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S P CHHEDA & CO
13-1 MRP and ERP
William J. Stevenson
Operations Management
8th edition
S P CHHEDA & CO
13-2 MRP and ERP
S P CHHEDA & CO
13-3 MRP and ERP
Material requirements planning (MRP): Computer-based information system that translates master schedule requirements for end items into time-phased requirements for subassemblies, components, and raw materials.
MRP
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13-4 MRP and ERP
Independent and Dependent Demand Independent Demand
A
B(4) C(2)
D(2) E(1) D(3) F(2)
Dependent Demand
Independent demand is uncertain. Dependent demand is certain.
S P CHHEDA & CO
13-5 MRP and ERP
Dependent demand: Demand for items that are subassemblies or component parts to be used in production of finished goods.
Once the independent demand is known, the dependent demand can be determined.
Dependant Demand
S P CHHEDA & CO
13-6 MRP and ERPDependent 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
Figure 13.1
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13-7 MRP and 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
Figure 13.2
S P CHHEDA & CO
13-8 MRP and 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
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13-9 MRP and 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.
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13-10 MRP and ERP
Planning Horizon
1 2 3 4 5 6 7 8 9 10
Procurement
Fabrication
Subassembly
Assembly
Figure 13.4
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13-11 MRP and ERP
Bill-of-Materials
Bill of materials (BOM): 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.
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13-12 MRP and ERP
Product Structure Tree
Chair
Seat
Legs (2) Crossbar
SideRails (2)
Crossbar
BackSupports (3)
LegAssembly
BackAssembly
Level 0
1
2
3
Figure 13.5
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13-13 MRP and ERP
Inventory Records
One of the three primary inputs in MRP Includes information on the status of each
item by time period Gross requirements Scheduled receipts Amount on hand Lead times Lot sizes And more …
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13-14 MRP and 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 13.7
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MRP Processing
Gross requirements
Schedule receipts
Projected on hand
Net requirements
Planned-order receipts
Planned-order releases
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13-16 MRP and ERP
MPR Processing Gross requirements
Total expected demand
Scheduled receipts Open orders scheduled to arrive
Planned on hand Expected inventory on hand at the beginning
of each time period
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13-17 MRP and ERP
MPR Processing Net requirements
Actual amount needed in each time period
Planned-order receipts Quantity expected to received at the beginning
of the period
Offset by lead time
Planned-order releases Planned amount to order in each time period
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13-18 MRP and ERP
Updating the System
Regenerative system Updates MRP records periodically
Net-change system Updates MPR records continuously
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13-19 MRP and 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.
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13-20 MRP and ERP
MRP Secondary Reports
Performance-control reports
Planning reports
Exception reports
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13-21 MRP and ERP
Other Considerations
Safety Stock Lot sizing
Lot-for-lot ordering Economic order quantity Fixed-period ordering
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13-22 MRP and 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 for cost estimation and scheduling
MRP in Services
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13-23 MRP and 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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13-24 MRP and 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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13-25 MRP and ERP
Expanded MRP with emphasis placed on integration Financial planning
Marketing
Engineering
Purchasing
Manufacturing
MRP II
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13-26 MRP and ERP
MarketMarketDemandDemand
ProductionProductionplanplan
Problems?Problems?
Rough-cutRough-cutcapacity planningcapacity planning
YesYes NoNo YesYesNoNo
FinanceFinance
MarketingMarketing
ManufacturingManufacturing
AdjustAdjustproduction planproduction plan
MasterMasterproduction scheduleproduction schedule
MRPMRP
CapacityCapacityplanningplanning
Problems?Problems?RequirementsRequirements
schedulesschedules
Ad
just
mas
ter
sch
edu
leA
dju
st m
aste
r sc
hed
ule
MRP IIFigure 13.14
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Capacity PlanningCapacity 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.
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13-28 MRP and ERP
Capacity PlanningDevelop 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
Figure 13.15
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Enterprise resource planning (ERP): Next step in an evolution that began with
MPR and evolved into MRPII Integration of financial, manufacturing, and
human resources on a single computer system.
ERP
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ERP Strategy Considerations
High initial cost High cost to maintain Future upgrades Training