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Operations Management

Lesson 6Material Requirements Planning and Enterprise

Resource Planning

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What you will learn in this unit: Material Resource Planning MRP Objectives and Demand Enterprise Resource Planning Advantages and Disadvantages of

ERP systems

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What is MRP?

Material Requirements Planning, is an effective inventory planning tool. Computerized MRP dates to the early 1960’s.Joseph Orlicky wrote the classic work on MRP in 1975.

MRP is a straightforward computer programme that makes mathematical calculations. The programme uses existing inventory data, determines total requirements for each item, compares it to what is already on hand and calculates what needs to be ordered. The objective of the MRP is to provide the right part, at the right time.

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MRP Objectives

There are two objectives for MRP namely;-

To determine the quantity of material and when it is required at the assembly plant

To determine the priority of the material in view of the manufacturing activities and processes

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Input/Output - MRP Process

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Customer orders

Master production schedule

Forecast demand

Bills of Materials Inventory Records

Material plans Works ordersPurchase orders

MaterialsRequirements

Planning

Materials requirement planning (MRP I)

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An Overview of MRP MRP uses the concept of backward scheduling to

determine how much and when to order and replenish

The CPR module checks to make sure the scheduled work load profile is feasible

The MPS module contains the authorized schedule The BOM module contains the product structure for

each unique product The Inventory Record module keeps track of the

inventory status for each item in the database MRP output includes schedules for all internal

activities and parts as well as orders for all supply chain items

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Types of Demand There are two types of demand. Independent Demand

Is the demand for finished products Does not depend on the demand of other products Needs to be forecasted

Dependent Demand Is the demand derived from finished products Is the demand for component parts based on the

number of end items being produced and is managed by the MRP system

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Objectives of MRP

Determines the quantity and timing of material requirements Determines what to order (checks BOM), how

much to order (lot size rules), when to place the order (need date minus lead time), and when to schedule delivery (on date needed)

Maintain priorities In a changing environment, MRP reorganizes

priorities to keep plans current and viable

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Enterprise Resource Planning

What Is ERP? Software designed for organizing and

managing business processes Modules share information across all

business functions Can share customer sales data with the

supply chain to help with global replenishment

All modules are fully integrated and use a common database – some PC based

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Quality Management and Maintenance

What you will learn in this unit: Quality and its Impact Total Quality Management Quality Management Tools Maintenance Total Productive Maintenance

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What is TQM?

Meeting quality expectations as defined by the customer

Integrated organizational effort designed to improve quality of processes at every business level

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Defining Quality – 5 Ways Conformance to specifications

Does product/service meet targets and tolerances defined by designers?

Fitness for use Evaluates performance for intended use

Value for price paid Evaluation of usefulness vs. price paid

Support services Quality of support after sale

Psychological e.g. Ambiance, prestige, friendly staff

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Manufacturing Quality vs. Service Quality

Manufacturing quality focuses on tangible product features Conformance, performance, reliability, features

Service organizations produce intangible products that must be experienced Quality often defined by perceptional factors

like courtesy, friendliness, promptness, waiting time, consistency

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Evolution of TQM – New Focus

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TQM Philosophy – What’s Different?

Focus on Customer Identify and meet customer needs Stay tuned to changing needs, e.g. fashion

styles Continuous Improvement

Continuous learning and problem solving, e.g. Kaizen, 6 sigma

Quality at the Source Inspection vs. prevention & problem solving

Employee Empowerment Empower all employees; external and

internal customers

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TQM Philosophy– What’s Different? (continued)

Understanding Quality Tools Ongoing training on analysis, assessment, and

correction, & implementation tools Team Approach

Teams formed around processes – 8 to 10 people

Meet weekly to analyze and solve problems Benchmarking

Studying practices at “best in class” companies Managing Supplier Quality

Certifying suppliers vs. receiving inspection

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TQM Philosophy– What’s Different? (continued)

Understanding Quality Tools Ongoing training on analysis, assessment, and

correction, & implementation tools Team Approach

Teams formed around processes – 8 to 10 people

Meet weekly to analyze and solve problems Benchmarking

Studying practices at “best in class” companies Managing Supplier Quality

Certifying suppliers vs. receiving inspection

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Four Dimensions of Quality Quality of design

Determining which features to include in the final design

Quality of conformance to design Production processes are set up to meet

design specifications Ease of use

Instructions, operation, maintenance, safety

Post-sale service Responsiveness, rapid repair, p.m., spare

parts

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Cost of Quality – 4 Categories

Early detection/prevention is less costly May be less by a factor of 10

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ISO Standards ISO 9000 Standards:

Certification developed by International Organization for Standardization

Set of internationally recognized quality standards

Companies are periodically audited & certified ISO 9000:2000 QMS – Fundamentals and Standards ISO 9001:2000 QMS – Requirements ISO 9004:2000 QMS - Guidelines for Performance More than 40,000 companies have been certified

ISO 14000: Focuses on a company’s environmental

responsibility