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Operations Management (MD021) MRP and ERP Agenda Dependent

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Operations Management (MD021) MRP and ERP Agenda Dependent Demand Inventories Basics of Material Requirements Planning (MRP) Systems MRP II Enterprise Resource ... – PowerPoint PPT presentation

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Title: Operations Management (MD021) MRP and ERP Agenda Dependent


1
Operations Management(MD021)
  • MRP and ERP

2
Agenda
  • Dependent Demand Inventories
  • Basics of Material Requirements Planning (MRP)
    Systems
  • MRP II
  • Enterprise Resource Planning (ERP)

3
Dependent Demand Inventory
4
Independent Demand Inventory vs. Dependent Demand
Inventory
MRP manages dependent demand inventories
5
Dependant Demand Inventories
  • Dependent demand
  • Demand for items that are subassemblies or
    component parts to be used in production of
    finished products.
  • Manufacturing
  • useful for lumpy demands large quantities are
    used at specific times, while little or no items
    are used at other times
  • Service examples
  • Postal Service procurement of stamps for a
    future release date
  • Hospital needed surgical equipment for a future
    operation
  • Universities procurement of desks for a new
    classroom, lawn care materials for Spring cleanup
  • Once the independent demand is known, the
    dependent demand can be determined.
  • Dependent demand items must be stocked prior to
    the time they will be needed in the production
    process

6
Independent vs. Dependent
Independent
Dependent
7
Basics of MRP Systems
8
MRP
  • Material Requirements Planning (MRP)
  • A computer-based information system
  • Translates master schedule requirements for end
    items into time-phased requirements for
    subassemblies, components, and raw materials.

9
Monitor Inventory Positions
Data on Each Inventory Item
Job Routings Through Factory
Data on Inventory/Resources for Each Job
10
Requirements of MRP
  • Computer infrastructure and necessary software
  • Accurate and up-to-date data on operations
  • Master schedules
  • Bills of materials
  • Inventory records file
  • Integrity of data

11
MRP System Components
12
Benefits of MRP when everything goes as planned
  • Low levels of in-process inventories
  • Ability to track material requirements
  • Ability to evaluate capacity requirements
  • Means of allocating production time

13
MPR Inputs
  • Master Production Schedule
  • Time-phased plan specifying timing and quantity
    of production for each end item.
  • Material Requirement Planning Process

Product Structure Tree
Lead Times
14
Master Schedule
  • Master Schedule (Master Production 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.

15
Planning Horizon
Master Production Schedule
Cumulative Lead Time 9 Weeks
Need to plan backwards from start of weeks 4
and 8
Weeks
16
Bill-of-Materials
  • Bill of Materials (BOM)
  • 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.

17
Assembly Diagram and Product Structure Tree for
Assembling a Chair
18
Bill of Materials
  • A listing of all raw materials, parts,
    subassemblies, and assemblies needed to produce
    one unit
  • Product structure Tree

Level
X
0
C
B(2)
1
2
F(2)
E(2)
E
D(3)
19
Bill of Materials
How many more of each component is needed to make
15 Xs if there are 5 of each already in stock?
Assuming 5 of B, C, D, E, F in stock B 215
5 25 C 115 5 10 D function of Bs
needed 325 5 70 F function of Cs
needed 210 5 15 E function of Bs and
Cs needed 125 210 5 40
20
Inventory Records
  • Data must be kept on the inventory status of each
    item by time period
  • Gross requirements
  • Scheduled receipts
  • Amount on hand
  • Lead times
  • Lot sizes
  • And more

21
Assembly Time Chart represents time-phased
assembly activities
22
Processing MRP Plans Involves Calculating Several
Quantities
  • Gross requirements
  • Total expected demand
  • Scheduled receipts
  • Open orders scheduled to arrive
  • Projected on hand
  • Expected inventory on hand at the beginning of
    each time period

23
Processing MRP Plans Involves Calculating Several
Quantities
  • Net requirements
  • Actual amount needed in each time period
  • Planned-order receipts
  • Quantity expected to received at the beginning of
    the period
  • Offset by lead time
  • Planned-order releases
  • Planned amount to order in each time period

24
The Quantities are Organized in a Time Phased MRP
Plan
25
MRP Plans are Updating on a Rolling Horizon
  • Regenerative system
  • Updates MRP records periodically
  • Net-change system
  • Updates MPR records continuously

26
Primary MRP Reports
  • 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.

27
Secondary MRP Reports
  • Performance-control reports
  • measure deviations from original plans (e.g.,
    deliveries, stockouts)
  • provide information on cost performance
  • Planning reports
  • future material requirements information useful
    for forecasting future inventory requirements
  • Exception reports
  • calls attention to major problems (late and
    overdue orders, excessive scrap rates, reporting
    errors)

28
Other Considerations
  • Safety Stock
  • Ideally, production is perfect, and no safety
    stock is needed
  • Realistically, always have random occurrences
    that leads to carrying safety stocks
  • Lot sizing may want to produce certain lot
    sizes
  • Lot-for-lot ordering
  • Economic order quantity
  • Fixed-period ordering

29
MRP II
30
MRP II
  • Expanded the scope of MRP with new emphasis
    placed on integration
  • Capacity requirement planning
  • Financial planning
  • Marketing
  • Engineering
  • Purchasing
  • Manufacturing

31
MRP II
32
Capacity Planning in MRP II
  • 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.

33
Capacity Planning in MRP II
34
Enterprise Resource Planning (ERP)
35
ERP
  • Enterprise resource planning (ERP)
  • Attempts to integrate all departments and
    functions across a company (e.g., financial,
    manufacturing, human resources)
  • Single computer system containing data to
    facilitate the needs of those different
    departments.
  • single, integrated software program
  • single database

36
ERP system for oilfield services company
37
ERP system for oilfield services company
38
ERP Strategy Considerations
  • Requires business process changes
  • Requires human behavior changes
  • High initial cost
  • Risky, long, expensive system implementations
  • High cost to maintain
  • Future upgrades
  • Training costs for everyone in organization to use

39
Potential Benefits of ERP
  • After installing ERP
  • Processes are standardized
  • Better visibility into operations activities
  • Thousands of incorrect, inefficient point
    solutions (i.e., spreadsheets) are eliminated
  • Consistent data across organization
  • Consistent access to data
  • Can better match requirements across all
    functions
  • You can later install SCM and CRM applications
    that can use the ERP system data

40
Integrating ERP with other software modules
ERP holds data records about internal activities
Data records used to improve customer
experience sell to customer
Data records used to improve supply chain
procurement and inventory flows
41
ERP Implementation Options
  • The Big Bang
  • Companies cast off all of their legacy systems
    and implement a single ERP system across the
    entire company
  • Out with the old system, in with the new system
  • Franchising Strategy
  • Best of breed approach within each function
  • Install independent ERP components within each
    functional area integrate functional ERP systems
    to the extent necessary
  • Slam-Dunk
  • Focus on implementing ERP for only a few key
    processes
  • Plan to implement more ERP components in the
    future

42
MRP/ERP in Service Operations
43
MRP/ERP Applications in Services
  • Food catering service
  • End item gt catered food
  • Dependent demand gt ingredients for each recipe,
    i.e. bill of materials
  • Hotel renovation
  • Activities and materials exploded into
    component parts for cost estimation and scheduling

44
MRP/ERP Applications in Services
  • Boston College
  • Uses PeopleSoft ERP for HR planning and materials
    ordering (MRP)
  • Food Service procure expected future food
    requirements
  • Lots of other resource requirements with time
    expectations that can be managed by the MRP
    component

45
MRP/ERP Applications in Services
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