chapter 13 13 mrp and erp mcgraw-hill/irwin operations management, eighth edition, by william j....

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CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

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Page 1: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

CHAPTER 1313

MRP and ERP

McGraw-Hill/IrwinOperations Management, Eighth Edition, by William J. StevensonCopyright © 2005 by The McGraw-Hill Companies, Inc. All rights

reserved.

Page 2: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

Material requirements planning (MRP): Computer-based information system that translates master schedule requirements for end items into time-phased requirements for subassemblies, components, and raw materials.

MRP

Page 3: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

Independent and Dependent DemandIndependent Demand

A

B(4) C(2)

D(2) E(1) D(3) F(2)

Dependent Demand

Independent demand is uncertain. Dependent demand is certain.

Page 4: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

Dependent demand: Demand for items that are subassemblies or component parts to be used in production of finished goods.

Once the independent demand is known, the dependent demand can be determined.

Dependant Demand

Page 5: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

MRP Inputs MRP Processing MRP Outputs

Masterschedule

Bill ofmaterials

Inventoryrecords

MRP computerprograms

Changes

Order releases

Planned-orderschedules

Exception reports

Planning reports

Performance-controlreports

Inventorytransaction

Primaryreports

Secondaryreports

Page 6: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

Master Production Schedule Time-phased plan specifying timing and

quantity of production for each end item. Material Requirement Planning Process

Product Structure

Tree

Lead Times

MPR Inputs

Page 7: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

Master Schedule

Master schedule: One of three primary inputs in MRP; states which end items are to be produced, when these are needed, and in what quantities.

Cumulative lead time: The sum of the lead times that sequential phases of a process require, from ordering of parts or raw materials to completion of final assembly.

Page 8: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

Planning Horizon

1 2 3 4 5 6 7 8 9 10

Procurement

Fabrication

Subassembly

Assembly

Page 9: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

Bill-of-Materials

Bill of materials (BOM): One of the three primary inputs of MRP; 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.

Page 10: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

Product Structure Tree

Chair

Seat

Legs (2) Crossbar

SideRails (2)

Crossbar

BackSupports (3)

LegAssembly

BackAssembly

Level 0

1

2

3

Page 11: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

Inventory Records One of the three primary inputs in

MRP Includes information on the status of

each item by time period Gross requirements Scheduled receipts Amount on hand Lead times Lot sizes And more …

Page 12: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

Assembly Time Chart

1 2 3 4 5 6 7 8 9 10 11

Procurement ofraw material D

Procurement ofraw material F

Procurement ofpart C

Procurement ofpart H

Procurement ofraw material I

Fabricationof part G

Fabricationof part E

Subassembly A

Subassembly B

Final assemblyand inspection

Page 13: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

MRP Processing

Gross requirements

Schedule receipts

Projected on hand

Net requirements

Planned-order receipts

Planned-order releases

Page 14: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

MPR Processing Gross requirements

Total expected demand

Scheduled receipts Open orders scheduled to arrive

Planned on hand Expected inventory on hand at the

beginning of each time period

Page 15: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

MPR Processing Net requirements

Actual amount needed in each time period

Planned-order receipts Quantity expected to received at the

beginning of the period

Offset by lead time

Planned-order releases Planned amount to order in each time

period

Page 16: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

Updating the System

Regenerative system Updates MRP records periodically

Net-change system Updates MPR records continuously

Page 17: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

MRP Outputs

Planned orders - schedule indicating the amount and timing of future orders.

Order releases - Authorization for the execution of planned orders.

Changes - revisions of due dates or order quantities, or cancellations of orders.

Page 18: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

MRP Secondary Reports

Performance-control reports

Planning reports

Exception reports

Page 19: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

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 for cost estimation and scheduling

MRP in Services

Page 20: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

Benefits of MRP

Low levels of in-process inventories

Ability to track material requirements

Ability to evaluate capacity requirements

Means of allocating production time

Page 21: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

Requirements of MRP

Computer and necessary software Accurate and up-to-date

Master schedules Bills of materials Inventory records

Integrity of data

Page 22: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

Expanded MRP with emphasis placed on integration Financial planning

Marketing

Engineering

Purchasing

Manufacturing

MRP II

Page 23: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

MarketMarketDemandDemand

ProductionProductionplanplan

Problems?Problems?

Rough-cutRough-cutcapacity planningcapacity planning

YesYes NoNo YesYesNoNo

FinanceFinance

MarketingMarketing

ManufacturingManufacturing

AdjustAdjustproduction planproduction plan

MasterMasterproduction scheduleproduction schedule

MRPMRP

CapacityCapacityplanningplanning

Problems?Problems?RequirementsRequirements

schedulesschedules

Ad

just

mas

ter

sch

edu

leA

dju

st m

aste

r sc

hed

ule

MRP II

Page 24: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

Capacity Planning

Capacity requirements planning: The process of determining short-range capacity requirements.

Load reports: Department or work center reports that compare known and expected future capacity requirements with projected capacity availability.

Time fences: Series of time intervals during which order changes are allowed or restricted.

Page 25: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

Capacity PlanningDevelop a tentativemaster production

schedule

Develop a tentativemaster production

schedule

Use MRP tosimulate material

requirements

Use MRP tosimulate material

requirements

Convert materialrequirements to

resource requirements

Firm up a portionof the MPS

Is shopcapacity

adequate?

Cancapacity be

changed to meetrequirements

Revise tentativemaster production

schedule

Changecapacity

Yes

No

Yes

No

Page 26: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

Enterprise resource planning (ERP): Next step in an evolution that began

with MPR and evolved into MRPII Integration of financial,

manufacturing, and human resources on a single computer system.

ERP

Page 27: CHAPTER 13 13 MRP and ERP McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies,

ERP Strategy Considerations

High initial cost High cost to maintain Future upgrades Training