MRP and ERP McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights...

MRP and ERP

McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

You should be able to:1. Describe the conditions under which MRP is most appropriate2. Describe the inputs, outputs, and nature of MRP processing3. Explain how requirements in a MPS are translated into

material requirements for lower-level items4. Discuss the benefits and requirements of MRP5. Explain how an MRP system is useful in capacity

requirements planning6. Outline the potential benefits and some of the difficulties

users have encountered with MRP7. Describe MRPII and its benefits8. Describe ERP, what it provides, and its hidden costs

12-2Student Slides

Master ProductionMaster ProductionScheduling (MPS)Scheduling (MPS)Master ProductionMaster ProductionScheduling (MPS)Scheduling (MPS)

Material RequirementsMaterial RequirementsPlanning (MRP)Planning (MRP)

Material RequirementsMaterial RequirementsPlanning (MRP)Planning (MRP)

Capacity RequirementsCapacity RequirementsPlanning (CRP)Planning (CRP)

Capacity RequirementsCapacity RequirementsPlanning (CRP)Planning (CRP)

AggregateAggregatePlanningPlanning

AggregateAggregatePlanningPlanning

ResourceResourceRequirementsRequirements

PlanningPlanning

Material Requirements Planning (MRP)

Dependent demandDemand for items that are subassemblies or

component parts to be used in the production of finished goods.

Dependent demand tends to be sporadic or “lumpy”Large quantities are used at specific points in

time with little or no usage at other times

12-5Student Slides

Material requirements planning (MRP):

A computer-based information system that translates master schedule requirements for end items into time-phased requirements for subassemblies, components, and raw materials.

The MRP is designed to answer three questions:1. What is needed?2. How much is needed?3. When is it needed?

Student Slides12-6

Student Slides12-7

MRP processing takes the end item requirements specified by the master schedule and “explodes” them into time-phased requirements for assemblies, parts, and raw materials offset by lead times

Student Slides12-8

The MRP is based on the product structure tree diagram

Requirements are determined level by level, beginning with the end item and working down the tree The timing and quantity of each “parent” becomes the

basis for determining the timing and quantity of the “children” items directly below it.

The “children” items then become the “parent” items for the next level, and so on

Student Slides12-9

Begins with number of end items neededAdd service parts not included in MPSExplode MPS into gross requirements by

consulting bill of materials fileModify gross requirements to get net

requirements:Net Requirements = Gross Requirements

+ Allocated Inventory+ Safety Stock

- Inventory On HandOffset orders to allow for lead time

Student Slides12-11

Student Slides12-12

Student Slides12-13

Enables managers to easily determine the quantities of each component for a given order

size To know when to release orders for each component To be alerted when items need attention

Additional benefits Low levels of in-process inventories The ability to track material requirements The ability to evaluate capacity requirements A means of allocating production time The ability to easily determine inventory usage via backflushing

Exploding an end item’s BOM to determine the quantities of the components that were used to make the item

12-14Student Slides

To implement an effective MRP system requires: A computer and the necessary software to handle

computations and maintain records Accurate and up-to-date

Master schedulesBills of materialsInventory records

Integrity of data files

12-15Student Slides

Manufacturing resources planning (MRP II) Expanded approach to production resource planning,

involving other areas of the firm in the planning process and enabling capacity requirements planning

Most MRP II systems have the capability of performing simulation to answer a variety of “what if” questions so they can gain a better appreciation of available options and their consequences

Student Slides12-16

Enterprise resource planning (ERP) ERP was the next step in an evolution that began with

MRP and evolved into MRPII

ERP, like MRP II, typically has an MRP core

Represents an expanded effort to integrate standardized that will permit information sharing among different areas of an organization in order to manage the system more effectively

ERP systems are composed of a collection of integrated modules

Student Slides12-17

ERP strategic implications High initial cost High cost to maintain Need for future upgrades Intensive training required

ERP as a strategic planning tool Can improve supply chain management Stronger links between their customers and their

supplier Makes the organization more capable of satisfying

changing customer requirements Offers opportunities for continuous improvement

12-18Student Slides

LocoMopeds is a manufacturer of off-road mopeds. The following product structure diagram represents the bill of materials for its dual-carburetor Model 442 moped. MOPEDMOPEDMOPEDMOPED

ENGINEENGINEASSEMBLYASSEMBLY

ENGINEENGINEASSEMBLYASSEMBLY

MOTORMOTORMOTORMOTOR CARBURETORCARBURETOR(2)(2)

CARBURETORCARBURETOR(2)(2)

GASGASTANKTANKGASGASTANKTANK

WHEELWHEELASSEMBLYASSEMBLY

(2)(2)

WHEELWHEELASSEMBLYASSEMBLY

(2)(2)

HUB HUB ASSEMBLYASSEMBLY

HUB HUB ASSEMBLYASSEMBLY TIRETIRETIRETIRE

FRAMEFRAMEFRAMEFRAME

Level 0Level 0

Level 1Level 1

Level 2Level 2

Bill of MaterialParent Component LevelCompon.Code Code Code Description Req’d

442 0 #442 Moped

442 EA 1 Engine Assem.1GT 1 Gas Tank 1WA 1 Wheel Assem. 2F 1 Frame 1

EA M 2 Motor 1C 2 Carburetor 2

WA HA 2 Hub Assem. 1T 2 Tire 1

Inventory Status Report

ItemItemCodeCode

On-On-HandHand

SafetySafetyStockStock

LotLotSizeSize

LeadLeadTimeTime

Sched. ReceiptsSched. ReceiptsQnty. WeekQnty. Week

442442 500500 200200 LFLLFL 11 ---- ----

EAEA 300300 100100 500500 11 10001000 1010

GTGT 600600 200200 LFLLFL 22 900900 1010

WAWA 500500 400400 500500 11 20002000 1010

FF 600600 00 20002000 33 20002000 1010

MM 250250 00 LFLLFL 11 ---- ----

CC 150150 100100 2000+2000+ 22 ---- ----

HAHA 100100 00 LFLLFL 11 24002400 1111

TT 500500 500500 10001000 33 3000,20003000,2000 11,1211,12

The company is currently planning production for weeks 10 through 16. Based on existing orders and demand forecasts, the master production schedule is as follows:

Master Production Schedule: #442 Moped

Determine the MRP schedule required to support the master production schedule for the Model 442 moped in weeks 10-16.

1111

13001300 800800 12001200 14001400

1010 16161515141413131212

00 10001000 00

WEEKWEEK

QUANTITYQUANTITY

MRP Schedule for #442 Mopeds for Weeks 10 - 16, considering that:Gross Requirements come from the moped

MPSThere is an On-Hand balance of 500 mopeds at

the end of week 9There are no Scheduled Receipts for mopeds A lot-for-lot rule is used for ordering mopedsSafety stock of 200 mopeds is desiredLead time for mopeds is one week

MRP Schedule for #442 Mopeds . . . Initially

GROSS REQUIREMENTSGROSS REQUIREMENTS

SCHEDULED RECEIPTSSCHEDULED RECEIPTS

AVAILABLE (ON-HAND = 500) AVAILABLE (ON-HAND = 500)

NET REQUIREMENTSNET REQUIREMENTS

PLANNED ORDER RECEIPTSPLANNED ORDER RECEIPTS

PLANNED ORDER RELEASESPLANNED ORDER RELEASES

ITEM: 442 MOPED LT: 1 ITEM: 442 MOPED LT: 1 LOT SIZE: LFL SS: 200 LOT SIZE: LFL SS: 200

00

1010

10001000 00

1111 1212 1313

13001300 800800

15151414

1400140012001200

1616

WEEKWEEK

MRP Schedule for #442 Mopeds . . . Completed



AVAILABLE (ON-HAND = 500)AVAILABLE (ON-HAND = 500)




ITEM: 442 MOPED LT: 1 ITEM: 442 MOPED LT: 1 LOT SIZE: LFL SS: 200 LOT SIZE: LFL SS: 200

00

300300

10001000

1010

10001000

10001000

300300

13001300

13001300

00

00

1111 1212 1313

13001300

12001200800800

12001200800800

1400140012001200

13001300

13001300

800800

000000 00

14001400

800800

1515

14001400

1414

1400140012001200

1616

WEEKWEEK

MRP Schedule for Gas Tanks for Weeks 10 - 16, considering that:Gross Requirements come from moped

Planned-Order-ReleasesThere is an On-Hand balance of 600 gas tanks

at the end of week 9There is a Scheduled Receipt for 900 tanks in

week 10 A lot-for-lot rule is used for ordering gas tanksSafety stock of 200 gas tanks is desiredLead time for gas tanks is two weeks

MRP Schedule for Gas Tanks . . . Initially



AVAILABLE (ON-HAND = 600)AVAILABLE (ON-HAND = 600)




ITEM: GAS TANK LT: 2 ITEM: GAS TANK LT: 2 LOT SIZE: LFL SS: 200LOT SIZE: LFL SS: 200

10001000

900900

1010

00 13001300

1111 1212 1313

800800 12001200

15151414

0014001400

1616

WEEKWEEK

MRP Schedule for Gas Tanks . . . Completed



AVAILABLE AVAILABLE (ON-HAND = 600) (ON-HAND = 600)

NET REQUIREMENTS NET REQUIREMENTS



ITEM: GAS TANK LT: 2 ITEM: GAS TANK LT: 2 LOT SIZE: LFL SS: 200 LOT SIZE: LFL SS: 200

10001000

900900

13001300

10001000

1010

800800

00

12001200

300300

13001300

1111 1212 1313

800800

12001200

14001400

12001200

15151414

0014001400

1616

WEEKWEEK

300300 000000

10001000

10001000 800800

800800

14001400

1400140012001200

00

MRP Schedule for Frames for Weeks 10 - 16, considering that:Gross Requirements come from moped

Planned-Order-ReleasesThere is an On-Hand balance of 600 frames at

the end of week 9There is a Scheduled Receipt for 2000 frames

in week 10The firm uses a Lot Size (multiple) of 2000 for

ordering framesNo safety stock of frames is desiredLead time for frames is 3 weeks

MRP Schedule for Frames . . . Initially



AVAILABLE AVAILABLE




ITEM: FRAME LT: 3 ITEM: FRAME LT: 3 LOT SIZE: 2000 SS: 0LOT SIZE: 2000 SS: 0

10001000

20002000

1010

00 13001300

1111 1212 1313

800800 12001200

15151414

0014001400

1616

WEEKWEEK

600600

MRP Schedule for Frames . . . Completed







ITEM: FRAME LT: 3 ITEM: FRAME LT: 3 LOT SIZE: 2000 SS: 0 LOT SIZE: 2000 SS: 0

10001000

20002000

26002600

00

20002000

1010

16001600

00

20002000

16001600

13001300

1111 1212 1313

800800

20002000

500500

20002000

300300300300 900900

00

12001200

15151414

0014001400

1616

WEEKWEEK

00 00

15001500

00 11001100

MRP Schedule for Engine Assemblies for Weeks 10 - 16, considering that:Gross Requirements come from moped

Planned-Order-ReleasesThere is an On-Hand balance of 300 engine

assemblies at the end of week 9There is a Scheduled Receipt for 1000 engine

assemblies in week 10The firm uses a Lot Size (multiple) of 500 for

ordering engine assembliesSafety Stock of 100 engine assemblies is

desiredLead time for engine assemblies is 1 week

MRP Schedule for Engine Assemblies . . . Initially







ITEM: ENGINE ASSEM. LT: 1 ITEM: ENGINE ASSEM. LT: 1 LOT SIZE: 500 SS: 100 LOT SIZE: 500 SS: 100

10001000

10001000

1010

00

13001300

1111 1212 1313

800800 12001200

15151414

0014001400

1616

WEEKWEEK

MRP Schedule for Engine Assemblies . . . Completed







ITEM: ENGINE ASSEM. LT: 1 ITEM: ENGINE ASSEM. LT: 1 LOT SIZE: 500 SS: 100 LOT SIZE: 500 SS: 100

10001000

10001000

12001200

1010

15001500

200 200

00

500500

15001500

11001100

200200

13001300

1111 1212 1313

800800

1000100011001100

1000100015001500

10001000

400400

500500

15001500

400400100100400400 00

12001200

15151414

0014001400

1616

WEEKWEEK

MRP Schedule for Motors for Weeks 10 - 16, considering that:Gross Requirements come from engine

assembly Planned-Order-ReleasesThere is an On-Hand balance of 250 motors at

the end of week 9There are no Scheduled Receipts for motorsA lot-for-lot rule is used for ordering motorsNo Safety Stock of motors is desiredLead time for motors is 1 week

MRP Schedule for Motors . . . Initially


SCHEDULED RECEIPTS SCHEDULED RECEIPTS





ITEM: MOTOR LT: 1 ITEM: MOTOR LT: 1 LOT SIZE: LFL SS: 0 LOT SIZE: LFL SS: 0 1010

15001500

500500

1111 1212 1313

15001500

10001000

15151414 1616

WEEKWEEK

MRP Schedule for Motors . . . Completed







ITEM: MOTOR LT: 1 ITEM: MOTOR LT: 1 LOT SIZE: LFL SS: 0 LOT SIZE: LFL SS: 0

250250

12501250

1010

12501250

500500

12501250

250250

15001500

15001500

500500

500500

00

500500

1111 1212 1313

15001500

10001000

10001000

15001500

15001500

10001000

000000 00

10001000

15151414 1616

WEEKWEEK

MRP Schedule for Carburetors for Weeks 10 - 16, considering that:Gross Requirements come from engine

assembly Planned-Order-Releases (times 2)There is an On-Hand balance of 150

carburetors at the end of week 9There are no Scheduled Receipts for

carburetorsA Lot Size of 200+ is used for ordering

carburetorsSafety Stock of 100 carburetors is desiredLead time for carburetors is 2 weeks

MRP Schedule for Carburetors . . . Initially






PLANNED ORDER RELEASES PLANNED ORDER RELEASES

ITEM: CARBURETOR LT: 2 ITEM: CARBURETOR LT: 2 LOT SIZE: 2000+ SS: 100LOT SIZE: 2000+ SS: 100 1010

30003000 10001000

1111 1212 1313

30003000 20002000

15151414 1616

WEEKWEEK

MRP Schedule for Carburetors . . . Completed






PLANNED ORDER RELEASES PLANNED ORDER RELEASES

ITEM: CARBURETOR LT: 2 ITEM: CARBURETOR LT: 2 LOT SIZE: 2500+ SS: 100LOT SIZE: 2500+ SS: 100

5050

25002500

1010

25002500

30503050

30003000

30003000

25002500

25002500

950950

5050

10001000

1111 1212 1313

30003000

950950

25002500

14501450

25002500

155015501050105015501550 15501550

20002000

15151414 1616

WEEKWEEK

MRP Schedule for Wheel Assemblies for Weeks 10 - 16, considering that:Gross Requirements come from moped

Planned-Order-Releases (times 2)There is an On-Hand balance of 500 wheel

assemblies at the end of week 9There is a Scheduled Receipt for 2000 wheel

assemblies in week 10A Lot Size (multiple) of 500 is used for ordering

wheel assembliesSafety Stock of 400 wheel assemblies is

desiredLead time for wheel assemblies is 1 week

MRP Schedule for Wheel Assemblies . . . Initially







ITEM: WHEEL ASSEM. LT: 1 ITEM: WHEEL ASSEM. LT: 1 LOT SIZE: 500 SS: 400 LOT SIZE: 500 SS: 400

20002000

20002000

1010

00

26002600

1111 1212 1313

16001600 24002400

15151414

0028002800

1616

WEEKWEEK

MRP Schedule for Wheel Assemblies . . . Completed







ITEM: WHEEL ASSEM. LT: 1 ITEM: WHEEL ASSEM. LT: 1 LOT SIZE: 500 SS: 400 LOT SIZE: 500 SS: 400

20002000

20002000

21002100

1010

25002500

100100

00

20002000

25002500

25002500

100100

26002600

1111 1212 1313

16001600

2800280020002000

3000300020002000

30003000

16001600

20002000

20002000

0040040000 200200

24002400

15151414

0028002800

1616

WEEKWEEK

MRP Schedule for Hub Assemblies for Weeks 10 - 16, considering that:Gross Requirements come from wheel assembly

Planned-Order-ReleasesThere is an On-Hand balance of 100 hub

assemblies at the end of week 9There is a Scheduled Receipt of 2400 hub

assemblies in week 11A lot-for-lot rule is used for ordering hub

assembliesNo Safety Stock of hub assemblies is desiredLead time for hub assemblies is 1 week

MRP Schedule for Hub Assemblies . . . Initially







ITEM: HUB ASSEM. LT: 1 ITEM: HUB ASSEM. LT: 1 LOT SIZE: LFL SS: 0 LOT SIZE: LFL SS: 0

00

1010

24002400

25002500

20002000

1111 1212 1313

20002000

30003000

15151414

0000

1616

WEEKWEEK

MRP Schedule for Hub Assemblies . . . Completed







ITEM: HUB ASSEM. LT: 1 ITEM: HUB ASSEM. LT: 1 LOT SIZE: LFL SS: 0 LOT SIZE: LFL SS: 0

00

100100

1010

20002000

25002500

24002400

25002500

20002000

20002000

20002000

00

20002000

1111 1212 1313

20002000

30003000

30003000

20002000

20002000

30003000

000000 00

30003000

15151414

0000

1616

WEEKWEEK

MRP Schedule for Tires for Weeks 10 - 16, considering that:Gross Requirements come from wheel

assembly Planned-Order-ReleasesThere is an On-Hand balance of 500 tires at the

end of week 9There are Scheduled Receipts for 3000 and

2000 tires weeks 11 and 12, respectivelyA Lot Size (multiple) of 1000 is used for

ordering tiresSafety Stock of 500 tires is desiredLead time for tires is 3 weeks

MRP Schedule for Tires . . . Initially







ITEM: TIRE LT: 3 ITEM: TIRE LT: 3 LOT SIZE: 1000 SS: 500 LOT SIZE: 1000 SS: 500

00

1010

30003000

25002500 20002000

20002000

1111 1212 1313

20002000

30003000

15151414

0000

1616

WEEKWEEK

MRP Schedule for Tires . . . Completed







ITEM: TIRE LT: 3 ITEM: TIRE LT: 3 LOT SIZE: 1000 SS: 500 LOT SIZE: 1000 SS: 500

00

0 0

20002000

1010

30003000

30003000

30003000

25002500

25002500

20002000

20002000

1111 1212 1313

20002000

25002500

30003000

15001500

20002000

500500 500500500 500 500 500

30003000

15151414

0000

1616

WEEKWEEK

MRP and ERP McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights...

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Transcript of MRP and ERP McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights...