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MRP and ERP
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MRP
Material requirements planning (MRP): Computer-based information system for ordering andscheduling of dependent demand inventories
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Dependent Demand
Dependent demand: Demand for items that aresubassemblies or component parts to be used inproduction of finished goods.
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Dependent vs Independent Demand
Time
Time Time
Time
Demand
Demand
Stable demandLumpy demand
Amountonhand
Amount
onhand
Safety stock
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MRP Inputs MRP Processing MRP Outputs
Master
schedule
Bill of
materials
Inventory
records
MRP computer
programs
Changes
Order releases
Planned-order
schedules
Exception reports
Planning reports
Performance-
control
reports
Inventory
transaction
Primary
reports
Secondary
reports
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MPR Inputs Master Production Schedule
Time-phased plan specifying timing and quantity ofproduction for each end item. Material Requirement Planning Process
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Master Schedule
Master schedule: One of three primary inputs inMRP; states which end items are to beproduced, when these are needed, and inwhat quantities.
Cumulative lead time: The sum of the lead timesthat sequential phases of a process require,from ordering of parts or raw materials tocompletion of final assembly.
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Planning Horizon
1 2 3 4 5 6 7 8 9 10
Procurement
Fabrication
Subassembly
Assembly
Figure 14-4
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Bill-of-Materials
Bill of materials: One of the three primary inputsof MRP; a listing of all of the raw materials,parts, subassemblies, and assembliesneeded to produce one unit of a product.
Product structure tree: Visual depiction of therequirements in a bill of materials, where allcomponents are listed by levels.
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Product Structure Tree
Chair
Seat
Legs (2)Cross
bar
Side
Rails (2)
Cross
bar
Back
Supports (3)
LegAssembly
BackAssembly
Level
0
1
2
3
Figure 15-5
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Assembly Time Chart
1 2 3 4 5 6 7 8 9 10 11
Procurement of
raw material D
Procurement of
raw material FProcurement of
part C
Procurement of
part H
Procurement ofraw material I
Fabricationof part G
Fabrication
of part E
Subassembly A
Subassembly B
Final assembly
and inspection
Figure 15-8
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MRP Processing
Gross requirements Schedule receipts
Projected on hand
Net requirements Planned-order receipts
Planned-order releases
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MRP Outputs
Planned orders - schedule indicating theamount and timing of future orders.
Order releases - Authorization for the executionof planned orders.
Changes - revisions of due dates or orderquantities, or cancellations of orders.
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MRP Secondary Reports
Performance-control reports
Planning reports
Exception reports
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Other Considerations
Safety Stock
Lot sizing Lot-for-lot ordering
Economic order quantity
Fixed-period ordering
Part-period model
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Capacity Planning
Capacity requirements planning: The process ofdetermining short-range capacityrequirements.
Load reports: Department or work centerreports that compare known and expectedfuture capacity requirements with
projected capacity availability.Time fences: Series of time intervals during which
order changes are allowed or restricted.
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MRP Planning
Develop a tentative
master production
schedule
Use MRP to
simulate material
requirements
Convert material
requirements toresource requirements
Firm up a portion
of the MPS
Is shop
capacity
adequate?
Can
capacity be
changed to meet
requirements
Revise tentative
master productionschedule
Change
capacity
Yes
No
Yes
No
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MRP in Services
Food catering service
End item => catered food
Dependent demand => 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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Market
Demand
Productionplan
Problems?
Rough-cut
capacity planning
Yes No YesNo
Finance
Marketing
Manufacturing
Adjustproduction plan
Master
production schedule
MRP
Capacity
planning
Problems?Requirements
schedules
Ad
justmasterschedule
MRP II
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ERP
Enterprise resource planning (ERP): An expanded
effort to integrate standardized record-keepingthat will permit information sharing throughoutthe organization