heizer om10 ch14-mrp

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1414 Material Requirements Planning (MRP) and ERP

Material Requirements Planning (MRP) and ERP

14 - 1© 2011 Pearson Education, Inc. publishing as Prentice Hall

PowerPoint presentation to accompany PowerPoint presentation to accompany Heizer and Render Heizer and Render Operations Management, 10e Operations Management, 10e Principles of Operations Management, 8ePrinciples of Operations Management, 8e

PowerPoint slides by Jeff Heyl

OutlineOutlineGlobal Company Profile: Wheeled CoachDependent DemandDependent Inventory Model Requirements


RequirementsMaster Production ScheduleBills of MaterialAccurate Inventory RecordsPurchase Orders OutstandingLead Times for Components

Outline Outline –– ContinuedContinued

MRP StructureMRP Management

MRP Dynamics


MRP DynamicsMRP and JIT

Lot-Sizing Techniques


Extensions of MRPMaterial Requirements Planning II (MRP II)Closed Loop MRP


Closed-Loop MRPCapacity Planning

MRP In ServicesDistribution Resource Planning (DRP)


Enterprise Resource Planning (ERP)Advantages and Disadvantages of ERP SystemsERP in the Service Sector


ERP in the Service Sector

Learning ObjectivesLearning ObjectivesWhen you complete this chapter you When you complete this chapter you should be able to:should be able to:

1. Develop a product structure


2. Build a gross requirements plan3. Build a net requirements plan4. Determine lot sizes for lot-for-lot,

EOQ, and PPB

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Learning ObjectivesLearning ObjectivesWhen you complete this chapter you When you complete this chapter you should be able to:should be able to:

5. Describe MRP II


6. Describe closed-loop MRP7. Describe ERP

Wheeled CoachWheeled Coach

Largest manufacturer of ambulances in the worldInternational competitor


p12 major ambulance designs

18,000 different inventory items6,000 manufactured parts12,000 purchased parts

Wheeled CoachWheeled Coach

Four Key TasksMaterial plan must meet both the requirements of the master schedule


qand the capabilities of the production facilityPlan must be executed as designedMinimize inventory investment Maintain excellent record integrity

Dependent DemandDependent Demand

For any product for which a schedule For any product for which a schedule can be established, dependent can be established, dependent

demand techniques should be useddemand techniques should be used


demand techniques should be useddemand techniques should be used

Dependent DemandDependent DemandBenefits of MRP1. Better response to customer

orders


2. Faster response to market changes3. Improved utilization of facilities

and labor4. Reduced inventory levels

Dependent DemandDependent DemandThe demand for one item is related to the demand for another itemGiven a quantity for the end item, the demand for all parts and


the demand for all parts and components can be calculatedIn general, used whenever a schedule can be established for an itemMRP is the common technique

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Dependent DemandDependent Demand

1 M t d ti h d l

Effective use of dependent demand inventory models requires the following


1. Master production schedule2. Specifications or bill of material3. Inventory availability4. Purchase orders outstanding5. Lead times

Master Production Schedule Master Production Schedule (MPS)(MPS)

Specifies what is to be made and whenMust be in accordance with the aggregate production planInputs from financial plans customer


Inputs from financial plans, customer demand, engineering, supplier performanceAs the process moves from planning to execution, each step must be tested for feasibilityThe MPS is the result of the production planning process


MPS is established in terms of specific productsSchedule must be followed for a reasonable length of time


reasonable length of timeThe MPS is quite often fixed or frozen in the near term part of the planThe MPS is a rolling scheduleThe MPS is a statement of what is to be produced, not a forecast of demand

ProcurementSupplierperformance

Human resourcesManpowerplanning

ProductionCapacityInventory

MarketingCustomerdemand

FinanceCash flow

The Planning ProcessThe Planning Process

14 - 16© 2011 Pearson Education, Inc. publishing as Prentice HallFigure 14.1

Change production

plan?Master production schedule

ManagementReturn oninvestmentCapital

EngineeringDesigncompletion

Aggregate production

plan

The Planning ProcessThe Planning Process

Change master

production schedule?

Change capacity?

Change requirements?

Capacity

Material requirements plan

Master production schedule


Is capacity plan being

met?

Is execution meeting the

plan?

No

Execute material plans

Execute capacity plans

Yes

Realistic?

p yrequirements plan

AggregateAggregateProduction PlanProduction Plan

Months January FebruaryAggregate Production Plan 1,500 1,200(Shows the totalquantity of amplifiers)Weeks 1 2 3 4 5 6 7 8


Weeks 1 2 3 4 5 6 7 8Master Production Schedule(Shows the specific type andquantity of amplifier to beproduced240-watt amplifier 100 100 100 100150-watt amplifier 500 500 450 45075-watt amplifier 300 100

Figure 14.2

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1 A customer order in a job shop (make-

Can be expressed in any of the following terms:


1. A customer order in a job shop (make-to-order) company

2. Modules in a repetitive (assemble-to-order or forecast) company

3. An end item in a continuous (stock-to-forecast) company

Focus for Different Focus for Different Process StrategiesProcess Strategies

Stock to Forecast

(Product Focus)

Assemble to Order or Forecast(Repetitive)

Make to Order

(Process Focus)

Schedule orders

Number of inputs


Schedule finished product

Schedule modules

Examples: Print shop Motorcycles Steel, Beer, BreadMachine shop Autos, TVs Lightbulbs

Fine-dining restaurant Fast-food restaurant Paper

Typical focus of the master production

schedule

Number of end items

Figure 14.3

MPS ExamplesMPS Examples

Gross Requirements for Crabmeat Quiche

Day 6 7 8 9 10 11 12 13 14 and so on

For Nancy’s Specialty Foods


Gross Requirements for Spinach Quiche

Day 6 7 8 9 10 11 12 13 14 and so onAmount 50 100 47 60 110 75

Day 7 8 9 10 11 12 13 14 15 16 and so onAmount 100 200 150 60 75 100

Table 14.1

Bills of MaterialBills of Material

List of components, ingredients, and materials needed to make product P id d t t t


Provides product structureItems above given level are called parentsItems below given level are called children

BOM ExampleBOM Example

B(2) Std. 12” Speaker kit C(3)Std. 12” Speaker kit w/ amp-booster1

Product structure for “Awesome” (A)A

Level0


E(2)E(2) F(2)

Packing box and installation kit of wire,

bolts, and screws

Std. 12” Speaker booster assembly

2

D(2)

12” Speaker

D(2)

12” Speaker

G(1)

Amp-booster

3

BOM ExampleBOM Example

B(2) Std. 12” Speaker kit C(3)Std. 12” Speaker kit w/ amp-booster1

Product structure for “Awesome” (A)A

Level0

Part B: 2 x number of As = (2)(50) = 100Part C: 3 x number of As = (3)(50) = 150Part D: 2 x number of Bs


E(2)E(2) F(2)

Packing box and installation kit of wire,

bolts, and screws

Std. 12” Speaker booster assembly

2

D(2)

12” Speaker

D(2)

12” Speaker

G(1)

Amp-booster

3

+ 2 x number of Fs = (2)(100) + (2)(300) = 800Part E: 2 x number of Bs

+ 2 x number of Cs = (2)(100) + (2)(150) = 500Part F: 2 x number of Cs = (2)(150) = 300Part G: 1 x number of Fs = (1)(300) = 300

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Bills of MaterialBills of Material

Modular BillsModules are not final products but components that can be assembled i t lti l d it


into multiple end itemsCan significantly simplify planning and scheduling

Bills of MaterialBills of MaterialPlanning Bills

Also called “pseudo” or super billsCreated to assign an artificial parent to the BOM


parent to the BOMUsed to group subassemblies to reduce the number of items planned and scheduledUsed to create standard “kits” for production

Bills of MaterialBills of MaterialPhantom Bills

Describe subassemblies that exist only temporarilyAre part of another assembly and


Are part of another assembly and never go into inventory

Low-Level CodingItem is coded at the lowest level at which it occursBOMs are processed one level at a time

Accurate RecordsAccurate RecordsAccurate inventory records are absolutely required for MRP (or any dependent demand system) to operate correctly


p yGenerally MRP systems require more than 99% accuracyOutstanding purchase orders must accurately reflect quantities and scheduled receipts

Lead TimesLead Times

The time required to purchase, produce, or assemble an item

For production – the sum of the order wait move setup store


order, wait, move, setup, store, and run timesFor purchased items – the time between the recognition of a need and the availability of the item for production

TimeTime--Phased Product Phased Product StructureStructure

2 weeks

1 weekD

Start production of DMust have D and E completed here so

production can begin on B2 weeks to produce

B


| | | | | | | |

1 2 3 4 5 6 7 8Time in weeks

F

2 weeks

3 weeks

1 week

AE

2 weeks

D

G

1 week

Figure 14.4

1 weekC

E

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MRP StructureMRP StructureOutput Reports

MRP by period report

MRP by date report

Data Files

BOM

Lead times

Masterproduction schedule


Figure 14.5

Planned order report

Purchase advice

Exception reports

Order early or late or not needed

Order quantity too small or too large

Purchasing data

(Item master file)

Inventory dataMaterial

requirement planning programs

(computer and software)

Determining Gross Determining Gross RequirementsRequirements

Starts with a production schedule for the end item – 50 units of Item A in week 8Using the lead time for the item,


g ,determine the week in which the order should be released – a 1 week lead time means the order for 50 units should be released in week 7This step is often called “lead time offset” or “time phasing”


From the BOM, every Item A requires 2 Item Bs – 100 Item Bs are required in week 7 to satisfy the order release for Item A


Item AThe lead time for the Item B is 2 weeks –release an order for 100 units of Item B in week 5The timing and quantity for component requirements are determined by the order release of the parent(s)


The process continues through the entire BOM one level at a time – often called “explosion”


By processing the BOM by level, items with multiple parents are only processed once, saving time and resources and reducing confusionLow-level coding ensures that each item appears at only one level in the BOM

Gross Requirements PlanGross Requirements PlanWeek

1 2 3 4 5 6 7 8 Lead TimeA. Required date 50

Order release date 50 1 weekB. Required date 100

Order release date 100 2 weeksC. Required date 150


Table 14.3

C. Required date 150Order release date 150 1 week

E. Required date 200 300Order release date 200 300 2 weeks

F. Required date 300Order release date 300 3 weeks

D. Required date 600 200Order release date 600 200 1 week

G. Required date 300Order release date 300 2 weeks

Net Requirements PlanNet Requirements Plan


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Net Requirements PlanNet Requirements Plan


Determining Net Determining Net RequirementsRequirements

Starts with a production schedule for the end item – 50 units of Item A in week 8Because there are 10 Item As on hand,


only 40 are actually required – (net requirement) = (gross requirement - on-hand inventory)The planned order receipt for Item A in week 8 is 40 units – 40 = 50 - 10


Following the lead time offset procedure, the planned order release for Item A is now 40 units in week 7The gross requirement for Item B is now


The gross requirement for Item B is now 80 units in week 7There are 15 units of Item B on hand, so the net requirement is 65 units in week 7A planned order receipt of 65 units in week 7 generates a planned order release of 65 units in week 5


A planned order receipt of 65 units in week 7 generates a planned order release of 65 units in week 5The on hand inventory record for Item B


The on-hand inventory record for Item B is updated to reflect the use of the 15 items in inventory and shows no on-hand inventory in week 8This is referred to as the Gross-to-Net calculation and is the third basic function of the MRP process

S

B CLead time = 6 for S

Master schedule for S

Gross Requirements Gross Requirements ScheduleSchedule

Figure 14.6

Master schedulefor B

sold directly

A

B CLead time = 4 for A

Master schedule for A


12 138 9 10 11

20 3040

1 2 3

10 10

Periods

Therefore, these are the gross requirements for B

Gross requirements: B 10 40 50 2040+10 15+30=50 =45

1 2 3 4 5 6 7 8Periods

5 6 7 8 9 10 11

40 1550

Net Requirements PlanNet Requirements PlanThe logic of net requirementsThe logic of net requirements

Gross requirements Allocations+


Available inventory

Net requirements

On hand

Scheduled receipts+– =

Total requirements

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MRP Planning SheetMRP Planning Sheet


Figure 14.7

Safety StockSafety Stock

BOMs, inventory records, purchase and production quantities may not be perfectConsideration of safety stock may be prudent


pShould be minimized and ultimately eliminatedTypically built into projected on-hand inventory

MRP ManagementMRP ManagementMRP is a dynamic systemFacilitates replanning when changes occur

RegeneratingNet change


Net changeSystem nervousness can result from too many changesTime fences put limits on replanningPegging links each item to its parent allowing effective analysis of changes

MRP and JITMRP and JIT

MRP is a planning system that does not do detailed schedulingMRP requires fixed lead times


which might actually vary with batch sizeJIT excels at rapidly moving small batches of material through the system

Finite Capacity SchedulingFinite Capacity Scheduling

MRP systems do not consider capacity during normal planning cyclesFinite capacity scheduling (FCS)


Finite capacity scheduling (FCS) recognizes actual capacity limitsBy merging MRP and FCS, a finite schedule is created with feasible capacities which facilitates rapid material movement

Small Bucket ApproachSmall Bucket Approach1. MRP “buckets” are reduced to daily or hourly2. Planned receipts are used internally to

sequence production3. Inventory is moved through the plant on a JIT

basis


basis4. Completed products are moved to finished

goods inventory which reduces required quantities for subsequent planned orders

5. Back flushing based on the BOM is used to deduct inventory that was used in production

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Balanced FlowBalanced FlowUsed in repetitive operationsMRP plans are executed using JIT techniques


JIT techniques based on “pull” principlesFlows are carefully balanced with small lot sizes

SupermarketSupermarketItems used by many products are held in a common area often called a supermarketItems are withdrawn as needed


Items are withdrawn as neededInventory is maintained using JIT systems and proceduresCommon items are not planned by the MRP system

LotLot--Sizing TechniquesSizing TechniquesLot-for-lot techniques order just what is required for production based on net requirements

May not always be feasible


If setup costs are high, lot-for-lot can be expensive

Economic order quantity (EOQ)EOQ expects a known constant demand and MRP systems often deal with unknown and variable demand

LotLot--Sizing TechniquesSizing TechniquesPart Period Balancing (PPB) looks at future orders to determine most economic lot sizeThe Wagner-Whitin algorithm is a


The Wagner-Whitin algorithm is a complex dynamic programming technique

Assumes a finite time horizonEffective, but computationally burdensome

LotLot--forfor--Lot ExampleLot Example1 2 3 4 5 6 7 8 9 10

Gross requirements 35 30 40 0 10 40 30 0 30 55

Scheduled receipts

Projected on


Projected on hand 35 35 0 0 0 0 0 0 0 0 0

Net requirements 0 30 40 0 10 40 30 0 30 55

Planned order receipts 30 40 10 40 30 30 55

Planned order releases 30 40 10 40 30 30 55

Holding cost = $1/week; Setup cost = $100; Lead time = 1 week

LotLot--forfor--Lot ExampleLot Example1 2 3 4 5 6 7 8 9 10


Scheduled receipts

Projected on

No on-hand inventory is carried through the systemTotal holding cost = $0

There are seven setups for this item in this planTotal ordering cost = 7 x $100 = $700




Planned order receipts 30 40 10 40 30 30 55

Planned order releases 30 40 10 40 30 30 55

Holding cost = $1/week; Setup cost = $100; Lead time = 1 week

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EOQ Lot Size ExampleEOQ Lot Size Example1 2 3 4 5 6 7 8 9 10


Scheduled receipts

Projected on




Planned order receipts 73 73 73 73

Planned order releases 73 73 73 73

Holding cost = $1/week; Setup cost = $100; Lead time = 1 weekAverage weekly gross requirements = 27; EOQ = 73 units

EOQ Lot Size ExampleEOQ Lot Size Example1 2 3 4 5 6 7 8 9 10


Scheduled receipts

Projected on

Annual demand = 1,404Total cost = setup cost + holding costTotal cost = (1,404/73) x $100 + (73/2) x ($1 x 52 weeks)Total cost = $3,798Cost for 10 weeks = $3,798 x (10 weeks/52 weeks) =

$730




Planned order receipts 73 73 73 73

Planned order releases 73 73 73 73

Holding cost = $1/week; Setup cost = $100; Lead time = 1 weekAverage weekly gross requirements = 27; EOQ = 73 units

PPB ExamplePPB Example1 2 3 4 5 6 7 8 9 10


Scheduled receipts

Projected on


Projected on hand 35

Net requirements

Planned order receipts

Planned order releases

Holding cost = $1/week; Setup cost = $100; Lead time = 1 weekEPP = 100 units



Scheduled receipts

Projected on

2 30 02, 3 70 40 = 40 x 12, 3, 4 70 402, 3, 4, 5 80 70 = 40 x 1 + 10 x 3 100 70 1702, 3, 4, 5, 6 120 230 = 40 x 1 + 10 x 3

+ 40 x 4

+ =

Combine periods 2 - 5 as this results in the Part Period

Trial Lot SizePeriods (cumulative net Costs

Combined requirements) Part Periods Setup Holding Total


Projected on hand 35

Net requirements

Planned order receipts

Planned order releases

Holding cost = $1/week; Setup cost = $100;EPP = 100 units

Co b e pe ods 5 as t s esu ts t e a t e odclosest to the EPP

Combine periods 6 - 9 as this results in the Part Period closest to the EPP

6 40 06, 7 70 30 = 30 x 16, 7, 8 70 30 = 30 x 1 + 0 x 26, 7, 8, 9 100 120 = 30 x 1 + 30 x 3 100 120 220+ =

10 55 0 100 0 100Total cost 300 190 490

+ =+ =



Scheduled receipts

Projected on




Planned order receipts 80 100 55

Planned order releases 80 100 55

Holding cost = $1/week; Setup cost = $100; Lead time = 1 weekEPP = 100 units

LotLot--Sizing SummarySizing Summary

For these three examples

Lot-for-lot $700EOQ $730


EOQ $730PPB $490

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LotLot--Sizing SummarySizing SummaryIn theory, lot sizes should be recomputed whenever there is a lot size or order quantity changeIn practice, this results in system


nervousness and instabilityLot-for-lot should be used when low-cost JIT can be achieved

LotLot--Sizing SummarySizing SummaryLot sizes can be modified to allow for scrap, process constraints, and purchase lotsUse lot-sizing with care as it can cause


considerable distortion of requirements at lower levels of the BOMWhen setup costs are significant and demand is reasonably smooth, PPB, Wagner-Whitin, or EOQ should give reasonable results

Extensions of MRPExtensions of MRPMRP IIClosed-Loop MRP

MRP system provides input to the capacity plan, MPS, and production planning process


Capacity PlanningMRP system generates a load report which details capacity requirementsThis is used to drive the capacity planning processChanges pass back through the MRP system for rescheduling

Material Requirements Material Requirements Planning IIPlanning II

Requirement data can be enriched by other resourcesGenerally called MRP II or Material Resource Planning


Outputs includeScrapPackaging wasteCarbon emissions

Data used by purchasing, production scheduling, capacity planning, inventory

Material Resource PlanningMaterial Resource PlanningWeeks

LT 5 6 7 8Computer 1 100Labor Hrs: .2 each 20Machine Hrs: .2 each 20Scrap: 1 ounce fiberglass each 6.25 lbsPayables: $0 each $0PC Board (1 each) 2 100


Labor Hrs: .15 each 15Machine Hrs: .1 each 10Scrap: .5 ounces copper each 3.125 lbPayables: raw material at $5 each $500Processor (5 each) 4 500Labor Hrs: .2 each 100Machine Hrs: .2 each 100Scrap: .01 ounces of acid waste each 0.3125 lbPayables: processors at $10 each $5,000

Table 14.4

ClosedClosed--Loop MRP SystemLoop MRP System

Priority Management

Develop Master ProductionSchedule

Capacity Management

Evaluate Resource Availability(Rough Cut)

Aggregate Production Plan

OK?OK?NONO

OK?OK?NONO OK? YESOK? YES Planning


Figure 14.8

Prepare MaterialsRequirements Pan

Detailed ProductionActivity Control

(Shop Scheduling/Dispatching)

Determine Capacity Availability

Implement Input/Output Control

NONO OK? YESOK? YES

OK? YESOK? YES

Planning

Execution(in repetitive systems JIT techniques are used)

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Capacity PlanningCapacity Planning

Feedback from the MRP systemLoad reports show resource requirements for work centers


qWork can be moved between work centers to smooth the load or bring it within capacity

Smoothing TacticsSmoothing Tactics1. Overlapping

Sends part of the work to following operations before the entire lot is completeReduces lead time

2. Operations splitting


Sends the lot to two different machines for the same operationShorter throughput time but increased setup costs

3. Order or lot splittingBreaking up the order into smaller lots and running part earlier (or later) in the schedule

Order SplittingOrder Splitting

Develop a capacity plan for a work cell at Wiz ProductsThere are 12 hours available each dayEach order requires 1 hour


Each order requires 1 hour

Day 1 2 3 4 5Orders 10 14 13 10 14

Order SplittingOrder Splitting

DayUnits

Ordered

Capacity Required (hours)

Capacity Available (hours)

Utilization: Over/

(Under) (hours)

Production Planner’s Action

New Production Schedule

1 10 10 12 (2) 122 14 14 12 2 Split order:

move 2 units to day 1

12


3 13 13 12 1 Split order: move one unit to day 6 or request overtime

13

4 10 10 12 (2) 125 14 14 12 2 Split order:

move 2 units to day 4

12

61

Order SplittingOrder SplittingAvailable capacity

Capacity exceeded on days 2, 3, and 5

2 orders moved to day 1 from day 2 (a day early)

1 order forced to overtimeor to day 6

2 orders moved to day 4 (a day early)

14 –

12 –

10 –

bor-

Hou

rs14 –

12 –

10 –

bor-

Hou

rs


Figure 14.9

8 –

6 –

4 –

2 –

0 –1 2 3 4 5

Days(b)

Stan

dard

la8 –

6 –

4 –

2 –

0 –1 2 3 4 5

Days(a)

Stan

dard

la

MRP in ServicesMRP in Services

Some services or service items are directly linked to demand for other servicesThese can be treated as dependent


These can be treated as dependent demand services or items

RestaurantsHospitalsHotels

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Chef;Work

Center #1

(a) PRODUCT STRUCTURE TREE

Veal picante #10001


Uncooked linguini #30004

Sauce #30006

Veal #30005

Helper one;Work

Center #2

Asst. Chef;Work

Center #3

Cooked linguini #20002

Spinach #20004

Prepared veal and sauce

#20003

Figure 14.10

MRP in ServicesMRP in Services(b) BILL OF MATERIALS

Part Number Description Quantity

Unit of Measure

Unit cost

10001 Veal picante 1 Serving —20002 C k d li i i 1 S i


20002 Cooked linguini 1 Serving —20003 Prepared veal and sauce 1 Serving —20004 Spinach 0.1 Bag 0.9430004 Uncooked linguini 0.5 Pound —30005 Veal 1 Serving 2.1530006 Sauce 1 Serving 0.80


(c) BILL OF LABOR FOR VEAL PICANTE

Labor HoursWork Center Operation Labor Type Setup Time Run Time


1 Assemble dish Chef .0069 .00412 Cook linguini Helper one .0005 .00223 Cook veal

and sauceAssistant Chef

.0125 .0500

Distribution Resource Distribution Resource Planning (DRP)Planning (DRP)

Using dependent demand techniques through the supply chain

Expected demand or sales forecasts


Expected demand or sales forecasts become gross requirements Minimum levels of inventory to meet customer service levelsAccurate lead timesDefinition of the distribution structure

Enterprise Resource Enterprise Resource Planning (ERP)Planning (ERP)

An extension of the MRP system to tie in customers and suppliers

Allows automation and integration of many business processes


many business processesShares common data bases and business practicesProduces information in real time

Coordinates business from supplier evaluation to customer invoicing


ERP modules includeBasic MRPFi


FinanceHuman resourcesSupply chain management (SCM)Customer relationship management (CRM)

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ERP and MRPERP and MRP


Figure 14.11

ERP and MRPERP and MRPCustomer Relationship Management

InvoicingShipping

Distributors, retailers,

and end users

Sales Order(order entry,

product configuration,sales management)


Figure 14.11

Bills of Material

Master Production Schedule

Inventory Management



Table 13.6

Work Orders

Purchasingand

Lead Times

Routingsand

Lead Times

g

Figure 14.11

MRP



Figure 14.11

Supply Chain Management

Vendor Communication(schedules, EDI, advanced shipping notice,

e-commerce, etc.)

ERP and MRPERP and MRPFinance/

Accounting

General Ledger

Accounts Receivable


Figure 14.11Table 13.6

Ledger

Payroll

Accounts Payable


ERP can be highly customized to meet specific business requirementsEnterprise application integration software (EAI) allows ERP systems


software (EAI) allows ERP systems to be integrated with

Warehouse managementLogisticsElectronic catalogsQuality management

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ERP systems have the potential toReduce transaction costs


Increase the speed and accuracy of information

Facilitates a strategic emphasis on JIT systems and integration

SAP’s ERP ModulesSAP’s ERP Modules


Advantages of ERP Advantages of ERP SystemsSystems

1. Provides integration of the supply chain, production, and administration

2. Creates commonality of databases3 Can incorporate improved best processes


3. Can incorporate improved best processes4. Increases communication and

collaboration between business units and sites

5. Has an off-the-shelf software database6. May provide a strategic advantage

Disadvantages of ERP Disadvantages of ERP SystemsSystems

1. Is very expensive to purchase and even more so to customize

2. Implementation may require major changes in the company and its processes


3. Is so complex that many companies cannot adjust to it

4. Involves an ongoing, possibly never completed, process for implementation

5. Expertise is limited with ongoing staffing problems

ERP in the Service SectorERP in the Service Sector

ERP systems have been developed for health care, government, retail stores, hotels, and financial services


servicesAlso called efficient consumer response (ECR) systemsObjective is to tie sales to buying, inventory, logistics, and production


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heizer om10 ch14-mrp

Documents

planned order receipt

planned order release

master schedule

gross requirements

prentice hall 14

prentice hall 14

prentice hall 14

prentice hall 14