1. Materials Requirements Planning

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 seems to be a good way to manage inventories: IBM’s MAPICS system is used

3. Enterprise Resource Planning (ERP) Organizes and manages a company’s business processes by sharing information across functional areas Connects with supply-chain and customer management applications

4. ERP Modules

5. ERP’s Central Database Finance & Accounting Sales & Marketing Human Resources Production & Materials Management ERP Data Repository

6. ERP Implementation First step is to analyze business processes Which processes have the biggest impact on customer relations? Which process would benefit the most from integration? Which processes should be standardized? Use of Internet portals can aid implementation

7. Customer Relationship Management (CRM) Plans and executes business processes that involve customer interaction Plans and executes business processes that involve customer interaction Changes focus from managing products to managing customers Changes focus from managing products to managing customers Point-of-sale data is analyzed for patterns used to predict future behavior Point-of-sale data is analyzed for patterns used to predict future behavior

8. Supply Chain Management Supply chain planning Supply chain planning Supply chain execution Supply chain execution Supplier relationships Supplier relationships Distinctions between ERP and SCM are becoming increasingly blurred Distinctions between ERP and SCM are becoming increasingly blurred

9. Collaborative Product Commerce (CPC) New product design and development and product life cycle management New product design and development and product life cycle management Integrates customers and suppliers in the design process though the entire product life cycle Integrates customers and suppliers in the design process though the entire product life cycle

10. Collaborative Product Commerce (CPC) Customer Relationship Management (CRM) Enterprise Resource Planning (ERP) Collaborative Product Commerce (CPC) Supply Chain Management (SCM) Time to Market Time to Customer Customers Product Design Suppliers Collaborative Design Manufacture & Delivery Collaborative Manufacture DFMA

11. Connectivity A very difficult problem Enterprise Application Integration (EAI) solutions EDI is being replaced by XML A continuing issue

12. ERP and MRP MRP (material requirements planning) was the precursor to ERP MRP (material requirements planning) was the precursor to ERP Primarily a production planning and control system Primarily a production planning and control system MRP evolved to MRP II (manufacturing resource planning) MRP evolved to MRP II (manufacturing resource planning) ERP and ERP II continue to extend the links through all business processes ERP and ERP II continue to extend the links through all business processes

13. Independent and Dependent Demand Independent Demand A B(4) C(2) D(2)E(1) D(3) F(2) Dependent Demand Independent demand is uncertain. Dependent demand is certain.

14.  Dependent demand : Demand for items that are subassemblies or component parts to be used in production of finished goods.  Once the independent demand is known, the dependent demand can be determined  Once the independent demand is known, the dependent demand can be determined. Dependent Demand

15. Demand Characteristics 12345 Week 400 400 – 300 300 – 200 200 – 100 100 – No. of tables Continuous demand M T W Th F M T W Th F 400 400 – 300 300 – 200 200 – 100 100 – No. of tables Discrete demand Independent demand 100 tables Dependent demand 100 x 1 = 100 tabletops 100 x 4 = 400 table legs

16. Dependent vs Independent Demand Time Demand Stable demand “Lumpy” demand Amount on hand Safety stock

17. Material Requirements Planning Defined  Materials requirements planning (MRP)  Materials requirements planning (MRP) is a computerized inventory planning and control system for determining when (no earlier and no later) and how many of each of the parts, components, and materials should be ordered or produced  Dependent demand drives MRP  MRP is a software system

18. When to Use MRP Dependent and discrete items Complex products Job shop production Assemble-to-order environments

19. Material Requirements Planning Material requirements planning Planned order releases Work orders Purchase orders Rescheduling notices Item master file Product structure file Master production schedule

20. Master Production Schedule Drives MRP process with a schedule of finished products; states which end items are to be produced, when these are needed, and in what quantities Quantities represent production not demand Quantities may consist of a combination of customer orders & demand forecasts Quantities represent what needs to be produced, not what can be produced

21. Master Production Schedule PERIOD MPS ITEM12345 Clipboard8595120100100 Lapdesk0500500 Lapboard75120472017 Pencil Case125125125125125

22. Bill-of-Materials Bill of materials (BOM) : 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.

23. 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 Product Structure Tree: Example 1 Product Structure Tree: Example 1

24. Product Drawing: Example 2 Top clip (1)Bottom clip (1) Pivot (1)Spring (1) Rivets (2) Finished clipboardPressboard (1) Clipboard

25. Product Structure Tree ( Example 2) Clipboard Level 0 Level 1 Level 2 Spring (1) Bottom Clip (1) Top Clip (1) Pivot (1) Rivets (2) Clip Ass’y (1) Pressboard (1)

26. Inventory Records File  One of the three primary inputs of MRP  Includes information on the inventory status of each item by time period

27. MRP Terminology (1 of 3)  Gross requirements  Scheduled receipts  Projected on hand  Net requirements  Planned-order receipts  Planned-order releases

28. MPR Terminology (2 of 3)  Gross requirements Total expected demand  Scheduled receipts Open orders scheduled to arrive  Projected on hand Expected inventory on hand at the beginning of each time period

29. MPR Processing Terminology (3 of 3)  Net requirements Actual amount needed in each time period  Planned-order receipts Quantity expected to be received at the beginning of the period Offset by lead time  Planned-order releases Planned amount to be ordered in each time period

30. Basic MRP Processes 1.Exploding the bill of material 2.Netting out inventory 3.Lot sizing 4.Time-phasing requirements

31. The MRP Matrix Gross RequirementsDerived from MPS or planned order releases of the parent Scheduled ReceiptsOn order and scheduled to be received Projected on HandBeg InvAnticipated quantity on hand at the end of the period Net RequirementsGross requirements net of inventory and scheduled receipts Planned Order Receipts When orders need to be received Planned Order Releases When orders need to be placed to be received on time ITEM NAME OR NO.LLC - LOW LEVEL CODEPERIOD LOT SIZE QTY MADE INLY - LEAD TIME12345

32. MRP Processing: Example 1-School Mate Products Master Production Schedule 12345 Clipboard8595120100100 Lapdesk0600600 Item Master File (ınventory record file CLIPBOARDLAPDESKPRESSBOARD On hand2520150 On order175 (Period 1)00 (sch receipt) (sch receipt) LLC001 Lot sizeL4LMult 50Min 100 Lead time111

33. School Mate Products Product Structure Record Clipboard Lapdesk Pressboard (2) Trim (3’) Beanbag (1) Glue (4 oz) Level 0 Pressboard (1) Clip Ass’y (1) Rivets (2) Level 1

34. School Mate Products ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: 112345 Gross Requirements8595120100100 Scheduled Receipts175 Projected on Hand25 Net Requirements Planned Order Receipts Planned Order Releases

35. School Mate Products ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: 112345 Gross Requirements8595120100100 Scheduled Receipts175 Projected on Hand25115 Net Requirements0 Planned Order Receipts Planned Order Releases (25 + 175) = 200 units available (200 - 85) = 115 on hand at the end of Period 1

36. School Mate Products ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: 112345 Gross Requirements8595120100100 Scheduled Receipts175 Projected on Hand2511520 Net Requirements00 Planned Order Receipts Planned Order Releases 115 units available (115 - 85) = 20 on hand at the end of Period 2

37. School Mate Products ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: 112345 Gross Requirements8595120100100 Scheduled Receipts175 Projected on Hand25115200 Net Requirements00100 Planned Order Receipts100 Planned Order Releases100 20 units available (20 - 120) = -100 — 100 additional Clipboards are required Order must be placed in Period 2 to be received in Period 3

38. School Mate Products ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: 112345 Gross Requirements8595120100100 Scheduled Receipts175 Projected on Hand2511520000 Net Requirements00100100100 Planned Order Receipts100100100 Planned Order Releases100100100 Following the same logic Gross Requirements in Periods 4 and 5 develop Net Requirements, Planned Order Receipts, and Planned Order Releases

39. School Mate Products ITEM: LAPDESKLLC: 0PERIOD LOT SIZE: MULT 50LT: 112345 Gross Requirements0600600 Scheduled Receipts Projected on Hand20 Net Requirements Planned Order Receipts Planned Order Releases

40. School Mate Products ITEM: LAPDESKLLC: 0PERIOD LOT SIZE: MULT 50LT: 112345 Gross Requirements0600600 Scheduled Receipts Projected on Hand2020101000 Net Requirements04050 Planned Order Receipts5050 Planned Order Releases5050 Following the same logic, the Lapdesk MRP matrix is completed as shown

41. School Mate Products ITEM: PRESSBOARDLLC: 0PERIOD LOT SIZE: MIN 100LT: 112345 Gross Requirements Scheduled Receipts Projected on Hand150 Net Requirements Planned Order Receipts Planned Order Releases ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: 112345 Planned Order Releases100100100 ITEM: LAPDESKLLC: 0PERIOD LOT SIZE: MULT 50LT: 112345 Planned Order Releases5050

42. School Mate Products ITEM: PRESSBOARDLLC: 0PERIOD LOT SIZE: MIN 100LT: 112345 Gross Requirements1001002001000 Scheduled Receipts Projected on Hand150 Net Requirements Planned Order Receipts Planned Order Releases ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: 112345 Planned Order Releases100100100 ITEM: LAPDESKLLC: 0PERIOD LOT SIZE: MULT 50LT: 112345 Planned Order Releases5050 x2 x2 x1 x1 x1

43. School Mate Products ITEM: PRESSBOARDLLC: 0PERIOD LOT SIZE: MIN 100LT: 112345 Gross Requirements1001002001000 Scheduled Receipts Projected on Hand1505050000 Net Requirements50150100 Planned Order Receipts100150100 Planned Order Releases100150100 ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: 112345 Planned Order Releases100100100 ITEM: LAPDESKLLC: 0PERIOD LOT SIZE: MULT 50LT: 112345 Planned Order Releases5050

44. School Mate Products Planned Order Report PERIOD ITEM12345 Clipboard100100100 Lapdesk5050 Pressboard100150100

45. MRP Processing: Example 2 Example 2 A(2)B(1) D(5)C(2) X C(3) Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10

46. A(2) X It takes 2 A’s for each X

47. B(1)A(2) X It takes 1 B for each X

48. A(2)B(1) X C(3) It takes 3 C’s for each A

49. A(2)B(1) C(2) X C(3) It takes 2 C’s for each B

50. A(2)B(1) D(5)C(2) X C(3) It takes 5 D’s for each B

51. Updating the MRP System  Regenerative system Updates MRP records periodically  Net-change system Updates MPR records continuously

52. Benefits of MRP  Reduced inventories without reduced customer service  Ability to track material requirements  Ability to evaluate capacity requirements  Means of allocating production time  Increased customer satisfaction due to meeting delivery schedules  Faster response to market changes  Improved labor and equipment utilization.  Better inventory planning and scheduling

53. Relaxing MRP Assumptions Material is not always the constraining resource Material is not always the constraining resource Lead times can vary Lead times can vary Not every transaction needs to be recorded Not every transaction needs to be recorded JIT can be used with MRP JIT can be used with MRP The shop floor may require a more sophisticated scheduling system The shop floor may require a more sophisticated scheduling system

54. Manufacturing Resource Planning (MRP II) Forecast Aggregate production plan Customer orders Feasible? Master production schedule Material requirements planning Capacity requirements planning Feasible? Purchase orders Work orders Inventory Shop floor control Manufacture No Yes Feedback No Yes

55. Manufacturing Resource Planning (MRP II) Forecast Aggregate production plan Customer orders Feasible? Master production schedule Material requirements planning Capacity requirements planning Feasible? Purchase orders Work orders Inventory Shop floor control Manufacture No Yes Feedback No Yes Forecast Aggregate production plan Customer orders Feasible? Master production schedule No Yes

56. Manufacturing Resource Planning (MRP II) Forecast Aggregate production plan Customer orders Feasible? Master production schedule Material requirements planning Capacity requirements planning Feasible? Purchase orders Work orders Inventory Shop floor control Manufacture No Yes Feedback No Yes Master production schedule Material requirements planning Capacity requirements planning Feasible? Yes No

57. Forecast Aggregate production plan Customer orders Feasible? Master production schedule Material requirements planning Capacity requirements planning Feasible? Purchase orders Work orders Inventory Shop floor control Manufacture No Yes Feedback No Yes Manufacturing Resource Planning (MRP II) Inventory Shop floor control Manufacture Purchase orders Work orders

58. Manufacturing Resource Planning (MRP II) Forecast Aggregate production plan Customer orders Feasible? Master production schedule Material requirements planning Capacity requirements planning Feasible? Purchase orders Work orders Inventory Shop floor control Manufacture No Yes Feedback No Yes

59. Capacity Requirements Planning (CRP) Computerized system that projects load from material plan Creates load profile Identifies underloads and overloads

60. Initial Load Profile Hours of capacity 123456123456123456123456 Time (weeks) Normalcapacity 120 120 – 110 110 – 100 100 – 90 90 – 80 80 – 70 70 – 60 60 – 50 50 – 40 40 – 30 30 – 20 20 – 10 10 – 0 0 –

61. Remedies for Underloads 1.Acquire more work 2.Pull work ahead that is scheduled for later time periods 3.Reduce normal capacity

62. Remedies for Overloads 1.Eliminate unnecessary requirements 2.Reroute jobs to alternative machines or work centers 3.Change lot-sizing or safety stock requirements 4.Split lots between two or more machines 5.Send pieces to the second operation before the entire lot has completed the first operation 6.Increase normal capacity 7.Subcontract 8.Increase the efficiency of the operation 9.Push work back to later time periods 10.Revise master schedule

63. Adjusted Load Profile Hours of capacity 123456123456123456123456 Time (weeks) Normalcapacity 120 120 – 110 110 – 100 100 – 90 90 – 80 80 – 70 70 – 60 60 – 50 50 – 40 40 – 30 30 – 20 20 – 10 10 – 0 0 – Pull ahead Push back Overtime Work an extra shift