Material Requirements Planning and Enterprise Resource Planning
Dr. Ron Lembke
Historical Perspective
mrp – material requirements
planning
MRP II – ManufacturingResource Planning
ERP- Enterprise Resource Planning
MRP Crusade (1975)
Material Requirements PlanningMake sure you have enough parts when
you need themTake future demands, factor in lead times
(time phase), compare to on hand, orderDetermine order size and timingControl and plan purchasing vs. OSWO
inventory management
Closed-Loop MRP
Capacity Consideration:Part routingsCalculate loads on each work stationSee if scheduled load exceeds capacityLead-time long enough to allow some
shuffling to make plan feasible
MRP II -- Manufacturing Resource Planning
“A method for the effective planning of all resources of a manufacturing company” (APICS def.) 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
Success? MRP CrusadeBegins
ERP differences
Material planningCapacity planningProduct designInformation warehousing
All functions in the entire company operate off of one common set of data
Instantaneous updating, visibility
ERP Sales
Y2K: Worldwide sales of top 10 vendors1995 $2.8 B1996 $4.2 B1997 $5.8 B $3.2 B SAP
Fortune survey: 44% reported spending at least 4 times as much on implementation as on software
ERP Challenges
Modules assume “best practices:”Change software to reflect company ($)Change company to follow software (?)
Accuracy of dataDrives entire systemOwnership of / responsibility for
Ability to follow structure
ERP Novel?
“Goal-like” novel Hero learns more about ERP,
deciding if it is right for his company
Company rushes through installation
General introduction to ERP systems, what they do, how different from MRP
SAP R/3 screen shots
The Heart of the Matter - mrp
System for organizing WIP releases Work in Process – work that has been started, but
not yet finished Consider Lead Time (LT)for each item Look at BOM to see what parts needed
Bill of Materials – what goes into what Release so they will arrive just as needed
Bike Production
Due
Mar1 7 14 21 28 4
Apr11 18
AssemblePartsArrive
Frame
Wheels
Drivetrain
Seat, Bars
OCLV Carbon
Snow Shovels
Example – Snow Shovel Order quantity is 50 units LT is one week
Simple Bill of Materials - BOM
MRP Table
1 2 3 4 5 Gross Requirements 10 40 10 Scheduled receipts (begin) 50 Projected Available Balance (ending) 4
54
44
44
4
Net Requirements 6 Planned Order Receipts Planned Order Releases
6 units short
MRP Table
1 2 3 4 5 Gross Requirements 10 40 10 Scheduled receipts (begin) 50 Projected Available Balance (ending) 4
54
44
44
4
Net Requirements 6 Planned Order Receipts 50 Planned Order Releases 50
Order 50 units week earlier
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
44
Net Requirements 6 Planned Order Receipts 50 Planned Order Releases 50
Ending inventory
Terminology
Projected Available balance Not on-hand (that may be greater) Tells how many will be available Available to Promise – the units aren’t spoken for
yet, we can assign them to a customer Planned order releases ≠ scheduled receipts
Only when material has been committed to their production
Move to scheduled receipts as late as possible Preserves flexibility
1605 Snow Shovel
1605 Snow Shovel
048Scoop-shaftconnector
13122 Top Handle Assy314 scoop assembly
118 Shaft (wood)
062 Nail (4)
14127 Rivet (4)
314 scoop assembly
314 scoop assembly
14127 Rivet (6)019 Blade (steel)
2142 Scoop (aluminum)
13122 Top Handle Assembly
1118Top handle
Coupling (steel)
11495 WeldedTop handle bracket
Assembly
13122 Top Handle Assembly
457 Top handle(wood)
129 Top HandleBracket (steel)
082 Nail (2)
BOM Explosion
Process of translating net requirements into components part requirementsTake into account existing inventoriesConsider also scheduled receipts
BOM Explosion Example
Need to make 100 shovelsWe are responsible for handle
assemblies.
13122 Top Handle Assembly
1118Top handle
Coupling (steel)
11495 WeldedTop handle bracket
Assembly
13122 Top Handle Assembly
457 Top handle(wood)
129 Top HandleBracket (steel)
082 Nail (2)
Net Requirements
Sch Gross NetPart Description Inv Rec Req ReqTop handle assy 25 -- 100 75
Top handle 22 25Nail (2 required) 4 50Bracket Assy 27 --
Top bracket 15 --Top coupling 39 15
Net Requirements
Sch Gross NetPart Description Inv Rec Req ReqTop handle assy 25 -- 100 75
Top handle 22 25 75 28Nail (2 required) 4 50 150 96Bracket Assy 27 -- 75 48
Top bracket 15 --Top coupling 39 15
13122 Top Handle Assembly
1118Top handle
Coupling (steel)
11495 WeldedTop handle bracket
Assembly
13122 Top Handle Assembly
457 Top handle(wood)
129 Top HandleBracket (steel)
082 Nail (2)
Net Requirements
Sch Gross NetPart Description Inv Rec Req ReqTop handle assy 25 -- 100 75
Top handle 22 25 75 28Nail (2 required) 4 50 150 96Bracket Assy 27 -- 75 48
Top bracket 15 -- 48 33Top coupling 39 15 48 --
Timing of Production
This tells us how many of each we needDoesn’t tell when to startStart as soon as possible?Dependent events (oh no, not that!)
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 10
Sch receipts
Proj. Avail Bal (ending)
25
25
5
5
Net Req 5 Planned Order Receipt 5 Planned Order Release 5
Order policy: Lot-for-lot
13122 Top Handle Assy-2
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
Order policy: Lot-for-lot
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
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
Order policy: Lot-for-lot
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
42
22
17
17
0
0
0
0
Net Req 18 10 Pl Order Rec 18 10 Pl Order Rel 18 10
Order policy: Lot-for-lot
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 50 Proj. Avail Bal (ending)
4
54
Net Req Pl Order Rec Pl Order Rel
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
Two nails forEach assembly
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 50
Proj. Avail Bal (ending)
4
54
44
44
4
44
44
24
4
4
4
Net Req 6 26
Pl Order Rec 50 50 Pl Order Rel 50 50
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
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
Proj. Avail Bal (ending)
27
Net Req
Pl Order Rec Pl Order Rel
One bracket forEach assembly
11495 Bracket Assembly
LT = 2
1
2
3
4
5
6
7
8
9
10
Gross Req 5 20 5 35 10
Sch receipts
Proj. Avail Bal (ending)
27
27
22
22
2
0
0
0
0
0
0
Net Req 3 35 10
Pl Order Rec 3 35 10 Pl Order Rel 3 35 10
Order policy: Lot-for-lot
129 Top Bracket
LT = 1
1
2
3
4
5
6
7
8
9
10
Gross Req 3 35 10
Sch receipts
Proj. Avail Bal (ending)
15
Net Req Pl Order Rec Pl Order Rel
LT = 2
1
2
3
4
5
6
7
8
9
10
Gross Req 5 20 5 35 10
Sch receipts
Proj. Avail Bal (ending)
27
22
22
2
Net Req 3 35 10 Pl Order Rec 3 35 10 Pl Order Rel 3 35 10
129 Top handle bracket
LT = 1
1
2
3
4
5
6
7
8
9
10
Gross Req 3 35 10
Sch receipts
Proj. Avail Bal (ending)
15
15
15
12
12
Net Req 23 10
Pl Order Rec 23 10 Pl Order Rel 23 10
Order policy: Lot-for-lot
1118 Top handle coupling
LT = 3 Safety Stock = 20
1
2
3
4
5
6
7
8
9
10
Gross Req 3 35 10
Sch receipts
Proj. Avail Bal (ending)
39
Net Req
Pl Order Rec Pl Order Rel
LT = 2
1
2
3
4
5
6
7
8
9
10
Gross Req 5 20 5 35 10
Sch receipts
Proj. Avail Bal (ending)
27
22
22
2
Net Req 3 35 10 Pl Order Rec 3 35 10 Pl Order Rel 3 35 10
1118 Top handle coupling
LT = 3 Safety Stock = 20
1
2
3
4
5
6
7
8
9
10
Gross Req 3 35 10
Sch receipts 15
Proj. Avail Bal (ending)
39
39
54
51
51
16
Net Req 4 Pl Order Rec 4 Pl Order Rel 4
Order policy: Lot-for-lot
1118 Top handle coupling
LT = 3 Safety Stock = 20
1
2
3
4
5
6
7
8
9
10
Gross Req 3 35 10
Sch receipts 15
Proj. Avail Bal (ending)
39
39
54
51
51
20
20
20
20
20
20
Net Req 4 10 Pl Order Rec 4 10 Pl Order Rel 4 10
Other considerations
Safety stock if uncertainty in demand or supply quantity Don’t let available go down to 0
Safety LT if uncertainty in arrival time Place order earlier than necessary
Order quantities EOQ – Economic Order Quantity, Fixed Size If that’s not enough, order what you need, OR order
two or more of the Fixed Size Lot-For-Lot, Periodic Order quantity, others
Summary
Demand for final productsCompute needs for it andDependent Demand for components
Look at all parts of the Bill of MaterialsComplete the Table for each
Bottom row (Pl Order Releases) becomes top row (Gross Requirements) of input components (also called children)
Multiplied by # needed for each parent