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Material Requirements Planning and Enterprise Resource Planning. Dr. Ron Lembke. Historical Perspective. ERP- Enterprise Resource Planning. MRP II – Manufacturing Resource Planning. mrp – material requirements planning . MRP Crusade (1975). Material Requirements Planning

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historical perspective
Historical Perspective

ERP- Enterprise Resource Planning

MRP II – Manufacturing

Resource Planning

mrp – material

requirements

planning

mrp crusade 1975
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
closed loop mrp
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
mrp ii manufacturing resource planning
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
success
Success?

MRP Crusade

Begins

erp differences
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
erp sales
ERP Sales
  • Y2K: Worldwide sales of top 10 vendors
    • 1995 $2.8 B
    • 1996 $4.2 B
    • 1997 $5.8 B $3.2 B SAP
  • Fortune survey: 44% reported spending at least 4 times as much on implementation as on software
erp challenges
ERP Challenges
  • Modules assume “best practices:”
    • Change software to reflect company ($)
    • Change company to follow software (?)
  • Accuracy of data
    • Drives entire system
    • Ownership of / responsibility for
  • Ability to follow structure
erp novel
ERP Novel?
  • “Goal-like” novel
  • Hero learns more about ERP, deciding if it is right for his company
  • Company rushes through installation
  • General introduction to ERP systems, what they do, how different from MRP
  • SAP R/3 screen shots
the heart of the matter mrp
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
bike production
Bike Production

Frame

OCLV Carbon

Drivetrain

Wheels

Assemble

Parts

Arrive

Seat, Bars

Due

1

14

7

21

4

11

28

18

Mar

Apr

snow shovels
Snow Shovels
  • Example – Snow Shovel
    • Order quantity is 50 units
    • LT is one week
  • Simple Bill of Materials - BOM
mrp table
MRP Table

6 units short

mrp table1
MRP Table

Order 50 units week earlier

ending inventory
Ending Inventory

Ending inventory

terminology
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
1605 snow shovel
1605 Snow Shovel

1605

Snow Shovel

062 Nail (4)

13122

Top Handle

Assy

048

Scoop-shaft

connector

14127

Rivet (4)

314 scoop assembly

118 Shaft (wood)

314 scoop assembly
314 scoop assembly

314 scoop assembly

019 Blade (steel)

14127 Rivet (6)

2142 Scoop (aluminum)

13122 top handle assembly
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)

bom explosion
BOM Explosion
  • Process of translating net requirements into components part requirements
    • Take into account existing inventories
    • Consider also scheduled receipts
bom explosion example
BOM Explosion Example
  • Need to make 100 shovels
  • We are responsible for handle assemblies.
13122 top handle assembly1
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)

net requirements
Net Requirements

Sch Gross Net

Part Description Inv Rec Req Req

Top handle assy 25 -- 100 75

Top handle 22 25

Nail (2 required) 4 50

Bracket Assy 27 --

Top bracket 15 --

Top coupling 39 15

net requirements1
Net Requirements

Sch Gross Net

Part Description Inv Rec Req Req

Top handle assy 25 -- 100 75

Top handle 22 25 75 28

Nail (2 required) 4 50 150 96

Bracket Assy 27 -- 75 48

Top bracket 15 --

Top coupling 39 15

13122 top handle assembly2
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)

net requirements2
Net Requirements

Sch Gross Net

Part Description Inv Rec Req Req

Top handle assy 25 -- 100 75

Top handle 22 25 75 28

Nail (2 required) 4 50 150 96

Bracket Assy 27 -- 75 48

Top bracket 15 -- 48 33

Top coupling 39 15 48 --

timing of production
Timing of Production
  • This tells us how many of each we need
    • Doesn’t tell when to start
    • Start as soon as possible?
    • Dependent events (oh no, not that!)
13122 top handle assy
13122 Top Handle Assy

Order policy: Lot-for-lot

13122 top handle assy 2
13122 Top Handle Assy-2

Order policy: Lot-for-lot

457 top handle
457 Top Handle

One handle for

Each assembly

457 top handle1
457 Top Handle

Order policy: Lot-for-lot

457 top handle2
457 Top Handle

Order policy: Lot-for-lot

082 nail 2 required
082 Nail (2 required)

Two nails for

Each assembly

11495 bracket assembly
11495 Bracket Assembly

One bracket for

Each assembly

11495 bracket assembly1
11495 Bracket Assembly

Order policy: Lot-for-lot

129 top handle bracket
129 Top handle bracket

Order policy: Lot-for-lot

1118 top handle coupling1
1118 Top handle coupling

Order policy: Lot-for-lot

other considerations
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
summary
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