1. Operations Management
William J. Stevenson
8th edition

2. CHAPTER 13
MRP and ERP
Operations Management, Eighth Edition, by William J. Stevenson
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin

3. MRP
Material requirements planning (MRP): Computer-based information system that translates master schedule requirements for end items into time-phased requirements for subassemblies, components, and raw materials.

4. Independent and Dependent Demand
Independent Demand A
B(4)
C(2)
D(2)
E(1)
D(3)
F(2)
Dependent Demand
Independent demand is uncertain. Dependent demand is certain.

5. Dependant Demand
Dependent demand: Demand for items that are subassemblies or component parts to be used in production of finished goods.
Once the independent demand is known, the dependent demand can be determined.

6. Dependent vs Independent Demand
Figure 13.1
Time
Demand
Stable demand
“Lumpy” demand
Amount on hand
Safety stock

7. Figure 13.2 MRP Inputs MRP Processing MRP Outputs Master schedule
Bill of
materials
Inventory
records
MRP computer
programs
Changes
Order releases
Planned-order
schedules
Exception reports
Planning reports
Performance-
control
reports
transaction
Primary
Secondary

8. MPR Inputs Master Production Schedule
Time-phased plan specifying timing and quantity of production for each end item.
Material Requirement Planning Process
Product Structure Tree
Lead Times

9. Master Schedule
Master schedule: One of three primary inputs in MRP; states which end items are to be produced, when these are needed, and in what quantities.
Cumulative lead time: The sum of the lead times that sequential phases of a process require, from ordering of parts or raw materials to completion of final assembly.

10. Planning Horizon Figure 13.4 1 2 3 4 5 6 7 8 9 10 Fabrication Assembly
Procurement
Fabrication
Subassembly
Assembly

11. Bill-of-Materials
Bill of materials (BOM): One of the three primary inputs of MRP; a listing of all of the raw materials, parts, subassemblies, and assemblies needed to produce one unit of a product.
Product structure tree: Visual depiction of the requirements in a bill of materials, where all components are listed by levels.

12. Product Structure Tree
Figure 13.5
Chair
Seat
Legs (2)
Cross
bar
Side
Rails (2)
Back
Supports (3)
Leg
Assembly
Level 1 2 3

13. Inventory Records One of the three primary inputs in MRP
Includes information on the status of each item by time period
Gross requirements
Scheduled receipts
Amount on hand
Lead times
Lot sizes
And more …

14. Assembly Time Chart Figure 13.7 1 2 3 4 5 6 7 8 9 10 11 Procurement of
raw material D
raw material F
part C
part H
raw material I
Fabrication
of part G
of part E
Subassembly A
Subassembly B
Final assembly
and inspection

15. MRP Processing Gross requirements Schedule receipts Projected on hand
Net requirements
Planned-order receipts
Planned-order releases

16. MPR Processing Gross requirements Scheduled receipts Planned on hand
Total expected demand
Scheduled receipts
Open orders scheduled to arrive
Planned on hand
Expected inventory on hand at the beginning of each time period

17. MPR Processing Net requirements Planned-order receipts
Actual amount needed in each time period
Planned-order receipts
Quantity expected to received at the beginning of the period
Offset by lead time
Planned-order releases
Planned amount to order in each time period

18. Updating the System Regenerative system Net-change system
Updates MRP records periodically
Net-change system
Updates MPR records continuously

19. MRP Outputs
Planned orders - schedule indicating the amount and timing of future orders.
Order releases - Authorization for the execution of planned orders.
Changes - revisions of due dates or order quantities, or cancellations of orders.

20. MRP Secondary Reports Performance-control reports Planning reports
Exception reports

21. Other Considerations Safety Stock Lot sizing Lot-for-lot ordering
Economic order quantity
Fixed-period ordering

22. MRP in Services Food catering service Hotel renovation
End item => catered food
Dependent demand => ingredients for each recipe, i.e. bill of materials
Hotel renovation
Activities and materials “exploded” into component parts for cost estimation and scheduling

23. Benefits of MRP Low levels of in-process inventories
Ability to track material requirements
Ability to evaluate capacity requirements
Means of allocating production time

24. Requirements of MRP Computer and necessary software
Accurate and up-to-date
Master schedules
Bills of materials
Inventory records
Integrity of data

25. MRP II Expanded MRP with emphasis placed on integration
Financial planning
Marketing
Engineering
Purchasing
Manufacturing

26. MRP II Figure 13.14 Market Demand Production plan Problems? Yes No
Rough-cut
capacity planning
Yes No
Finance
Marketing
Manufacturing
Adjust
production plan
Master
production schedule
MRP
Capacity
planning
Requirements
schedules
Adjust master schedule

27. Capacity Planning
Capacity requirements planning: The process of determining short-range capacity requirements.
Load reports: Department or work center reports that compare known and expected future capacity requirements with projected capacity availability.
Time fences: Series of time intervals during which order changes are allowed or restricted.

28. resource requirements
Capacity Planning
Figure 13.15
Develop a tentative
master production
schedule
Use MRP to
simulate material
requirements
Convert material
requirements to
resource requirements
Firm up a portion
of the MPS
Is shop
capacity
adequate?
Can
capacity be
changed to meet
Revise tentative
Change
Yes No

29. ERP Enterprise resource planning (ERP):
Next step in an evolution that began with MPR and evolved into MRPII
Integration of financial, manufacturing, and human resources on a single computer system.

30. ERP Strategy Considerations
High initial cost
High cost to maintain
Future upgrades
Training

31. CHAPTER 13
Additional PowerPoint slides contributed by Geoff Willis, University of Central Oklahoma.

32. Bill of Materials – Part 1
A listing of all raw materials, parts, subassemblies, and assemblies needed to produce one unit
Product structure Tree
Level X
B(2) C 1 2
D(3) E
E(2)
F(2)

33. Bill of Materials – Part 2
How many more of each component is needed to make 15 Xs if there are 5 of each already in stock? X
B(2) C
D(3) E
E(2)
F(2)

34. ERP Benefits
ERP2
Summary

35. Plant Linkages at Hillerich & Bradsby
H&B SAP Application
ERP7
Plant Linkages at Hillerich & Bradsby

36. Bill of Materials
PT3
Federal Signal