Materials Requirement Planning-Enterprise Resource Planning

N.K.Agarwal

Material Requirement Planning (MRP)

• Objectives of MRP in Operations Management are– To improve customer service by meeting delivery schedules

promised and shortening delivery lead times– To reduce inventory costs by reduction in inventory levels– To improve plant operating efficiency by better use of

productive resources

• A computer based programme

– Most helpful to the organisation

• With finished goods or end products – Which are made from a number of components, and

also – Which are subject to uneven or lumpy demand

MRP - Functions

• MRP performs three important functions in Operations Management– Order planning and control i.e. when to release

orders and what quantity– Priority planning and control i.e.comparison of

expected date of availability with the need date of each item

– Provisions of a basis for planning capacity requirements and development of broad business plans

• MRP primarily applicable to companies that carry out the fabrication of parts and assembly of standard products in batch quantity

• Main inputs for preparing MRP– Master Production Schedule

• Shows the number of units to be produced in each period

– Bill of Material• Shows the materials, parts and components needed for

the product

– Inventory Records• Shows what is available in stock, on order etc useful for

working out the net requirement of material to be ordered

Material Requirement Planning (MRP)

INVENTORY RECORDS

SCHEDULED RECEIPTS

STANDARD ORDER INFORMATION

CURRENT STOCKS

TIME AND QUANTITIES TO ORDER

MATERIALS TO ORDER

NET REQUIREMENTS

GROSS REQUIREMENTS

BILL OF MATERIALS

MASTER PRODUCTION SCHEDULE

MRP PROCEDURE

MRP – Application in service industry

• Hospitals – Hospitals use MRP for scheduling surgical

operations and ensure that supplies and equipment are ready when needed

– Schedule of• Surgery gives the planned operations in any period, • The bill of materials contains information about the

equipment and resources needed for each type of surgery, and

• Inventory file contains information about surgical instruments, disposable materials, reusable instruments, sterilized materials etc

MRP – Application in service industry

• Restaurants– Restaurants use MRP to schedule food and

equipment. Menus give the meals planned for the restaurants, and the recipes for each meal provide the bill of materials

• Universities– Universities’ MPS show the number of students

who will be graduating from each programme in each term. The bill of material describes the courses the students take in each term. MRP can find the number of teachers, classrooms, laboratories etc

• Benefits– Material supply is directly linked to known demand– Stock levels are lower, with savings in capital, space, etc– There is higher stock turnover– Customer service is better with no delays due to shortages

of materials– Delivery times are more reliable and faster– Higher utilization of facilities as materials are always

available– Less time spent on expediting and emergency orders– Better planning– MRP schedules can be used for short-term planning– MRP shows the priority of jobs supplying materials

Material Requirement Planning (MRP)

• Financial and marketing functions are tied to operation function in MRP II

• Production and finance work together to ensure availability of desired resources to meet the production requirement

• Marketing and plant people update sales forecast and update master schedules

• MRP II provides a convenient vehicle for co-coordinating the efforts of manufacturing , finance, marketing, engineering and personnel departments towards the common business plan

Manufacturing Resource Planning (MRP II)

Enterprise Resource Planning (ERP)

• A software package developed for optimum use of resources of an enterprise in a planned manner

• Integrates the entire enterprise starting– From the supplier to the customer

• Covering logistics, financial and human resources

• A package for cost saving• A single solution addressing the information needs of

the whole organisation

ERP- Features

• A central data base• Accommodating Variety

– Provides multi-lingual and multi-currency, multi mode manufacturing and multi- facility capabilities to compete and succeed globally

• Integrated Management Information – Used for Flexible reporting tools to extract information as

and when needed without depending on MIS department– For Electronic data interchange to accepting information like

Purchase Orders, Schedule amendments, cash payments, order acknowledgements, raising invoices etc.

– For Imaging to provide the ability to display drawings , specifications, store original sale orders, Purchase Orders, quotation etc.

– For Database creation starting with attendance reporting, monitoring and control of machines and post sale statistics

• Seamless Integration– Integration of new product introductions or changes to

existing products fully into the enterprise system of Engineering Change Management, to include electronic approval, routing, change order process routing, revision-level control etc.

ERP- Features

• Supply Chain Management • Resource Management

– Effective management of human as well as equipment resources

• Integrated data model– Heart of any ERP system providing for data for employees,

suppliers and customers

ERP- Features

•Organisation, payroll/employee•Cost accounting, Receivables,

•General Ledger, PM,Fixed Asset,•Payables,Budgeting,Inventory,

•Logistics, Data Model

•Order Management,•Distribution Management

•Strategic & Business Planning- Matls•New product introduction•Bill of Materials•Long range forecasting and cap. Plng•Engg Change Management

•Strategic & Business Planning- Resources•Intelligent resource Planning,•Human resource Planning,•Quality Management

•Facilities maintenance,•Planning & implementation

•Operational Plng and materials-Resources•Payroll, -Recruitment, -Costing & budgeting,•Job evaluation and performance Appraisal,•Quality control & Planning,•Maint Engg and scheduling, -Fixed asset Mngmt,•Resource MIS

•Operational Plng and execution- Materials•Routing, -Order Processing,•Supplier Management,•Inventory Management,Forecasting,•Distribution management,•Scheduling and WIP Management

Work flow Automation Electronic Mail Database Creation / E Data Interchanging

Multi- Platform Multi- Facility Multi- Mode Manufacturing Multi- Currency

General Model of ERP Multi- LingualImaging

ERP- Scope

• Financial– Financial accounting, treasury management, asset

management and enterprise control

• Logistics– Production Planning, Material management, Plant

maintenance, Quality management, Project management &

Distribution management

• Human resources– Personnel management, Training & Development and Skills

inventory

• Work flow– Flexible assignment of tasks and responsibilities to

locations, positions, jobs, groups or individuals

ERP- Scope

ERP- Benefits

• Some of the Tangible benefits– Reduction of lead time (up to 60%)– 99% on- time shipments– Doubled business– Increase in inventory turn over to over 30%– Reduction of cycle time to 80%– Reduction of W-I-P inventory to 70%

• Some Intangible benefits– Better customer satisfaction– Improved vendor performance– Reduced quality costs– Improved resource utilisation – Improved information accuracy– Improved decision- making capacity

ERP- Benefits

ERP

• Application– Large number of organisation nationally and internationally

have implemented already/ in the process of implementing– Sales of ERP group of Industries increased from $13 billion

in 1977 to over $25 billion

• Selection of ERP package– Cost of package from few lakhs to a few crores– Needs of the company to be fully understood before

ordering a package– Implementation period varies from 12-24 months– Building of right platform, right software vendor selection and

right consultant for implementation essential to get the right ERP package

• Major vendors are SAP, Oracle applications and Baan

• Others in the field include JD Edwards, People Soft, Scala, Ramco Marshal, QAD etc

• A very high commitment absolutely essential for a successful implementation of ERP

ERP

ERP with SAP R/3

• Production planning (or Production Logistics) is the SAP solution for PPC

• Provides quick response by reducing planning cycle and improving the productivity of work process

• SAP R/3 has highly integrated Production Planning(PP) system

ERP

• Enterprise Resource Planning is used world wide by companies to integrate business resources and thereby reduce costs and increase productivity

• ERP provides a total solution on an integrated system providing information needs of the entire enterprise

• Careful selection of the ERP package is extremely important to suit the specific business needs of the enterprise as it involves huge expenditure

References

• Production And Operations management : K. Aswathappa / K. Shridhara Bhat

• Production Planning And Control : S.K.Mukhopadhyay

Thank You

ORDERS & FORECASTS

MASTER SCHEDULE

MRP PROGRAMME

INVENTORY STATUS

PRODUCT STRUCTURES & BILL OF MATERIAL

REPORTS: OPEN ORDERS

PLANNED ORDERS

NET REQUIREMENTS

LOAD & CAPACITY

INVENTORY

SPECIAL

STRUCTURE OF MRP COMPUTER PROGRAMME

MASTER PRODUCTION SCHEDULE

BILL OF MATERIALS

LEAD TIMES

OTHER ORDER INFORMATION

INVENTORY LEVELS

TIMETABLE FOR ORDERS

CHANGES TO ORDERS

TIMES FOR OPERATIONS

EXCEPTION REPORTS

PERFORMANCEREPORTS

LONG TERM PLANS

INVENTORY TRANSACTIONS

MRP PROGRAMS

OUTPUTSINPUTS

INPUTS & OUTPUTS FROM MRP SYSTEM