Lecture Introduction to operations management - Chapter 16: Material requirements planning and ERP

In this chapter we will discuss: Definitions of MRP systems, MRP versus order point systems, MRP example, MRP elements, operating an MRP system, the successful MRP system, enterprise resource planning systems.

Contemporary Concepts and Cases

Chapter SixteenMaterial Requirements Planning and ERP

Forecast of Demand

Purchase

Orders

Vendors

MRP Parts Explosion

Rough-cut capacity planning

Capacity planning Shop Orders

Shop-floor control

Master schedule

Inv

Transactions

Comparison of MRP & Order-Point Systems

Attribute MRP Order Point

Order philosophy Requirements Replenishment

Forecast Based on master schedule Based on past demand

Control concept Control all items ABC

Objectives Meet manufacturing needs Meet customer needs

Demand pattern Lumpy but predictable Random

Types of inventory Work in process and raw

materials Finished goods and spareparts

BOM (Product Structure)

1 week

Tops GROSS REQUIREMENTS: 0 0 150 150 100 0     SCHEDULED RECEIPTS 0 50 0 0 0 0     PROJECTED ON HAND 50 50 100 0 0 0     NET REQUIREMENTS 0 0 50 150 100 0     PLAN. ORDER RELEASES 50 150 100 0 0 0  

Leg GROSS REQUIREMENTS: 0 0 150 150 100 0   Assembly SCHEDULED RECEIPTS 0 0 0 0 0 0     PROJECTED ON HAND 100 100 100 0 0 0     NET REQUIREMENTS 0 0 50 150 100 0  

Materials Plan

In Table 16.4, note the following:

Gross requirements in level 0 (Tables) come from the  master schedule.

Gross requirements in level 1 (and below) come from  the planned order releases in the level above.

Master Schedule

Quantities derived from S&OP production plan 

(product groups) [input]

Drives MRP process with a schedule of finished products (actual items by week) [output]

Quantities may consist of a combination of 

customer orders & demand forecasts

Quantities represent what needs to be produced, not what can be produced (infinite capacity 

Counting Inventory (1)

In the past, inventory was counted to learn how much was on hand

Capacity Planning

Purpose is to aid management in checking on the validity of the master schedule

Two ways it can be done

– Rough­cut capacity (resource) planning

– Shop loading

Alternative is finite capacity scheduling

Enterprise Resource Planning

(ERP) Systems

Extension and integration of all functions  through a common database

– Forces standard systems throughout the organization

ERP used to coordinate decisions along the  supply chain

Expensive and time­consuming to 

implement.

Enterprise Resource Planning

End of Chapter Sixteen