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Chapter 15 Resource Planning Russell and Taylor Operations and Supply Chain Management, 8th Edition.

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Presentation on theme: "Chapter 15 Resource Planning Russell and Taylor Operations and Supply Chain Management, 8th Edition."— Presentation transcript:

1 Chapter 15 Resource Planning Russell and Taylor Operations and Supply Chain Management, 8th Edition

2 Lecture Outline Material Requirements Planning (MRP) – Slide 4Material Requirements Planning (MRP) Capacity Requirements Planning (CRP) – Slide 45Capacity Requirements Planning (CRP) Enterprise Resource Planning (ERP) – Slide 58Enterprise Resource Planning (ERP) Customer Relationship Management (CRM) – Slide 63Customer Relationship Management (CRM) Supply Chain Management (SCM) – Slide 64Supply Chain Management (SCM Product Lifecycle Management (PLM) – Slide 65Product Lifecycle Management (PLM) © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-2

3 Learning Objectives Discuss the differences between independent and dependent demand systems Describe the inputs and outputs to an MRP system, and execute the MRP process Determine resource capacity and load percent, and perform load leveling on capacitated resources Explain the hierarchical planning process for resources as a closed loop system, and discuss the assumptions on which this process is based Describe basic ERP systems and the scope of their implementations, including the connection to SCM, CRM and PLM Discuss the issues, advantages and drawbacks of the enterprise IT software systems that run today’s global businesses © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-3

4 Resource Planning for Manufacturing © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-4

5 Material Requirements Planning (MRP) Computerized inventory control and production planning system When to use MRP? Dependent demand items Discrete demand items Complex products Job shop production Assemble-to-order environments © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-5

6 Demand Characteristics © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Week 400 – 300 – 200 – 100 – No. of tables Continuous demand M T W Th F 400 – 300 – 200 – 100 – No. of tables Discrete demand Independent demand 100 tables Dependent demand 100 x 1 = 100 tabletops 100 x 4 = 400 table legs 15-6

7 Material Requirements Planning © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-7

8 MRP Inputs and Outputs Inputs –Master production schedule –Product structure file –Item master file Outputs –Planned order releases Work orders Purchase orders Rescheduling notices © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-8

9 Master Production Schedule Drives MRP process with a schedule of finished products Quantities represent production not demand Quantities may consist of a combination of customer orders and demand forecasts Quantities represent what needs to be produced, not what can be produced Quantities represent end items that may or may not be finished products © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-9

10 Master Production Schedule Cumulative lead time total length of time needed to manufacture a product Time fence Management-specified date within which no changes are allowed in the MPS © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-10

11 Product Structure Product structure file contains computerized bill of material for every item produced Bill of Material list of all materials, parts and assemblies needed to make an item includes quantities, parent-component relationships & order quantities © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-11

12 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Master Production Schedule PERIOD MPS ITEM12345 Pencil Case Clipboard Lapboard Lapdesk

13 Product Structures © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-13

14 Product Structure Tree © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-14

15 Product Structure © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-15

16 Multilevel Indented BOM © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Clipboardea Clip Assemblyea Top Clipea Bottom Clipea Pivotea Springea Rivetea Press Boardea1 LEVELITEMUNIT OF MEASUREQUANTITY 15-16

17 Specialized BOMs Phantom bills Transient subassemblies Never stocked Immediately consumed in next stage K-bills (kit numbers) Group small, loose parts under pseudo-item number Reduces paperwork, processing time, and file space © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-17

18 Specialized BOMs Modular bills Plan production of products with many optional features Product assembled from major subassemblies and customer options Modular bill kept for each major subassembly Simplifies forecasting and planning X10 automobile example 3 x 8 x 3 x 8 x 4 = 2,304 configurations = 26 modular bills © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-18

19 Modular BOMs © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-19

20 Time-phased Bills © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e –An assembly chart shown against a time scale

21 Time-phased Bills Forward scheduling start at today‘s date and schedule forward to determine the earliest date the job can be finished. If each item takes one period to complete, the clipboards can be finished in three periods Backward scheduling start at the due date and schedule backwards to determine when to begin work. If an order for clipboards is due by period three, we should start production now © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-21

22 Item Master File © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e DESCRIPTIONINVENTORY POLICY ItemPressboardLead time1 Item no.7341Annual demand5000 Item typePurchHolding cost1 Product/sales classCompOrdering/setup cost50 Value classBSafety stock 0 Buyer/plannerRSRReorder point39 Vendor/drawing07142EOQ316 Phantom codeNMinimum order qty100 Unit price/cost1.25Maximum order qty500 PeggingYMultiple order qty1 LLC1Policy code

23 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Item Master File On hand150YTD usage/sales1100 LocationW142MTD usage/sales75 On order100YTD receipts1200 Allocated75MTD receipts0 Cycle3Last receipt8/25 Last count9/5Last issue10/5 Difference-2 Cost acct Routing00326 Engr07142 PHYSICAL INVENTORYUSAGE/SALES CODES 15-23

24 MRP Processes Exploding the bill of material Netting out the inventory Netting the process of subtracting on-hand quantities and scheduled receipts from gross requirements to produce net requirements Lot sizing determining the quantities in which items are usually made or purchased Time-phasing requirements © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-24

25 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e MRP Matrix 15-25

26 MRP Example © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Master Production Schedule Clipboard Lapdesk Item Master File CLIPBOARDLAPDESKPRESSBOARD On hand On order175 (Period 1)00 (sch receipt) LLC001 Lot sizeL4LMult 50Min 100 Lead time

27 MRP Example © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-27

28 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: Gross Requirements Scheduled Receipts175 Projected on Hand25 Net Requirements Planned Order Receipts Planned Order Releases MRP

29 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e MRP - 2 ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: Gross Requirements Scheduled Receipts175 Projected on Hand25115 Net Requirements0 Planned Order Receipts Planned Order Releases ( ) = 200 units available ( ) = 115 on hand at the end of Period

30 MRP - 3 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: Gross Requirements Scheduled Receipts175 Projected on Hand Net Requirements00 Planned Order Receipts Planned Order Releases 115 units available ( ) = 20 on hand at the end of Period

31 MRP - 4 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: Gross Requirements Scheduled Receipts175 Projected on Hand Net Requirements00100 Planned Order Receipts100 Planned Order Releases units available ( ) = -100 — 100 additional Clipboards are required Order must be placed in Period 2 to be received in Period

32 MRP - 5 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: Gross Requirements Scheduled Receipts175 Projected on Hand Net Requirements Planned Order Receipts Planned Order Releases Following the same logic Gross Requirements in Periods 4 and 5 develop Net Requirements, Planned Order Receipts, and Planned Order Releases 15-32

33 MRP - 6 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e ITEM: LAPDESKLLC: 0PERIOD LOT SIZE: MULT 50LT: Gross Requirements Scheduled Receipts Projected on Hand20 Net Requirements Planned Order Receipts Planned Order Releases 15-33

34 MRP - 7 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e ITEM: LAPDESKLLC: 0PERIOD LOT SIZE: MULT 50LT: Gross Requirements Scheduled Receipts Projected on Hand Net Requirements04050 Planned Order Receipts5050 Planned Order Releases5050 Following the same logic, the Lapdesk MRP matrix is completed as shown 15-34

35 MRP - 8 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e ITEM: PRESSBOARDLLC: 0PERIOD LOT SIZE: MIN 100LT: Gross Requirements Scheduled Receipts Projected on Hand150 Net Requirements Planned Order Receipts Planned Order Releases ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: Planned Order Releases ITEM: LAPDESKLLC: 0PERIOD LOT SIZE: MULT 50LT: Planned Order Releases

36 MRP – 9 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e ITEM: PRESSBOARDLLC: 0PERIOD LOT SIZE: MIN 100LT: Gross Requirements Scheduled Receipts Projected on Hand150 Net Requirements Planned Order Receipts Planned Order Releases ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: Planned Order Releases ITEM: LAPDESKLLC: 0PERIOD LOT SIZE: MULT 50LT: Planned Order Releases5050 x1 x

37 MRP – 10 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e ITEM: PRESSBOARDLLC: 0PERIOD LOT SIZE: MIN 100LT: Gross Requirements Scheduled Receipts Projected on Hand Net Requirements Planned Order Receipts Planned Order Releases ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: Planned Order Releases ITEM: LAPDESKLLC: 0PERIOD LOT SIZE: MULT 50LT: Planned Order Releases5050 x1 x

38 MRP - 11 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e PERIOD ITEM12345 Clipboard Lapdesk5050 Pressboard Planned Order Report 15-38

39 Lot Sizing in MRP Systems Lot-for-lot ordering policy Fixed-size lot ordering policy Minimum order quantities Maximum order quantities Multiple order quantities Economic order quantity Periodic order quantity © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-39

40 Advanced Lot Sizing Rules: L4L © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Total cost of L4L = (4 X $60) + (0 X $1) = $

41 Advanced Lot Sizing Rules: EOQ © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e minimum order quantity Total cost of EOQ = (2 X $60) + [( ) X $1)] = $

42 Advanced Lot Sizing Rules: POQ © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e periods worth of requirements Total cost of POQ = (2 X $60) + [( ) X $1] = $

43 Planned Order Report © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Item#2740Date On hand100Lead time2 weeks On order200Lot size200 Allocated50Safety stock50 SCHEDULEDPROJECTED DATEORDER NO.GROSS REQS.RECEIPTSON HANDACTION AL AL GR SR Expedite SR CO GR GR GR Release PO Key:AL= allocatedWO= work order CO= customer orderSR= scheduled receipt PO= purchase orderGR= gross requirement 15-43

44 MRP Action Report © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e ITEMDATEORDER NO.QTY.ACTION # ExpediteSR10-01 # Move forwardPO10-07 # Move forwardPO10-05 # Move backwardPO10-25 # De-expediteSR10-30 # ReleasePO10-13 # ReleaseWO10-24 Current date

45 Capacity Requirements Planning (CRP) Creates a load profile Identifies under-loads and over-loads Inputs Planned order releases Routing file Open orders file © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-45

46 CRP © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-46

47 Calculating Capacity Maximum capability to produce Rated Capacity Theoretical output that could be attained if a process were operating at full speed without interruption, exceptions, or downtime Effective Capacity Takes into account the efficiency with which a particular product or customer can be processed and the utilization of the scheduled hours or work © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Effective Daily Capacity = (no. of machines or workers) x (hours per shift) x (no. of shifts) x (utilization) x ( efficiency) 15-47

48 Calculating Capacity Utilization Percent of available time spent working Efficiency How well a machine or worker performs compared to a standard output level Load Standard hours of work assigned to a facility Load Percent Ratio of load to capacity © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Load Percent = x 100% load capacity 15-48

49 Graphical comparison of load versus capacity Leveling underloaded conditions: Acquire more work Pull work ahead that is scheduled for later time periods Reduce normal capacity Load leveling Process of balancing underloads and overloads © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Load Profiles 15-49

50 Reducing Over-load Conditions Eliminate unnecessary requirements Reroute jobs to alternative machines, workers, or work centers Split lots between two or more machines Increase normal capacity Subcontract Increase efficiency of the operation Push work back to later time periods Revise master schedule © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-50

51 Copy Courier Two high-speed copiers that can be operated by one operator. 2 shifts per day 8 hours/shift, 5 days/week. No breaks during the day 30 minutes for lunch or dinner Machine service time = 30 minutes at the beginning of each shift Machine efficiency = 90%. Capacity 2 copiers * 2 shifts * 8 hrs/day * 7/8 utilization *.90 efficiency = 1512 minutes/day © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-51

52 Copy Courier Job No. of Setup Time Run Time Copies(min)(min/unit) © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-52

53 Load Calculations Job Setup + Run x No. CopiesJob Time (500 X 0.08) = (1000 X 0.10) = (5000 X 0.12) = (4500 X 0.14) = (2000 X 0.10) = , min © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-53

54 Loading Capacity 2 copiers * 2 shifts * 8 hrs/day * 7/8 utilization *.90 efficiency = 1512 minutes/day Load percent = /1512 = X 100% = 106.8% Overloaded by 6.8%. Extends working day by approximately 36 minutes Load percent = 99%. Increase efficiency to 97%. © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-54

55 Initial Load Profile © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-55

56 Adjusted Load Profile © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-56

57 Relaxing MRP Assumptions Material is not always the most constraining resource Lead times can vary Not every transaction needs to be recorded Shop floor may require a more sophisticated scheduling system Scheduling in advance may not be appropriate for on-demand production. © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-57

58 Enterprise Resource Planning (ERP) Software that organizes and manages a company’s business processes by sharing information across functional areas integrating business processes facilitating customer interaction providing benefit to global companies © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-58

59 Organizational Data Flows © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-59

60 ERP’s Central Database © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-60

61 Selected Enterprise Software Vendors © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-61

62 ERP Implementation Analyze business processes Choose modules to implement Which processes have the biggest impact on customer relations? Which process would benefit the most from integration? Which processes should be standardized? Align level of sophistication Finalize delivery and access Link with external partners © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-62

63 Customer Relationship Management (CRM) Software that Plans and executes business processes Involves customer interaction Changes focus from managing products to managing customers Analyzes point-of-sale data for patterns used to predict future behavior © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-63

64 Supply Chain Management Software that plans and executes business processes related to supply chains Includes Supply chain planning Supply chain execution Supplier relationship management Distinctions between ERP and SCM are becoming increasingly blurred © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-64

65 Product Lifecycle Management (PLM) Software that Incorporates new product design and development and product life cycle management Integrates customers and suppliers in the design process though the entire product life cycle © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-65

66 ERP and Software Systems © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-66

67 Connectivity Application programming interfaces (APIs) give other programs well-defined ways of speaking to them Enterprise Application Integration (EAI) solutions EDI is being replaced by XML, business language of Internet Service-oriented architecture (SOA) collection of “services” that communicate with each other within software or between software © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 15-67

68 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e Copyright 2014 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permission Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein


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