material requirements planning and enterprise resource planning

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


54

44

44

4

Net Requirements 6 Planned Order Receipts 50 Planned Order Releases 50

Order 50 units week earlier

Ending Inventory


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


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.


1118Top handle

Coupling (steel)


Assembly




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


Top handle 22 25 75 28Nail (2 required) 4 50 150 96Bracket Assy 27 -- 75 48

Top bracket 15 --Top coupling 39 15


1118Top handle

Coupling (steel)


Assembly




082 Nail (2)

Net Requirements


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


1

2

3

4

5

6

7

8

9

10

Gross Req 20 10 20 5 35 10

Sch receipts


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


457 Top Handle


1

2

3

4

5

6

7

8

9

10

Gross Req 20 10 20 5 35 10

Sch receipts


25

25

5

5

0

0

0

0

0

0

0

Net Req 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


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


22

22

17

Net Req Pl Order Rec Pl Order Rel


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


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


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



1

2

3

4

5

6

7

8

9

10

Gross Req 20 10 20 5 35 10

Sch receipts


25

25

5

5

0

0

0

0

0

0

0

Net Req 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


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


1

2

3

4

5

6

7

8

9

10

Gross Req 20 10 20 5 35 10

Sch receipts


25

25

5

5

0

0

0

0

0

0

0

Net Req 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


27

Net Req


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


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


129 Top Bracket

LT = 1

1

2

3

4

5

6

7

8

9

10

Gross Req 3 35 10

Sch receipts


15


LT = 2

1

2

3

4

5

6

7

8

9

10

Gross Req 5 20 5 35 10

Sch receipts


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


15

15

15

12

12

Net Req 23 10

Pl Order Rec 23 10 Pl Order Rel 23 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


39

Net Req


LT = 2

1

2

3

4

5

6

7

8

9

10

Gross Req 5 20 5 35 10

Sch receipts


27

22

22

2

Net Req 3 35 10 Pl Order Rec 3 35 10 Pl Order Rel 3 35 10



1

2

3

4

5

6

7

8

9

10

Gross Req 3 35 10

Sch receipts 15


39

39

54

51

51

16

Net Req 4 Pl Order Rec 4 Pl Order Rel 4




1

2

3

4

5

6

7

8

9

10

Gross Req 3 35 10

Sch receipts 15


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

material requirements planning and enterprise resource planning

Documents

change company

entire company

bom mrp table

manufacturing company

handle assembly457

change software

effective planning

enterprise resource