MRP and ERP

MRP
Material

requirements planning (MRP): Computerbased information system for ordering and scheduling of dependent demand inventories

Dependent Demand
Dependent

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

Dependent vs Independent Demand

Demand

Demand

Lumpy demand

Stable demand

Time

Time Amount on hand

Amount on hand

Safety stock Time

Time

MRP Inputs

MRP Processing

MRP Outputs

Changes
Order releases Master schedule Primary reports Bill of materials Planned-order schedules
Exception reports

MRP computer programs

Planning reports

Secondary reports

Performancecontrol reports

Inventory records

Inventory transaction

MPR Inputs

Master Production Schedule Time-phased plan specifying timing and quantity of production for each end item. Material Requirement Planning Process

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.

Planning Horizon
Figure 14-4

Assembly
Subassembly

Fabrication
Procurement

10

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.

Product Structure Tree

Figure 15-5

Level 0 1 Leg Assembly

Chair Back Assembly

Seat

2 Legs (2)

Cross bar

Side Cross Back Rails (2) bar Supports (3)

Assembly Time Chart

Figure 15-8
Procurement of raw material D Fabrication of part E Subassembly A Procurement of raw material F Procurement of part C Procurement of part H Procurement of raw material I Fabrication of part G Final assembly and inspection

Subassembly B

10

11

MRP Processing

Gross requirements Schedule receipts

Projected on hand
Net requirements Planned-order receipts

Planned-order releases

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.

MRP Secondary Reports

Performance-control Planning

reports

reports reports

Exception

Other Considerations
Safety

Stock Lot sizing

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

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.

MRP Planning
Develop a tentative master production schedule Use MRP to simulate material requirements
Convert material requirements to resource requirements Is shop capacity adequate? Yes Firm up a portion of the MPS

Revise tentative master production schedule

Can capacity be changed to meet requirements

No

No

Yes Change capacity

MRP in Services
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

Benefits of MRP
Low

levels of in-process inventories to track material requirements

Ability

Ability

to evaluate capacity requirements

of allocating production time

Means

Requirements of MRP

Computer and necessary software Accurate and up-to-date

Master schedules
Bills of materials Inventory records

Integrity of data

MRP II

Expanded MRP with and emphasis placed on integration

Financial planning Marketing

Engineering
Purchasing Manufacturing

MRP II
Finance Marketing Production plan MRP

Market Demand

Manufacturing

Master production schedule

Rough-cut capacity planning

Capacity planning

Adjust production plan

Yes

Problems?

No

Requirements schedules

No Problems?

Yes

Adjust master schedule

ERP
Enterprise

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