1. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-1 Operations Management Material Requirements Planning (MRP) & ERP Chapter 14

2. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-2 Collins Industries  Largest manufacturer of ambulances in the world  International competitor  12 major ambulance designs  18,000 different inventory items  6,000 manufactured parts  12,000 purchased parts  MRP: IBM’s MAPICS

3. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-3 Collins Industries  Collins requires:  Material plan must meet both the requirements of the master schedule and the capabilities of the production facility  Plan must be executed as designed  Effective “time-phased” deliveries, consignments, and constant review of purchase methods  Maintenance of record integrity

4. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-4 Inventory Process stage Demand Type Number & Value Other Raw Material WIP Finished Goods Independent Dependent A Items B Items C Items Maintenance Operating Inventory Classifications

5. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-5 Item Materials With Independent Demand Materials With Dependent Demand Demand Source Company CustomersParent Items Material Type Finished GoodsWIP & Raw Materials Method of Estimating Demand Forecast & Booked Customer Orders Calculated Planning Method EOQ & ROPMRP Dependent versus Independent Demand

6. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-6 Requirements for Effective Use of Dependent Demand Inventory Models Effective use of dependent demand inventory models requires that the operations manager know the:  master production schedule  specifications or bills-of-material  inventory availability  purchase orders outstanding  lead times

7. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-7 Inputs to the Production Plan Aggregate Production Plan Marketing Customer Demand Engineering Design Completion Management Return on Investment Capital Human Resources Manpower Planning Procurement Supplier Performance Finance Cash Flow Production Capacity Inventory

8. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-8 The Planning Process Change master production schedule? Execute material plans Execute capacity plans Detail capacity plan Material requirements plan Master production schedule Aggregate production plan Change requirements? Change capacity? Realistic No Yes Change production plan? Is capacity plan being met? Is execution meeting the plan?

9. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-9 Aggregate Production Plan 1,2001,500 Aggregate Production Plan (shows the total quantity of amplifiers 100300 75 watt amplifier 450 500 150 watt amplifier 100 240 watt amplifier Master Production Schedule (Shows the specific type and quantity of amplifier to be produced 8 7654321Weeks FebruaryJanuaryMonths

10. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-10 Typical Focus of the Master Production Schedule Make to Order (Process Focus) Assemble to Order or Forecast (Repetitive) Stock to Forecast (Product Focus) Schedule finished product Steel, Beer, Bread Light bulbs, Paper Print shop Machine shop Fine dining restaurant Examples: Number of end items Number of inputs Typical focus of the master production schedule Schedule orders Schedule modules Motorcycles, autos, TVs, fast-food restaurant

11. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-11  List of components & quantities needed to make product  Provides product structure (tree)  Parents: Items above given level  Children: Items below given level  Shows low-level coding  Lowest level in structure item occurs  Top level is 0; next level is 1 etc. Bill-of-Material

12. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-12 Product Structure for “Awesome” A

13. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-13  Modular bills  Modules are final components used to make assemble-to- stock end items  Planning bills  Used to assign artificial parent  Reduces number of items scheduled  Phantom bills  Used for subassemblies that exist temporarily Special Bills-of-Material

14. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-14 Bicycle(1) P/N 1000 Handle Bars (1) P/N 1001 Frame Assembly (1) P/N 1002 Wheels (2) P/N 1003 Frame (1) P/N 1004 Bill-of-Material Product Structure Tree

15. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-15 Time-Phased Product Structure 1 2345678 3 weeks F 2 weeks E A 1 week C G 2 weeks D 1 week E 2 weeks Start production of D D 1 week B 2 weeks to produce Must have D and E completed here so production can begin on B

16. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-16  Manufacturing computer information system  Determines quantity & timing of dependent demand items © 1995 Corel Corp. Material Requirements Planning (MRP)

17. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-17  Computer system  Mainly discrete products  Accurate bill-of-material  Accurate inventory status  99% inventory accuracy  Stable lead times © 1984-1994 T/Maker Co. MRP Requirements

18. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-18  Increased customer satisfaction due to meeting delivery schedules  Faster response to market changes  Improved labor & equipment utilization  Better inventory planning & scheduling  Reduced inventory levels without reduced customer service MRP Benefits

19. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-19 Structure of the MRP System Master Production Schedule BOM Lead Times (Item Master File) Inventory Data Purchasing data MRP planning programs (computer and software) MRP by Period Report MRP by date report Planned order report Purchase advice Exception report

20. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-20 Gross Material Requirements Plan for 50 “Awesome A” Speaker Kits

21. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-21  Shows items to be produced  End item, customer order, module  Derived from aggregate plan Master Production Schedule Item/WeekOct 3Oct 10Oct 17Oct 24 Drills300200310300 Saws300450310330 Example

22. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-22 Derivation of Master Schedule Therefore, these are the gross requirements for B Periods 10 1 2 3 Master schedule for S sold directly 405015 A C B 5 6 7 8 9 10 11 Lead time = 4 for A Master schedule for A 402030 S B C 8 9 10 12 11 13 Lead time = 6 for S Master schedule for S 10 40+10 = 50 40 50 20 15+30 = 45 1 2 3 4 5 6 7 8 Periods Gross requirements: B

23. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-23 MRP Dynamics  Supports “replanning”  Problem with system “nervousness”  “Time fence” - allows a segment of the master schedule to be designated as “not to be rescheduled”  “Pegging” - tracing upward in the bill-of-materials from the component to the parent item  That a manager can react to changes, doesn’t mean he/she should

24. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-24 MRP and JIT  MRP - a planning and scheduling technique with fixed lead times  JIT - a way to move material expeditiously  Integrating the two:  Small bucket approach and back flushing  Balanced flow approach

25. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-25 Lot-Sizing Techniques  Lot-for-lot  Economic Order Quantity  Part Period Balancing  Wagner-Whitin Algorithm

26. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-26 MRP Lot-Sizing Problem: Lot-for-Lot Techniques

27. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-27 MRP Lot-Sizing Problem: EOQ Technique

28. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-28 MRP Lot-Sizing Problem: PPB Technique

29. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-29 Extensions of MRP  Closed loop MRP  Capacity planning - load reports  MRP II - Material Resource Planning  Enterprise Resource Planning

30. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-30 Closed Loop MRP

31. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-31 Extensions of MRP Capacity Planning  Tactics for smoothing the load and minimizing the impact of changed lead time include:  Overlapping - reduces the lead time, entails sending pieces to the second operation before the entire lot has completed the first operation  Operations splitting - sends the lot to two different machines for the same operation  Lot splitting - breaking up the order and running part of it ahead of the schedule

32. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-32 Initial Resource Requirements/Smoothed Resource Requirements

33. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-33 Extensions to MRP Enterprise Resource Planning MRP II with ties to customers and suppliers

34. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-34 MRP and ERP Information Flows, Integrated with Other Systems

35. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-35 MRP in Services  Can be used when demand for service or service items is directly related to or derived from demand for other services  restaurant - rolls required for each meal  hospitals - implements for surgery  etc.

36. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-36 Product Structure, Bill of Materials, Bill of Labor for Veal Picante