MRP Systems

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Operations Management, Seventh Edition, by William J. Stevenson

Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

MRP & ERP

Chapter 15

MRP and ERP

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MRP & ERP

• Material requirements planning (MRP):

Computer-based information system for

ordering and scheduling of dependent

demand inventories

MRP

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MRP & ERP

• Dependent demand: Demand for items

that are subassemblies or component

parts to be used in production of

finished goods.

Dependant Demand

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Dependent vs Independent Demand

Time

Time Time

Time

De

ma

nd

Dem

an

d

Stable demand “Lumpy” demand

Am

ou

nt

on

ha

nd

Am

ou

nt

on

ha

nd

Safety stock

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MRP & ERP

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

Inventory

transaction

Primary

reports

Secondary

reports

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MRP & ERP

• Master Production Schedule

• Time-phased plan specifying timing

and quantity of production for each

end item.

• Material Requirement Planning

Process

MPR Inputs

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MRP & ERP

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.

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MRP & ERP

Planning Horizon

1 2 3 4 5 6 7 8 9 10

Procurement

Fabrication

Subassembly

Assembly

Figure 14-4

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MRP & ERP

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.

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MRP & ERP

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

3

Figure 15-5

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MRP & ERP

Assembly Time Chart

1 2 3 4 5 6 7 8 9 10 11

Procurement of

raw material D

Procurement of

raw material F Procurement of

part C

Procurement of

part H

Procurement of

raw material I

Fabrication

of part G

Fabrication

of part E

Subassembly A

Subassembly B

Final assembly

and inspection

Figure 15-8

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MRP & ERP

MRP Processing

• Gross requirements

• Schedule receipts

• Projected on hand

• Net requirements

• Planned-order receipts

• Planned-order releases

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MRP & ERP

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.

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MRP & ERP

MRP Secondary Reports

• Performance-control reports

• Planning reports

• Exception reports

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MRP & ERP

Other Considerations

• Safety Stock

• Lot sizing

– Lot-for-lot ordering

– Economic order quantity

– Fixed-period ordering

– Part-period model

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MRP & ERP

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.

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MRP & ERP

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

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MRP & ERP

• Food catering service

– End item => catered food

– Dependent demand => ingredients for

each recipe, i.e. bill of materials

• Hotel renovation

– Activities and materials “exploded” into

component parts

MRP in Services

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MRP & ERP

Benefits of MRP

• Low levels of in-process inventories

• Ability to track material requirements

• Ability to evaluate capacity requirements

• Means of allocating production time

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MRP & ERP

Requirements of MRP

• Computer and necessary software

• Accurate and up-to-date

– Master schedules

– Bills of materials

– Inventory records

• Integrity of data

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MRP & ERP

• Expanded MRP with and emphasis

placed on integration

– Financial planning

– Marketing

– Engineering

– Purchasing

– Manufacturing

MRP II

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MRP & ERP

Market

Demand

Production

plan

Problems?

Rough-cut

capacity planning

Yes No Yes No

Finance

Marketing

Manufacturing

Adjust

production plan

Master

production schedule

MRP

Capacity

planning

Problems? Requirements

schedules

Ad

jus

t m

as

ter

sc

he

du

le

MRP II

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MRP & ERP

• Enterprise resource planning (ERP): An

expanded effort to integrate

standardized record-keeping that will

permit information sharing throughout

the organization

ERP

MRP Systems

Business

Transcript of MRP Systems