MRP Text Material

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13 - Manufacturing ResourcePlanning

Dr. Ron Tibben-Lembke


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Historical Perspective

mrp material

requirements

planning

MRP II Manufacturing

Resource Planning

ERP- Enterprise

Resource Planning


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MRP Crusade (1975)

Material Requirements Planning

Make sure you have enough parts when

you need themTake future demands, factor in lead times(time phase), compare to on hand, order

Determine order size and timing

Control and plan purchasing vs. OSWOinventory management


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Closed-Loop MRP

Capacity Consideration:Part routings

Calculate loads on each work station

See if scheduled load exceeds capacity

Lead-time long enough to allow someshuffling to make plan feasible


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MRP II -- ManufacturingResource Planning

A method for the effective planning of allresources of a manufacturing company (APICSdef.)

Financial accounting incorporated Sales

Operations Planning

Simulate capacity requirements of different possible

Master Production Schedules 1989, $1.2B MRPII sales in U.S., one third of total software sales


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Success? MRP CrusadeBegins


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Electronic Data Interchange

My computer talks to yours, tells you exactlywhat I want to order, when

You fill out a form, very compressed message

sent, viewed as formSoftware, hardware expensive to implement

Sample Purchase Transaction

ST88850*1 Transaction Set identifier

BEG*00*NE*00498765**010698 Beginning of Segment

PID*X*08*MC**Large Widget Description of Product

P01**5*DZ*4.55*TD Baseline Item Data

CTT*1 Transaction Totals

SE*1*1 End of Segment


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XML

eXtensible Markup Language

XML provides self-describing information.

Much easier, faster to implement or modifythan EDI.

Expected to replace EDI.

Standardization through RosettaNet efforts


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ERP differences

Material planningCapacity planningProduct designInformation warehousingAll functions in the entire company operate

off of one common set of data

Instantaneous updating, visibility


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Historical Perspective

Database

Server(s)

Application

Server(s)User PCs


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ERP Sales

Worldwide sales of top 10 vendors1995 $2.8 B

1996 $4.2 B

1997 $5.8 B $3.2 B SAP

Fortune survey: 44% reported spendingat least 4 times as much onimplementation as on software


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ERP Challenges

Modules assume best practices:Change software to reflect company ($)

Change company to follow software (?)

Accuracy of dataDrives entire system

Ownership of / responsibility for

Ability to follow structure


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ERP Novel?

Goal-like novelHero learns more about ERP,

deciding if it is right for his

companyCompany rushes through

installationGeneral introduction to ERP

systems, what they do, howdifferent from MRP

SAP R/3 screen shots


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3 Reasons for ERP

1. Legacy systems outdated and needreplacing anyway

2. Desire for greater communication

between locations3. Reconfigure business to take

advantage of current and future

communications and computingbreakthroughs


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Why ERP?

Common Client

Multiple Processes

Multiple Clients

Multiple Processes

Common ClientBest Practices

Multiple ClientsMostly Best Practices

High LowCentralization

High

LowFlexibili

ty


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ERP Considerations

1. Control: how much centralization, drill-down visibility?

2. Structure: How large & dispersed, how tightlyintegrated does it need to be?

3. Database: desired structure, accessibility

4. Customization: out/in source, how willing? Ability tomodify in real time. Creating in-house experts vs.continued consulting dependence

5. Best practices: how willing to embrace?

Source: Carol A. Ptak ERP: Tools, Techniques and Applications forIntegrating the Supply Chain, St. Lucie Press, APICS Series onResource Management, 1999, p. 252.


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How do we

System for organizing WIP releasesConsider LT for each item

Look at BOM to see what parts needed

Release so they will arrive just as needed

Example Snow ShovelOrder quantity is 50 units

LT is one week


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MRP Table

1 2 3 4 5

Gross Requirements 10 40 10

Scheduled receipts (begin)50

Projected Available

Balance (ending) 4 54 44 44 4Net Requirements 6

Planned Order Receipts

Planned Order Releases

6 units short


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Ending Inventory

1 2 3 4 5

Gross Requirements 10 40 10

Scheduled receipts (begin)50

Projected Available

Balance (ending) 4 54 44 44 4 44Net Requirements 6

Planned Order Receipts 50

Planned Order Releases 50

Ending inventory


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1605 Snow Shovel

1605Snow Shovel

048Scoop-shaftconnector

13122Top Handle

Assy314 scoop assembly

118 Shaft (wood)

062 Nail (4)

14127Rivet (4)


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314 scoop assembly

314 scoop assembly

14127 Rivet (6)019 Blade (steel)

2142 Scoop (aluminum)


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13122 Top Handle Assembly

1118Top handleCoupling (steel)

11495 Welded

Top handle bracketAssembly


457 Top handle(wood)

129 Top HandleBracket (steel) 082 Nail (2)


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BOM Explosion Example

Need to make 100 shovels

We are responsible for handleassemblies.


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Net Requirements

Sch Gross Net

Part Description Inv Rec Req Req

Top handle assy 25 -- 100 75

Top handle 22 25Nail (2 required) 4 50

Bracket Assy 27 --

Top bracket 15 --Top coupling 39 15


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Net Requirements

Sch Gross Net



Top handle 22 25 75 28Nail (2 required) 4 50 150 96

Bracket Assy 27 -- 75 48

Top bracket 15 --

Top coupling 39 15


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1118Top handleCoupling (steel)

11495 Welded

Top handle bracketAssembly


457 Top handle(wood)

129 Top HandleBracket (steel) 082 Nail (2)


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Net Requirements

Sch Gross Net



Top handle 22 25 75 28Nail (2 required) 4 50 150 96

Bracket Assy 27 -- 75 48

Top bracket 15 -- 48 33

Top coupling 39 15 48 --


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13122 Top Handle Assy

13122 Top handle

LT = 2 1 2 3 4 5 6 7 8 9 10

Gross Req 20 10 20 5 35 10Sch receipts

Proj. Avail Bal

(ending) 25 25 5 5

Net Req 5

Pl Order Rec 5

Pl Order Rel 5


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457 Top Handle

13122 Top handle

LT = 2 1 2 3 4 5 6 7 8 9 10

Gross Req 20 10 20 5 35 10

Sch receipts

Proj. Avail Bal

(ending) 25 25 5 5 0 0 0 0 0 0 0

Net Req 5 20 5 35 10

Pl Order Rec 5 20 5 35 10

Pl Order Rel 5 20 5 35 10

LT = 2 1 2 3 4 5 6 7 8 9 10

Gross Req 5 20 5 35 10

Sch receipts 25

Proj. Avail Bal

(ending) 22 22

Net Req

Pl Order Rec

Pl Order Rel

One handle forEach assembly


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457 Top Handle

LT = 2 1 2 3 4 5 6 7 8 9 10

Gross Req 5 20 5 35 10

Sch receipts 25

Proj. Avail Bal

(ending) 22 22 17

Net Req

Pl Order Rec

Pl Order Rel


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082 Nail (2 required)

LT = 1

Lot Size = 50 1 2 3 4 5 6 7 8 9 10

Gross Req 10 40 10 70 20

Sch receipts 50Proj. Avail Bal

(ending) 4 54

Net Req

Pl Order Rec

Pl Order Rel

13122 Top handleLT = 2 1 2 3 4 5 6 7 8 9 10

Gross Req 20 10 20 5 35 10

Sch receipts

Proj. Avail Bal

(ending) 25 25 5 5 0 0 0 0 0 0 0

Net Req 5 20 5 35 10



Two nails forEach assembly


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LT = 1

Lot Size = 50 1 2 3 4 5 6 7 8 9 10

Gross Req 10 40 10 70 20

Sch receipts 50

Proj. Avail Bal

(ending) 4 54 44 44 4

Net Req 6

Pl Order Rec 50Pl Order Rel 50


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LT = 1

Lot Size = 50 1 2 3 4 5 6 7 8 9 10

Gross Req 10 40 10 70 20

Sch receipts 50

Proj. Avail Bal

(ending) 4 54 44 44 4 44

Net Req 6 26 20

Pl Order Rec 50Pl Order Rel 50


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LT = 1

Lot Size = 50 1 2 3 4 5 6 7 8 9 10

Gross Req 10 40 10 70 20

Sch receipts 50

Proj. Avail Bal

(ending) 4 54 44 44 4 44 44 24 4 4 4

Net Req 6 26

Pl Order Rec 50 50Pl Order Rel 50


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11495 Bracket Assembly

13122 Top handle

LT = 2 1 2 3 4 5 6 7 8 9 10

Gross Req 20 10 20 5 35 10

Sch receipts

Proj. Avail Bal

(ending) 25 25 5 5 0 0 0 0 0 0 0

Net Req 5 20 5 35 10



LT = 2 1 2 3 4 5 6 7 8 9 10

Gross Req

Sch receipts

Proj. Avail Bal

(ending) 27

Net Req

Pl Order Rec

Pl Order Rel

One bracket forEach assembly


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11495 Bracket Assembly

13122 Top handle

LT = 2 1 2 3 4 5 6 7 8 9 10

Gross Req 20 10 20 5 35 10

Sch receipts

Proj. Avail Bal

(ending) 25 25 5 5 0 0 0 0 0 0 0

Net Req 5 20 5 35 10



LT = 2 1 2 3 4 5 6 7 8 9 10

Gross Req 5

Sch receipts

Proj. Avail Bal

(ending) 27

Net Req

Pl Order Rec

Pl Order Rel

One bracket forEach assembly


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Other considerations

Safety stock if uncertainty in demand orsupply quantityDont let available go down to 0

Safety LT if uncertainty in arrival time ofsupplyPlace order earlier than necessary

Order quantitiesEOQ, Lot-For-Lot, Periodic Order quantity,

others


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Assumptions

All requirements must be available at startof period

All future requirements must be met, and

cant be backorderedSystem operated on periodic basis (e.g.

weekly)

Requirements properly offset for LTsParts used uniformly through a periodUse average inventory levels for holding cost


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EOQ

Minimizes totalordering & holdingcosts

Assumes demandsame every periodDefinitely not always

true for this useAvg. demand and

holding cost needsame time units (e.g.per week)

Economic Lot Size:

Where:D = avg demand

CP = ordering costC

H= holding cost

H

P

C

DCELS

2=


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EOQ

Sqrt( 2 * 300 * 92.1 / 2) = 166

Week number 1 2 3 4 5 6 7 8 9 10 11 12

Requirements 10 10 15 20 70 180 250 270 230 40 0 10

Order Quant 166

Begin Inv

Ending Inv


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Periodic Order Quantities

Week No. 1 2 3 4 5 6 7 8 9 10 11 12

Req. 10 10 15 20 70 180 250 270 230 40 0 10

Orders 20 35 250 520 270 10

Begin 20 10 35 20 250 180 520 270 270 40 10 10

End 10 0 20 0 180 0 270 0 40 0 10 0

Avg Inv 15 5 28 10 215 90 395 135 155 20 10 5

Ordering cost = 6 * 300 = $1,800

Inv carry cost =1,082.5 * 2 = $2,145

Total $3,945


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P P i d B l i


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Part Period Balancing

Week 5:

Order 70: Holding = 10*0.5*2 = $10

Order 250: 10 + 180*1.5*2 = $550

So I could: Order 250 units, pay $300 in ordering and $540 holding,

for a total of $840,

Order 70 now, 180 next week, and pay $600 in orderingand $10 + 180*0.5*2=180 in holding = $790

Seems like the second option is best.

Week No. 1 2 3 4 5 6 7 8 9 10 11 12

Req. 10 10 15 20 70 180 250 270 230 40 0 10

Orders 55 0 0 0


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P t P i d B l i


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Part Period BalancingWeek No. 1 2 3 4 5 6 7 8 9 10 11 12

Req. 10 10 15 20 70 180 250 270 230 40 0 10Orders 55 0 0 0 70 180 250 270 280 0 0 0

Begin 55 45 35 20 70 180 250 270 280 50 10 10

End 45 35 20 0 0 0 0 0 50 10 10 0

W Withi


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Wagner-Within

Mathematically optimal

Work back from planning period farthestin the future

Consider all possibilities:Order for 5, 4 and 5, 3 and 4, then 5, etc.

Uses dynamic programming similar to

linear programming

Si l ti E i t


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Simulation Experiments

What is best under real-worldconditions?Multiple levels to be concerned about

Real-time changes

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