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15-1
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
Chapter 15
MRP and ERP
15-2
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
• Material requirements planning (MRP): Computer-based information system for ordering and scheduling of dependent demand inventories
MRP
15-3
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
• Dependent demand: Demand for items that are subassemblies or component parts to be used in production of finished goods.
Dependant Demand
15-4
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
Dependent vs Independent Demand
Time
Time Time
Time
Dem
and
Dem
and
Stable demand“Lumpy” demand
Am
ou
nt
on
han
d
Am
ou
nt
on
han
d
Safety stock
15-5
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
MRP Inputs MRP Processing MRP Outputs
Masterschedule
Bill ofmaterials
Inventoryrecords
MRP computerprograms
Changes
Order releases
Planned-orderschedules
Exception reports
Planning reports
Performance-controlreports
Inventorytransaction
Primaryreports
Secondaryreports
15-6
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
• Master Production Schedule• Time-phased plan specifying timing and quantity of production for each
end item.• Material Requirement Planning Process
Product Structure
Tree
Lead Times
MPR Inputs
15-7
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
Master Schedule
Master schedule: One of three primary inputs in MRP; states which end items are to be produced, when these are needed, and in what quantities.
Cumulative lead time: The sum of the lead times that sequential phases of a process require, from ordering of parts or raw materials to completion of final assembly.
15-8
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
Planning Horizon
1 2 3 4 5 6 7 8 9 10
Procurement
Fabrication
Subassembly
Assembly
Figure 14-4
15-9
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
Bill-of-Materials
Bill of materials: One of the three primary inputs of MRP; 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.
15-10
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
Product Structure Tree
Chair
Seat
Legs (2) Crossbar
SideRails (2)
Crossbar
BackSupports (3)
LegAssembly
BackAssembly
Level 0
1
2
3
Figure 15-5
15-11
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
Assembly Time Chart
1 2 3 4 5 6 7 8 9 10 11
Procurement ofraw material D
Procurement ofraw material F
Procurement ofpart C
Procurement ofpart H
Procurement ofraw material I
Fabricationof part G
Fabricationof part E
Subassembly A
Subassembly B
Final assemblyand inspection
Figure 15-8
15-12
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
MRP Processing
• Gross requirements
• Schedule receipts
• Projected on hand
• Net requirements
• Planned-order receipts
• Planned-order releases
15-13
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
MRP Outputs
• Planned orders - schedule indicating the amount and timing of future orders.
• Order releases - Authorization for the execution of planned orders.
• Changes - revisions of due dates or order quantities, or cancellations of orders.
15-14
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
MRP Secondary Reports
• Performance-control reports
• Planning reports
• Exception reports
15-15
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
Other Considerations
• Safety Stock• Lot sizing
– Lot-for-lot ordering– Economic order quantity– Fixed-period ordering– Part-period model
15-16
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
Capacity Planning
Capacity requirements planning: The process of determining short-range capacity requirements.
Load reports: Department or work center reports that compare known and expected future capacity requirements with projected capacity availability.
Time fences: Series of time intervals during which order changes are allowed or restricted.
15-17
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
MRP Planning
Develop a tentativemaster production
schedule
Develop a tentativemaster production
schedule
Use MRP tosimulate material
requirements
Use MRP tosimulate material
requirements
Convert materialrequirements to
resource requirements
Firm up a portionof the MPS
Is shopcapacity
adequate?
Cancapacity be
changed to meetrequirements
Revise tentativemaster production
schedule
Changecapacity
Yes
No
Yes
No
15-18
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
• 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
MRP in Services
15-19
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
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
15-20
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
Requirements of MRP
• Computer and necessary software
• Accurate and up-to-date
– Master schedules
– Bills of materials
– Inventory records
• Integrity of data
15-21
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
• Expanded MRP with and emphasis placed on integration
– Financial planning
– Marketing
– Engineering
– Purchasing
– Manufacturing
MRP II
15-22
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
MarketDemand
Productionplan
Problems?
Rough-cutcapacity planning
Yes No YesNo
Finance
Marketing
Manufacturing
Adjustproduction plan
Masterproduction schedule
MRP
Capacityplanning
Problems?Requirements
schedules
Ad
just
mas
ter
sch
edu
le
MRP II
15-23
McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
MRP & ERP
• Enterprise resource planning (ERP): An expanded effort to integrate standardized record-keeping that will permit information sharing throughout the organization
ERP