1. Material Requirements Planning and Enterprise Resource Planning Dr. Ron Lembke

2. Historical Perspective mrp – material requirements planning MRP II – Manufacturing Resource Planning ERP- Enterprise Resource Planning

3. MRP Crusade (1975) Material Requirements Planning Make sure you have enough parts when you need them Take future demands, factor in lead times (time phase), compare to on hand, order Determine order size and timing Control and plan purchasing vs. OSWO inventory management

4. Closed-Loop MRP Capacity Consideration: Part routings Calculate loads on each work station See if scheduled load exceeds capacity Lead-time long enough to allow some shuffling to make plan feasible

5. MRP II -- Manufacturing Resource Planning “A method for the effective planning of all resources of a manufacturing company” (APICS def.) Financial accounting incorporated Sales Operations Planning Simulate capacity requirements of different possible Master Production Schedules 1989, $1.2B MRPII sales in U.S., one third of total software sales

6. Success? MRP Crusade Begins

7. ERP differences Material planning Capacity planning Product design Information warehousing All functions in the entire company operate off of one common set of data Instantaneous updating, visibility

8. ERP Sales Y2K: Worldwide sales of top 10 vendors 1995$2.8 B 1996$4.2 B 1997 $5.8 B$3.2 B SAP Fortune survey: 44% reported spending at least 4 times as much on implementation as on software

9. ERP Challenges Modules assume “best practices:” Change software to reflect company ($) Change company to follow software (?) Accuracy of data Drives entire system Ownership of / responsibility for Ability to follow structure

10. ERP Novel? “Goal-like” novel Hero learns more about ERP, deciding if it is right for his company Company rushes through installation General introduction to ERP systems, what they do, how different from MRP SAP R/3 screen shots

11. The Heart of the Matter - mrp System for organizing WIP releases Work in Process – work that has been started, but not yet finished Consider Lead Time (LT)for each item Look at BOM to see what parts needed Bill of Materials – what goes into what Release so they will arrive just as needed

12. Bike Production Due Mar 1 7 14 21 28 4 Apr 11 18 Assemble Parts Arrive Frame Wheels Drivetrain Seat, Bars OCLV Carbon

13. Snow Shovels Example – Snow Shovel Order quantity is 50 units LT is one week Simple Bill of Materials - BOM

14. MRP Table 6 units short

15. MRP Table Order 50 units week earlier

16. Ending Inventory Ending inventory

17. Terminology Projected Available balance Not on-hand (that may be greater) Tells how many will be available Available to Promise – the units aren’t spoken for yet, we can assign them to a customer Planned order releases ≠ scheduled receipts Only when material has been committed to their production Move to scheduled receipts as late as possible Preserves flexibility

18. 1605 Snow Shovel 1605 Snow Shovel 048 Scoop-shaft connector 13122 Top Handle Assy 314 scoop assembly 118 Shaft (wood) 062 Nail (4) 14127 Rivet (4)

19. 314 scoop assembly 14127 Rivet (6) 019 Blade (steel) 2142 Scoop (aluminum)

20. 13122 Top Handle Assembly 1118 Top handle Coupling (steel) 11495 Welded Top handle bracket Assembly 13122 Top Handle Assembly 457 Top handle (wood) 129 Top Handle Bracket (steel) 082 Nail (2)

21. BOM Explosion Process of translating net requirements into components part requirements Take into account existing inventories Consider also scheduled receipts

22. BOM Explosion Example Need to make 100 shovels We are responsible for handle assemblies.

23. 13122 Top Handle Assembly 1118 Top handle Coupling (steel) 11495 Welded Top handle bracket Assembly 13122 Top Handle Assembly 457 Top handle (wood) 129 Top Handle Bracket (steel) 082 Nail (2)

24. Net Requirements SchGrossNet Part DescriptionInvRecReqReq Top handle assy25--10075 Top handle2225 Nail (2 required)450 Bracket Assy27-- Top bracket15-- Top coupling3915

25. Net Requirements SchGrossNet Part DescriptionInvRecReqReq Top handle assy25--10075 Top handle22257528 Nail (2 required)45015096 Bracket Assy27--7548 Top bracket15-- Top coupling3915

26. 13122 Top Handle Assembly 1118 Top handle Coupling (steel) 11495 Welded Top handle bracket Assembly 13122 Top Handle Assembly 457 Top handle (wood) 129 Top Handle Bracket (steel) 082 Nail (2)

27. Net Requirements SchGrossNet Part DescriptionInvRecReqReq Top handle assy25--10075 Top handle22257528 Nail (2 required)45015096 Bracket Assy27--7548 Top bracket15--4833 Top coupling391548--

28. Timing of Production This tells us how many of each we need Doesn’t tell when to start Start as soon as possible? Dependent events (oh no, not that!)

29. 13122 Top Handle Assy Order policy: Lot-for-lot

30. 13122 Top Handle Assy-2 Order policy: Lot-for-lot

31. 457 Top Handle One handle for Each assembly

32. 457 Top Handle Order policy: Lot-for-lot

33. 457 Top Handle Order policy: Lot-for-lot

34. 082 Nail (2 required) Two nails for Each assembly

35. 082 Nail (2 required)

37. 11495 Bracket Assembly One bracket for Each assembly

38. 11495 Bracket Assembly Order policy: Lot-for-lot

39. 129 Top Bracket

40. 129 Top handle bracket Order policy: Lot-for-lot

41. 1118 Top handle coupling

42. Order policy: Lot-for-lot

43. 1118 Top handle coupling

44. Other considerations Safety stock if uncertainty in demand or supply quantity Don’t let available go down to 0 Safety LT if uncertainty in arrival time Place order earlier than necessary Order quantities EOQ – Economic Order Quantity, Fixed Size If that’s not enough, order what you need, OR order two or more of the Fixed Size Lot-For-Lot, Periodic Order quantity, others

45. Summary Demand for final products Compute needs for it and Dependent Demand for components Look at all parts of the Bill of Materials Complete the Table for each Bottom row (Pl Order Releases) becomes top row (Gross Requirements) of input components (also called children) Multiplied by # needed for each parent