OM5-1MRP & ERP Chapter 15 MRP and ERP. OM5-2MRP & ERP Material requirements planning (MRP): Computer-based information system for ordering and scheduling

OM5-1 MRP & ERP

Chapter 15

MRP and ERP

OM5-2 MRP & ERP

• Material requirements planning (MRP): Computer-based information system for ordering and scheduling of dependent demand inventories

MRP

OM5-3 MRP & ERP

• Dependent demand: Demand for items that are subassemblies or component parts to be used in production of finished goods.

Dependant Demand

OM5-4 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

OM5-5 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

OM5-6 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

OM5-7 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.

OM5-8 MRP & ERP

Planning Horizon

1 2 3 4 5 6 7 8 9 10

Procurement

Fabrication

Subassembly

Assembly

Figure 14-4

OM5-9 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.

OM5-10 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

OM5-11 MRP & ERP

MRP Processing

• Gross requirements

• Schedule receipts

• Projected on hand

• Net requirements

• Planned-order receipts

• Planned-order releases

OM5-12 MRP & ERP

Typical MRP Matrix

Week

1

2

3

4

5

6

7

8 Gross Requirements

Scheduled Receipts

Available On Hand

Net Requirements

Planned Order Receipts

Planned Order Release

OM5-13 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.

OM5-14 MRP & ERP

MRP Secondary Reports

• Performance-control reports

• Planning reports

• Exception reports

OM5-15 MRP & ERP

Other Considerations

• Safety Stock• Lot sizing

– Lot-for-lot ordering– Economic order quantity– Fixed-period ordering– Part-period model

OM5-16 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

OM5-17 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

OM5-18 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

OM5-19 MRP & ERP

Requirements of MRP

• Computer and necessary software

• Accurate and up-to-date

– Master schedules

– Bills of materials

– Inventory records

• Integrity of data

OM5-20 MRP & ERP

MRP: Problem 1

• Suppose you are to produce 100 units of product A in period 8 with the product structure shown below. If no stock is on hand or on order, determine when to release orders for each component and the size of each order. Product A with a lead time of 4 periods is made from components B and C with lead times of 3 and 2 periods, respectively; C is made from components D and E with a lead time of 1 period each.

OM5-21 MRP & ERP

MRP: Problem 1

• Product Structure

A

B (1) C (2)

D (1) E (2)

OM5-22 MRP & ERP

MRP: Problem 1 - Solution

Master Production Schedule (MPS)

Week

1

2

3

4

5

6

7

8

Demand 100

OM5-23 MRP & ERP

MRP: Problem 1 - Solution (cont.)

• The following can be calculated in this problem since there is zero available-on-hand for item A and all of its components.

– End Item A Requirements: 100

– Component B Requirements: 100

– Component C Requirements: 200

– Component D Requirements: 200

– Component E Requirements: 400

OM5-24 MRP & ERP

MRP: Problem 1 – Solution (cont.)

100


100

Gross RequirementsA4

87654321ItemLead-Time

OM5-25 MRP & ERP


100


100

Gross RequirementsB3


OM5-26 MRP & ERP


200


200

Gross RequirementsC2


OM5-27 MRP & ERP


200


200

Gross RequirementsD1


OM5-28 MRP & ERP


400


400

Gross RequirementsE1


OM5-29 MRP & ERP

MRP: Problem 2

• In the MRP table below, indicate the available on hand requirements, the planned order receipts, and the planned order releases. The lead-time is two periods. Available on hand are 20 units. Consider a) the lot size is the same as the net requirements {Lot-For-Lot (LFL) or lot size = 1} and b) lot size equals 15.

OM5-30 MRP & ERP

MRP: Problem 2

Week

1

2

3

4

5

6

7


5

10

18

0

10

6

0

14 Scheduled Receipts 20

Available On Hand 20

Net Requirements



OM5-31 MRP & ERP

MRP: Problem 2 (a)- Solution

Week

1

2

3

4

5

6

7


5

10

18

0

10

6

0


Available On Hand 20 15

Net Requirements



OM5-32 MRP & ERP


Week

1

2

3

4

5

6

7


5

10

18

0

10

6

0


Available On Hand 20 15 25

Net Requirements



OM5-33 MRP & ERP


Week

1

2

3

4

5

6

7


5

10

18

0

10

6

0


Available On Hand 20 15 25 7

Net Requirements



OM5-34 MRP & ERP


Week

1

2

3

4

5

6

7


5

10

18

0

10

6

0


Available On Hand 20 15 25 7 7

Net Requirements



OM5-35 MRP & ERP


Week

1

2

3

4

5

6

7


5

10

18

0

10

6

0



Net Requirements 3



OM5-36 MRP & ERP


Week

1

2

3

4

5

6

7


5

10

18

0

10

6

0



Net Requirements 3

Planned Order Receipts 3


OM5-37 MRP & ERP


Week

1

2

3

4

5

6

7


5

10

18

0

10

6

0



Net Requirements 3


Planned Order Release 3

OM5-38 MRP & ERP


Week

1

2

3

4

5

6

7


5

10

18

0

10

6

0


Available On Hand 20 15 25 7 7 0

Net Requirements 3



OM5-39 MRP & ERP


Week

1

2

3

4

5

6

7


5

10

18

0

10

6

0


Available On Hand 20 15 25 7 7 0 0 0

Net Requirements 3 6

Planned Order Receipts 3 6

Planned Order Release 3 6

OM5-40 MRP & ERP


Week

1

2

3

4

5

6

7


5

10

18

0

10

6

0


Available On Hand 20 15 25 7 7 0 0 0 0

Net Requirements 3 6 14

Planned Order Receipts 3 6 14

Planned Order Release 3 6 14

OM5-41 MRP & ERP

MRP: Problem 2 (b) - Solution

Week

1

2

3

4

5

6

7


5

10

18

0

10

6

0



Net Requirements



OM5-42 MRP & ERP


Week

1

2

3

4

5

6

7


5

10

18

0

10

6

0



Net Requirements 3



OM5-43 MRP & ERP


Week

1

2

3

4

5

6

7


5

10

18

0

10

6

0



Net Requirements 3



OM5-44 MRP & ERP


Week

1

2

3

4

5

6

7


5

10

18

0

10

6

0



Net Requirements 3



OM5-45 MRP & ERP


Week

1

2

3

4

5

6

7


5

10

18

0

10

6

0


Available On Hand 20 15 25 7 7 12

Net Requirements 3



OM5-46 MRP & ERP


Week

1

2

3

4

5

6

7


5

10

18

0

10

6

0


Available On Hand 20 15 25 7 7 12 6

Net Requirements 3



OM5-47 MRP & ERP


Week

1

2

3

4

5

6

7


5

10

18

0

10

6

0



Net Requirements 3



OM5-48 MRP & ERP


Week

1

2

3

4

5

6

7


5

10

18

0

10

6

0






OM5-49 MRP & ERP


Week

1

2

3

4

5

6

7


5

10

18

0

10

6

0


Available On Hand 20 15 25 7 7 12 6 6 7


Planned Order Receipts 15 15

Planned Order Release 15 15

OM5-50 MRP & ERP

MRP: Problem 3

• A company produces two products: Product A and Product Q. The owner has received an order from a customer of 103 units of product A for week 8 and 200 units of product Q for week 7. The product structures and other pertinent information are given below in the table as well as on top of each MRP table. Develop a materials requirements plan that will provide the customer the two products.

OM5-51 MRP & ERP

MRP: Problem 3

Item Lead Time (Weeks)

Direct Components

Lot-Sizing Rule

A 4 B(1), C(2) 1

Q 2 C(1), E(1) 1

B 3 ------ 1

C 2 D(1), E(2) 1

D 1 ------ 200

E 1 ------ 500

OM5-52 MRP & ERP

MRP: Problem 3 - Solution

Item: A On hand = 18 Safety Stock = 5 Allocated = 10 Therefore, Available-On-Hand = 18 – 5 – 10 = 3

Week 1 2 3 4 5 6 7 8

Gross Requirements

103 Scheduled Receipts

Available On Hand

3

Net Requirements

Planned Order Receipt

Planned order Release

OM5-53 MRP & ERP


Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand

3 3 3 3 3 3 3 3 Net Requirements

100 Planned Order Receipt


OM5-54 MRP & ERP


Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand



100 Planned order Release

OM5-55 MRP & ERP


Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand




100

OM5-56 MRP & ERP

MRP: Problem 3 – Solution (cont.)Item: Q On hand = 6 Safety Stock = 6 Allocated = 0 Therefore, Available-On-Hand = 6

Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand

0 0 0 0 0 0 0 Net Requirements



OM5-57 MRP & ERP

MRP: Problem 3 – Solution (cont.)Item: Q On hand = 6 Safety Stock = 6 Allocated = 0

Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand




OM5-58 MRP & ERP


Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand




OM5-59 MRP & ERP


Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand




200

OM5-60 MRP & ERP

MRP: Problem 3 – Solution (cont.)Item: B On hand = 10 Safety Stock = 0 Allocated = 0

Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand

10 10 10 10 Net Requirements



OM5-61 MRP & ERP


Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand




OM5-62 MRP & ERP


Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand

10 10 10 10 0 0 0 0 0 Net Requirements



90

OM5-63 MRP & ERP

MRP: Problem 3 – Solution (cont.)Item: C On hand = 20 Safety Stock = 0 Allocated = 0

Week 1 2 3 4 5 6 7 8

Gross Requirements

200 200 Scheduled Receipts

Available On Hand




OM5-64 MRP & ERP


Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand

20 20 20 20 0 Net Requirements



180

OM5-65 MRP & ERP


Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand


180 200 Planned Order Receipt

180 200 Planned order Release

180 200

OM5-66 MRP & ERP


Item: D On hand = 0 Safety Stock = 0 Allocated = 0

Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand

0 0 Net Requirements



OM5-67 MRP & ERP



Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand




OM5-68 MRP & ERP



Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand




OM5-69 MRP & ERP



Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand




200

OM5-70 MRP & ERP



Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand



200 200 Planned order Release

200 200

OM5-71 MRP & ERP

MRP: Problem 3 – Solution (cont.)Item: E On hand = 30 Safety Stock = 0 Allocated = 0

Week 1 2 3 4 5 6 7 8

Gross Requirements

360 400 200 Scheduled Receipts

Available On Hand




OM5-72 MRP & ERP


Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand

30 30 170 Net Requirements


500 Planned Order Release

500

OM5-73 MRP & ERP


Item: E On hand = 30 Safety Stock = 0 Allocated = 0

Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand



500 500 Planned Order Release

500 500

OM5-74 MRP & ERP


Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand

30 30 170 270 270 Net Requirements



500 500

OM5-75 MRP & ERP


Item: E On hand = 30 Safety Stock = 0 Allocated = 0

Week 1 2 3 4 5 6 7 8

Gross Requirements


Available On Hand




500 500

OM5-76 MRP & ERP

• Expanded MRP with and emphasis placed on integration

– Financial planning

– Marketing

– Engineering

– Purchasing

– Manufacturing

MRP II

OM5-77 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

OM5-78 MRP & ERP

• Enterprise resource planning (ERP): An expanded effort to integrate standardized record-keeping that will permit information sharing throughout the organization

ERP

OM5-79 MRP & ERP

MRP II and ERP Systems

• Expanded MRP with and emphasis placed on integration

– Financial planning

– Marketing

– Engineering

– Purchasing

– Manufacturing

– Other Capabilities

Documents

OM5-1MRP & ERP Chapter 15 MRP and ERP. OM5-2MRP & ERP Material requirements planning (MRP): Computer-based information system for ordering and scheduling