1. 1 MRP and ERP Chapter 14

2. 2 Transparency on aggregate to master plan

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

4. 4 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. Dependant Demand

5. 5 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. MRP

6. 6 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

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

8. 8 Planning Horizon 12345 67 8910 Weeks Procurement Fabrication Subassembly Assembly

9. 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. Time fences: Series of time intervals during which order changes are allowed or restricted.

10. 10 Bill-of-Materials Bill of materials: 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.

11. 11 Product Structure Tree Chair Seat Legs (2) Cross bar Side Rails (2) Cross bar Back Supports (3) Leg Assembly Back Assembly Level 0 1 2

12. 12 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 …

13. 13 Other Considerations Safety Stock Lot sizing

14. 14 MRP Processing Gross requirements Schedule requirements Projected on hand Net requirements Planned-order receipts Planned-order releases

15. 15 MPR Processing Gross requirements –Total expected demand Scheduled receipts –Open orders scheduled to arrive Planned on hand –Expected inventory on hand at the beginning of each time period

16. 16 MPR Processing Net requirements –Actual amount needed in each time period Planned-order receipts –Quantity expected to received at the beginning of the period in which it is shown, reflecting the lot size Planned-order releases –Planned amount to order in each time period; same as Planned-order receipts offset by lead time

17. 17 Inventory Requirements Net requirements: Available Inventory: Net Requirements = Gross Requirements – Available Inventory Available Inventory = Projected on hand – Safety stock – Inventory allocated to other items

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19. 19 A Key MRP Output Planned orders (referring to Planned Order Releases)- schedule indicating the amount and timing of future orders. It tells us how when to order and how much, assuring us a lower level of inventory than if we did not use MRP.

20. 20 Other MRP Outputs (MRP Secondary Reports) Performance-control reports Planning reports Exception reports

21. 21 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.

22. 22 Capacity Requirements in MRP Planning 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 requirements Revise tentative master production schedule Change capacity Yes No Yes No

23. 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. 24 Requirements of MRP Computer and necessary software Accurate and up-to-date – Master schedules – Bills of materials – Inventory records Integrity of data

25. 25 MRP II or Manufacturing Resource Planning Expanded MRP with and emphasis placed on integration – Financial planning – Marketing – Engineering – Purchasing – Manufacturing

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

27. 27 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. ERP

28. 28 ERP Software –ERP software provides a system to capture and make data available in real time to decision makers and other users in the organization –Provides tools for planning and monitoring various business processes –Includes Production planning and scheduling Inventory management Product costing Distribution

29. 29 MRP in Services Service applications such as: –Professional services –Postal services –Retail –Banking –Healthcare –Higher education –Engineering –Logistical services –Real estate

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

31. 31 The following slides are from a consultant who markets ERP systems. Please review the slides. As time permits. we can go through them in class. Note the reason for these slides is to illustrate a situation you might find yourself in if you are a manager in a company making a decision to purchase an ERP system. It can be a very intimidating process for your company when the seller has all the information about a complex system, and the buyer is at the mercy of the seller’s knowledge and technical know-how.

32. 32 Basic Definitions

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42. 42 End of slides for MRP/ERP