13-1 MRP and ERP
Operations Management
William J. Stevenson
8th edition
13-2 MRP and ERP
CHAPTER
13
MRP and ERP
Operations Management, Eighth Edition, by William J. Stevenson
McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
13-3 MRP and ERP
MRP
Material requirements planning (MRP):
Computer-based information system that
translates master schedule requirements for
end items into time-phased requirements for
subassemblies, components, and raw
materials.
13-4 MRP and ERP
Independent and Dependent Demand
Independent Demand
A Dependent Demand
B(4) C(2)
D(2) E(1) D(3) F(2)
Independent demand is uncertain.
Dependent demand is certain.
13-5 MRP and ERP
Dependant Demand
Dependent demand: Demand for items that
are subassemblies or component parts to be
used in production of finished goods.
Once the independent demand is known,
the dependent demand can be determined.
13-6 MRP and ERP
Dependent vs Independent Demand
Figure 13.1
Demand
Demand
“Lumpy” demand
Stable demand
Time Time
Amount on hand
Amount on hand
Safety stock
Time Time
13-7 MRP and ERP
Figure 13.2
MRP Inputs MRP Processing MRP Outputs
Changes
Order releases
Master
schedule Planned-order
schedules
Primary
reports Exception reports
Bill of Planning reports
materials MRP computer Secondary
Performance-
programs reports control
reports
Inventory
records Inventory
transaction
13-8 MRP and ERP
MPR Inputs
Master Production Schedule
Time-phased plan specifying timing and
quantity of production for each end item.
Material Requirement Planning Process
u re
ru ct
S t
u ct
rod mes
P ee i
Tr a dT
Le
13-9 MRP and ERP
Master Schedule
Master schedule: One of three primary
inputs in MRP; states which end items are
to be produced, when these are needed,
and in what quantities.
Cumulative lead time: The sum of the lead
times that sequential phases of a process
require, from ordering of parts or raw
materials to completion of final assembly.
13-10 MRP and ERP
Planning Horizon
Figure 13.4
Assembly
Subassembly
Fabrication
Procurement
1 2 3 4 5 6 7 8 9 10
13-11 MRP and ERP
Bill-of-Materials
Bill of materials (BOM): One of the three primary
inputs of MRP; a listing of all of the raw materials,
parts, subassemblies, and assemblies needed to produce
one unit of a product.
Product structure tree: Visual depiction of the
requirements in a bill of materials, where all
components are listed by levels.
13-12 MRP and ERP
Product Structure Tree
Figure 13.5
Level Chair
0
1 Leg Back
Assembly Seat Assembly
Cross Side Cross Back
2 Legs (2)
bar Rails (2) bar Supports (3)
3
13-13 MRP and ERP
Inventory Records
One of the three primary inputs in MRP
Includes information on the status of each
item by time period
Gross requirements
Scheduled receipts
Amount on hand
Lead times
Lot sizes
And more …
13-14 MRP and ERP
MPR Processing
Gross requirements
Total expected demand
Scheduled receipts
Open orders scheduled to arrive
Planned on hand
Expected inventory on hand at the
beginning of each time period
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MPR Processing
Net requirements
Actual amount needed in each time period
Planned-order receipts
Quantity expected to received at the
beginning of the period
Offset by lead time
Planned-order releases
Planned amount to order in each time period
13-16 MRP and ERP
MRP Outputs
Planned orders - schedule indicating the
amount and timing of future orders.
Order releases - Authorization for the
execution of planned orders.
Changes - revisions of due dates or order
quantities, or cancellations of orders.
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MRP Secondary Reports
Performance-control reports
Planning reports
Exception reports
13-18 MRP and ERP
Other Considerations
Safety Stock
Lot sizing
Lot-for-lot ordering
Economic order quantity
Fixed-period ordering
13-19 MRP and ERP
MRP in Services
Food catering service
End item => catered food
Dependent demand => ingredients for each
recipe, i.e. bill of materials
Hotel renovation
Activities and materials “exploded” into
component parts for cost estimation and
scheduling
13-20 MRP and ERP
Benefits of MRP
Low levels of in-process inventories
Ability to track material requirements
Ability to evaluate capacity requirements
Means of allocating production time
13-21 MRP and ERP
Requirements of MRP
Computer and necessary software
Accurate and up-to-date
Master schedules
Bills of materials
Inventory records
Integrity of data
13-22 MRP and ERP
MRP II
Expanded MRP with emphasis placed
on integration
Financial planning
Marketing
Engineering
Purchasing
Manufacturing
13-23 MRP and ERP
MRP II
Figure 13.14
Market Master
Finance Manufacturing production schedule
Demand
Adjust master schedule
Marketing
Production
plan MRP
Rough-cut Capacity
capacity planning planning
Adjust
production plan
Yes No Requirements No Yes
Problems? schedules Problems?
13-24 MRP and ERP
ERP
Enterprise resource planning (ERP):
Next step in an evolution that began with
MPR and evolved into MRPII
Integration of financial, manufacturing, and
human resources on a single computer
system.
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ERP Strategy Considerations
High initial cost
High cost to maintain
Future upgrades
Training
