Chapter 14 MRP, ERP, MRPII
- Dependent Demand
o For any product for which a schedule can be established, dependent demand
techniques should be used
Benefits of MRP
1. Better response to customer orders
2. Faster response to market changes
3. Improved utilization of facilities and labor
4. Reduced inventory levels
- The demand for one item is related to the demand for another item
- Given a quantity for the end item, the demand for all parts and components can be calculated
- In general, used whenever a schedule can be established for an item
- MRP is the common technique
- Effective use of dependent demand inventory models requires the following
o Master production schedule
o Specifications or bill of material
o Inventory availability
o Purchase orders outstanding
o Lead times
- When MRP is met dependent models are preferable to the EOQ models
- Dependent techniques are used in production environment = MRP
MRP: dependent demand technique that uses a bill of material, inventory, expected receipts and master
production schedule to determine material requirement
o Master production schedule
o Specifications or bill of material
o Inventory availability
o Purchase orders outstanding
o Lead times
o MPS is established in terms of specific products
o Schedule must be followed for a reasonable length of time
o The MPS is quite often fixed or frozen in the near term part of the plan
o The MPS is a rolling schedule
o The MPS is a statement of what is to be produced, not a forecast of demand
o
- Because MRP is a clean structure for dependent demand it evolved as the basis for ERP
- ERP: an information system for identifying and planning the enterprise-wide resources need to
take, make, ship and account for customer orders
Master Production Schedule (MPS)
- A customer order in a job shop (make-to-order) company
- Modules in a repetitive (assemble-to-order or forecast) company
- An end item in a continuous (stock-to-forecast) company
Bills of Material
- List of components, ingredients, and materials needed to make product
- Provides product structure
- Items above given level are called parents
- Items below given level are called children
- Engineering change notice is a change or correction to an engineering drawing or bill of material
- One-way BOM defines a product is by providing a product structure
MRP AND JIT
- MRP is a planning system that does not do detailed scheduling
- MRP requires fixed lead times which might vary with batch size
- JIT excels at rapidly moving small batches of material through the system
Balanced Flow
- Used in repetitive operations
- MRP plans are executed using JIT techniques based on “pull” principles
- Flows are carefully balanced with small lot sizes
MRPII (Material Requirement Planning)
- Closed-Loop MRP
o MRP system provides input to the capacity plan, MPS, and production planning process
- Capacity Planning
o MRP system generates a load report which details capacity requirements
o This is used to drive the capacity planning process
o Changes pass back through the MRP system for rescheduling
- Requirement data can be enriched by other resources
- Generally called MRP II or Material Resource Planning
o Outputs include
o Scrap
o Packaging waste
- Carbon emissions
- Data used by purchasing, production scheduling, capacity planning, inventory
- Some services or service items are directly linked to demand for other services
- These can be treated as dependent demand services or items
o Restaurants
o Hospitals
o Hotels
Enterprise Resource Planning (ERP)
- An extension of the MRP system to tie in customers and suppliers
o Allows automation and integration of many business processes
o Shares common data bases and business practices
o Produces information in real time
- Coordinates business from supplier evaluation to customer invoicing
- ERP modules include:
o Basic MRP
o Finance
o Human resources
o Supply chain management (SCM)
o Customer relationship management (CRM)
- ERP can be highly customized to meet specific business requirements
- Enterprise application integration software (EAI) allows ERP systems to be integrated with
o Warehouse management
o Logistics
o Electronic catalogs
o Quality management
- ERP systems have the potential to
o Reduce transaction costs
o Increase the speed and accuracy of information
- Facilitates a strategic emphasis on JIT systems and integration
- Materials requirement planning (MRP) schedules production and inventory when demand is
dependent
- Master schedule, precise requirements for all components, accurate inventory and purchasing
records, and accurate lead times are all need for MRP to work
- MRP can be used with lean manufacturing techniques (JIT etc.)
- ERP systems are integrated systems that ties a company’s finances, production, human
resources etc. together
