Chapter 15 - Material & Capacity Requirements Planning(MRP/CRP)

Planning Objectives

• Satisfy customer demand

• Ensure availability and efficient use of resources– Material– Capacity

• KEY - Balance demand and resources

Planning and Control System Questions

• What are we going to make, and when?

• What does it take to make it?

• What do we already have?

• What must we get, and when?

• Successful answers result in right:– goods, quantity, quality, time, cost

Types of Resource Planning Systems

• Material Requirements Planning (MRP) -– A set of techniques that uses bill of material

data, inventory data, and the master production schedule to calculate time-phased requirements for materials. Recommends release of replenishment orders and rescheduling of open orders as conditions (priorities) change.

» APICS Dictionary - 9th Ed.

MRP’s Objectives

• What to Order

• How Much to Order

• When to Order

• When to Schedule Delivery

MRP OverviewMRP Inputs MRP Processing MRP Outputs

Masterschedule

Bill ofmaterials

file

Inventoryrecords

file

MRP computerprograms

Changes

Order releases

Planned-orderschedules

Exception reports

Planning reports

Performance-controlreports

Inventorytransaction

Primaryreports

Secondaryreports

Material Requirements PlanningInputs• Master schedule: States which end items to produce,

when, and in what quantities.• Bill of materials: Raw materials, parts, subassemblies, and

assemblies needed to produce one unit of a product (Single vs. multiple level).

• Product structure tree: Visual depiction of a bill of materials, with all components listed by levels

• Inventory status/transactions: Location, quantity, ins, outs, picks, changes.

• Planning Factors: Lead time, scrap allowance, yield factors, lot sizes, safety stock/safety lead time

Material Requirements Planning

A Final Point

• MRP focuses on materials ONLY and DOES NOT guarantee that the plan can be implemented from a capacity/resource perspective. To close the loop, it’s necessary to do capacity requirements planning (CRP)

Capacity Requirements Planning• The process of determining short-

range capacity requirements from MRP outputs

• Load reports/profiles show known and expected future capacity requirements vs. expected capacity availability

Ch 13 - 28© 1998 by Prentice-Hall IncRussell/Taylor Oper Mgt 2/e

Capacity Requirements PlanningMRP planned

orderreleases

Routingfile

Capacityrequirements

planning

Openorders

file

Load profile foreach machine center

Ch 13 - 31© 1998 by Prentice-Hall IncRussell/Taylor Oper Mgt 2/e

Capacity Requirements Planning - Initial Load Profile

1 2 3 4 5 6

Time (weeks)

Normalcapacity

Hours ofcapacity

Ch 13 - 32© 1998 by Prentice-Hall IncRussell/Taylor Oper Mgt 2/e

Capacity Requirements Planning - Adjusted Profile

1 2 3 4 5 6

Time (weeks)

Work an extra shift

Push back

Push back

Pull ahead

Overtime

Hours ofcapacity

Types of Resource Planning Systems

• Manufacturing Resource Planning (MRP II)– A method for the effective planning of all

resources of a manufacturing company. Provides simulation capability to answer “what-if” capability and is made up of a variety of planning functions, each linked together. Output from these functions is linked with other business functions and financial reports. An extension of MRP.

» Modified from APICS Dictionary - 9th Ed.

Types of Resource Planning Systems

• Enterprise Resource Planning (ERP)– A method for the effective planning and control

of all resources needed to take, make, ship, and account for customer orders. Differs from typical MRP II in technical requirements such as graphical user interface, relational database, 4GL languages, client-server architecture and open-system portability (Example SAP R/3)

» Modified from APICS Dictionary - 9th Ed.

Trends in Resource Planning Systems

• More powerful/sophisticated• More encompassing• More integrated/flexible• More options• More user-friendly/robust• More data-base focused• More data-intense

Chapter 16 - Just-In-Time

JIT/Lean ProductionJust-in-time: Repetitive production system

in which processing and movement of materials and goods occur just as they are needed, usually in small batches

• JIT is characteristic of lean production systems

• JIT operates with very little “fat”

Just-In-Time Concepts

• jit - Inventory/production control system

• JIT - Philosophy of continuous improvement

• Simplification/Execution

• Elimination of Waste

• Reduced transaction processing

• Multi-pronged approach– High quality, Quick response, Flexibility

JIT vs. MRP/ERP• Similar goals

– Right products, right place, right time

• MRP II – Computer-based, manages complexity

• JIT– Manual systems, simplicity/execution

• The Super Bowl of Planning & Control• Choice? - play to strengths

– MRP – Planning; JIT - execution

JIT Characteristics• A Fixed, Steady Rate of Production

– Uniform flow– Linear production

• Low Inventories– Less space, investment– Uncover defects

• Small Lot Sizes– Less WIP– Flexibility/Velocity– Fast feedback

JIT Characteristics• Quick, Low Cost Setups

– Flexibility/Velocity

– Small lot sizes

• Layout– U-shaped

– Cellular

• Preventive Maintenance & Repair– Worker pride/ownership

JIT Characteristics• Multifunctional/Cooperative Workers

– Guerilla squad

– Flexible capacity

• High Quality Levels– On-going production

– Small/frequent deliveries

• Product simplification– Standardization

– Fewer part numbers/drawings

JIT Characteristics• Reliable Vendors

– Dock-to-stock

– Much smaller number

– Long-term relationships

• A Pull System of Moving Goods– Request-based

– Kanban signal

• Problem Solving/Continuous Improvement