12 – MRP and ERP

12 – MRP and ERP

Dr. Ron Lembke

Historical Perspective

mrp – material requirements

planning

MRP II – ManufacturingResource Planning

ERP- Enterprise Resource Planning

MRP Crusade (1975)

Material Requirements PlanningMake sure you have enough parts when

you need themTake future demands, factor in lead times

(time phase), compare to on hand, orderDetermine order size and timingControl and plan purchasing vs. OSWO

inventory management

Closed-Loop MRP

Capacity Consideration:Part routingsCalculate loads on each work stationSee if scheduled load exceeds capacityLead-time long enough to allow some

shuffling to make plan feasible

MRP II -- Manufacturing Resource Planning

“A method for the effective planning of all resources of a manufacturing company” (APICS def.)

Financial accounting incorporated Sales Operations Planning Simulate capacity requirements of different possible

Master Production Schedules 1989, $1.2B MRPII sales in U.S., one third of total software sales

Success? MRP CrusadeBegins

ERP differences

Material planningCapacity planningProduct designInformation warehousing

All functions in the entire company operate off of one common set of data

Instantaneous updating, visibility

ERP Sales

Y2K: Worldwide sales of top 10 vendors1995 $2.8 B1996 $4.2 B1997 $5.8 B $3.2 B SAP

Fortune survey: 44% reported spending at least 4 times as much on implementation as on software

ERP Challenges

Modules assume “best practices:”Change software to reflect company ($)Change company to follow software (?)

Accuracy of dataDrives entire systemOwnership of / responsibility for

Ability to follow structure

ERP Novel?

“Goal-like” novel Hero learns more about ERP,

deciding if it is right for his company

Company rushes through installation

General introduction to ERP systems, what they do, how different from MRP

SAP R/3 screen shots

The Heart of the Matter - mrp

System for organizing WIP releases Work in Process – work that has been started, but

not yet finished Consider Lead Time (LT)for each item Look at BOM to see what parts needed

Bill of Materials – what goes into what

Release so they will arrive just as needed

Example – Snow Shovel Order quantity is 50 units LT is one week

MRP Table

1 2 3 4 5

Gross Requirements 10 40 10

Scheduled receipts (begin) 50

Projected Available Balance (ending) 4

54

44

44

4

Net Requirements 6

Planned Order Receipts

Planned Order Releases

6 units short

MRP Table

1 2 3 4 5

Gross Requirements 10 40 10

Scheduled receipts (begin) 50

Projected Available Balance (ending) 4

54

44

44

4

Net Requirements 6

Planned Order Receipts 50

Planned Order Releases 50

Order 50 units week earlier

Ending Inventory

1 2 3 4 5

Gross Requirements 10 40 10

Scheduled receipts (begin) 50

Projected Available Balance (ending) 4

54

44

44

4

44

Net Requirements 6

Planned Order Receipts 50

Planned Order Releases 50

Ending inventory

Terminology

Projected Available balance Not on-hand (that may be greater) Tells how many will be available Available to Promise – the units aren’t spoken for

yet, we can assign them to a customer

Planned order releases ≠ scheduled receipts Only when material has been committed to their

production Move to scheduled receipts as late as possible Preserves flexibility

1605 Snow Shovel

1605 Snow Shovel

048Scoop-shaftconnector

13122 Top Handle Assy314 scoop assembly

118 Shaft (wood)

062 Nail (4)

14127 Rivet (4)

314 scoop assembly

314 scoop assembly

14127 Rivet (6)019 Blade (steel)

2142 Scoop (aluminum)

13122 Top Handle Assembly

1118Top handle

Coupling (steel)

11495 WeldedTop handle bracket

Assembly

13122 Top Handle Assembly

457 Top handle(wood)

129 Top HandleBracket (steel)

082 Nail (2)

BOM Explosion

Process of translating net requirements into components part requirementsTake into account existing inventoriesConsider also scheduled receipts

BOM Explosion Example

Need to make 100 shovelsWe are responsible for handle

assemblies.

13122 Top Handle Assembly

1118Top handle

Coupling (steel)

11495 WeldedTop handle bracket

Assembly

13122 Top Handle Assembly

457 Top handle(wood)

129 Top HandleBracket (steel)

082 Nail (2)

Net Requirements

Sch Gross NetPart Description Inv Rec Req ReqTop handle assy 25 -- 100 75

Top handle 22 25Nail (2 required) 4 50Bracket Assy 27 --

Top bracket 15 --Top coupling 39 15

Net Requirements

Sch Gross NetPart Description Inv Rec Req ReqTop handle assy 25 -- 100 75

Top handle 22 25 75 28Nail (2 required) 4 50 150 96Bracket Assy 27 -- 75 48

Top bracket 15 --Top coupling 39 15

13122 Top Handle Assembly

1118Top handle

Coupling (steel)

11495 WeldedTop handle bracket

Assembly

13122 Top Handle Assembly

457 Top handle(wood)

129 Top HandleBracket (steel)

082 Nail (2)

Net Requirements

Sch Gross NetPart Description Inv Rec Req ReqTop handle assy 25 -- 100 75

Top handle 22 25 75 28Nail (2 required) 4 50 150 96Bracket Assy 27 -- 75 48

Top bracket 15 -- 48 33Top coupling 39 15 48 --

Timing of Production

This tells us how many of each we needDoesn’t tell when to startStart as soon as possible?Dependent events (oh no, not that!)

13122 Top Handle Assy

13122 Top handle LT = 2

1

2

3

4

5

6

7

8

9

10

Gross Req 20 10 20 5 35 10

Sch receipts

Proj. Avail Bal (ending)

25

25

5

5

Net Req 5

Planned Order Receipt 5

Planned Order Release 5

Order policy: Lot-for-lot

13122 Top Handle Assy-2

13122 Top handle LT = 2

1

2

3

4

5

6

7

8

9

10

Gross Req 20 10 20 5 35 10

Sch receipts

Proj. Avail Bal (ending)

25

25

5

5

0

0

0

0

0

0

0

Net Req 5 20 5 35 10

Pl Order Rec 5 20 5 35 10

Pl Order Rel 5 20 5 35 10

Order policy: Lot-for-lot

13122 Top Handle Assy -3

13122 Top handle LT = 2

1

2

3

4

5

6

7

8

9

10

Gross Req 20 10 20 5 35 10

Sch receipts

Proj. Avail Bal (ending)

25

25

5

5

0

0

0

0

0

0

0

Net Req 5 20 5 35 10

Pl Order Rec 5 20 5 35 10

Pl Order Rel 5 20 5 35 10

Order policy: Lot-for-lot

457 Top Handle

13122 Top handle LT = 2

1

2

3

4

5

6

7

8

9

10

Gross Req 20 10 20 5 35 10

Sch receipts

Proj. Avail Bal (ending)

25

25

5

5

0

0

0

0

0

0

0

Net Req 5 20 5 35 10

Pl Order Rec 5 20 5 35 10

Pl Order Rel 5 20 5 35 10

LT = 2

1

2

3

4

5

6

7

8

9

10

Gross Req 5 20 5 35 10

Sch receipts 25

Proj. Avail Bal (ending)

22

22

Net Req

Pl Order Rec

Pl Order Rel

One handle forEach assembly

457 Top Handle

LT = 2

1

2

3

4

5

6

7

8

9

10

Gross Req 5 20 5 35 10

Sch receipts 25

Proj. Avail Bal (ending)

22

22

17

Net Req

Pl Order Rec

Pl Order Rel

Order policy: Lot-for-lot

457 Top Handle

LT = 2

1

2

3

4

5

6

7

8

9

10

Gross Req 5 20 5 35 10

Sch receipts 25

Proj. Avail Bal (ending)

22

22

17

42

22

17

17

0

0

0

0

Net Req 18 10

Pl Order Rec 18 10

Pl Order Rel 18 10

Order policy: Lot-for-lot

082 Nail (2 required)

LT = 1 Lot Size = 50

1

2

3

4

5

6

7

8

9

10

Gross Req 10 40 10 70 20

Sch receipts 50

Proj. Avail Bal (ending)

4

54

Net Req

Pl Order Rec

Pl Order Rel

13122 Top handle LT = 2

1

2

3

4

5

6

7

8

9

10

Gross Req 20 10 20 5 35 10

Sch receipts

Proj. Avail Bal (ending)

25

25

5

5

0

0

0

0

0

0

0

Net Req 5 20 5 35 10

Pl Order Rec 5 20 5 35 10

Pl Order Rel 5 20 5 35 10

Two nails forEach assembly

082 Nail (2 required)

LT = 1 Lot Size = 50

1

2

3

4

5

6

7

8

9

10

Gross Req 10 40 10 70 20

Sch receipts 50

Proj. Avail Bal (ending)

4

54

44

44

4

Net Req 6

Pl Order Rec 50

Pl Order Rel 50

082 Nail (2 required)

LT = 1 Lot Size = 50

1

2

3

4

5

6

7

8

9

10

Gross Req 10 40 10 70 20

Sch receipts 50

Proj. Avail Bal (ending)

4

54

44

44

4

44

44

24

4

4

4

Net Req 6 26

Pl Order Rec 50 50

Pl Order Rel 50 50

11495 Bracket Assembly

13122 Top handle LT = 2

1

2

3

4

5

6

7

8

9

10

Gross Req 20 10 20 5 35 10

Sch receipts

Proj. Avail Bal (ending)

25

25

5

5

0

0

0

0

0

0

0

Net Req 5 20 5 35 10

Pl Order Rec 5 20 5 35 10

Pl Order Rel 5 20 5 35 10

LT = 2

1

2

3

4

5

6

7

8

9

10

Gross Req

Sch receipts

Proj. Avail Bal (ending)

27

Net Req

Pl Order Rec

Pl Order Rel

One bracket forEach assembly

11495 Bracket Assembly

13122 Top handle LT = 2

1

2

3

4

5

6

7

8

9

10

Gross Req 20 10 20 5 35 10

Sch receipts

Proj. Avail Bal (ending)

25

25

5

5

0

0

0

0

0

0

0

Net Req 5 20 5 35 10

Pl Order Rec 5 20 5 35 10

Pl Order Rel 5 20 5 35 10

LT = 2

1

2

3

4

5

6

7

8

9

10

Gross Req 5

Sch receipts

Proj. Avail Bal (ending)

27

Net Req

Pl Order Rec

Pl Order Rel

One bracket forEach assembly

11495 Bracket Assembly

13122 Top handle LT = 2

1

2

3

4

5

6

7

8

9

10

Gross Req 20 10 20 5 35 10

Sch receipts

Proj. Avail Bal (ending)

25

25

5

5

0

0

0

0

0

0

0

Net Req 5 20 5 35 10

Pl Order Rec 5 20 5 35 10

Pl Order Rel 5 20 5 35 10

LT = 2

1

2

3

4

5

6

7

8

9

10

Gross Req 5 20 5 35 10

Sch receipts

Proj. Avail Bal (ending)

27

Net Req

Pl Order Rec

Pl Order Rel

One bracket forEach assembly

11495 Bracket Assembly

LT = 2

1

2

3

4

5

6

7

8

9

10

Gross Req 5 20 5 35 10

Sch receipts

Proj. Avail Bal (ending)

27

27

22

22

2

0

0

0

0

0

0

Net Req 3 35 10

Pl Order Rec 3 35 10

Pl Order Rel 3 35 10

Order policy: Lot-for-lot

129 Top Bracket

LT = 1

1

2

3

4

5

6

7

8

9

10

Gross Req 3 35 10

Sch receipts

Proj. Avail Bal (ending)

15

Net Req

Pl Order Rec

Pl Order Rel

LT = 2

1

2

3

4

5

6

7

8

9

10

Gross Req 5 20 5 35 10

Sch receipts

Proj. Avail Bal (ending)

27

22

22

2

Net Req 3 35 10

Pl Order Rec 3 35 10

Pl Order Rel 3 35 10

129 Top handle bracket

LT = 1

1

2

3

4

5

6

7

8

9

10

Gross Req 3 35 10

Sch receipts

Proj. Avail Bal (ending)

15

15

15

12

12

Net Req 23 10

Pl Order Rec 23 10

Pl Order Rel 23 10

1118 Top handle coupling

LT = 3 Safety Stock = 20

1

2

3

4

5

6

7

8

9

10

Gross Req 3 35 10

Sch receipts

Proj. Avail Bal (ending)

39

Net Req

Pl Order Rec

Pl Order Rel

LT = 2

1

2

3

4

5

6

7

8

9

10

Gross Req 5 20 5 35 10

Sch receipts

Proj. Avail Bal (ending)

27

22

22

2

Net Req 3 35 10

Pl Order Rec 3 35 10

Pl Order Rel 3 35 10

1118 Top handle coupling

LT = 3 Safety Stock = 20

1

2

3

4

5

6

7

8

9

10

Gross Req 3 35 10

Sch receipts 15

Proj. Avail Bal (ending)

39

39

54

51

51

16

Net Req 4

Pl Order Rec 4

Pl Order Rel 4

1118 Top handle coupling

LT = 3 Safety Stock = 20

1

2

3

4

5

6

7

8

9

10

Gross Req 3 35 10

Sch receipts 15

Proj. Avail Bal (ending)

39

39

54

51

51

20

20

20

20

20

20

Net Req 4 10

Pl Order Rec 4 10

Pl Order Rel 4 10

Other considerations

Safety stock if uncertainty in demand or supply quantity Don’t let available go down to 0

Safety LT if uncertainty in arrival time Place order earlier than necessary

Order quantities EOQ – Economic Order Quantity, Fixed Size If that’s not enough, order what you need, OR order

two or more of the Fixed Size Lot-For-Lot, Periodic Order quantity, others