MRP, MRP II, and ERP

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• MRP, MRP II, and ERP

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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.

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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.

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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

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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.

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MPR Inputs Master Schedule
Figure 14-4
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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.

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MRP Inputs Bill-of-Materials
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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
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MRP Inputs Bill-of-Materials, Example
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MRP Inputs Bill-of-Materials, Example
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MRP Inputs Bill-of-Materials, Example
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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

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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.

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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.

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MRP Processing
Figure 15-8
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MRP Processing Terminologies

• Gross requirements
• Schedule receipts
• Projected on hand
• Net requirements
• Planned-order receipts
• Planned-order releases

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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.

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MRP Processing Example

• Master Schedule

• Product Directory Tree

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MRP Processing Example, Lot-for-Lot Ordering
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MRP Processing Example, Lot-Size Ordering
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MRP Processing Pegging

• Pegging is the process of identifying the parent
  items that have generated a given set of material
  requirements for an item.

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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.

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MRP Processing Pegging, Example
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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.

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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.

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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.

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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

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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.

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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

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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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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 II

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

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MRP II
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ERP

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