Copyright 2006 John Wiley & Sons, Inc. Beni Asllani University of Tennessee at Chattanooga Resource Planning Operations Management Chapter 15 Roberta Russell & Bernard W. Taylor, III

Copyright 2006 John Wiley & Sons, Inc.15-2 MRP Structure Figure 15.5 Output Reports MRP by period report MRP by date report Planned order report Purchase advice Exception reports Order early or late or not needed Order quantity too small or too large Data Files Purchasing data BOM Lead times (Item master file) Inventory data Master production schedule Material requirement planning programs (computer and software)

Copyright 2006 John Wiley & Sons, Inc.15-3 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

Copyright 2006 John Wiley & Sons, Inc. Primary MRP Reports  Planned orders to be released at a future time.  Order release notices to execute the planned orders.  Changes in due dates of open orders due to rescheduling.  Cancellations or suspensions of open orders due to cancellation or suspension of orders on the master production schedule.  Inventory status data.

Copyright 2006 John Wiley & Sons, Inc. Secondary MRP Reports  Planning reports, for example, forecasting inventory requirements over a period of time.  Performance reports used to determine agreement between actual and programmed usage and costs.  Exception reports used to point out serious discrepancies, such as late or overdue orders.

Copyright 2006 John Wiley & Sons, Inc.15-6 Material Requirements Planning Material requirements planning Planned order releases Work orders Purchase orders Rescheduling notices Item master file Product structure file Master production schedule

Copyright 2006 John Wiley & Sons, Inc.15-7 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

Copyright 2006 John Wiley & Sons, Inc.15-8 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

Copyright 2006 John Wiley & Sons, Inc.15-9 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)

Copyright 2006 John Wiley & Sons, Inc MRP Processes 1.Exploding the bill of material 2.Netting out inventory 3.Lot sizing 4.Time-phasing requirements

Copyright 2006 John Wiley & Sons, Inc CRP MRP planned order releases Routing file Capacity requirements planning Open orders file Load profile for each machine center

Copyright 2006 John Wiley & Sons, Inc Leveling Under-load Conditions 1.Acquire more work 2.Pull work ahead that is scheduled for later time periods 3.Reduce normal capacity

Copyright 2006 John Wiley & Sons, Inc Reducing Over-load Conditions   Eliminating unnecessary requirements   Rerouting jobs to alternative machines, workers, or work centers   Splitting lots between two or more machines   Increasing normal capacity   Subcontracting   Increasing efficiency of the operation   Pushing work back to later time periods   Revising master schedule

Copyright 2006 John Wiley & Sons, Inc Relaxing MRP Assumptions   Material is not always the most constraining resource   Lead times can vary   Not every transaction needs to be recorded   Shop floor may require a more sophisticated scheduling system   Scheduling in advance may not be appropriate for on-demand production.

Copyright 2006 John Wiley & Sons, Inc 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