MRP and ERPzxc

8/19/2019 MRP and ERPzxc

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© 2008 Prentice Hall, Inc. 14 – 2

Global Company Profile: WheeledGlobal Company Profile: WheeledCoachCoach

ependent emand ependent emand

ependent !n"entory Modelependent !n"entory ModelRequirementsRequirements

Master Production #cheduleMaster Production #chedule

$ills of Material $ills of Material %ccurate !n"entory Records %ccurate !n"entory Records

Purchase &rders &utstanding Purchase &rders &utstanding

'ead imes for Components'ead imes for Components


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E,tensions of MRP E,tensions of MRP

Material Requirements Planning !!Material Requirements Planning !!(MRP !!)(MRP !!)

Closed*'oop MRP Closed*'oop MRP

Capacity Planning Capacity Planning

MRP !n #er"icesMRP !n #er"icesistribution Resource Planningistribution Resource Planning

(RP)(RP)


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Enterprise Resource PlanningEnterprise Resource Planning

(ERP)(ERP)

%d"antages and isad"antages of %d"antages and isad"antages ofERP #ystemsERP #ystems

ERP in the #er"ice #ector ERP in the #er"ice #ector


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When you complete this chapter you should be able

to:

-.-. e"elop a product structuree"elop a product structure/./. $uild a gross requirements plan$uild a gross requirements plan

0.0. $uild a net requirements plan$uild a net requirements plan

1.1. etermine lot si+es for lot*for*lot2etermine lot si+es for lot*for*lot2E&32 and PP$E&32 and PP$


7/89© 2008 Prentice Hall, Inc. 14 – 7

When you complete this chapter you should be ableto:

4.4. escribe MRP !! escribe MRP !!

5.5. escribe closed*loop MRP escribe closed*loop MRP

6.6. escribe ERP escribe ERP


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'argest manufacturer of'argest manufacturer ofambulances in the 7orld ambulances in the 7orld

!nternational competitor !nternational competitor -/ ma8or ambulance designs-/ ma8or ambulance designs

-92 different in"entory items-92 different in"entory items

52 manufactured parts52 manufactured parts

-/2 purchased parts-/2 purchased parts


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;our



-.-. $etter response to customer$etter response to customerordersorders

/./. ;aster response to mar=et;aster response to mar=etchangeschanges

0.0. !mpro"ed utili+ation of facilities!mpro"ed utili+ation of facilities

and labor and labor

1.1. Reduced in"entory le"elsReduced in"entory le"els



he demand for one item is relatedhe demand for one item is relatedto the demand for another itemto the demand for another item

Gi"en a quantity for the end item2Gi"en a quantity for the end item2the demand for all parts andthe demand for all parts andcomponents can be calculated components can be calculated

!n general2 used 7hene"er a!n general2 used 7hene"er aschedule can be established for anschedule can be established for anitemitem

MRP is the common techniqueMRP is the common technique



-.-. Master production scheduleMaster production schedule

/./. #pecifications or bill of material #pecifications or bill of material

0.0. !n"entory a"ailability !n"entory a"ailability 1.1. Purchase orders outstanding Purchase orders outstanding

4.4. 'ead times'ead times

Effecti"e use of dependent demandEffecti"e use of dependent demandin"entory models requires thein"entory models requires thefollo7ing:follo7ing:



The dependent technique used in a production environment

Provides a clean structure for dependent

demand Evolved as the basis for Enterprise

Resource Planning (ERP)


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#pecifies 7hat is to be made and 7hen#pecifies 7hat is to be made and 7hen

Must be in accordance 7ith the a production planMust be in accordance 7ith the a production plan

!nputs from financial plans2 customer demand2!nputs from financial plans2 customer demand2engineering capabilities2 labor a"ailability2engineering capabilities2 labor a"ailability2in"entory fluctuations2 supplier performance2 andin"entory fluctuations2 supplier performance2 andother considerationsother considerations

%s the process mo"es from the production plan to %s the process mo"es from the production plan to

e,ecution2 each step must be tested for feasibility e,ecution2 each step must be tested for feasibility he MP# is the result of the production planninghe MP# is the result of the production planning

process process


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MP# is established in terms of specificMP# is established in terms of specific products products

#chedule must be follo7ed for a#chedule must be follo7ed for areasonable length of timereasonable length of time

he MP# is quite often fi,ed2 firm2 orhe MP# is quite often fi,ed2 firm2 orfro+en schedule in the near*term part offro+en schedule in the near*term part of

the planthe plan he MP# is a rolling production schedulehe MP# is a rolling production schedule

he MP# is a statement of 7hat is to behe MP# is a statement of 7hat is to be

produced2 not a forecast of demand produced2 not a forecast of demand


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Figure 14.1Figure 14.1

Change production

plan> Master productionschedule

Management Return onin"estment

Capital

Engineering esigncompletion

%ggregate production

plan

Procurement

#upplier performance

?uman resources

#taff planning

ProductionCapacity !n"entory

Mar=eting Customer demand

;inanceCash flo7


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!s capacity plan being

met>

!se,ecution

meeting the

plan>

Changemaster

productionschedule>

Changecapacity>

Changerequirements>

@o@o

E,ecutematerial plans

E,ecute capacity plans

Aes

Realistic>

Capacityrequirements plan

Materialrequirements plan

Master productionschedule


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Months anuary ;ebruary

%ggregate Production Plan 1,500 1,200(#ho7s the total

quantity of amplifiers)Wee=s - / 0 1 4 5 6 9

Master Production #chedule(#ho7s the specific type and quantity of amplifier to be produced

/1*7att amplifier 100 100 100 100

-4*7att amplifier 500 500 450 450

64*7att amplifier 300 100



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% customer order in a 8ob shop (ma=e* % customer order in a 8ob shop (ma=e* to*order) company to*order) company

Modules in a repetiti"e (assemble*to* Modules in a repetiti"e (assemble*to*

order or forecast) company order or forecast) company %n end item in a continuous (stoc=*to* %n end item in a continuous (stoc=*to*

forecast) company forecast) company

Can be e,pressed in any of theCan be e,pressed in any of thefollo7ing terms:follo7ing terms:


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#toc= to ;orecast #toc= to ;orecast

(Product ;ocus)(Product ;ocus)

#chedule finished

product

%ssemble to &rder %ssemble to &rderor ;orecast or ;orecast (Repetiti"e)(Repetiti"e)

#chedule modules

Ma=e to &rder Ma=e to &rder

(Process ;ocus)(Process ;ocus)

#chedule orders

E,amples: Print shop Motorcycles #teel2 $eer2 $read Machine shop %utos2 Bs 'ightbulbs

;ine*dining restaurant ;ast*food restaurant Paper

ypical focus of theypical focus of themaster productionmaster production

scheduleschedule

@umber of@umber ofend itemsend items

@umber of@umber ofinputsinputs



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Gross Requirements for Crabmeat 3uicheGross Requirements for Crabmeat 3uiche

Gross Requirements for #pinach 3uicheGross Requirements for #pinach 3uiche

ay ay 5 5 6 6 9 9 - - ---- -/ -/ -0-0 -1-1 and so onand so on

%mount %mount 4 4 - - 16 16 5 5 -- -- 64 64

ay ay 6 6 9 9 - - ---- -/ -/ -0-0 -1-1 -4 -4 -5 -5 and so onand so on

%mount %mount - - / / -4 -4 5 5 64 64 - -

Table 14.1Table 14.1

;or @ancyDs #pecialty ;oods;or @ancyDs #pecialty ;oods


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'ist of components2 ingredients2'ist of components2 ingredients2and materials needed to ma=eand materials needed to ma=e

product product Pro"ides product structurePro"ides product structure

!tems abo"e gi"en le"el are called!tems abo"e gi"en le"el are called

parents parents !tems belo7 gi"en le"el are called!tems belo7 gi"en le"el are called

childrenchildren


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$$(2)(2) #td. -/ #pea=er =it #td. -/ #pea=er =it C C (3)(3)#td. -/ #pea=er =it 7F#td. -/ #pea=er =it 7Famp*booster amp*booster

--

E E (2)(2)E E (2)(2) ; ; (2)(2)

Pac=ing bo, andPac=ing bo, and

installation =it of 7ire2installation =it of 7ire2bolts2 and scre7sbolts2 and scre7s

#td. -/ #pea=er#td. -/ #pea=erbooster assembly booster assembly

/ /

(2)(2)

-/ #pea=er -/ #pea=er

(2)(2)


G G (1)(1)

%mp*booster %mp*booster

00

Product structure for %7esomeProduct structure for %7esome (( % %))

% %

'e"el 'e"el


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$$(2)(2) #td. -/ #pea=er =it #td. -/ #pea=er =it C C (3)(3)#td. -/ #pea=er =it 7F#td. -/ #pea=er =it 7Famp*booster amp*booster

--

E E (2)(2)E E (2)(2) ; ; (2)(2)

Pac=ing bo, andPac=ing bo, and

installation =it of 7ire2installation =it of 7ire2bolts2 and scre7sbolts2 and scre7s

#td. -/ #pea=er#td. -/ #pea=erbooster assembly booster assembly

/ /

(2)(2)


(2)(2)


G G (1)(1)

%mp*booster %mp*booster

00

Product structure for %7esomeProduct structure for %7esome (( % %))

% %

'e"el 'e"el

Part $: 2 , number of %s = (2)(50) = 100Part C: 3 , number of %s = (3)(50) = 150

Part : 2 , number of $s+ 2 , number of ;s = (2)(100) + (2)(300) = 800

Part E: 2 , number of $s+ 2 , number of Cs = (2)(100) + (2)(150) = 500

Part ;: 2 , number of Cs = (2)(150) = 300

Part G: 1 , number of ;s = (1)(300) = 300


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Modular $illsModular $ills

Modules are not final products butModules are not final products but

are components that can beare components that can beassembled into unitsassembled into units

hey are bills of material forhey are bills of material formodulesmodules

Can significantly simplify planningCan significantly simplify planningand scheduling and scheduling


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Planning $ills (Pseudo $ills)Planning $ills (Pseudo $ills)

Created to assign an artificial parentCreated to assign an artificial parent

to the $&M to the $&M Hsed to group subassemblies toHsed to group subassemblies to

reduce the number of items plannedreduce the number of items plannedand scheduled and scheduled

Hsed to create standard =its forHsed to create standard =its for production production

May also be =no7n as =itted materialMay also be =no7n as =itted material

or =it or =it


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Phantom $illsPhantom $ills

escribe subassemblies that e,istescribe subassemblies that e,istonly temporarily only temporarily

%re part of another assembly and %re part of another assembly andne"er go into in"entory ne"er go into in"entory

'o7*'e"el Coding 'o7*'e"el Coding

!s necessary 7hen identical items e,ist!s necessary 7hen identical items e,istat "arious le"elsat "arious le"els

!tem is coded at the lo7est le"el at!tem is coded at the lo7est le"el at7hich it occurs7hich it occurs

$&Ms are rocessed one le"el at a time$&Ms are processed one le"el at a time


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%ccurate in"entory records are %ccurate in"entory records areabsolutely required for MRP (orabsolutely required for MRP (orany dependent demand system) toany dependent demand system) to

operate correctly operate correctly

Generally MRP systems requireGenerally MRP systems requireI accuracy I accuracy

&utstanding purchase orders must&utstanding purchase orders mustaccurately reflect quantities andaccurately reflect quantities andscheduled receiptsscheduled receipts


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he time required to purchase2he time required to purchase2 produce2 or assemble an item produce2 or assemble an item

;or manufactured items J the sum;or manufactured items J the sumof mo"e2 setup2 and assembly orof mo"e2 setup2 and assembly orrun times for each component run times for each component

;or purchased items J the time;or purchased items J the time

bet7een the recognition of needbet7een the recognition of needfor an order and the a"ailability offor an order and the a"ailability ofthe item for productionthe item for production


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KK KK KK KK KK KK KK KK

-- / / 00 11 4 4 5 5 6 6 9 9 ime in 7ee=sime in 7ee=s

; ;

/ 7ee=s/ 7ee=s

0 7ee=s0 7ee=s

- 7ee= - 7ee=

% %

/ 7ee=s/ 7ee=s

- 7ee= - 7ee=

E E

/ 7ee=s/ 7ee=s

G G

- 7ee= - 7ee=

- 7ee= - 7ee=

/ 7ee=s to/ 7ee=s to produce produce

$$

C C

E E

#tart production of #tart production of Must ha"e and EMust ha"e and Ecompleted here socompleted here so production can production can

begin on $begin on $



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&utput Reports&utput Reports

MRP by period report

MRP bydate report

Planned orderreport

Purchase ad"ice

E,ception reports

&rder early or lateor not needed

&rder quantity toosmall or too large

ata ;ilesata ;iles

Purchasing data

$&M

'ead times

(!tem master file)

!n"entory data

Master production schedule

Materialrequirement

planning programs(computer and

soft7are)


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;rom the $&M2 e"ery !tem % requires;rom the $&M2 e"ery !tem % requires 22 !tem $s J!tem $s J 100100 !tem $s are required in!tem $s are required in

7ee= 6 to satisfy the order release for7ee= 6 to satisfy the order release for!tem %!tem %

he lead time for the !tem $ ishe lead time for the !tem $ is 22 7ee=s J7ee=s Jrelease an order forrelease an order for 100100 units of !tem $ inunits of !tem $ in

7ee= 4 7ee= 4 he timing and quantity for componenthe timing and quantity for component

requirements are determined by therequirements are determined by the orderorderreleaserelease of the parent(s)of the parent(s)


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he process continues through the entirehe process continues through the entire$&M one le"el at a time J often called$&M one le"el at a time J often called

e,plosion e,plosion $y processing the $&M by le"el2 items$y processing the $&M by le"el2 items

7ith multiple parents are only processed7ith multiple parents are only processedonce2 sa"ing time and resources andonce2 sa"ing time and resources and

reducing confusionreducing confusion

'o7*le"el coding ensures that each item'o7*le"el coding ensures that each itemappears at only one le"el in the $&M appears at only one le"el in the $&M


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Wee= Wee=

- / 0 1 4 5 6 9 'ead ime

%. Required date 50&rder release date 50 1 7ee=

$. Required date 100

&rder release date 100 2 7ee=sC. Required date 150

&rder release date 150 1 7ee=

E. Required date 200 300&rder release date 200 300 2 7ee=s

;. Required date 300

&rder release date 300 3 7ee=sG. Required date 600 200

&rder release date 600 200 1 7ee=

G. Required date 300&rder release date 300 2 7ee=s


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#tarts 7ith a production schedule for the#tarts 7ith a production schedule for theend item Jend item J 5050 units of !tem % at 7ee= 9 units of !tem % at 7ee= 9

$ecause there are$ecause there are 1010 !tem %s on hand2!tem %s on hand2onlyonly 4040 are actually required J (netare actually required J (netrequirement) L (gross requirement * on*requirement) L (gross requirement * on*hand in"entory)hand in"entory)

he planned order receipt for !tem % inhe planned order receipt for !tem % in7ee= 9 is7ee= 9 is 4040 units Junits J 40 = 50 - 1040 = 50 - 10


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;ollo7ing the lead time offset procedure2;ollo7ing the lead time offset procedure2the planned order release for !tem % isthe planned order release for !tem % is

no7no7 4040 units in 7ee= 6 units in 7ee= 6 he gross requirement for !tem $ is no7he gross requirement for !tem $ is no7

8080 units in 7ee= 6 units in 7ee= 6

here arehere are 1515 units of !tem $ on hand2 sounits of !tem $ on hand2 sothe net requirement isthe net requirement is 6565 units in 7ee= 6 units in 7ee= 6

% planned order receipt of % planned order receipt of 6565 units inunits in7ee= 6 generates a planned order release7ee= 6 generates a planned order release

ofof 6565 units in 7ee= 4 units in 7ee= 4


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% planned order receipt of % planned order receipt of 6565 units inunits in7ee= 6 generates a planned order release7ee= 6 generates a planned order release

ofof 6565 units in 7ee= 4 units in 7ee= 4 he on*hand in"entory record for !tem $he on*hand in"entory record for !tem $

is updated to reflect the use of theis updated to reflect the use of the 1515items in in"entory and sho7s no on*handitems in in"entory and sho7s no on*hand

in"entory in 7ee= in"entory in 7ee= 88 his is referred to as the Gross*to*@ethis is referred to as the Gross*to*@et

calculation and is the third basic functioncalculation and is the third basic functionof the MRP processof the MRP process


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he logic of net requirementshe logic of net requirements

%"ailable in"entory %"ailable in"entory

@et@etrequirementsrequirements

&n&nhand hand

#cheduled#cheduledreceiptsreceipts

J J LL

otal requirementsotal requirements

GrossGross

requirementsrequirements %llocations %llocations


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Figure 14.6Figure 14.6 %

$$ C C

4 5 6 9 - --

40 50 15

'ead time L 1 for %'ead time L 1 for %

Master schedule for %Master schedule for %

#

$$ C C

-/ -09 - --

20 3040

'ead time L 5 for # 'ead time L 5 for #

Master schedule for # Master schedule for #

- / 0

10 10

Master scheduleMaster scheduleforfor $

sold directly sold directly

PeriodsPeriods

herefore2 theseherefore2 theseare the grossare the grossrequirements for $requirements for $

Gross requirements: $Gross requirements: $ 1010 4040 5050 202040+10 15+30

=50 =45

-- / / 00 11 4 4 5 5 6 6 9 9 PeriodsPeriods


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BOMs, inventor records, purchase and production quantities ma not be perfect

!onsideration of safet stoc" ma be

prudent #hould be minimi$ed and ultimateleliminated

Tpicall built into pro%ected on&handinventor of the MRP logic


45/89

MRP is a dynamic systemMRP is a dynamic system

;acilitates replanning 7hen changes;acilitates replanning 7hen changes

occur occur #ystem ner"ousness can result from#ystem ner"ousness can result from

too many changestoo many changes

ime fences put limits on replanning ime fences put limits on replanning Pegging lin=s each item to its parentPegging lin=s each item to its parent

allo7ing effecti"e analysis of changesallo7ing effecti"e analysis of changes


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MRP is a planning system thatMRP is a planning system thatdoes not do detailed scheduling does not do detailed scheduling

MRP requires fi,ed lead timesMRP requires fi,ed lead times7hich might actually "ary 7ith7hich might actually "ary 7ithbatch si+ebatch si+e

! (8ust*in*time) e,cels at rapidly! (8ust*in*time) e,cels at rapidlymo"ing small batches of materialmo"ing small batches of materialthrough the systemthrough the system


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MRP systems do not considerMRP systems do not considercapacity during normal planningcapacity during normal planningcycles. !t is considered infinitecycles. !t is considered infinite

scheduling technique.scheduling technique. ;inite capacity scheduling (;C#);inite capacity scheduling (;C#)

recogni+es actual capacity limitsrecogni+es actual capacity limits

$y merging MRP and ;C#2 a finite$y merging MRP and ;C#2 a finiteschedule is created 7ith feasibleschedule is created 7ith feasiblecapacities 7hich facilitates rapidcapacities 7hich facilitates rapidmaterial mo"ement material mo"ement


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#EP#:#EP#:-.-. MRP buc=ets are reduced to daily or hourly MRP buc=ets are reduced to daily or hourly

he most common planning period (timehe most common planning period (timebuc=et) for MRP systems is 7ee=ly buc=et) for MRP systems is 7ee=ly

/./. Planned receipts are used internally to sequencePlanned receipts are used internally to sequence production production

0.0. !n"entory is mo"ed through the plant on a !!n"entory is mo"ed through the plant on a !basisbasis

1.1. Completed products are mo"ed to finished goodsCompleted products are mo"ed to finished goodsin"entory 7hich reduces required quantities forin"entory 7hich reduces required quantities forsubsequent planned orderssubsequent planned orders

4.4. $ac= flushing based on the $&M is used to$ac= flushing based on the $&M is used to

deduct in"entory that 7as used in productiondeduct in"entory that 7as used in production


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Hsed in repetiti"e operationsHsed in repetiti"e operations

MRP plans areMRP plans are

e,ecuted usinge,ecuted using! techniques! techniquesbased on pullbased on pull

principles principles

;lo7s are carefully;lo7s are carefullybalanced 7ithbalanced 7ithsmall lot si+essmall lot si+es


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!tems used by many products are!tems used by many products areheld in a common area often calledheld in a common area often called

a supermar=et a supermar=et !tems are 7ithdra7n as needed !tems are 7ithdra7n as needed

!n"entory is maintained using!n"entory is maintained using

!F=anban systems and procedures!F=anban systems and procedures Common items are not planned byCommon items are not planned by

the MRP systemthe MRP system


51/89

'ot*for*lot techniques order 8ust 7hat'ot*for*lot techniques order 8ust 7hatis required for production based onis required for production based onnet requirementsnet requirements

May not al7ays be feasibleMay not al7ays be feasible !f setup costs are high2 lot*for*lot can!f setup costs are high2 lot*for*lot can

be e,pensi"ebe e,pensi"e

Economic order quantity (E&3)Economic order quantity (E&3) E&3 e,pects a =no7n constantE&3 e,pects a =no7n constant

demand and MRP systems often dealdemand and MRP systems often deal7ith un=no7n and "ariable demand 7ith un=no7n and "ariable demand


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Part Period $alancing (PP$) loo=s atPart Period $alancing (PP$) loo=s atfuture orders to determine mostfuture orders to determine mosteconomic lot si+eeconomic lot si+e

he Wagner*Whitin algorithm is ahe Wagner*Whitin algorithm is acomple, dynamic programmingcomple, dynamic programmingtechniquetechnique

%ssumes a finite time hori+on %ssumes a finite time hori+on

Effecti"e2 but computationallyEffecti"e2 but computationallyburdensomeburdensome


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-- / / 00 11 4 4 5 5 6 6 9 9 - -

GrossGrossrequirementsrequirements

3535 3030 4040 00 1010 4040 3030 00 3030 5555


Pro8ected onPro8ected onhand hand

3535 3535 00 00 00 00 00 00 00 00 00


00 3030 4040 00 1010 4040 3030 00 3030 5555

Planned orderPlanned orderreceiptsreceipts

3030 4040 1010 4040 3030 3030 5555

Planned orderPlanned orderreleasesreleases

3030 4040 1010 4040 3030 3030 5555

?olding cost L?olding cost L $1$1 F7ee=N #etup cost L F7ee=N #etup cost L $100;$100; 'ead time L'ead time L 11 7ee= 7ee=


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-- / / 00 11 4 4 5 5 6 6 9 9 - -


3535 3030 4040 00 1010 4040 3030 00 3030 5555



3535 3535 00 00 00 00 00 00 00 00 00


00 3030 4040 00 1010 4040 3030 00 3030 5555


3030 4040 1010 4040 3030 3030 5555


3030 4040 1010 4040 3030 3030 5555


@o on*hand in"entory is carried through the system

otal holding cost = $0

here are se"en setups for this item in this planotal setup cost = 7 x $100 = $700


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-- / / 00 11 4 4 5 5 6 6 9 9 - -


3535 3030 4040 00 1010 4040 3030 00 3030 5555



3535 3535 00 4343 33 33 6666 2626 66 66 33


00 3030 00 00 77 00 44 00 00 1616


7373 7373 7373 7373


7373 7373 7373 7373

?olding cost L?olding cost L $1$1 F7ee=N #etup cost L F7ee=N #etup cost L $100;$100; 'ead time L'ead time L 11

7ee= 7ee=

%"erage 7ee=ly gross requirements %"erage 7ee=ly gross requirements = 27;= 27; E&3 E&3 = 73= 73 unitsunits


56/89

-- / / 00 11 4 4 5 5 6 6 9 9 - -


3535 3030 4040 00 1010 4040 3030 00 3030 5555



3535 3535 00 00 00 00 00 00 00 00 00


00 3030 00 00 77 00 44 00 00 1616


7373 7373 7373 7373


7373 7373 7373 7373


%"erage 7ee=ly gross requirements %"erage 7ee=ly gross requirements = 27;= 27; E&3 E&3 = 73= 73 unitsunits

%nnual demand = 1,404

otal cost L setup cost holding cost otal cost = (1,404 F 73) , $100 + (73 F 2) , ($1 , 52 7ee=s)otal cost = $3,78Cost for 10 7ee=s = $3,78 , (10 7ee=sF 52 7ee=s) =

$730


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-- / / 00 11 4 4 5 5 6 6 9 9 - -


3535 3030 4040 00 1010 4040 3030 00 3030 5555



3535





EPP EPP = 100= 100 unitsunits


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-- / / 00 11 4 4 5 5 6 6 9 9 - -


3535 3030 4040 00 1010 4040 3030 00 3030 5555



3535




?olding cost L?olding cost L $1$1 F7ee=N #etup cost L F7ee=N #etup cost L $100;$100;


/ 30 0/2 0 70 40 = 40 x 1/2 02 1 70 40/2 02 12 4 80 70 = 40 x 1 + 10 x 3 100 70 170/2 02 12 42 5 120 230 = 40 x 1 + 10 x 3

+ 40 x 4

+ =

Combine periods / * 4 as this results in the Part Periodclosest to the EPP

Combine periods 5 * as this results in the Part Periodclosest to the EPP

5 40 052 6 70 30 = 30 x 152 62 9 70 30 = 30 x 1 + 0 x 2

52 62 92 100 120 = 30 x 1 + 30 x 3 100 120 220+ =

- 44 0 100 0 100T!"al #!" 300 10 40

+ =

+ =

rial 'ot #i+ePeriods (cumulati"e net Costs

Combined requirements) Part Periods #etup ?olding otal


59/89

-- / / 00 11 4 4 5 5 6 6 9 9 - -


3535 3030 4040 00 1010 4040 3030 00 3030 5555



3535 3535 00 5050 1010 1010 00 6060 3030 3030 00


00 3030 00 00 00 4040 00 00 00 5555


8080 100100 5555


8080 100100 5555




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;or these three e,amples;or these three e,amples

'ot*for*lot 'ot*for*lot $700$700

E&3 E&3 $730$730

PP$PP$ $40$40

W agner *W hit in 7 ould ha" e y ielded a

plan 7 it h a t ot al cost o

f $ 455


61/89

!n theory2 lot si+es should be recomputed!n theory2 lot si+es should be recomputed7hene"er there is a lot si+e or order7hene"er there is a lot si+e or orderquantity changequantity change

!n practice2 this results in system!n practice2 this results in systemner"ousness and instability ner"ousness and instability

'ot*for*lot should'ot*for*lot shouldbe used 7henbe used 7hen

lo7*cost ! canlo7*cost ! canbe achie"ed be achie"ed


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'ot si+es can be modified to allo7 for'ot si+es can be modified to allo7 forscrap2 process constraints2 or ra7scrap2 process constraints2 or ra7material purchase lotsmaterial purchase lots

Hse lot*si+ing 7ith care as it can causeHse lot*si+ing 7ith care as it can causeconsiderable distortion of requirementsconsiderable distortion of requirementsat lo7er le"els of the $&M at lo7er le"els of the $&M

When setup costs are significant andWhen setup costs are significant anddemand is reasonably smooth2 PP$2demand is reasonably smooth2 PP$2Wagner*Whitin2 or E&3 should pro"ideWagner*Whitin2 or E&3 should pro"idesatisfactory resultssatisfactory results


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Closed*'oop MRP Closed*'oop MRP

MRP system pro"ides input to the capacityMRP system pro"ides input to the capacity plan2 MP#2 and production planning plan2 MP#2 and production planning process process

Capacity Planning Capacity Planning

MRP system generates a load report 7hichMRP system generates a load report 7hichdetails capacity requirementsdetails capacity requirements

his is used to dri"e the capacity planninghis is used to dri"e the capacity planning process process

Changes pass bac= through the MRPChanges pass bac= through the MRPsystem for rescheduling system for rescheduling


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&nce an MRP system is in place2 in"entory&nce an MRP system is in place2 in"entorydata can be augmented by other usefuldata can be augmented by other usefulinformationinformation

'abor hours'abor hours

Material costsMaterial costs

Capital costsCapital costs

Birtually anyBirtually anyresourceresource

#ystem is generally called MRP !! or#ystem is generally called MRP !! orMaterial Resource Planning Material Resource Planning


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Wee= Wee=

4 4 5 5 6 6 9 9

%. %. Hnits (lead timeHnits (lead time 11 7ee=)7ee=) 100100'abor: -'abor: -00 hours eachhours each 1,0001,000Machine:Machine: 22 hours eachhours each 200200Payable:Payable: $0$0 eacheach O O 00

$.$. Hnits (lead timeHnits (lead time 22 7ee=s27ee=s222 each required)each required) 200200

'abor:'abor: 1010 hours eachhours each 2,0002,000Machine:Machine: 22 hours eachhours each 400400Payable: Ra7 material atPayable: Ra7 material at $5$5 eacheach O O 1,0001,000

C.C. Hnits (lead timeHnits (lead time 44 7ee=s27ee=s233 each required)each required) 300300'abor:'abor: 22 hours eachhours each 600600Machine:Machine: 11 hour eachhour each 300300Payable: Ra7 material atPayable: Ra7 material at $10$10 eacheach O O 3,0003,000



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Capacity Planning

ResourceResource planning planning

;irst cut;irst cutcapacity capacity

@o

CapacityCapacityrequirementsrequirements

(detailed)(detailed)

Aes

MaterialMaterialrequirementsrequirements

(detailed)(detailed)

Priority Planning

esiredesiredmaster productionmaster production

scheduleschedule

Realistic> Realistic>

Production planProduction plan

Planning


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Capacity Control (7or= center throughput)

Priority Control (detailed scheduling)

E,ecution

Aes

E,ecutethe plan

@o @o

!nputFoutput!nputFoutputreport report

!s!sa"eragea"eragecapacitycapacityadequateadequate

> >

ispatch list ispatch list

!s!sspecificspecificcapacitycapacityadequateadequate

> >


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Figure 14.Figure 14.

'ot -

'ot /

'ot 1

'ot 6

'ot

9 'ot 0

'ot 4

'ot - 'ot

-0

'ot 'ot

-/

'ot -1 'ot

-5

'ot 5

'ot -4

'ot --

%"ailable %"ailable

capacity capacity

Capacity e,ceededCapacity e,ceededin periods 1 5 in periods 1 5

'ot -

'ot /

'ot 1

'ot 6

'ot

9 'ot 0

'ot 4

'ot - 'ot

-0

'ot 'ot

-/

'ot -1 'ot

-5

'ot 5

'ot -4

'ot --

%"ailable %"ailable

capacity capacity

'ot 5 split 'ot 5 split 'ot -- mo"ed 'ot -- mo"ed

// J

-4-4 J

-- J

44 J

J

-- / / 00 11 4 4 5 5 6 6 9 9

Period Period

(a)(a)

# t a n d a r d

l a b o r

h o u r s

# t a n d a r d

l a b o r

h o u r s

// J

-4-4 J

-- J

44 J

J

-- / / 00 11 4 4 5 5 6 6 9 9

Period Period

(b)(b)

# t a n d a r d

l a b o r

h o u r s

# t a n d a r d

l a b o r

h o u r s


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Figure 14.Figure 14.

'ot -

'ot /

'ot 1

'ot 6

'ot

9 'ot 0

'ot 4

'ot - 'ot

-0

'ot 'ot

-/

'ot -1 'ot

-5

'ot 5

'ot -4

'ot --

%"ailable %"ailable

capacity capacity

Capacity e,ceededCapacity e,ceededin periods 1 5 in periods 1 5

'ot -

'ot /

'ot 1

'ot 6

'ot

9 'ot 0

'ot 4

'ot - 'ot

-0

'ot 'ot

-/

'ot -1 'ot

-5

'ot 5

'ot -4

'ot --

%"ailable %"ailable

capacity capacity

'ot 5 split 'ot 5 split 'ot -- mo"ed 'ot -- mo"ed

// J

-4-4 J

-- J

44 J

J

-- / / 00 11 4 4 5 5 6 6 9 9

Period Period

(a)(a)

# t a n d a r d

l a b o r

h o u r s

# t a n d a r d

l a b o r

h o u r s

// J

-4-4 J

-- J

44 J

J

-- / / 00 11 4 4 5 5 6 6 9 9

Period Period

(b)(b)

# t a n d a r d

l a b o r

h o u r s

# t a n d a r d

l a b o r h o u r s

!t is also possible to split lots 5 and -- andmo"e them earlier in the schedule. his 7oulda"oid any potential problems 7ith late orders

but 7ould increase in"entory holding cost.


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-.-. &"erlapping &"erlapping #ends pieces to the second operation before#ends pieces to the second operation before

the entire lot is completethe entire lot is complete

Reduces lead timeReduces lead time

/./. &perations splitting &perations splitting #ends the lot to t7o different machines for#ends the lot to t7o different machines for

the same operationthe same operation

#horter throughput time but increased setup#horter throughput time but increased setupcostscosts

0.0. &rder or lot splitting &rder or lot splitting $rea=ing up the order into smaller lots and$rea=ing up the order into smaller lots and

running part ahead of schedulerunning part ahead of schedule


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#ome ser"ices or ser"ice items are#ome ser"ices or ser"ice items aredirectly lin=ed to demand for otherdirectly lin=ed to demand for otherser"icesser"ices

hese can be treated as dependenthese can be treated as dependentdemand ser"ices or itemsdemand ser"ices or items

RestaurantsRestaurants

?ospitals?ospitals

?otels?otels


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Hncoo=edlinguiniQ01

#auceQ05

BealQ04

ChefNWor=

Center Q-

?elper oneNWor=

Center Q/

%sst. ChefNWor=

Center Q0

Coo=edlinguiniQ//

#pinachQ/1

Prepared "ealand sauce

Q/0

(a) PR&HC #RHCHRE REE

Beal picanteQ--



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(b) $!'' &; M%ER!%'#

PartPart@umber @umber escriptionescription 3uantity 3uantity

Hnit ofHnit ofMeasureMeasure

HnitHnitcost cost

---- Beal picanteBeal picante 11 #er"ing #er"ing %%

// // Coo=ed linguini Coo=ed linguini 11 #er"ing #er"ing %%

/0/0 Prepared "eal and saucePrepared "eal and sauce 11 #er"ing #er"ing %%

/1/1 #pinach#pinach 0.10.1 $ag $ag 0.40.4

0101 Hncoo=ed linguini Hncoo=ed linguini 0.50.5 Pound Pound %%

04 04 Beal Beal 11 #er"ing #er"ing 2.152.15

05 05 #auce#auce 11 #er"ing #er"ing 0.800.80


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(c) $!'' &; '%$&R ;&R BE%' P!C%@E

'abor 'abor ?ours?ours

Wor= Center Wor= Center &peration&peration 'abor ype'abor ype #etup ime#etup ime Run imeRun ime-- %ssemble dish %ssemble dish Chef Chef .006.006 .0041.0041

/ / Coo= linguini Coo= linguini ?elper one?elper one .0005.0005 .0022.0022

00 Coo= "ealCoo= "ealand sauceand sauce

%ssistant Chef %ssistant Chef .0125.0125 .0500.0500


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%n e,tension of the MRP system to %n e,tension of the MRP system totie in customers and supplierstie in customers and suppliers

-.-. %llo7s automation and integration of %llo7s automation and integration ofmany business processesmany business processes

/./. #hares common data bases and#hares common data bases andbusiness practicesbusiness practices

0.0. Produces information in real timeProduces information in real time

Coordinates business fromCoordinates business fromsupplier e"aluation to customersupplier e"aluation to customerin"oicinin"oicin


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Figure 14.11


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Figure 14.11

Customer Relationship Management

!n"oicing

#hipping istributors2

retailers2and end users

#ales &rder (order entry2

product configuration2sales management)


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Table 13.6

$ills ofMaterial

Wor=&rders

Purchasing and

'ead imes

Routingsand

'ead imes

MasterProduction#chedule

!n"entoryManagement

Figure 14.11

MRP MRP


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Figure 14.11

#upply Chain Management

Bendor Communication(schedules2 E!2 ad"anced shipping notice2

e*commerce2 etc.)


83/89


84/89

ERP can be highly customi+ed to meetERP can be highly customi+ed to meetspecific business requirementsspecific business requirements

Enterprise application integrationEnterprise application integrationsoft7are (E%!) allo7s ERP systems tosoft7are (E%!) allo7s ERP systems tobe integrated 7ithbe integrated 7ith Warehouse management Warehouse management

'ogistics'ogistics Electronic catalogsElectronic catalogs 3uality management 3uality management Product life cycle managment Product life cycle managment


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ERP systems ha"e the potential toERP systems ha"e the potential to

Reduce transaction costsReduce transaction costs !ncrease the speed and accuracy of!ncrease the speed and accuracy of

informationinformation

;acilitates a strategic emphasis on;acilitates a strategic emphasis on! systems and integration! systems and integration


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-.-. Pro"ides integration of the supply chain2Pro"ides integration of the supply chain2 production2 and administration production2 and administration

/./. Creates commonality of databasesCreates commonality of databases

0.0. Can incorporate impro"ed best processesCan incorporate impro"ed best processes

1.1. !ncreases communication and!ncreases communication andcollaboration bet7een business units andcollaboration bet7een business units and

sitessites4.4. ?as an off*the*shelf soft7are database?as an off*the*shelf soft7are database

5.5. May pro"ide a strategic ad"antageMay pro"ide a strategic ad"antage


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-.-. !s "ery e,pensi"e to purchase and e"en!s "ery e,pensi"e to purchase and e"enmore so to customi+emore so to customi+e

/./. !mplementation may require ma8or changes!mplementation may require ma8or changes

in the company and its processesin the company and its processes

0.0. !s so comple, that many companies cannot!s so comple, that many companies cannotad8ust to it ad8ust to it

1.1. !n"ol"es an ongoing2 possibly ne"er!n"ol"es an ongoing2 possibly ne"ercompleted2 process for implementationcompleted2 process for implementation

4.4. E,pertise is limited 7ith ongoing staffingE,pertise is limited 7ith ongoing staffing problems problems


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Cash to CashCo"ers all financial related acti"ity: %ccounts recei"able General ledger Cash management %ccounts payable reasury %sset management

oc= to ispatchCo"ers internal in"entory management:Warehousing ;orecasting Physical in"entory istribution planning Replenishment planning Material handling

Promote to eli"er Co"ers front*end customer*oriented

acti"ities:Mar=eting 3uote and order

processing ransportationocumentation and

labeling %fter sales ser"iceWarranty and

guarantees

Procure to Pay Co"ers sourcingacti"ities:

Bendor sourcing Purchaserequisitioning

Purchase ordering Purchase contracts!nbound logistics#upplier in"oicingF matching #upplier paymentF

settlement #upplier performance

esign to ManufactureCo"ers internal production acti"ities:esign #hop floor

engineering reporting Production ContractFpro8ect engineering management Plant #ubcontractor maintenance management

Recruit to ?ireCo"ers all ?R* and payroll*oriented

acti"ity:ime and attendance Payroll ra"el and e,penses


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ERP systems ha"e been de"elopedERP systems ha"e been de"elopedfor health care2 go"ernment2 retailfor health care2 go"ernment2 retail

stores2 hotels2 and financialstores2 hotels2 and financialser"icesser"ices

%lso called efficient consumer %lso called efficient consumer

response (ECR) systemsresponse (ECR) systems &b8ecti"e is to tie sales to buying2&b8ecti"e is to tie sales to buying2

in"entory2 logistics2 and productionin"entory2 logistics2 and production

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