MRP II

Manufacturing resource planning (MRP II) is defined as a method for the effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units and financial planning .

This is not exclusively a software function, but a combination of people skills, dedication to data base accuracy, and computer resources. It is a total company management concept for using human resources which is used more productively.

CAD ( computer-aided engineering)› Design database

CAM (Computer-aided manufacturing)

Robotics

Reorder point (ROP) systems› The reorder point is the level

of inventory when an order should be made with suppliers to bring the inventory up by the Economic order quantity 

› Still used by many firms. It is especially well suited to retail inventories.

Reorder PointReorder PointReorder point

Lead time Time

Safety stock

Balanceon hand

Balanceon hand

A. No safety stock

B. Safety stock

Components:1. Production scheduling system - produces a

master production schedule that encompasses the longest lead time plus the longest production time.

2. MRP system - explores the bill of materials. Converts the gross requirements into the net requirements.

3. Capacity requirements planning system works with MRP system to keep production within plant capacity. Produces outputs: reports and planned order schedule.

4. Order release system produces reports for shop floor and purchasing.

Customerorder file

Sales forecast

file

Finished-goods

inventory file

Produc-tion

capacityfile

Bill ofmaterial

file

PlannedPlannedorderorder

scheduleschedule

Rawmaterialsinventory

file

1.Productionscheduling

system

2. Materialrequirements

planning system

3. Capacityrequirements

planning

Purchasingsystem

Order releasereport

4.Order releasesystem

Order releasereport

Shop floorcontrolsystem

Performance reports

Planning reports

Exception reports

Changes to planned orders

An MRP An MRP II System System

Masterproduc-

tionschedule

The purpose is to integrate MRP with all systems that affect materials management

Organizational systems Accounting information system

Materialrequirements

planning

Executive information

system

Orderentry

Accounts payable

Accountsreceivable General

ledger

An MRP II SystemAn MRP II SystemOther functional information systems

Purchasing

ReceivingBilling

More efficient use of resources› Reduced inventories› Less idle time› Fewer bottlenecks

Better priority planning› Quicker production starts› Schedule flexibility

Improved customer service› Meet delivery dates› Improved quality› Lower price possibility

Improved employee moral Better management information

Faster material flow Small lot size Timing Compare JIT to online processing and

MRP to batch Kanban pulls material as opposed to

MRP push Computer not emphasized

Definition (same components as marketing)› A computer-based system that works in

conjunction with other functional information systems to support the firm's management in solving problems that relate to manufacturing the firm's products

DATABASE

Accountinginformation

system

Industrialengineering

system

Manufacturingintelligencesubsystem

Productionsubsystem

Inventorysubsystem

Qualitysubsystem

Costsubsystem

Internalsources

Environmentalsources

InputInputsubsystemssubsystems

OutputOutputsubsystemssubsystems

Users

Data Information

A Model of a Manufacturing SystemA Model of a Manufacturing System

Data collection terminals› Track material flow› Gather job data (job reporting)› Gather attendance data (attendance

reporting)

TerminalTerminal

Receiving areaReceiving area

Raw-materialsRaw-materialsstoreroomstoreroom

ReceivingReceivinginspectioninspection

Shop floor areaShop floor area

Finished-goodsFinished-goodsstoreroomstoreroom

Shipping areaShipping area

1

2

3 4 5

6

7

8

9

10

11

12

Location of Location of Data Collection TerminalsData Collection Terminals

Can be viewed in terms of environmental contacts

Labor unions (personnel flow)› formal and informal systems› personnel information› union contract compliance

Suppliers (material and machine flow)

1. QuestionnaireProduction capabilityEmphasis on quality

2.Financial analysisLong-term reliability

3.Buyer tour of supplier's plant4.Suppliers tour the firm's plant

Units replaced or repaired becauseof defective parts, supplier spareparts availability, and so on

Units rejected upon receipt, unitsrejected during production, reasons for rejection, and so on

Customerservice input

Qualitycontrol input

Supplierinput

Financial strength, quality controlemphasis, past quality and deliveryperformance, and so on

Supplierfile

Input to Supplier RecordsInput to Supplier Records

Used to:1. Build production facilities2. Operate production facilities Production schedule determines when

the production steps are performed Track expected and actual completion

times

Rawmaterialsinventory

Plastic top

Plasticcylinder

Step 1

Step 5

Step 6

Step 7

Step 8

Step 2

Step 3 Step 4Step 9

Finishedgoods

inventory

Flashlight

Attach springAttach spring

Install bulbInstall bulb

Install reflectorInstall reflector

Install red lensInstall red lens

Install clear lensInstall clear lens

Attach switchAttach switch

Attach strapAttach strap Add batteriesAdd batteriesPut top onPut top oncylindercylinder

PRODUCTION AREAPRODUCTION AREA

Importance of determining the inventory level

Maintenance cost (a.k.a. carrying costs)

Purchasing costs Economic Order Quantity (EOQ) Economic manufacturing quantity

(EMQ)

---------------------------------------------------

Safety stock

Average inventory level

Safety stock

Average inventory level ------------------------------------------------------

A. Order quantity of 20; average level is 15.

0

5

15

25

0

13

5

21

B. Order quantity of 16; average level is 13.

Bal

ance

on

h

and

Bal

ance

on

han

d

Time

Time

The Effect of Order Quantity on Average The Effect of Order Quantity on Average Inventory LevelInventory Level

Deming’s fourteen points; maintained that it is not workers but management that determines quality

Total quality management (TQM) Elements of TQM

› zero defects› quality at the source

TQM Philosophy

*Customer-driven quality standards*Customer-supplierlinks*Preventionorientation*Quality at the source*Continuous improvement

TotalQuality

Management

Graphical Tools

*Process flowcharts*Check sheets*Pareto analysisand histograms*Cause and effect (fishbone) diagrams*Run charts*Scatter diagrams*Control charts

Statistical Tools

*Sampling plans*Process capability*Taguchi methods

Top management commitment Annual quality targets A fine-tuned physical system

› Maintained machines› Neat facilities› Trained workers

Emphasis on raw material

Periodic reports Required ingredients

1. Standards2. Information

SubsystemSubsystem

User Inventory Quality Production CostUser Inventory Quality Production Cost

Vice president of manufacturingVice president of manufacturing

Other executivesOther executives

Plant SuperintendentPlant Superintendent

Manager of planning and control Manager of planning and control

Manager of EngineeringManager of Engineering

Manager of quality controlManager of quality control

Director of purchasing Director of purchasing

Manager of inventory controlManager of inventory control

Other managers Other managers

How Managers Use the How Managers Use the Manufacturing Information SystemManufacturing Information System

XX XX XX

XX

XX

XX

XX

XX

XXXX XX

XX XX

XXXXXX XX

XXXX XX

XX XX XX XX

The philosophy that all production and information technologies must work together

Includes both physical and conceptual systems

CAD is the link

The Physical Production

System The CBIS

CAM

RoboticsCAD

Executive Information

System

Other functional

information systems

Manufacturing Information

System

Legend :

Physical System

Conceptual system

Both physical and conceptual system

Criticism Authors like Pochet and Wolsey [3] argue that MRP and MRP II, as well as the planning modules in current APS and ERP systems, are actually sets of heuristics. Better production plans could be obtained by optimization over more powerful mathematical programming models, usually integer programming models. While they acknowledge that the use of heuristics, like those prescribed by MRP and MRP II, were necessary in the past due to lack of computational power to solve complex optimization models, this is no longer true