OM_MRP-ERP

7/30/2019 OM_MRP-ERP

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12-508-97 Production and Operations Management

MRP-ERP-OM


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INVENTORY

Idle stock reqd for Production

Carefully manged to reduce the cost

EOQ MODEL

BOM

FAST/SLOW MOVING ITEM

OBSOLETE ITEMS

USE OF I T


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From Aggregate to Master Planning

Aggregate Production Plan

Capacity ?

Master Production Schedule

Feasibility approved?

Material Requirement Planning

Yes

Yes

No

No

Can we produce 10,000

equivalent units (total for

products A, B and C) per month

for the next year?

Can we produce 500

units of A, 600 of B and400 of C per week for the

next month ?


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Production Plan VS

Master Production Schedule

Mid term production planning

Order promising

SKU level(stock keeping unit)

About 3 months

1 week

Long term capacity

decisions

Product families

(Equiv. Units)

12 to 15 months

1 month

ProductionPlan

Objective

Product

Horizon

Timebuckets

Master ProductionSchedule


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The Aggregate Plan and the Master

Production Schedule


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When to Order ?Three approaches

Reorder Point (continuous review system)Constant amount ordered when inventory declines to

predetermined level

Periodic Review System(fixed time review period)Order placed for variable amount after fixed passage of time

Time Phased Order PointMaster Production Schedule

Material Requirements Planning

Distribution Requirements Planning

RE

ACTIVE

SYSTEMS

PROACTIVE

SYSTEMS


7/4172-508-97 Production and Operations Management

Objectives of the Master Production Schedule

Establish and meet delivery dates

Determine launch dates for orders

Optimize the use of available capacity

Meet the objectives of the aggregate plan

Make trade-off decisions between production and

marketing

Sales

Purch.

Operations

Operations

Systemic

Approach



Master Production Plan : Inputs

Inputs to the MPS are :

Beginning Inventory

Forecasts for each week of the schedule

Customer orders (quantities already committed to

customers)

Total available capacity for each week of the schedule



Developing a MPS

Identification of individual products.

Development of an MPS grid for each product in

real units according to the available data (forecast,

committed orders, inventory levels, lot sizes, lead

times) and the specified constraints.

Rough cut capacity planning in equivalent units (for

all products).

Does the plans meet all constraints? (capacitylimits, stock levels, etc.)



Developing a MPS

Forecast of the demand for the products with independent demand

Firm orders received from the customers for period i.

Projected on-hand Inventory (i)= Projected on-hand inv. (i - 1)

+ Planned production (i)

- Max (Forecast (i) ,

Customer orders (i) )

Lot size 100 unitsLead time: 1 period

Periods 1 2 3

75 85 80

80 60 55

Proj. on-hand Inv. 200 120 35 55

100

100MPS - Order Release

ForecastCustomer Orders

MPS - Order Receipt



Period 1 2 3 4

Forecast250 250 250 250

Customer

Orders 230 280 180 150

Projectedinventory 160 80 30 180

Planned

receipts 0 200 200 400

Plannedreleases 200 200 400

Product Lot Size LeadTime BeginningInventory

X12DE 200 1 410

1) Forecast for products with an independant

demand2) Committed customer orders

2a) Identify the Max between forecast and

customer orders

3) Planned order receipts for each period:

4) Projected on-hand inventory (i) = beginning inventory (i - 1)

+ planned order receipts (i) - Max (forecast (i) , customer

orders (i) )

5) Planned order releases

shifted back the

length of the lead

time

Developing a MPS



Periods 1 2 3 4 5 6 7 8 9 10

50 45 45 50 50 50 40 40 40 50

25 60 15 55 25 35

Projected on-hand inv 100

Forecast

Customer Orders

Planned Order Receipts

Planned Order Releases

Product A

Preliminary Plan :

Complete the following MPS

Product A

Beginning Inventory = 100 Lot Size: 100 units

Lead Time: 1 week

1 equivalent unit



Periods 1 2 3 4 5 6 7 8 9 10

60 120 80 40 30 50 20 20 20 30

35 150 60 30 25 35

Proj. on-hand inv. 300

Forecast

Customer Orders



Product B

Product B

Beginning Inv. = 300 Lot Size : 100 units

Lead Time: 1 week

2 equivalent units

Preliminary Plan :

Complete the following MPS



Rough Cut Capacity Planning

Approximate calculation of the capacity required at critical

work centers to meet the demand in order to check the

feasibility of a Master Production Schedule.

When the capacity required exceeds the capacity

available the MPS must be adjusted before proceeding to

the MRP.

Fi l MPS



100 0 100 0 100 0 0 100 0 0

0 0 200 0 200 0 0 0 0 0

100 0 300 0 300 0 0 100 0 0

Prod A - Planned Order Releases

Prod B - Planned Order Releases

Total

Products A and B

Total capacity is 200 equivalent units per period. Establish

the final MPS for each product.

Because the total planned order releases of products A and Bis superior to 200 units in periods 3 and 5, we must move the

release ofone of the two articles to periods 2 and 4.

We decide, for example, to move the release of product A toperiods 2 and 4.

We must then complete the final plan for both products.

Final MPS :

Rough Cut Capacity Planning

Fi l MPS



Periods 1 2 3 4 5 6 7 8 9 10

50 45 45 50 50 50 40 40 40 50

25 60 15 55 25 35

Proj. on-hand inv. 100 0 100 0 0 100 0

100 0 0 100 0 0

Forecast

Customer Orders



Product A

Planned Order Release is moved from period 3 to period 2.

Consequently, Planned Order Receipts are moved from period4 to period 3.

Projected on-hand inventories must be recalculated to accountfor the changes.

50 90 145 90 140 90 50 10 70 20

1000

10001000

1000

Final MPS :

Modifications to the Preliminary Plan

Final MPS



Periods 1 2 3 4 5 6 7 8 9 10

60 120 80 40 30 50 20 20 20 30

35 150 60 30 25 35

Proj. on-hand inv. 300 240 90 10 70 40 90 70 50 30 00 0 0 100 0 0 100 0 0 0

0 0 100 0 0 100 0 0 0 0

Forecast

Customer Orders



Product B

Since weve made no changes to the planned order releases ofprodcut B, le preliminary and final plans are identical.

Final MPS :

Modifications to the Preliminary Plan


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On-hand

inventory

Inventory of tables

Time

Quantity

Demand for the tables

Time

Reorder Point System VS MRP



Reorder Point System VS MRP

Quantity

Inventory of the table legs

Quantity

Demand for the table legs



Objectives of MRP

Calculate with precision the quantities of components,

parts and raw material that must be produced or

purchased in order to realize the MPS

HOW MANY ?

To determine when to release production or to place

the orders in order to receive the required units at the

right moment WHEN ?

M t i l R i t Pl i



Material Requirements Planning :

Information Structure

- Stocks on hand- Safety stocks

- Lot sizes

- Economic Order Quantities

- Lead time

Item Master

File

ForecastsCustomer

Orders

Bill of

MaterialMRP

MPS

Aggregate

Planning



Bill of Materials (BOM)

X

Y (3) Z (2)

Y (1)W (2)

Level 0

Level 1

Level 2

For each product X we need 3 Y and 2 ZFor each product Z we need 2 W and 1 Y

Product Structure Tree

Parent

ParentComponent

Component



ProblemsS&H (2007) p.515 #3 - S&H (2004) p.628 #3

Item Lead Time Amount on

Hand

Direct

Components

End 1 0 L(2), C(1), K(3)

L 2 10 B(2), J(3)

C 3 15 G(2), B(2)

K 3 20 H(4), B(2)

B 2 30

J 3 30

G 3 5

H 2 0



MRP Matrix

Note: The book from Stevenson shows the projected inventory at the

beginning of the period, this is not the usual way to do it, so we will

always show the projected inventory at the END of the period



MRP calculation process

Always process the items in the order of their low level

code: level 0 level 1 level 2

When an item appears at different levels of the product

structure(s), the lowest level (highest number) is the level

that we must use.

Gross requirements for an item are calculated by:

Multiplying the quantity of the planned order

release(s) of the parent(s) of the item by thequantity required as per the BOM for the

specific parent-component relationship(s).


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Lot Sizing in MRP Systems

Lot-for-lot (L4L) ordering policy

Minimum order quantity (Ex: Min 250)

Multiple order quantity (Ex: X100)

Economic order quantity (Ex: 350; annual demand: 4 200)

Periodic order quantity (Ex: 2 months)


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Example

A company is manufacturing several office supply items

among which we have:Clipboard

Lapdesk

etc.


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Product Structure

Top clip (1) Bottom clip (1)

Pivot (1) Spring (1)

Rivets (2)

Finished clipboard Pressboard (1)

Clipboard


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Product Structure Tree

Clipboard Level 0

Level 1

Level 2Spring

(1)Bottom Clip

(1)Top Clip

(1)Pivot

(1)

Rivets(2)

Clip Assy(1)

Pressboard(1)


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MRP: Example (cont.)

Product Structure Record

Clipboard

Lapdesk

Pressboard(2)

Trim(3)

Beanbag(1)

Glue(4 oz)

Level 0

Level 0

Pressboard(1)

Clip Assy(1)

Rivets(2) Level 1

Level 1


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ITEM: PRESSBOARD LLC: 1 PERIOD

LOT SIZE: MIN 100 LT: 1 1 2 3 4 5

Gross Requirements

Scheduled Receipts

Projected on Hand 150

Net Requirements



ITEM: CLIPBOARD LLC: 0 PERIOD

LOT SIZE: L4L LT: 1 1 2 3 4 5

Planned Order Releases 100 100 100

ITEM: LAPDESK LLC: 0 PERIOD

LOT SIZE: MULT 50 LT: 1 1 2 3 4 5

Planned Order Releases 50 50


M.P.S.

M.R

.P.


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M.P.S.

M.R

.P.


LOT SIZE: MIN 100 LT: 1 1 2 3 4 5

Gross Requirements 100 100 200 100 0

Scheduled Receipts

Projected on Hand 150

Net Requirements




LOT SIZE: L4L LT: 1 1 2 3 4 5



LOT SIZE: MULT 50 LT: 1 1 2 3 4 5


x2 x2

x1 x1x1



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M.P.S.

M.R

.P.


LOT SIZE: MIN 100 LT: 1 1 2 3 4 5


Scheduled Receipts

Projected on Hand 150 50 50 0 0 0Net Requirements 50 150 100

Planned Order Receipts 100 150 100



LOT SIZE: L4L LT: 1 1 2 3 4 5



LOT SIZE: MULT 50 LT: 1 1 2 3 4 5



MRP E l ( t )


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Planned Order Report

PERIOD

ITEM 1 2 3 4 5

Clipboard 100 100 100

Lapdesk 50 50

Pressboard 100 150 100


Item Lot size LT

Prod ct A 200 1

Product A


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Product A 200 1

MPS 1 2 3 4 5 6

25 25 25 25 25 25

30 20 15 10 5

Projected inventory 135 105 80 55 30 5 180

200

Order releases 200

Item Lot size LT

Product Z 500 2

MPS 1 2 3 4 5 630 30 30 30 30 30

35 20 15 20 10 5

Projected inventory 135 100 70 40 10 480 450

500

Order releases 500

Item Lot size LT

Sub-ass. B 1 500 2

MRP 1 2 3 4 5 6

Gross Requirements Prod. A 0 0 0 0 400 0

Gross Requirements Prod. Z 0 0 1 500 0 0 0

0 0 1 500 0 400 0

Projected inventory 200 200 200 200 200 1 300 1 300

1 300 200

1 500 1 500

Planned Order Releases 1 500 1 500

Item Lot size LT

Component C 4 500 1

MRP 1 2 3 4 5 6

Gross Requirements Prod. A 0 0 0 0 200 0

Gross Requirements Sub-ass. B 4 500 0 4 500 0 0 0

4 500 0 4 500 0 200 0

Projected inventory 4 600 100 100 100 100 4 400 4 400

4 400 100

4 500 4 500

Planned Order Releases 4 500 4 500

Item Lot size LT

Component D 10 000 1

MRP 1 2 3 4 5 6

Gross Requirements Prod. Z 0 0 1 000 0 0 0

Gross Requirements Sub-ass. B 6 000 0 6 000 0 0 0

6 000 0 7 000 0 0 0

Projected inventory 6500 500 500 3 500 3 500 3 500 3 500

6 500

10 000


Sales Forecast

Customer Orders

Gross Req. Tot.


Net Requirements

Net Requirements

Gross Req. Tot.

Order Receipts


Gross Req. Tot.

Net Requirements


Sales Forecast

Customer Orders

Order Receipts

Component C

(1)

Sub.-Ass. B

(2)

Component C(3)

Component D(4)

Product A

Component D

(2)

Sub.-Ass. B

(3)

Component C

(3)Component D

(4)

Product Z

Month


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0 1 2 3 4 5


Lot-for-lot (L4L) ordering policy

Net Requirements 75 350 200 750 1000

Planned order receipts 75 350 200 750 1000

Projected on-hand inventory 0 0 0 0 0 0

Fixed-size lot ordering policy (Ex: 500)

Net Requirements 75 125 375 875

Planned order receipts 500 500 500 1000


Minimum order quantity (Ex: Min 250)

Net Requirements 75 175 125 625 1000Planned order receipts 250 250 250 625 1000


Multiple order quantity (Ex: X100)

Net Requirements 75 325 125 675 975

Planned order receipts 100 400 200 700 1000


Economic order quantity (ex: 700; Ann. Dem: 4200)

Net Requirements 75 675 975

Planned order receipts 700 700 1400


Periodic order quantity (2 months)

Net Requirements 75 200 1000

Planned order receipts 425 950 1000


Month


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Establishing the Minimum Planning Horizon

9 periods

4 periods

7 periods

A

B C

D(2) E

Lead Time = 2 periods


Lead Time = 2 periods Lead Time = 4 periods



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Establishing the Minimum Planning Horizon

A

B

C

D(2)

E

LT = 2 periods

LT = 3 periods

LT = 2 periods

LT = 4 periods

LT = 2 periods

LT 2 3 4 5 6 7 8 9 10

A Assembly 2 100 100

B Purchase 2 100 100

C Assembly 3 100 100

D Purchase 2 200 200

E Purchase 4 100 100

Periods

MPS / MRP PROCESS


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Billofmaterials

MPS / MRP PROCESSPlanned Order Receipt

Planned Order Release

Ref.: adapted from D. A. Turbide, MRP+, Industrial Press, 1993.

Level 0


Supplier

Gross Requirements

Net Requirements

Planned Order Receipt

Level 2


Gross Requirements

Net Requirements

Planned Order Receipt

Level 1 On-hand Inv.

Lot Sizing

Lead time

MPS

Mate

rialsRequirementPlanning

Minimum

Planning

Horizon

ERP


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ERP

EXTN OF MRP

ENTIRE ORGANIZATION IS USED

IT MUST

WASTEFUL WORK IS ELIMINATED

INFORMATION AT FINGER TIP

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