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  • 1. 14 - 1© 2011 Pearson Education, Inc. publishing as Prentice Hall14 Material RequirementsPlanning (MRP) and ERPPowerPoint presentation to accompanyHeizer and RenderOperations Management, 10ePrinciples of Operations Management, 8ePowerPoint slides by Jeff Heyl
  • 2. 14 - 2© 2011 Pearson Education, Inc. publishing as Prentice HallOutline Global Company Profile: WheeledCoach Dependent Demand Dependent Inventory ModelRequirements Master Production Schedule Bills of Material Accurate Inventory Records Purchase Orders Outstanding Lead Times for Components
  • 3. 14 - 3© 2011 Pearson Education, Inc. publishing as Prentice HallOutline – Continued MRP Structure MRP Management MRP Dynamics MRP and JIT Lot-Sizing Techniques
  • 4. 14 - 4© 2011 Pearson Education, Inc. publishing as Prentice HallOutline – Continued Extensions of MRP Material Requirements Planning II(MRP II) Closed-Loop MRP Capacity Planning MRP In Services Distribution Resource Planning(DRP)
  • 5. 14 - 5© 2011 Pearson Education, Inc. publishing as Prentice HallOutline – Continued Enterprise Resource Planning (ERP) Advantages and Disadvantages ofERP Systems ERP in the Service Sector
  • 6. 14 - 6© 2011 Pearson Education, Inc. publishing as Prentice HallLearning ObjectivesWhen you complete this chapter youshould be able to:1. Develop a product structure2. Build a gross requirements plan3. Build a net requirements plan4. Determine lot sizes for lot-for-lot,EOQ, and PPB
  • 7. 14 - 7© 2011 Pearson Education, Inc. publishing as Prentice HallLearning ObjectivesWhen you complete this chapter youshould be able to:5. Describe MRP II6. Describe closed-loop MRP7. Describe ERP
  • 8. 14 - 8© 2011 Pearson Education, Inc. publishing as Prentice HallWheeled Coach Largest manufacturer ofambulances in the world International competitor 12 major ambulance designs 18,000 different inventory items 6,000 manufactured parts 12,000 purchased parts
  • 9. 14 - 9© 2011 Pearson Education, Inc. publishing as Prentice HallWheeled Coach Four Key Tasks Material plan must meet both therequirements of the master scheduleand the capabilities of theproduction facility Plan must be executed as designed Minimize inventory investment Maintain excellent record integrity
  • 10. 14 - 10© 2011 Pearson Education, Inc. publishing as Prentice HallDependent DemandFor any product for which a schedulecan be established, dependentdemand techniques should be used
  • 11. 14 - 11© 2011 Pearson Education, Inc. publishing as Prentice HallDependent DemandBenefits of MRP1. Better response to customerorders2. Faster response to market changes3. Improved utilization of facilitiesand labor4. Reduced inventory levels
  • 12. 14 - 12© 2011 Pearson Education, Inc. publishing as Prentice HallDependent Demand The demand for one item is relatedto the demand for another item Given a quantity for the end item,the demand for all parts andcomponents can be calculated In general, used whenever aschedule can be established for anitem MRP is the common technique
  • 13. 14 - 13© 2011 Pearson Education, Inc. publishing as Prentice HallDependent Demand1. Master production schedule2. Specifications or bill of material3. Inventory availability4. Purchase orders outstanding5. Lead timesEffective use of dependent demandinventory models requires thefollowing
  • 14. 14 - 14© 2011 Pearson Education, Inc. publishing as Prentice HallMaster Production Schedule(MPS) Specifies what is to be made and when Must be in accordance with the aggregateproduction plan Inputs from financial plans, customerdemand, engineering, supplier performance As the process moves from planning toexecution, each step must be tested forfeasibility The MPS is the result of the productionplanning process
  • 15. 14 - 15© 2011 Pearson Education, Inc. publishing as Prentice HallMaster Production Schedule(MPS) MPS is established in terms of specificproducts Schedule must be followed for areasonable length of time The MPS is quite often fixed or frozen inthe near term part of the plan The MPS is a rolling schedule The MPS is a statement of what is to beproduced, not a forecast of demand
  • 16. 14 - 16© 2011 Pearson Education, Inc. publishing as Prentice HallFigure 14.1Changeproductionplan?Master productionscheduleManagementReturn oninvestmentCapitalEngineeringDesigncompletionAggregateproductionplanProcurementSupplierperformanceHuman resourcesManpowerplanningProductionCapacityInventoryMarketingCustomerdemandFinanceCash flowThe Planning Process
  • 17. 14 - 17© 2011 Pearson Education, Inc. publishing as Prentice HallThe Planning ProcessFigure 14.1Is capacityplan beingmet?Is executionmeeting theplan?Changemasterproductionschedule?Changecapacity?Changerequirements?NoExecutematerial plansExecute capacityplansYesRealistic?Capacityrequirements planMaterialrequirements planMaster productionschedule
  • 18. 14 - 18© 2011 Pearson Education, Inc. publishing as Prentice HallAggregateProduction PlanMonths January FebruaryAggregate Production Plan 1,500 1,200(Shows the totalquantity of amplifiers)Weeks 1 2 3 4 5 6 7 8Master Production Schedule(Shows the specific type andquantity of amplifier to beproduced240-watt amplifier 100 100 100 100150-watt amplifier 500 500 450 45075-watt amplifier 300 100Figure 14.2
  • 19. 14 - 19© 2011 Pearson Education, Inc. publishing as Prentice HallMaster Production Schedule(MPS)1. A customer order in a job shop (make-to-order) company2. Modules in a repetitive (assemble-to-order or forecast) company3. An end item in a continuous (stock-to-forecast) companyCan be expressed in any of thefollowing terms:
  • 20. 14 - 20© 2011 Pearson Education, Inc. publishing as Prentice HallFocus for DifferentProcess StrategiesStock to Forecast(Product Focus)Schedule finishedproductAssemble to Orderor Forecast(Repetitive)Schedule modulesMake to Order(Process Focus)Schedule ordersExamples: Print shop Motorcycles Steel, Beer, BreadMachine shop Autos, TVs LightbulbsFine-dining restaurant Fast-food restaurant PaperTypical focus of themaster productionscheduleNumber ofinputsNumber ofend itemsFigure 14.3
  • 21. 14 - 21© 2011 Pearson Education, Inc. publishing as Prentice HallMPS ExamplesGross Requirements for Crabmeat QuicheGross Requirements for Spinach QuicheDay 6 7 8 9 10 11 12 13 14 and so onAmount 50 100 47 60 110 75Day 7 8 9 10 11 12 13 14 15 16 and so onAmount 100 200 150 60 75 100Table 14.1For Nancy’s Specialty Foods
  • 22. 14 - 22© 2011 Pearson Education, Inc. publishing as Prentice HallBills of Material List of components, ingredients,and materials needed to makeproduct Provides product structure Items above given level are calledparents Items below given level are calledchildren
  • 23. 14 - 23© 2011 Pearson Education, Inc. publishing as Prentice HallBOM ExampleB(2) Std. 12” Speaker kit C(3)Std. 12” Speaker kit w/amp-booster1E(2)E(2) F(2)Packing box andinstallation kit of wire,bolts, and screwsStd. 12” Speakerbooster assembly2D(2)12” SpeakerD(2)12” SpeakerG(1)Amp-booster3Product structure for “Awesome” (A)ALevel0
  • 24. 14 - 24© 2011 Pearson Education, Inc. publishing as Prentice HallBOM ExampleB(2) Std. 12” Speaker kit C(3)Std. 12” Speaker kit w/amp-booster1E(2)E(2) F(2)Packing box andinstallation kit of wire,bolts, and screwsStd. 12” Speakerbooster assembly2D(2)12” SpeakerD(2)12” SpeakerG(1)Amp-booster3Product structure for “Awesome” (A)ALevel0Part B: 2 x number of As = (2)(50) = 100Part C: 3 x number of As = (3)(50) = 150Part D: 2 x number of Bs+ 2 x number of Fs = (2)(100) + (2)(300) = 800Part E: 2 x number of Bs+ 2 x number of Cs = (2)(100) + (2)(150) = 500Part F: 2 x number of Cs = (2)(150) = 300Part G: 1 x number of Fs = (1)(300) = 300
  • 25. 14 - 25© 2011 Pearson Education, Inc. publishing as Prentice HallBills of Material Modular Bills Modules are not final products butcomponents that can be assembledinto multiple end items Can significantly simplify planningand scheduling
  • 26. 14 - 26© 2011 Pearson Education, Inc. publishing as Prentice HallBills of Material Planning Bills Also called “pseudo” or super bills Created to assign an artificialparent to the BOM Used to group subassemblies toreduce the number of items plannedand scheduled Used to create standard “kits” forproduction
  • 27. 14 - 27© 2011 Pearson Education, Inc. publishing as Prentice HallBills of Material Phantom BillsDescribe subassemblies that existonly temporarilyAre part of another assembly andnever go into inventory Low-Level CodingItem is coded at the lowest level atwhich it occursBOMs are processed one level at a time
  • 28. 14 - 28© 2011 Pearson Education, Inc. publishing as Prentice HallAccurate Records Accurate inventory records areabsolutely required for MRP (orany dependent demand system) tooperate correctly Generally MRP systems requiremore than 99% accuracy Outstanding purchase orders mustaccurately reflect quantities andscheduled receipts
  • 29. 14 - 29© 2011 Pearson Education, Inc. publishing as Prentice HallLead Times The time required to purchase,produce, or assemble an item For production – the sum of theorder, wait, move, setup, store,and run times For purchased items – the timebetween the recognition of a needand the availability of the item forproduction
  • 30. 14 - 30© 2011 Pearson Education, Inc. publishing as Prentice HallTime-Phased ProductStructure| | | | | | | |1 2 3 4 5 6 7 8Time in weeksF2 weeks3 weeks1 weekA2 weeks1 weekDE2 weeksDG1 weekStart production of DMust have D and Ecompleted here soproduction canbegin on BFigure 14.41 week2 weeks toproduceBCE
  • 31. 14 - 31© 2011 Pearson Education, Inc. publishing as Prentice HallMRP StructureFigure 14.5Output ReportsMRP byperiod reportMRP bydate reportPlanned orderreportPurchase adviceException reportsOrder early or lateor not neededOrder quantity toosmall or too largeData FilesPurchasing dataBOMLead times(Item master file)Inventory dataMasterproduction scheduleMaterialrequirementplanningprograms(computer andsoftware)
  • 32. 14 - 32© 2011 Pearson Education, Inc. publishing as Prentice HallDetermining GrossRequirements Starts with a production schedule for theend item – 50 units of Item A in week 8 Using the lead time for the item,determine the week in which the ordershould be released – a 1 week lead timemeans the order for 50 units should bereleased in week 7 This step is often called “lead timeoffset” or “time phasing”
  • 33. 14 - 33© 2011 Pearson Education, Inc. publishing as Prentice HallDetermining GrossRequirements From the BOM, every Item A requires 2Item Bs – 100 Item Bs are required inweek 7 to satisfy the order release forItem A The lead time for the Item B is 2 weeks –release an order for 100 units of Item B inweek 5 The timing and quantity for componentrequirements are determined by the orderrelease of the parent(s)
  • 34. 14 - 34© 2011 Pearson Education, Inc. publishing as Prentice HallDetermining GrossRequirements The process continues through the entireBOM one level at a time – often called“explosion” By processing the BOM by level, itemswith multiple parents are only processedonce, saving time and resources andreducing confusion Low-level coding ensures that each itemappears at only one level in the BOM
  • 35. 14 - 35© 2011 Pearson Education, Inc. publishing as Prentice HallGross Requirements PlanTable 14.3Week1 2 3 4 5 6 7 8 Lead TimeA. Required date 50Order release date 50 1 weekB. Required date 100Order release date 100 2 weeksC. Required date 150Order release date 150 1 weekE. Required date 200 300Order release date 200 300 2 weeksF. Required date 300Order release date 300 3 weeksD. Required date 600 200Order release date 600 200 1 weekG. Required date 300Order release date 300 2 weeks
  • 36. 14 - 36© 2011 Pearson Education, Inc. publishing as Prentice HallNet Requirements Plan
  • 37. 14 - 37© 2011 Pearson Education, Inc. publishing as Prentice HallNet Requirements Plan
  • 38. 14 - 38© 2011 Pearson Education, Inc. publishing as Prentice HallDetermining NetRequirements Starts with a production schedule for theend item – 50 units of Item A in week 8 Because there are 10 Item As on hand,only 40 are actually required – (netrequirement) = (gross requirement - on-hand inventory) The planned order receipt for Item A inweek 8 is 40 units – 40 = 50 - 10
  • 39. 14 - 39© 2011 Pearson Education, Inc. publishing as Prentice HallDetermining NetRequirements Following the lead time offset procedure,the planned order release for Item A isnow 40 units in week 7 The gross requirement for Item B is now80 units in week 7 There are 15 units of Item B on hand, sothe net requirement is 65 units in week 7 A planned order receipt of 65 units inweek 7 generates a planned order releaseof 65 units in week 5
  • 40. 14 - 40© 2011 Pearson Education, Inc. publishing as Prentice HallDetermining NetRequirements A planned order receipt of 65 units inweek 7 generates a planned order releaseof 65 units in week 5 The on-hand inventory record for Item Bis updated to reflect the use of the 15items in inventory and shows no on-handinventory in week 8 This is referred to as the Gross-to-Netcalculation and is the third basic functionof the MRP process
  • 41. 14 - 41© 2011 Pearson Education, Inc. publishing as Prentice HallSB C12 138 9 10 1120 3040Lead time = 6 for SMaster schedule for SGross RequirementsScheduleFigure 14.61 2 310 10Master schedulefor Bsold directlyPeriodsTherefore, theseare the grossrequirements for BGross requirements: B 10 40 50 2040+10 15+30=50 =451 2 3 4 5 6 7 8PeriodsAB CLead time = 4 for AMaster schedule for A5 6 7 8 9 10 1140 1550
  • 42. 14 - 42© 2011 Pearson Education, Inc. publishing as Prentice HallNet Requirements PlanThe logic of net requirementsAvailable inventoryNetrequirementsOnhandScheduledreceipts+– =Total requirementsGrossrequirementsAllocations+
  • 43. 14 - 43© 2011 Pearson Education, Inc. publishing as Prentice HallMRP Planning SheetFigure 14.7
  • 44. 14 - 44© 2011 Pearson Education, Inc. publishing as Prentice HallSafety Stock BOMs, inventory records, purchase andproduction quantities may not be perfect Consideration of safety stock may beprudent Should be minimized and ultimatelyeliminated Typically built into projected on-handinventory
  • 45. 14 - 45© 2011 Pearson Education, Inc. publishing as Prentice HallMRP Management MRP is a dynamic system Facilitates replanning when changes occur Regenerating Net change System nervousness can result from toomany changes Time fences put limits on replanning Pegging links each item to its parentallowing effective analysis of changes
  • 46. 14 - 46© 2011 Pearson Education, Inc. publishing as Prentice HallMRP and JIT MRP is a planning system thatdoes not do detailed scheduling MRP requires fixed lead timeswhich might actually vary withbatch size JIT excels at rapidly moving smallbatches of material through thesystem
  • 47. 14 - 47© 2011 Pearson Education, Inc. publishing as Prentice HallFinite Capacity Scheduling MRP systems do not considercapacity during normal planningcycles Finite capacity scheduling (FCS)recognizes actual capacity limits By merging MRP and FCS, a finiteschedule is created with feasiblecapacities which facilitates rapidmaterial movement
  • 48. 14 - 48© 2011 Pearson Education, Inc. publishing as Prentice HallSmall Bucket Approach1. MRP “buckets” are reduced to daily or hourly2. Planned receipts are used internally tosequence production3. Inventory is moved through the plant on a JITbasis4. Completed products are moved to finishedgoods inventory which reduces requiredquantities for subsequent planned orders5. Back flushing based on the BOM is used todeduct inventory that was used in production
  • 49. 14 - 49© 2011 Pearson Education, Inc. publishing as Prentice HallBalanced Flow Used in repetitive operations MRP plans areexecuted usingJIT techniquesbased on “pull”principles Flows are carefullybalanced withsmall lot sizes
  • 50. 14 - 50© 2011 Pearson Education, Inc. publishing as Prentice HallSupermarket Items used by many products areheld in a common area often calleda supermarket Items are withdrawn as needed Inventory is maintained using JITsystems and procedures Common items are not planned bythe MRP system
  • 51. 14 - 51© 2011 Pearson Education, Inc. publishing as Prentice HallLot-Sizing Techniques Lot-for-lot techniques order just whatis required for production based onnet requirements May not always be feasible If setup costs are high, lot-for-lot canbe expensive Economic order quantity (EOQ) EOQ expects a known constantdemand and MRP systems often dealwith unknown and variable demand
  • 52. 14 - 52© 2011 Pearson Education, Inc. publishing as Prentice HallLot-Sizing Techniques Part Period Balancing (PPB) looks atfuture orders to determine mosteconomic lot size The Wagner-Whitin algorithm is acomplex dynamic programmingtechnique Assumes a finite time horizon Effective, but computationallyburdensome
  • 53. 14 - 53© 2011 Pearson Education, Inc. publishing as Prentice HallLot-for-Lot Example1 2 3 4 5 6 7 8 9 10Grossrequirements35 30 40 0 10 40 30 0 30 55ScheduledreceiptsProjected onhand35 35 0 0 0 0 0 0 0 0 0Netrequirements0 30 40 0 10 40 30 0 30 55Planned orderreceipts30 40 10 40 30 30 55Planned orderreleases30 40 10 40 30 30 55Holding cost = $1/week; Setup cost = $100; Lead time = 1 week
  • 54. 14 - 54© 2011 Pearson Education, Inc. publishing as Prentice HallLot-for-Lot Example1 2 3 4 5 6 7 8 9 10Grossrequirements35 30 40 0 10 40 30 0 30 55ScheduledreceiptsProjected onhand35 35 0 0 0 0 0 0 0 0 0Netrequirements0 30 40 0 10 40 30 0 30 55Planned orderreceipts30 40 10 40 30 30 55Planned orderreleases30 40 10 40 30 30 55Holding cost = $1/week; Setup cost = $100; Lead time = 1 weekNo on-hand inventory is carried through the systemTotal holding cost = $0There are seven setups for this item in this planTotal ordering cost = 7 x $100 = $700
  • 55. 14 - 55© 2011 Pearson Education, Inc. publishing as Prentice HallEOQ Lot Size Example1 2 3 4 5 6 7 8 9 10Grossrequirements35 30 40 0 10 40 30 0 30 55ScheduledreceiptsProjected onhand35 35 0 43 3 3 66 26 69 69 39Netrequirements0 30 0 0 7 0 4 0 0 16Planned orderreceipts73 73 73 73Planned orderreleases73 73 73 73Holding cost = $1/week; Setup cost = $100; Lead time = 1 weekAverage weekly gross requirements = 27; EOQ = 73 units
  • 56. 14 - 56© 2011 Pearson Education, Inc. publishing as Prentice HallEOQ Lot Size Example1 2 3 4 5 6 7 8 9 10Grossrequirements35 30 40 0 10 40 30 0 30 55ScheduledreceiptsProjected onhand35 35 0 0 0 0 0 0 0 0 0Netrequirements0 30 0 0 7 0 4 0 0 16Planned orderreceipts73 73 73 73Planned orderreleases73 73 73 73Holding cost = $1/week; Setup cost = $100; Lead time = 1 weekAverage weekly gross requirements = 27; EOQ = 73 unitsAnnual demand = 1,404Total cost = setup cost + holding costTotal cost = (1,404/73) x $100 + (73/2) x ($1 x 52 weeks)Total cost = $3,798Cost for 10 weeks = $3,798 x (10 weeks/52 weeks) =$730
  • 57. 14 - 57© 2011 Pearson Education, Inc. publishing as Prentice HallPPB Example1 2 3 4 5 6 7 8 9 10Grossrequirements35 30 40 0 10 40 30 0 30 55ScheduledreceiptsProjected onhand35NetrequirementsPlanned orderreceiptsPlanned orderreleasesHolding cost = $1/week; Setup cost = $100; Lead time = 1 weekEPP = 100 units
  • 58. 14 - 58© 2011 Pearson Education, Inc. publishing as Prentice HallPPB Example1 2 3 4 5 6 7 8 9 10Grossrequirements35 30 40 0 10 40 30 0 30 55ScheduledreceiptsProjected onhand35NetrequirementsPlanned orderreceiptsPlanned orderreleasesHolding cost = $1/week; Setup cost = $100;EPP = 100 units2 30 02, 3 70 40 = 40 x 12, 3, 4 70 402, 3, 4, 5 80 70 = 40 x 1 + 10 x 3 100 70 1702, 3, 4, 5, 6 120 230 = 40 x 1 + 10 x 3+ 40 x 4+ =Combine periods 2 - 5 as this results in the Part Periodclosest to the EPPCombine periods 6 - 9 as this results in the Part Periodclosest to the EPP6 40 06, 7 70 30 = 30 x 16, 7, 8 70 30 = 30 x 1 + 0 x 26, 7, 8, 9 100 120 = 30 x 1 + 30 x 3 100 120 220+ =10 55 0 100 0 100Total cost 300 190 490+ =+ =Trial Lot SizePeriods (cumulative net CostsCombined requirements) Part Periods Setup Holding Total
  • 59. 14 - 59© 2011 Pearson Education, Inc. publishing as Prentice HallPPB Example1 2 3 4 5 6 7 8 9 10Grossrequirements35 30 40 0 10 40 30 0 30 55ScheduledreceiptsProjected onhand35 35 0 50 10 10 0 60 30 30 0Netrequirements0 30 0 0 0 40 0 0 0 55Planned orderreceipts80 100 55Planned orderreleases80 100 55Holding cost = $1/week; Setup cost = $100; Lead time = 1 weekEPP = 100 units
  • 60. 14 - 60© 2011 Pearson Education, Inc. publishing as Prentice HallLot-Sizing SummaryFor these three examplesLot-for-lot $700EOQ $730PPB $490
  • 61. 14 - 61© 2011 Pearson Education, Inc. publishing as Prentice HallLot-Sizing Summary In theory, lot sizes should be recomputedwhenever there is a lot size or orderquantity change In practice, this results in systemnervousness and instability Lot-for-lot shouldbe used whenlow-cost JIT canbe achieved
  • 62. 14 - 62© 2011 Pearson Education, Inc. publishing as Prentice HallLot-Sizing Summary Lot sizes can be modified to allow forscrap, process constraints, andpurchase lots Use lot-sizing with care as it can causeconsiderable distortion of requirementsat lower levels of the BOM When setup costs are significant anddemand is reasonably smooth, PPB,Wagner-Whitin, or EOQ should givereasonable results
  • 63. 14 - 63© 2011 Pearson Education, Inc. publishing as Prentice HallExtensions of MRP MRP II Closed-Loop MRP MRP system provides input to the capacityplan, MPS, and production planning process Capacity Planning MRP system generates a load report whichdetails capacity requirements This is used to drive the capacity planningprocess Changes pass back through the MRP systemfor rescheduling
  • 64. 14 - 64© 2011 Pearson Education, Inc. publishing as Prentice HallMaterial RequirementsPlanning II Requirement data can be enriched byother resources Generally called MRP II or MaterialResource Planning Outputs include Scrap Packaging waste Carbon emissions Data used by purchasing, productionscheduling, capacity planning, inventory
  • 65. 14 - 65© 2011 Pearson Education, Inc. publishing as Prentice HallMaterial Resource PlanningWeeksLT 5 6 7 8Computer 1 100Labor Hrs: .2 each 20Machine Hrs: .2 each 20Scrap: 1 ounce fiberglass each 6.25 lbsPayables: $0 each $0PC Board (1 each) 2 100Labor Hrs: .15 each 15Machine Hrs: .1 each 10Scrap: .5 ounces copper each 3.125 lbPayables: raw material at $5 each $500Processor (5 each) 4 500Labor Hrs: .2 each 100Machine Hrs: .2 each 100Scrap: .01 ounces of acid waste each 0.3125 lbPayables: processors at $10 each $5,000Table 14.4
  • 66. 14 - 66© 2011 Pearson Education, Inc. publishing as Prentice HallClosed-Loop MRP SystemFigure 14.8Priority ManagementDevelop Master ProductionSchedulePrepare MaterialsRequirements PanDetailed ProductionActivity Control(Shop Scheduling/Dispatching)Capacity ManagementEvaluate Resource Availability(Rough Cut)Determine Capacity AvailabilityImplement Input/Output ControlAggregate Production PlanOK?NOOK?NO OK? YESOK? YESPlanningExecution(in repetitivesystems JITtechniquesare used)
  • 67. 14 - 67© 2011 Pearson Education, Inc. publishing as Prentice HallCapacity Planning Feedback from the MRP system Load reports show resourcerequirements for work centers Work can be moved between workcenters to smooth the load or bringit within capacity
  • 68. 14 - 68© 2011 Pearson Education, Inc. publishing as Prentice HallSmoothing Tactics1. Overlapping Sends part of the work to followingoperations before the entire lot is complete Reduces lead time2. Operations splitting Sends the lot to two different machines forthe same operation Shorter throughput time but increased setupcosts3. Order or lot splitting Breaking up the order into smaller lots andrunning part earlier (or later) in the schedule
  • 69. 14 - 69© 2011 Pearson Education, Inc. publishing as Prentice HallOrder Splitting Develop a capacity plan for a work cell atWiz Products There are 12 hours available each day Each order requires 1 hourDay 1 2 3 4 5Orders 10 14 13 10 14
  • 70. 14 - 70© 2011 Pearson Education, Inc. publishing as Prentice HallOrder SplittingDayUnitsOrderedCapacityRequired(hours)CapacityAvailable(hours)Utilization:Over/(Under)(hours)ProductionPlanner’s ActionNewProductionSchedule1 10 10 12 (2) 122 14 14 12 2 Split order:move 2 units today 1123 13 13 12 1 Split order:move one unitto day 6 orrequestovertime134 10 10 12 (2) 125 14 14 12 2 Split order:move 2 units today 41261
  • 71. 14 - 71© 2011 Pearson Education, Inc. publishing as Prentice HallOrder SplittingFigure 14.9AvailablecapacityCapacity exceededon days 2, 3, and 52 orders moved to day 1 fromday 2 (a day early)1 order forced to overtimeor to day 62 orders moved today 4 (a day early)14 –12 –10 –8 –6 –4 –2 –0 –1 2 3 4 5Days(b)Standardlabor-Hours14 –12 –10 –8 –6 –4 –2 –0 –1 2 3 4 5Days(a)Standardlabor-Hours
  • 72. 14 - 72© 2011 Pearson Education, Inc. publishing as Prentice HallMRP in Services Some services or service items aredirectly linked to demand for otherservices These can be treated as dependentdemand services or items Restaurants Hospitals Hotels
  • 73. 14 - 73© 2011 Pearson Education, Inc. publishing as Prentice HallUncookedlinguini#30004Sauce#30006Veal#30005MRP in ServicesChef;WorkCenter #1Helper one;WorkCenter #2Asst. Chef;WorkCenter #3Cookedlinguini#20002Spinach#20004Prepared vealand sauce#20003(a) PRODUCT STRUCTURE TREEVealpicante#10001Figure 14.10
  • 74. 14 - 74© 2011 Pearson Education, Inc. publishing as Prentice HallMRP in Services(b) BILL OF MATERIALSPartNumber Description QuantityUnit ofMeasureUnitcost10001 Veal picante 1 Serving —20002 Cooked linguini 1 Serving —20003 Prepared veal and sauce 1 Serving —20004 Spinach 0.1 Bag 0.9430004 Uncooked linguini 0.5 Pound —30005 Veal 1 Serving 2.1530006 Sauce 1 Serving 0.80
  • 75. 14 - 75© 2011 Pearson Education, Inc. publishing as Prentice HallMRP in Services(c) BILL OF LABOR FOR VEAL PICANTELabor HoursWork Center Operation Labor Type Setup Time Run Time1 Assemble dish Chef .0069 .00412 Cook linguini Helper one .0005 .00223 Cook vealand sauceAssistant Chef.0125 .0500
  • 76. 14 - 76© 2011 Pearson Education, Inc. publishing as Prentice HallDistribution ResourcePlanning (DRP)Using dependent demand techniquesthrough the supply chain Expected demand or sales forecastsbecome gross requirements Minimum levels of inventory to meetcustomer service levels Accurate lead times Definition of the distribution structure
  • 77. 14 - 77© 2011 Pearson Education, Inc. publishing as Prentice HallEnterprise ResourcePlanning (ERP) An extension of the MRP system totie in customers and suppliers Allows automation and integration ofmany business processes Shares common data bases andbusiness practices Produces information in real time Coordinates business from supplierevaluation to customer invoicing
  • 78. 14 - 78© 2011 Pearson Education, Inc. publishing as Prentice HallEnterprise ResourcePlanning (ERP) ERP modules include Basic MRP Finance Human resources Supply chain management (SCM) Customer relationship management(CRM)
  • 79. 14 - 79© 2011 Pearson Education, Inc. publishing as Prentice HallERP and MRPFigure 14.11
  • 80. 14 - 80© 2011 Pearson Education, Inc. publishing as Prentice HallERP and MRPFigure 14.11Customer Relationship ManagementInvoicingShippingDistributors,retailers,and end usersSales Order(order entry,product configuration,sales management)
  • 81. 14 - 81© 2011 Pearson Education, Inc. publishing as Prentice HallTable 13.6Bills ofMaterialWorkOrdersPurchasingandLead TimesRoutingsandLead TimesMasterProductionScheduleInventoryManagementERP and MRPFigure 14.11MRP
  • 82. 14 - 82© 2011 Pearson Education, Inc. publishing as Prentice HallERP and MRPFigure 14.11Supply Chain ManagementVendor Communication(schedules, EDI, advanced shipping notice,e-commerce, etc.)
  • 83. 14 - 83© 2011 Pearson Education, Inc. publishing as Prentice HallERP and MRPFigure 14.11Table 13.6Finance/AccountingGeneralLedgerAccountsReceivablePayrollAccountsPayable
  • 84. 14 - 84© 2011 Pearson Education, Inc. publishing as Prentice HallEnterprise ResourcePlanning (ERP) ERP can be highly customized tomeet specific business requirements Enterprise application integrationsoftware (EAI) allows ERP systemsto be integrated with Warehouse management Logistics Electronic catalogs Quality management
  • 85. 14 - 85© 2011 Pearson Education, Inc. publishing as Prentice HallEnterprise ResourcePlanning (ERP) ERP systems have the potential to Reduce transaction costs Increase the speed and accuracy ofinformation Facilitates a strategic emphasis onJIT systems and integration
  • 86. 14 - 86© 2011 Pearson Education, Inc. publishing as Prentice HallSAP’s ERP ModulesFigure 14.12
  • 87. 14 - 87© 2011 Pearson Education, Inc. publishing as Prentice HallAdvantages of ERPSystems1. Provides integration of the supply chain,production, and administration2. Creates commonality of databases3. Can incorporate improved best processes4. Increases communication andcollaboration between business units andsites5. Has an off-the-shelf software database6. May provide a strategic advantage
  • 88. 14 - 88© 2011 Pearson Education, Inc. publishing as Prentice HallDisadvantages of ERPSystems1. Is very expensive to purchase and evenmore so to customize2. Implementation may require major changesin the company and its processes3. Is so complex that many companies cannotadjust to it4. Involves an ongoing, possibly nevercompleted, process for implementation5. Expertise is limited with ongoing staffingproblems
  • 89. 14 - 89© 2011 Pearson Education, Inc. publishing as Prentice HallERP in the Service Sector ERP systems have been developedfor health care, government, retailstores, hotels, and financialservices Also called efficient consumerresponse (ECR) systems Objective is to tie sales to buying,inventory, logistics, and production
  • 90. 14 - 90© 2011 Pearson Education, Inc. publishing as Prentice HallAll rights reserved. No part of this publication may be reproduced, stored in a retrievalsystem, or transmitted, in any form or by any means, electronic, mechanical, photocopying,recording, or otherwise, without the prior written permission of the publisher.Printed in the United States of America.