Chapter 14 MRP to ERP.ppt

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Chapter 14 MRP to ERP.ppt

  1. 1. Chapter 14 – MRP to ERP Independent vs. dependent demand, MRP inputs and processing, Closed-loop MRP, MRP II, ERP
  2. 2. Traditional I/C Problems <ul><li>Reorder point ( when to order) </li></ul><ul><ul><li>Assumes known, linear demand (sawtooth) </li></ul></ul><ul><ul><li>Assumes rough knowledge of lead time </li></ul></ul><ul><ul><li>Uses safety stock (or safety time) as buffer </li></ul></ul><ul><ul><li>Each item planned independently </li></ul></ul><ul><li>EOQ ( how much to order) </li></ul><ul><ul><li>Focuses on mechanics of formula </li></ul></ul><ul><ul><li>Assumes linear (constant) usage </li></ul></ul><ul><ul><li>Always results in inventory </li></ul></ul>
  3. 3. MRP <ul><li>Material Requirements Planning ( MRP ) </li></ul><ul><ul><li>“ Father” of MRP: Joseph Orlicky (???? - ????) </li></ul></ul><ul><ul><li>Dependent vs. independent demand concept </li></ul></ul><ul><li>Other requirements </li></ul><ul><ul><li>Manufacturing Bill of Materials (BOM) </li></ul></ul><ul><ul><li>Accurate, well-managed Master Production Schedule (MPS) to drive MRP </li></ul></ul><ul><ul><li>Computer software to “explode” BOMs </li></ul></ul><ul><ul><li>Computer hardware speed and data capacity </li></ul></ul>
  4. 4. Key MRP Inputs <ul><li>Master Production Schedule (MPS) </li></ul><ul><ul><li>Well managed “Build Plan” </li></ul></ul><ul><li>Bill of Materials (or “recipes”) </li></ul><ul><ul><li>Parent/child relationships </li></ul></ul><ul><ul><li>Single level vs. multi-level </li></ul></ul><ul><ul><li>Structured for manufacturing </li></ul></ul><ul><li>On hand inventory (available to use) </li></ul><ul><li>Material on order (from “supplier”) </li></ul>
  5. 5. Key MRP Inputs <ul><li>Planning factors </li></ul><ul><ul><li>Lead time </li></ul></ul><ul><ul><li>Lot sizing algorithm or rule </li></ul></ul><ul><ul><li>Optional adjustments </li></ul></ul><ul><ul><ul><li>Safety stock </li></ul></ul></ul><ul><ul><ul><li>Safety time </li></ul></ul></ul><ul><ul><ul><li>Yield </li></ul></ul></ul><ul><ul><ul><li>Shrinkage </li></ul></ul></ul><ul><ul><ul><li>etc. </li></ul></ul></ul>
  6. 6. MRP Processing <ul><li>Answers both questions </li></ul><ul><ul><li>When to order </li></ul></ul><ul><ul><li>How much to order </li></ul></ul><ul><li>Proceeds one level at a time (level-by-level) </li></ul><ul><li>“Nets” and plans action only when lowest level in any BOM is reached </li></ul>
  7. 7. Lot Sizing Algorithms <ul><li>Lot for lot </li></ul><ul><ul><li>Seeks to balance supply and demand </li></ul></ul><ul><li>Fixed order quantity </li></ul><ul><ul><li>May have minimums, maximums, multiples </li></ul></ul><ul><li>Economic Order Quantity (EOQ) </li></ul><ul><ul><li>Variations are Least Unit Cost, Least Total Cost, Part Period Balancing </li></ul></ul><ul><li>Period Order Quantity </li></ul><ul><li>Fixed Period Requirements </li></ul><ul><li>Wagner-Whitin </li></ul>
  8. 8. MRP Summary - 1 <ul><li>Big “number-cruncher” </li></ul><ul><li>Follows rules using built-in logic and tables </li></ul><ul><li>Predicts shortages </li></ul><ul><li>Gross requirements derived from planned order releases of parent items </li></ul><ul><li>Processes level-by-level </li></ul><ul><li>Nets requirements and plans for an item at lowest level of use in any BOM </li></ul>
  9. 9. MRP Summary - 2 <ul><li>First suggests pull-ins , push-outs , cancellations </li></ul><ul><li>Then creates planned orders (not released) </li></ul><ul><li>Provides action and/or exception messages </li></ul><ul><li>High-speed computers now mean process in minutes rather than hours </li></ul><ul><li>Planner needs to evaluate results before acting </li></ul>
  10. 10. Problems with MRP <ul><li>Computer model </li></ul><ul><ul><li>Decisions may be based on inaccurate data </li></ul></ul><ul><li>Inventory-building features have crept in </li></ul><ul><ul><li>Safety stock </li></ul></ul><ul><ul><li>Safety time </li></ul></ul><ul><ul><li>EOQ </li></ul></ul><ul><li>Represents a “ push ” system </li></ul>
  11. 11. Resource Planning Systems <ul><li>MRP </li></ul><ul><li>Closed loop MRP </li></ul><ul><li>MRP II </li></ul><ul><li>ERP </li></ul><ul><li>SCM </li></ul><ul><li>Next emphasis > E-commerce </li></ul>
  12. 12. Closed Loop MRP and MRP II <ul><li>Oliver Wight (???? – 1983) </li></ul><ul><ul><li>“Sold” concepts to American management </li></ul></ul><ul><li>Closed Loop MRP </li></ul><ul><ul><li>Feedback any changes in due dates and quantities </li></ul></ul><ul><ul><li>Must have accurate due dates </li></ul></ul><ul><li>Manufacturing Resource Planning (MRP II) </li></ul><ul><ul><li>Integrate Long Range, Intermediate Range, Short Range, and Real-time planning </li></ul></ul>
  13. 13. ERP and SCM <ul><li>Enterprise Resource Planning (ERP) </li></ul><ul><ul><li>Coined by Gartner Group </li></ul></ul><ul><ul><li>Extends integrated planning to Customer Service, Forecasting, Quality, Human Resources, Accounting, Project Management </li></ul></ul><ul><li>Supply Chain Management (SCM) </li></ul><ul><ul><li>Extends planning to other organizations </li></ul></ul><ul><ul><li>Tightly couples suppliers and customers </li></ul></ul>
  14. 14. ERP Software Vendors - 2001 <ul><li>Enterprise Resource Planning (ERP) </li></ul><ul><ul><li>SAP </li></ul></ul><ul><ul><li>Oracle </li></ul></ul><ul><ul><li>Baan </li></ul></ul><ul><ul><li>PeopleSoft </li></ul></ul><ul><ul><li>J.D. Edwards </li></ul></ul>
  15. 15. ERP Software Vendors - 2005 <ul><li>Enterprise Resource Planning (ERP) </li></ul><ul><ul><li>SAP </li></ul></ul><ul><ul><li>Oracle </li></ul></ul><ul><ul><ul><li>PeopleSoft </li></ul></ul></ul><ul><ul><ul><ul><li>J.D. Edwards </li></ul></ul></ul></ul><ul><ul><li>Baan (financial and legal problems followed by acquisition) </li></ul></ul>
  16. 16. ERP Software Vendors - 2008 <ul><li>Enterprise Resource Planning (ERP) </li></ul><ul><ul><li>SAP </li></ul></ul><ul><ul><li>Oracle </li></ul></ul><ul><ul><li>Infor Global Solutions (SSA ERP - formerly Baan) </li></ul></ul><ul><ul><li>The Sage Group </li></ul></ul>

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