Operations ManagementMaterial Requirements Planning (MRP) & ERP Chapter 14: Operations Management Material Requirements Planning (MRP) & ERP Chapter 14


Outline: Outline GLOBAL COMPANY PROFILE: COLLINS INDUSTRIES DEPENDENT INVENTORY MODEL REQUIREMENTS Master Production Schedule Bills of Materials Accurate Inventory records Purchase Orders Outstanding Lead Times for Each Component MRP STRUCTURE


Outline - Continued: Outline - Continued MRP MANAGEMENT MRP Dynamics MRP and JIT LOT-SIZING TECHNIQUES EXTENSIONS IN MRP Closed-Loop MRP Capacity Planning Material Requirements Planning II (MRP II) MRP IN SERVICES


Outline - Continued: Outline - Continued DISTRIBUTION RESOURCE PLANNING (DRP) ENTERPRISE RESOURCE PLANNING (ERP) Advantages and Disadvantages of ERP System ERP in the Service Sector


Learning Objectives: Learning Objectives When you complete this chapter, you should be able to : Identify or Define: Planning bills and kits Phantom bills Low-level coding Lot sizing


Learning Objectives - Continued: Learning Objectives - Continued When you complete this chapter, you should be able to : Describe or Explain: Material requirements planning Distribution requirements planning Enterprise resource planning How ERP works Advantages and disadvantages of ERP systems


Collins Industries: Collins Industries Largest manufacturer of ambulances in the world International competitor 12 major ambulance designs 18,000 different inventory items 6,000 manufactured parts 12,000 purchased parts MRP: IBM’s MAPICS


Collins Industries: Collins Industries Collins requires: Material plan must meet both the requirements of the master schedule and the capabilities of the production facility Plan must be executed as designed Effective “time-phased” deliveries, consignments, and constant review of purchase methods Maintenance of record integrity


Requirements for Effective Use of Dependent Demand Inventory Models: Requirements for Effective Use of Dependent Demand Inventory Models Effective use of dependent demand inventory models requires that the operations manager know the: master production schedule (what is to be made and when) specifications or bills-of-material (amount of materials and parts required to make the product) inventory availability purchase orders outstanding (what is on order) lead times (time it takes to get various components)


Inputs to the Aggregate Production Plan: Inputs to the Aggregate Production Plan


The Planning Process: The Planning Process


Aggregate Production Plan: Aggregate Production Plan


Typical Focus of the Master Production Schedule: Typical Focus of the Master Production Schedule


Bill-of-Material: List of components & quantities needed to make product Provides product structure (tree) Parents: Items above given level Children: Items below given level Shows low-level coding A part gets the lowest level code in item structure. Top level is 0; next level is 1 etc. Bill-of-Material


Product Structure for “Awesome” A: Product Structure for “Awesome” A


Ex: Calculate the Part Requirements: Ex: Calculate the Part Requirements For an order size of 50 A items: #Part B=2(#A)=(2)(50)=100 #Part C=3(#A)=(3)(50)=150 #Part E=2(#B)+2(#C)=(2)(100)+2(150)=500 #Part F=2(#C)=(2)(150)=300 #Part D=2(#B)+2(#F)=(2)(100)+2(300)=800 #Part G=1(#F)=300


Issues in MRP:Accurate Inventory Records: Issues in MRP: Accurate Inventory Records Good inventory management is an absolute necessity for an MRP system to work, i.e., one needs to know what is in stock. If the firm has not yet received at least 99% record accuracy, then MRP will not work.


Issues in MRP:Purchase Orders Outstanding: Issues in MRP: Purchase Orders Outstanding When purchase orders are executed, records of those orders and their scheduled delivery dates must be available to production personnel.


Issues in MRP:Lead Times: Issues in MRP: Lead Times The time required to acquire an item is the lead time Lead time of a manufactured item consists of move, setup, assembly or run times. Lead time of a purchased item includes the time between order release and its retreival.


Time-Phased Product Structure for Awesome Speakers: Time-Phased Product Structure for Awesome Speakers


Material Requirements Planning (MRP): Manufacturing computer information system Determines quantity & timing of dependent demand items © 1995 Corel Corp. Material Requirements Planning (MRP)


MRP Requirements: Computer system Mainly discrete products Accurate bill-of-material Accurate inventory status 99% inventory accuracy Stable lead times © 1984-1994 T/Maker Co. MRP Requirements


MRP Benefits: Increased customer satisfaction due to meeting delivery schedules Faster response to market changes Improved labor & equipment utilization Better inventory planning & scheduling Reduced inventory levels without reduced customer service MRP Benefits


Structure of the MRP System: Structure of the MRP System


Time-Phased Product Structure for Awesome Speakers: Time-Phased Product Structure for Awesome Speakers


Gross Material Requirements Plan for 50 “Awesome A” Speaker Kits: Gross Material Requirements Plan for 50 “Awesome A” Speaker Kits


Net Material Requirements Plan: Net Material Requirements Plan Item Onhand A 10 B 15 C 20 D 10 E 10 F 5 G 0


Net Requirements Plan: Net Requirements Plan


Net Requirements Plan: Net Requirements Plan


Derivation of Master Schedule: Derivation of Master Schedule Therefore, these are the gross requirements for B Periods


MRP Dynamics: MRP Dynamics Supports “replanning” Problem with system “nervousness” “Time fence” - allows a segment of the master schedule to be designated as “not to be rescheduled” “Pegging” - tracing upward in the bill-of-materials from the component to the parent item That a manager can react to changes, doesn’t mean he/she should


MRP and JIT: MRP and JIT MRP - a planning and scheduling technique with fixed lead times JIT - a way to move material expeditiously Integrating the two: Small bucket approach and back flushing Balanced flow approach


Lot-Sizing Techniques: Lot-Sizing Techniques Lot-for-lot Economic Order Quantity Part Period Balancing Wagner-Whitin Algorithm


MRP Lot-Sizing Problem: Lot-for-Lot Techniques: MRP Lot-Sizing Problem: Lot-for-Lot Techniques


MRP Lot-Sizing Problem: EOQ Technique: MRP Lot-Sizing Problem: EOQ Technique


MRP Lot-Sizing Problem: PPB Technique (omitted): MRP Lot-Sizing Problem: PPB Technique (omitted)


Extensions of MRP: Extensions of MRP Closed loop MRP Capacity planning - load reports MRP II - Material Resource Planning Enterprise Resource Planning


Closed Loop MRP: Closed Loop MRP


Extensions of MRPCapacity Planning: Extensions of MRP Capacity Planning Tactics for smoothing the load and minimizing the impact of changed lead time include: Overlapping - reduces the lead time, entails sending pieces to the second operation before the entire lot has completed the first operation Operations splitting - sends the lot to two different machines for the same operation Lot splitting - breaking up the order and running part of it ahead of the schedule


Initial Resource Requirements/Smoothed Resource Requirements: Initial Resource Requirements/Smoothed Resource Requirements


Extensions to MRPEnterprise Resource Planning: Extensions to MRP Enterprise Resource Planning MRP II with ties to customers and suppliers


MRP and ERP Information Flows, Integrated with Other Systems: MRP and ERP Information Flows, Integrated with Other Systems


MRP in Services: MRP in Services Can be used when demand for service or service items is directly related to or derived from demand for other services restaurant - rolls required for each meal hospitals - implements for surgery etc.


Product Structure, Bill of Materials, Bill of Labor for Veal Picante: Product Structure, Bill of Materials, Bill of Labor for Veal Picante