mrp. question: how do firms actually organize things to turn materials into finished products?
TRANSCRIPT
MRPMRP
Question: how do firms actually organize things to turn materials into finished products?
Master Production Schedule (MPS)
• Time-phased plan specifying how many and when the firm plans to build each end item
Aggregate Plan(Product Groups)
Aggregate Plan(Product Groups)
MPS(Specific End Items)
MPS Example – Maine Woods Toy Co.
41 42 43 44 45 46 47 48 49 50 51 52
Tricycle 300 300 300 300 300 300 300 300 250 250 250 250Wagon 300 300 300 300 250 250Scooter 300 300 300 300 250 250
Totals 2,000
Week
Pro
duct
2,400 2,400
October November DecemberMonth
One possible MPS…
Products are combinations of parts…
Example: Bicycle
Handle bars (1)
Metal Frame (1)
Wheels (2)
Dependent vs Independent Demand
• Dependent Demand
– Demand for a component (raw material, part, sub-assembly) is dependent on the demand for the end-item into which the component goes.
• demand often occurs in batches
• Independent Demand
– Demand for an item is independent of the demand for other items. These demands are typically determined by outside customers and are end-item demands
Bill of Materials (BOM)
• Shows all the assemblies, subassemblies, components, and raw materials required to produce an item
• Shows way a finished product or parent item is put together from individual components
• Parent item shown at highest level or level zero• Parts that go into parent item are called level 1
components and so on• Production planners explode BOM for level zero item
to determine the number, due dates, and order dates of subcomponents
Let’s look at an example BOM...
A
B(2) C(1)
D(3) E(3) D(1)
Question:
How many D’s we need in order to produce 50 A’s?
Schematic of MRP System
Material Requirements Planning (MRP)
• Computer-based information system that schedules and orders dependent-demand inventory components;
• Uses the master production schedule, bills of materials, and inventory records as inputs;
• Outputs recommendations:– When to release new orders– When to reschedule open orders.
Let’s look at an example BOM...
A
B(2) C(1)
D(3) E(3) D(1)
How do we manage order release?
Parts-Product Process Lead Time
A 10
B 15
C 10
D 15
E 10
We need information on delivery times!
Let’s look at an example BOM...
A
B(2) C(1)
D(3) E(3) D(1)
Question:
When do we start producing/ordering each
part?
(10)
(15) (10)
(10)
(15)
(15)
Let’s assume that we need 50 units of A…
Parts-Products
A
B
C
D
E
Delivery date for final product
5 days
Let’s assume that we need 50 units of A…
Parts-Products
A
B
C
D
E
Start assembly for 50 units of A
Let’s assume that we need 50 units of A…
Parts-Products
A
B
C
D
E
Start assembly for 100 units of B
Let’s assume that we need 50 units of A…
Parts-Products
A
B
C
D
E
Start assembly for 50 units of C
Let’s assume that we need 50 units of A…
Parts-Products
A
B
C
D
E
Order 300 units of D for B’s process
Let’s assume that we need 50 units of A…
Parts-Products
A
B
C
D
E
Order 50 units of D for C’s assembly
Let’s assume that we need 50 units of A…
Parts-Products
A
B
C
D
E
Order 50 units of E for C’s assembly
Customer
Assembly
Assembly
Production
Production
Production
Units are PUSHED forward according to the plan!
Summary: How does MRP work?
Material Requirements Planning
Customer
Assembly
Assembly
Production
Production
Production
Units are PULLED forward only when needed!
What about JIT/Lean Production?
Forecast
Hamburger Patties
Chicken Patties
Cheeseburger
Hamburger
Chicken Sandwich
Push/Pull Decoupling Point
Material Requirements Planning
Units are PUSHED forward to a certain point. Final configuration (PULL) occurs only when the actual
customer demand occurs.
Lot Sizing in MRP Systems
• Lot-for-lot (L4L):Produce to cover next period
• EOQ:Apply the EOQ approximation for yearly demand
• Least Unit Cost:Minimize total cost (order + carry) per unit
These are all approximate methods, none is guaranteed to be optimal. We can apply all of them and find the least-cost one to implement.
• MRP generates material orders
• Order sizes/lots can be chosen according to various objectives
Example
Cost per item: $10Order/setup cost: $47Inventory carrying cost/month 2%Starting inventory: 50Production lead time 1 monthMonthly requirements1 2 3 4 5 6100 50 80 120 70 80
For the solution, see file mrp_methods.pdf
MRP Evolution
MRP
Closed Loop MRP
MRP II
ERP
Schedule Materials
Schedule Materials
Incorporate Feedback
Schedule & Purchase Materials
Coordinate w/ Mfg Resources
Closed-Loop MRP
Production PlanningMaster Production SchedulingMaterial Requirements PlanningCapacity Requirements Planning
Realistic?No
Feedback
Execute:Capacity PlansMaterial Plans
Yes
Feedback
Goal: Plan and monitor all resources of a manufacturing firm (closed loop): manufacturing marketing finance engineering
Simulate the manufacturing system
Manufacturing Resource Planning (MRP II)
Enterprise Resource Planning Systems is a computer system that integrates application programs in accounting, sales, manufacturing, and other functions in the firm
This integration is accomplished through a database shared by all the application programs
ERP Systems
Typical ERP System
Video: ERP at Hillerich & Bradsby Notes:
Major ERP Providers
Firm HQ Acquisitions2004 Share of $23.6B Market
SAP Germany 40%
Oracle US People Soft
JD Edwards22%
Sage Group UK 7%
Microsoft US 3%
Infor US SSA
BaanSource: AMR Research
Desire to standardize and improve processes
To improve the level of systems integration
To improve information quality
Reasons to Implement ERP
ERP Drawbacks
Cost $250M+ for a Fortune 100 company
Transition painImplementation resourcesTrainingResistance to change
Summary and Conclusions… Master Production Schedule (MPS) converts
aggregate plan to a detailed schedule Primary inputs to MRP are MPS, BOM’s (for
part relationships) and Inventory Records (for lead times and inventory position)
MRP is a push system but can be used in conjunction with pull systems
MRP grew and evolved to include closed-loop, Manufacturing Resource Planning (MRP II), and eventually ERP