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

2. Historical Perspective
ERP- Enterprise Resource Planning
MRP II – Manufacturing
Resource Planning
mrp – material
requirements
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:” Accuracy of data
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. 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

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

12. MRP Table
6 units short

13. MRP Table
Order 50 units week earlier

14. Ending Inventory
Ending inventory

15. 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

16. 1605 Snow Shovel 1605 Snow Shovel Front View 1605 Snow Shovel
Back View

17. 1605 Snow Shovel 1605 Snow Shovel 082 Nail (4) 13122 048 Top Handle
Scoop-shaft
connector
13122
Top Handle
Assy
118 Shaft
(wood)
14127
Rivet (4)
314 scoop assembly
082 Nail
(4)

18. 314 scoop assembly 314 scoop assembly 019 Blade (steel) 14127
2142 Scoop (aluminum)
019 Blade (steel)
14127
Rivet (6)

19. 13122 Top Handle Assembly 13122 Top Handle Assembly 457 Top handle
(wood)
082 Nail (2)
11495 Welded
Top handle bracket
Assembly
1118
Top handle
Coupling (steel)
129 Top Handle
Bracket (steel)

20. Linking the Records
Process of translating net requirements for one product into Gross Requirements for its component parts
Take into account existing inventories
Consider also scheduled receipts
AKA Bill of Materials Explosion

21. Put in the Scoop Pieces 1605 Snow Shovel 118 Shaft (wood) 048
Scoop-shaft
connector
13122
Top Handle
Assy
082 Nail
(4)
14127
Rivet (4)
314 scoop assembly
2142 Scoop
(aluminum)
14127
Rivet (6)
019 Blade (steel)

22. Entire BOM 1605 Snow Shovel 13122 Top Handle Assy 118 Shaft (wood)
082 Nail
(4)
048
Scoop-shaft
connector
14127
Rivet (4)
314 scoop assembly
14127
Rivet (6)
019 Blade (steel)
2142 Scoop
(aluminum)
11495
Welded
457
handle
082 Nail (2)
1118
Coupling
129 Top
Bracket

23. Product Structure Diagram
1605
Snow Shovel
118 Shaft
13122
Top Handle
Assy
082 Nail
(4)
048
connector
14127
Rivet (4)
314 scoop assembly
2142 Scoop
14127
Rivet (6)
019 Blade
082 Nail (2)
11495
Welded
457
handle
1118
Coupling
129 Top
Bracket

24. Product Structure Diagram
1605
Snow Shovel
LEVEL 0
13122
Top Handle
Assy
118 Shaft
048
connector
LEVEL 1
314 scoop assembly
LEVEL 2
2142 Scoop
14127
Rivet (6)
14127
Rivet (4)
019 Blade
11495
Welded
457
handle
082 Nail
(2)
082 Nail
(4)
1118
Coupling
129 Top
Bracket
LEVEL 3

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

26. Net Requirements Sch Gross Net Part Description Inv Rec Req Req
Top handle assy
Top handle
Nail (2 required)
Bracket Assy
Top bracket
Top coupling
Doesn’t tell us when to order what.

27. 13122 Top Handle Assy
Order policy: Lot-for-lot
Lt = 2

28. 13122 Top Handle Assy
Order policy: Lot-for-lot
Lt = 2

29. 13122 Top Handle Assembly 13122 Top Handle Assembly 11495 Welded
Top handle bracket
Assembly
457 Top handle
(wood)
1118
Top handle
Coupling (steel)
129 Top Handle
Bracket (steel)
082 Nail (2)

30. 457 Wooden Dowel
One handle for
Each assembly

31. 457 Wooden Dowel
Order policy: Q = 50

32. 457 Wooden Dowel
Order policy: Q = 50

33. 082 Nail (2 required)
x2!!!
Two nails for
Each assembly

34. 082 Nail (2 required) x4!!! +300 +200 +120 +240 +100 +80
Four nails for
Each shovel final assembly
+160
+80

35. 082 Nail (2 required)

36. 11495 Bracket Assembly
One bracket for
Each assembly

37. 11495 Bracket Assembly
Periodic Ordering Quantity: 2 periods

38. 11495 Bracket Assembly
Periodic Ordering Quantity: 2 periods

39. 129 Top Bracket

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

41. 1118 Top handle coupling

42. 1118 Top handle coupling LT = 1 Order policy: Lot-for-lot,
Safety Stock = 20

43. 1118 Top handle coupling LT = 1 Order policy: Lot-for-lot,
Safety Stock = 20

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

46. 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

47. 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