Resource Planning Chapter 14

MGMT 326 Foundations of Operations Introduction Strategy Managing Projects Quality Assurance Facilities & Work Design Products & Processes Product Design Process Design Managing Quality Statistical Process Control Just-in-Time & Lean Systems Facility Layout Capacity and Location Linear Program- ming Work System Design Managing Inventory Planning & Control Resource Planning Aggregate Planning

Presentation Outline Resource Planning: Material Requirement Planning (MRP) Objective and definition Terminology Basic MRP computations MRP process and databases Enterprise resource planning (ERP) ERP systems ERP II systems

Ch © 1998 by Prentice-Hall Inc Russell/Taylor Oper Mgt 2/e Material Requirement Planning (MRP) Objective: To ensure that customer demand will be met in a cost-effective way MRP is a computerized inventory control and production planning system for dependent demand Schedules component items and subassemblies when they are needed - no earlier and no later Specifies planned orders for internal production and external purchase

Ch © 1998 by Prentice-Hall Inc Russell/Taylor Oper Mgt 2/e MRP Terminology Lot size: amount of an item to order. Lead time (LT): elapsed time from order placement to order receipt. LT is assumed to be fixed and known. Planning periods may be days, weeks or months. Must be consistent. Current period = period 1.

MRP Terminology (2) Planned order receipt: order quantity which must be received on a specific date. May be a work order or a purchase order. Planned order release: order quantity which will be released on a specific date. Available to promise: amount of inventory and planned production which is available to fill new customer orders.

Step Stool Assembly

Step Stool Assembly (2)

MRP Process MRP requires data accuracy in all files. (Planned order report)

Databases Used in MRP Calculation Bill of material file: list of parts, raw materials, and subassemblies for each finished good Quantity required for each item Order of assembly (how product is put together) Contains the same information as a parts tree, but in a form that can be used for computerized data processing Inventory records file: amount of each finished good, part, raw material, and subassembly in inventory, plus amounts already ordered and expected dates of receipt

Why Enterprise Resource Planning (ERP) was Needed Marketing, Operations, Accounting and Finance, and Human Resources Management need to share a common database (First generation ERP) Companies need to communicate rapidly with suppliers and customers share selected data with suppliers and customers systems that meet this need are called second generation ERP, extended ERP, or ERP II systems

Business Information Flow to and from Operations

First Generation ERP System A management information system that uses a common database (data warehouse) and integrates information from all functional areas of business (company departments) In Figure 14.1, first-generation ERP is shown in the brown oval. In manufacturing, MRP is one part of the ERP system

Figure Enterprise Resource Planning

ERP II Systems Include first-generation ERP system functions, plus links with suppliers and customers Everything in Figure 14.1

ERP II System Advantages Lower operating costs Shorter cycle times for manufacturing and delivery  faster customer service Better product availability Faster replenishment of popular items Fewer unwanted items PC-based systems are affordable for mid-size firms