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Chapter 14 MRP to ERP

Independent vs. dependentdemand, MRP inputs and

processing, Closed-loop MRP, MRPII, ERP

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Traditional I/C Problems Reorder point (when to order)

Assumes known, linear demand (sawtooth)

Assumes rough knowledge of lead time Uses safety stock (or safety time) as buffer

Each item planned independently

EOQ (how much to order) Focuses on mechanics of formula

Assumes linear (constant) usage

Always results in inventory

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MRP Material Requirements Planning (MRP)

Father of MRP: Joseph Orlicky (???? - ????)

Dependent vs. independent demand concept Other requirements

Manufacturing Bill of Materials (BOM)

Accurate, well-managed Master Production

Schedule (MPS) to drive MRP Computer software to explode BOMs

Computer hardware speed and data capacity

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Key MRP Inputs Master Production Schedule (MPS)

Well managed Build Plan

Bill of Materials (or recipes) Parent/child relationships

Single level vs. multi-level

Structured for manufacturing On hand inventory (available to use)

Material on order (from supplier)

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Key MRP Inputs Planning factors

Lead time

Lot sizing algorithm or rule Optional adjustments

Safety stock

Safety time

Yield

Shrinkage

etc.

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MRP ProcessingAnswers both questions

When to order

How much to order

Proceeds one level at a time (level-by-level)

Nets and plans action only when lowestlevel in any BOM is reached

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Lot Sizing Algorithms Lot for lot

Seeks to balance supply and demand

Fixed order quantity May have minimums, maximums, multiples

Economic Order Quantity (EOQ) Variations are Least Unit Cost, Least Total Cost,

Part Period Balancing

Period Order Quantity

Fixed Period Requirements

Wagner-Whitin

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MRP Summary - 1 Big number-cruncher

Follows rules using built-in logic and tables

Predicts shortages

Gross requirements derived from plannedorder releases of parent items

Processes level-by-level Nets requirements and plans for an item at

lowest level of use in any BOM

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MRP Summary - 2 First suggests pull-ins, push-outs,

cancellations

Then creates plannedorders (not released)

Provides action and/or exceptionmessages

High-speed computers now mean process inminutes rather than hours

Planner needs to evaluate results before acting

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Problems with MRP Computer model

Decisions may be based on inaccurate data

Inventory-building features have crept in

Safety stock

Safety time

EOQ

Represents a push system

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Resource Planning Systems MRP

Closed loop MRP

MRP II

ERP

SCM Next emphasis > E-commerce

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Closed Loop MRP and MRP II Oliver Wight (???? 1983)

Sold concepts to American management

Closed Loop MRP Feedback any changes in due dates and

quantities

Must have accurate due dates

Manufacturing Resource Planning(MRP II) Integrate Long Range, Intermediate Range,

Short Range, and Real-time planning

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ERP and SCM Enterprise Resource Planning (ERP)

Coined by Gartner Group

Extends integrated planning to CustomerService, Forecasting, Quality, HumanResources, Accounting, Project Management

Supply Chain Management (SCM) Extends planning to other organizations

Tightly couples suppliers and customers

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ERP Software Vendors - 2001 Enterprise Resource Planning (ERP)

SAP Oracle Baan

PeopleSoft J.D. Edwards

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ERP Software Vendors - 2005 Enterprise Resource Planning (ERP)

SAPOracle

PeopleSoft J.D. Edwards

Baan (financial and legal problems followed by acquisition)

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ERP Software Vendors - 2008 Enterprise Resource Planning (ERP)

SAPOracle Infor Global Solutions (SSA ERP - formerly Baan)

The Sage Group