Resource Planning

14-2 Lecture Outline   Material Requirements Planning (MRP)   Capacity Requirements Planning (CRP)   Enterprise Resource Planning (ERP)   Customer Relationship Management (CRM)   Supply Chain Management (SCM)   Collaborative Product Commerce (CPC)

14-3 Resource Planning for Manufacturing

14-4 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

14-5 Demand Characteristics Week – – – – No. of tables Continuous demand M T W Th F M T W Th F – – – – No. of tables Discrete demand Independent demand 100 tables Dependent demand 100 x 1 = 100 tabletops 100 x 4 = 400 table legs

14-6 Material Requirements Planning Material requirements planning Planned order releases Work orders Purchase orders Rescheduling notices Item master file Product structure file Master production schedule

14-7 MRP Inputs and Outputs  Inputs Master production schedule Master production schedule Product structure file Product structure file Item master file Item master file  Outputs Planned order releases Planned order releases Work orders Work orders Purchase orders Purchase orders Rescheduling notices Rescheduling notices

14-8 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

14-9 Master Production Schedule (cont.) PERIOD MPS ITEM12345 Clipboard Lapdesk Lapboard Pencil Case

14-10 Product Structure Top clip (1)Bottom clip (1) Pivot (1)Spring (1) Rivets (2) Finished clipboardPressboard (1) Clipboard

14-11 Product Structure Tree 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)

14-12 Intended BOM List Clipboardea Clip Assemblyea Top Clipea Bottom Clipea Pivotea Springea Rivetea Press Boardea1 LEVELITEMUNIT OF MEASUREQUANTITY

14-13 Specialized BOMs  Phantom bills Transient subassemblies Transient subassemblies Never stocked Never stocked Immediately consumed in next stage Immediately consumed in next stage  K-bills Group small, loose parts under pseudo-item number Group small, loose parts under pseudo-item number Reduces paperwork Reduces paperwork

14-14 Specialized BOMs (cont.)  Modular bills Product assembled from major subassemblies and customer options Product assembled from major subassemblies and customer options Modular bill kept for each major subassembly Modular bill kept for each major subassembly Simplifies forecasting and planning Simplifies forecasting and planning X10 automobile example X10 automobile example 3 x 8 x 3 x 8 x 4 = 2,304 configurations 3 x 8 x 3 x 8 x 4 = 2,304 configurations = 26 modular bills = 26 modular bills   Time-phased bills an assembly chart shown against a time scale

Cylinder (.40)Bright red (.10)Leather (.20)Grey (.10)Sports coupe (.20) 6-Cylinder (.50)White linen (.10)Tweed (.40)Light blue (.10)Two-door (.20) 8-Cylinder (.10)Sulphur yellow (.10)Plush (.40)Rose (.10)Four-door (.30) Neon orange (.10)Off-white (.20)Station wagon (.30) Metallic blue (.10)Cool green (.10) Emerald green (.10)Black (.20) Jet black (.20)Brown (.10) Champagne (.20)B/W checked (.10) X10 Automobile EnginesExterior colorInteriorInterior colorBody (1 of 3)(1 of 8)(1 of 3)(1 of 8)(1 of 4) Modular BOMs

14-16 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

14-17 Item Master File DESCRIPTIONINVENTORY POLICY ItemPressboardLead time1 Item no.734Annual 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 qty LLC1Policy code3

14-18 Item Master File (cont.) PHYSICAL INVENTORYUSAGE/SALES CODES On hand100YTD usage/sales1100 LocationW142MTD usage/sales75 On order100YTD receipts1200 Allocated75MTD receipts0 Cycle3Last receipt8/25 Last count9/5Last issue10/5 Difference-2 Cost acct Routing00326 Engr07142

14-19 MRP Processes 1.Exploding the bill of material 2.Netting out inventory 3.Lot sizing 4.Time-phasing requirements

14-20 MRP Matrix

14-21 MRP: Example Master Production Schedule Clipboard Lapdesk Item Master File CLIPBOARDLAPDESKPRESSBOARD On hand On order175 (Period 1)00 (sch receipt) (sch receipt) LLC001 Lot sizeL4LMult 50Min 100 Lead time111

14-22 MRP: Example (cont.) 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

14-23 ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: Gross Requirements Scheduled Receipts Projected on Hand Net Requirements Planned Order Receipts Planned Order Releases MRP: Example (cont.)

14-24 MRP: Example (cont.) ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: Gross Requirements Scheduled Receipts Projected on Hand Net Requirements Planned Order Receipts Planned Order Releases

14-25 ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: Gross Requirements Scheduled Receipts Projected on Hand Net Requirements Planned Order Receipts Planned Order Releases MRP: Example (cont.)

14-26 ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: Gross Requirements Scheduled Receipts Projected on Hand Net Requirements Planned Order Receipts Planned Order Releases MRP: Example (cont.)

14-27 ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: Gross Requirements Scheduled Receipts 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 MRP: Example (cont.)

14-28 ITEM: LAPDESKLLC: 0PERIOD LOT SIZE: MULT 50LT: Gross Requirements Scheduled Receipts Projected on Hand Net Requirements Planned Order Receipts Planned Order Releases MRP: Example (cont.)

14-29 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 MRP: Example (cont.)

14-30 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 Releases MRP: Example (cont.)

14-31 Planned Order Report PERIOD ITEM12345 ClipboardLapdeskPressboard MRP: Example (cont.)

14-32 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

14-33 Advanced Lot Sizing Rules: L4L Total cost of L4L = =

14-34 Advanced Lot Sizing Rules: EOQ minimum order quantity Total cost of EOQ = =

14-35 Advanced Lot Sizing Rules: POQ periods worth of requirements Total cost of POQ = =

14-36 Planned Order Report 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

14-37 MRP Action Report Current date ITEMDATEORDER NO.QTY.ACTION # ExpediteSR10-01 # Move forwardPO10-07 # Move forwardPO10-05 # Move backwardPO10-25 # De-expediteSR10-30 # ReleasePO10-13 # ReleaseWO10-24

14-38 Capacity Requirements Planning (CRP)   Creates a load profile   Identifies under-loads and over-loads   Inputs Planned order releases Routing file Open orders file

14-39 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

14-40 Organizational Data Flows Source: Adapted from Joseph Brady, Ellen Monk, and Bret Wagner, Concepts in Enterprise Resource Planning (Boston: Course Technology, 2001), pp. 7–12

14-41 Selected Enterprise Software Vendors

14-42 ERP Implementation   Analyze business processes   Choose modules to implement Which processes have the biggest impact on customer relations? Which processes have the biggest impact on customer relations? Which process would benefit the most from integration? Which process would benefit the most from integration? Which processes should be standardized? Which processes should be standardized?   Align level of sophistication   Finalize delivery and access   Link with external partners

14-43 Customer Relationship Management (CRM)   Software that Plans and executes business processes Involves customer interaction Involves customer interaction Changes focus from managing products to managing customers Changes focus from managing products to managing customers Analyzes point-of-sale data for patterns used to predict future behavior Analyzes point-of-sale data for patterns used to predict future behavior

14-44 Supply Chain Management   Software that plans and executes business processes related to supply chains   Includes 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