosion Routings and time standards Action notices

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Releasing new orders

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Adjusting due dates Material requirements plan Priority reports

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Dispatch lists

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Supplier schedules Capacity reports

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Capacity requirements planning

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Finite capacity scheduling

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Input-output control Figure 15.15 – MRP Outputs

Manufacturing resources plan Performance reports Cost and price data 15 – 33

MRP Explosion

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Translates the MPS and other sources of demand into the requirements needed for all of the subassemblies, components, and raw materials the firm needs to produce parent items

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An item’s gross requirements are derived from three sources

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The MPS for immediate parents that are end items

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The planned order releases for parents below the MPS level

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Any other requirements not originating in the MPS, such as the demand for replacement parts

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MRP Explosion

C(1) Seat subassembly H(1) Seat frame J(4) Seat-frame boards

I(1) Seat cushion Figure 15.16 – BOM for the Seat Subassembly 15 – 35

MRP Explosion

Item: Seat subassembly Lot size: 230 units Lead time: 2 weeks Gross requirements Scheduled receipts Projected on-hand inventory Planned receipts 37 Planned order releases 1 150 230 117 2 0 0 117 230 3 0 0 117 4 120 0 227 230 Week 5 0 0 227 230 Figure 15.17 – MRP Explosion of Seat Assembly Components

6 150 7 120 0 77 0 187 230 8 0 0 187 15 – 36

MRP Explosion

Item: Seat subassembly Lot size: 230 units Lead time: 2 weeks Gross requirements 1 150 Planned receipts Planned order releases 2 0 230 3 0 4 Week 5 120 0 6 150 7 120 8 0 230 230 230 Figure 15.17 – MRP Explosion of Seat Assembly Components

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MRP Explosion

Item: Seat subassembly Lot size: 230 units Lead time: 2 weeks Gross requirements 1 150 Planned receipts Planned order releases 2 0 230 3 0 4 Week 5 120 0 6 150 7 120 8 0 230 230 230 Item: Seat frames Lot size: 300 units Item: Seat cushion Lot size: L4L Lead time: 1 week Gross requirements 1 2 3 4 Week 5 6 7 8 Lead time: 1 week Gross requirements 1 Scheduled receipts 0 300 0 0 0 0 0 0 Scheduled receipts 0 Projected on-hand inventory 40 Projected on-hand inventory 0 Planned receipts Planned receipts Planned order releases Planned order releases Figure 15.17 – MRP Explosion of Seat Assembly Components

0 2 3 4 Week 5 6 7 8 0 0 0 0 0 0 15 – 38

MRP Explosion

Item: Seat subassembly Lot size: 230 units Lead time: 2 weeks Gross requirements 1 150 Planned receipts Planned order releases 2 0 230 3 0 4 Week 5 120 0 6 150 7 120 8 0 230 230 230 Usage quantity: 1 Item: Seat frames Lot size: 300 units Item: Seat cushion Lot size: L4L Lead time: 1 week Gross requirements 1 0 2 230 3 4 Week 5 6 7 8 Lead time: 1 week Gross requirements 1 0 Scheduled receipts 0 300 0 0 0 0 0 0 Scheduled receipts 0 Projected on-hand inventory 40 Projected on-hand inventory 0 Planned receipts Planned receipts Planned order releases Planned order releases Figure 15.17 – MRP Explosion of Seat Assembly Components

2 230 0 3 0 Usage quantity: 1 4 Week 5 0 0 6 0 7 0 8 0 15 – 39

MRP Explosion

Item: Seat subassembly Lot size: 230 units Lead time: 2 weeks Gross requirements 1 150 Planned receipts Planned order releases 2 0 230 3 0 4 Week 5 120 0 6 150 7 120 8 0 230 230 230 Usage quantity: 1 Item: Seat frames Lot size: 300 units Item: Seat cushion Lot size: L4L Lead time: 1 week Gross requirements 1 0 2 230 3 0 4 Week 5 0 230 6 7 8 Lead time: 1 week Gross requirements 1 0 Scheduled receipts 0 300 0 0 0 0 0 0 Scheduled receipts 0 Projected on-hand inventory 40 Projected on-hand inventory 0 Planned receipts Planned receipts Planned order releases Planned order releases Figure 15.17 – MRP Explosion of Seat Assembly Components

2 230 0 3 0 0 Usage quantity: 1 4 Week 5 0 230 6 0 0 0 7 0 8 0 15 – 40

MRP Explosion

Item: Seat subassembly Lot size: 230 units Lead time: 2 weeks Gross requirements 1 150 Planned receipts Planned order releases 2 0 230 3 0 4 Week 5 120 0 6 150 7 120 8 0 230 230 230 Item: Seat frames Lot size: 300 units Item: Seat cushion Lot size: L4L Lead time: 1 week Gross requirements 1 0 2 230 3 0 4 Week 5 0 230 6 0 7 0 8 0 Lead time: 1 week Gross requirements 1 0 2 230 Scheduled receipts 0 300 0 0 0 0 0 0 Scheduled receipts 0 Projected on-hand inventory 40 40 110 110 110 180 180 180 180 Projected on-hand inventory 0 0 Planned receipts 300 Planned receipts Planned order releases 300 Planned order releases 230 Figure 15.17 – MRP Explosion of Seat Assembly Components

0 0 230 0 0 3 0 0 0 230 4 Week 5 0 230 6 0 0 0 230 0 0 7 0 0 0 8 0 0 0 15 – 41

MRP Explosion

Item: Seat frames Lot size: 300 units Week Lead time: 1 week 1 2 3 4 5 6 7 Gross requirements 0 230 0 0 230 0 0 Planned receipts Planned order releases 300 300 8 0 Item: Seat cushion Lot size: L4L Lead time: 1 week Gross requirements Planned receipts Planned order releases 1 0 230 2 230 230 3 0 230 4 Week 5 0 230 6 0 230 7 0 8 0 Item: Seat-frame boards Lot size: 1500 units Lead time: 1 week Gross requirements 1 2 3 4 Week 5 6 7 8 Scheduled receipts 0 0 0 0 0 0 0 0 Projected on-hand inventory 200 Planned receipts Planned order releases Figure 15.17 – MRP Explosion of Seat Assembly Components

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MRP Explosion

Item: Seat frames Lot size: 300 units Week Lead time: 1 week 1 2 3 4 5 6 7 Gross requirements 0 230 0 0 230 0 0 Planned receipts Planned order releases Usage quantity: 4 300 300 8 0 Item: Seat cushion Lot size: L4L Lead time: 1 week Gross requirements Planned receipts Planned order releases 1 0 230 2 230 230 Item: Seat-frame boards Lot size: 1500 units Lead time: 1 week Gross requirements 1 0 2 0 3 0 4 Week 5 1200 0 6 0 7 0 8 0 Scheduled receipts 0 0 0 0 0 0 0 0 Projected on-hand inventory 200 Planned receipts Planned order releases Figure 15.17 – MRP Explosion of Seat Assembly Components

3 0 230 4 Week 5 0 230 6 0 230 7 0 8 0 15 – 43

MRP Explosion

Item: Seat frames Lot size: 300 units Week Lead time: 1 week 1 2 3 4 5 6 7 Gross requirements 0 230 0 0 230 0 0 Planned receipts Planned order releases 300 300 8 0 Item: Seat cushion Lot size: L4L Lead time: 1 week Gross requirements Planned receipts Planned order releases 1 0 230 2 230 230 3 0 230 4 Week 5 0 230 6 0 230 7 0 8 0 Item: Seat-frame boards Lot size: 1500 units Lead time: 1 week Gross requirements 1 0 2 0 3 0 4 Week 5 1200 0 6 0 7 0 8 0 Scheduled receipts 0 0 0 0 0 0 0 0 Projected on-hand inventory 200 200 200 200 500 500 500 500 500 Planned receipts 1500 Planned order releases 1500 Figure 15.17 – MRP Explosion of Seat Assembly Components

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Other Important Reports

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Action notice

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Capacity requirements planning (CRP)

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Theory of constraints principles can be applied to keep bottleneck operations fed by adjusting some lot sizing rules or occasionally overriding planned order releases

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Priority reports

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Manufacturing resource planning (MRP II)

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MRP and the Environment

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Consumer and government concern about the deterioration of the natural environment has driven manufacturers to reengineer their processes to become more environmentally friendly

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Companies can modify their MRP systems to help track these waste and plans for their disposal

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Resource Planning for Service Providers

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Dependent demand for services

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Restaurants

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Airlines

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Hospitals

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Hotels

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Bill of resources (BOR)

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Bill of Resources

Level 1 Discharge Level 2 Intermediate care Level 3 Postoperative care (Step down) Level 4 Postoperative care (Intensive) Level 5 Surgery Nurse (6 hr) (b) MD (1 hr) Therapy (1 hr) Level 6 Preoperative care (Angiogram) Bed (24 hr) Lab (3 tests) Kitchen (1 meal) Pharmacy (10 medicines) Level 6 Preoperative care (Angiogram) Level 7 Preoperative care (Testing) Figure 15.18 (a)

– BOR for Treating an Aneurysm 15 – 48

Resource Planning Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 15 – 1

Transcript Resource Planning Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 15 – 1

Resource Planning

Resource Planning

Enterprise Resource Planning

Enterprise Resource Planning

Materials Requirements Planning

MRP Inputs

Demand Patterns

Bill of Materials

Bill of Materials

Bill of Materials

Master Production Schedule (MPS)

Master Production Schedule (MPS)

Master Production Schedule (MPS)

Developing a MPS

Developing a MPS

Developing a MPS

Application 15.1

Application 15.1

Application 15.1

Master Production Schedule (MPS)

Master Production Schedule (MPS)

Master Production Schedule (MPS)

MRP: Inventory Record

Inventory Record

Planning Factors

Lot-sizing rules

Planning Factors

Planning Factors

Outputs from MRP

MRP Explosion

MRP Explosion

MRP Explosion

MRP Explosion

MRP Explosion

MRP Explosion

MRP Explosion

MRP Explosion

MRP Explosion

MRP Explosion

MRP Explosion

Other Important Reports

MRP and the Environment

Resource Planning for Service Providers

Dependent demand for services

Bill of resources (BOR)

Bill of Resources

Directory