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MRP, MRP II, and ERP

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Material requirement planning is as much a philosophy as it is a technique, and as much an approach to scheduling as it is to inventory control. – PowerPoint PPT presentation

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Title: MRP, MRP II, and ERP


1
  • MRP, MRP II, and ERP

2
Overview
  • MRP, Material Requirements Planning
  • Planning and scheduling technique used for batch
    production of assembled items.
  • MRP II, Manufacturing Resource Planning
  • ERP, Enterprise Resource Planning
  • The extensive use of software to integrate record
    keeping and information sharing throughout an
    organization.

3
Independent vs. Dependent Demand
  • Independent demand Demand of finished goods.
  • Dependent demand Demand for items that are
    subassemblies or component parts to be used in
    the production of finished goods.
  • The amount of dependent demand is the function of
    the amount of independent demand.

4
Material Requirement Planning (MRP)
  • Material requirements planning (MRP)
    Computer-based information system for ordering
    and scheduling of dependent demand inventories.
  • What to order
  • When to order
  • How much to order

5
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6
MPR Inputs Master Schedule
  • Master Production Schedule
  • which end items are to be produced,
  • when they are needed, and
  • in what quantities.
  • Sources of quantities customer orders,
    forecasts, orders from warehouses, and external
    demand.

7
MPR Inputs Master Schedule
Figure 14-4
8
MRP Inputs Bill-of-Materials
  • Bill of materials 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.

9
MRP Inputs Bill-of-Materials
10
MRP Inputs Bill-of-Materials, Example
  • Example Use the information presented in the
    following figure to do the following
  • Determine the quantities of B, C, D, E, and F
    needed to assemble one X.
  • Determine the quantities of these components that
    will be required to assemble 10 Xs, taking into
    account the quantities on hand (i.e., in
    inventory) of various components.

Component On Hand
B 4
C 10
D 8
E 60
11
MRP Inputs Bill-of-Materials, Example
12
MRP Inputs Bill-of-Materials, Example
13
MRP Inputs Bill-of-Materials, Example
14
MRP Inputs Bill-of-Materials, Summary
  • Many products have considerably more components.
  • Timing is essential (i.e., when must the
    components be ordered or made).
  • The amounts on hand must be netted out (i.e.,
    subtracted from the apparent requirements) to
    determine the true requirements.
  • Accurate records are a prerequisite.
  • complex and time-consuming

15
MRP Inputs Inventory Records
  • Inventory records refer to standard information
    on the status of each item by time period.
  • Gross requirements, scheduled receipts, and
    expected amount on hand.
  • Supplier, lead time, and lot size.
  • Changes due to stock receipts and withdrawals,
    canceled orders, and similar events.
  • Like the bill of materials, inventory records
    must be accurate.

16
MRP Processing
  • 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 using the
    bill of materials offset by lead times.
  • The determination of the net requirements
    (netting) is the core of MRP processing.

17
MRP Processing
Figure 15-8
18
MRP Processing Terminologies
  • Gross requirements
  • Schedule receipts
  • Projected on hand
  • Net requirements
  • Planned-order receipts
  • Planned-order releases

19
MRP Processing Example
  • A firm that produces wood shutters and bookcases
    has received two orders for shutters one for 100
    shutters and one for 150 shutters.
  • The 100-unit order is due for delivery at the
    start of week 4 of the current schedule, and the
    150-unit order is due for delivery at the start
    of week 8.
  • There is a scheduled receipt of 70 wood sections
    in (i.e., at the beginning of) week 1.
  • Each shutter consists of two frames and four
    slatted wood sections. The wood sections are made
    by the firm, and fabrication takes one week. The
    frames are ordered, and lead time is two weeks.
    Assembly of the shutters requires one week.
  • Determine the size and timing of planned-order
    releases necessary to meet delivery requirements
    under each of these conditions
  • Lot-for-lot ordering (i.e., order size equal to
    net requirements).
  • Lot-size ordering with a lot size of 320 units
    for frames and 70 units for wood sections.

20
MRP Processing Example
  • Master Schedule
  • Product Directory Tree

21
MRP Processing Example, Lot-for-Lot Ordering
22
MRP Processing Example, Lot-Size Ordering
23
MRP Processing Pegging
  • Pegging is the process of identifying the parent
    items that have generated a given set of material
    requirements for an item.

24
MRP Processing Pegging, Example
  • For example, consider the two product structure
    trees shown below.
  • Suppose that there is a beginning inventory of
    110 units of D on hand, and all items have lead
    times of one week.
  • A cancellation of 50 units of C will require the
    pegging information in the following figure.

25
MRP Processing Pegging, Example
26
MRP Processing Regenerative vs. Net Change
  • A regenerative system is updated periodically. It
    is essentially a batch-type system.
  • Stable system.
  • Long lead time.
  • Less processing load.
  • A net change system is continuously updated. Only
    the changes are explored through the system,
    level by level the entire plan would not be
    regenerated.
  • Frequent change.
  • Up-to-date information for planning and control
    purposes.

27
MRP Primary Outputs
  • Planned orders - schedule indicating the amount
    and timing of future orders.
  • Order releases - Authorization for the execution
    of planned orders.
  • Changes to planned orders - revisions of due
    dates or order quantities, or cancellations of
    orders.

28
MRP Secondary Outputs
  • Performance-control reports
  • missed deliveries and stockouts, and information
    for accessing cost performance.
  • Planning reports
  • purchase commitments and information for future
    material requirements.
  • Exception reports
  • late and overdue orders, excessive scrap rates,
    reporting errors, and nonexistent parts.

29
MRP Other Considerations
  • Safety Stock / Safety Time Maintain smooth
    operations.
  • Lot sizing Minimize the sum of ordering cost (or
    setup cost) and holding cost.
  • Lot-for-lot ordering
  • Economic order quantity
  • Fixed-period ordering
  • Part-period model

30
MRP in Services
  • MRP applications in services may involve material
    goods that form a part of the product-service
    package, or they may involve mainly service
    components.
  • Examples Food catering and large-scale
    renovations such as sports stadium or a major
    hotel.

31
MRP 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

32
Benefits of MRP
  • Low levels of in-process inventories
  • Ability to track material requirements
  • Ability to evaluate capacity requirements
  • Means of allocating production time

33
Requirements of MRP
  • Computer and necessary software
  • Accurate and up-to-date
  • Master schedules
  • Bills of materials
  • Inventory records
  • Integrity of data

34
MRP II
  • Expanded MRP with and emphasis placed on
    integration
  • Financial planning
  • Marketing
  • Engineering
  • Purchasing
  • Manufacturing

35
MRP II
36
ERP
  • Enterprise resource planning (ERP) An expanded
    effort to integrate standardized record-keeping
    that will permit information sharing throughout
    the organization
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