OM5-1MRP & ERP Chapter 15 MRP and ERP. OM5-2MRP & ERP Material requirements planning (MRP): Computer-based information system for ordering and scheduling.
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OM5-1 MRP & ERP
Chapter 15
MRP and ERP
OM5-2 MRP & ERP
• Material requirements planning (MRP): Computer-based information system for ordering and scheduling of dependent demand inventories
MRP
OM5-3 MRP & ERP
• Dependent demand: Demand for items that are subassemblies or component parts to be used in production of finished goods.
Dependant Demand
OM5-4 MRP & ERP
Dependent vs Independent Demand
Time
Time Time
Time
Dem
and
Dem
and
Stable demand“Lumpy” demand
Am
ou
nt
on
han
d
Am
ou
nt
on
han
d
Safety stock
OM5-5 MRP & ERP
MRP Inputs MRP Processing MRP Outputs
Masterschedule
Bill ofmaterials
Inventoryrecords
MRP computerprograms
Changes
Order releases
Planned-orderschedules
Exception reports
Planning reports
Performance-controlreports
Inventorytransaction
Primaryreports
Secondaryreports
OM5-6 MRP & ERP
• Master Production Schedule• Time-phased plan specifying timing and quantity of production for each
end item.• Material Requirement Planning Process
Product Structure
Tree
Lead Times
MPR Inputs
OM5-7 MRP & 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.
OM5-8 MRP & ERP
Planning Horizon
1 2 3 4 5 6 7 8 9 10
Procurement
Fabrication
Subassembly
Assembly
Figure 14-4
OM5-9 MRP & ERP
Bill-of-Materials
Bill of materials: 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.
OM5-10 MRP & ERP
Product Structure Tree
Chair
Seat
Legs (2) Crossbar
SideRails (2)
Crossbar
BackSupports (3)
LegAssembly
BackAssembly
Level 0
1
2
3
Figure 15-5
OM5-11 MRP & ERP
MRP Processing
• Gross requirements
• Schedule receipts
• Projected on hand
• Net requirements
• Planned-order receipts
• Planned-order releases
OM5-12 MRP & ERP
Typical MRP Matrix
Week
1
2
3
4
5
6
7
8 Gross Requirements
Scheduled Receipts
Available On Hand
Net Requirements
Planned Order Receipts
Planned Order Release
OM5-13 MRP & 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.
OM5-14 MRP & ERP
MRP Secondary Reports
• Performance-control reports
• Planning reports
• Exception reports
OM5-15 MRP & ERP
Other Considerations
• Safety Stock• Lot sizing
– Lot-for-lot ordering– Economic order quantity– Fixed-period ordering– Part-period model
OM5-16 MRP & ERP
MRP Planning
Develop a tentativemaster production
schedule
Develop a tentativemaster production
schedule
Use MRP tosimulate material
requirements
Use MRP tosimulate material
requirements
Convert materialrequirements to
resource requirements
Firm up a portionof the MPS
Is shopcapacity
adequate?
Cancapacity be
changed to meetrequirements
Revise tentativemaster production
schedule
Changecapacity
Yes
No
Yes
No
OM5-17 MRP & ERP
• 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
MRP in Services
OM5-18 MRP & 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
OM5-19 MRP & ERP
Requirements of MRP
• Computer and necessary software
• Accurate and up-to-date
– Master schedules
– Bills of materials
– Inventory records
• Integrity of data
OM5-20 MRP & ERP
MRP: Problem 1
• Suppose you are to produce 100 units of product A in period 8 with the product structure shown below. If no stock is on hand or on order, determine when to release orders for each component and the size of each order. Product A with a lead time of 4 periods is made from components B and C with lead times of 3 and 2 periods, respectively; C is made from components D and E with a lead time of 1 period each.
OM5-21 MRP & ERP
MRP: Problem 1
• Product Structure
A
B (1) C (2)
D (1) E (2)
OM5-22 MRP & ERP
MRP: Problem 1 - Solution
Master Production Schedule (MPS)
Week
1
2
3
4
5
6
7
8
Demand 100
OM5-23 MRP & ERP
MRP: Problem 1 - Solution (cont.)
• The following can be calculated in this problem since there is zero available-on-hand for item A and all of its components.
– End Item A Requirements: 100
– Component B Requirements: 100
– Component C Requirements: 200
– Component D Requirements: 200
– Component E Requirements: 400
OM5-24 MRP & ERP
MRP: Problem 1 – Solution (cont.)
100
Planned Order Release
100
Gross RequirementsA4
87654321ItemLead-Time
OM5-25 MRP & ERP
MRP: Problem 1 – Solution (cont.)
100
Planned Order Release
100
Gross RequirementsB3
87654321ItemLead-Time
OM5-26 MRP & ERP
MRP: Problem 1 – Solution (cont.)
200
Planned Order Release
200
Gross RequirementsC2
87654321ItemLead-Time
OM5-27 MRP & ERP
MRP: Problem 1 – Solution (cont.)
200
Planned Order Release
200
Gross RequirementsD1
87654321ItemLead-Time
OM5-28 MRP & ERP
MRP: Problem 1 – Solution (cont.)
400
Planned Order Release
400
Gross RequirementsE1
87654321ItemLead-Time
OM5-29 MRP & ERP
MRP: Problem 2
• In the MRP table below, indicate the available on hand requirements, the planned order receipts, and the planned order releases. The lead-time is two periods. Available on hand are 20 units. Consider a) the lot size is the same as the net requirements {Lot-For-Lot (LFL) or lot size = 1} and b) lot size equals 15.
OM5-30 MRP & ERP
MRP: Problem 2
Week
1
2
3
4
5
6
7
8 Gross Requirements
5
10
18
0
10
6
0
14 Scheduled Receipts 20
Available On Hand 20
Net Requirements
Planned Order Receipts
Planned Order Release
OM5-31 MRP & ERP
MRP: Problem 2 (a)- Solution
Week
1
2
3
4
5
6
7
8 Gross Requirements
5
10
18
0
10
6
0
14 Scheduled Receipts 20
Available On Hand 20 15
Net Requirements
Planned Order Receipts
Planned Order Release
OM5-32 MRP & ERP
MRP: Problem 2 (a)- Solution
Week
1
2
3
4
5
6
7
8 Gross Requirements
5
10
18
0
10
6
0
14 Scheduled Receipts 20
Available On Hand 20 15 25
Net Requirements
Planned Order Receipts
Planned Order Release
OM5-33 MRP & ERP
MRP: Problem 2 (a)- Solution
Week
1
2
3
4
5
6
7
8 Gross Requirements
5
10
18
0
10
6
0
14 Scheduled Receipts 20
Available On Hand 20 15 25 7
Net Requirements
Planned Order Receipts
Planned Order Release
OM5-34 MRP & ERP
MRP: Problem 2 (a)- Solution
Week
1
2
3
4
5
6
7
8 Gross Requirements
5
10
18
0
10
6
0
14 Scheduled Receipts 20
Available On Hand 20 15 25 7 7
Net Requirements
Planned Order Receipts
Planned Order Release
OM5-35 MRP & ERP
MRP: Problem 2 (a)- Solution
Week
1
2
3
4
5
6
7
8 Gross Requirements
5
10
18
0
10
6
0
14 Scheduled Receipts 20
Available On Hand 20 15 25 7 7
Net Requirements 3
Planned Order Receipts
Planned Order Release
OM5-36 MRP & ERP
MRP: Problem 2 (a)- Solution
Week
1
2
3
4
5
6
7
8 Gross Requirements
5
10
18
0
10
6
0
14 Scheduled Receipts 20
Available On Hand 20 15 25 7 7
Net Requirements 3
Planned Order Receipts 3
Planned Order Release
OM5-37 MRP & ERP
MRP: Problem 2 (a)- Solution
Week
1
2
3
4
5
6
7
8 Gross Requirements
5
10
18
0
10
6
0
14 Scheduled Receipts 20
Available On Hand 20 15 25 7 7
Net Requirements 3
Planned Order Receipts 3
Planned Order Release 3
OM5-38 MRP & ERP
MRP: Problem 2 (a)- Solution
Week
1
2
3
4
5
6
7
8 Gross Requirements
5
10
18
0
10
6
0
14 Scheduled Receipts 20
Available On Hand 20 15 25 7 7 0
Net Requirements 3
Planned Order Receipts 3
Planned Order Release 3
OM5-39 MRP & ERP
MRP: Problem 2 (a)- Solution
Week
1
2
3
4
5
6
7
8 Gross Requirements
5
10
18
0
10
6
0
14 Scheduled Receipts 20
Available On Hand 20 15 25 7 7 0 0 0
Net Requirements 3 6
Planned Order Receipts 3 6
Planned Order Release 3 6
OM5-40 MRP & ERP
MRP: Problem 2 (a)- Solution
Week
1
2
3
4
5
6
7
8 Gross Requirements
5
10
18
0
10
6
0
14 Scheduled Receipts 20
Available On Hand 20 15 25 7 7 0 0 0 0
Net Requirements 3 6 14
Planned Order Receipts 3 6 14
Planned Order Release 3 6 14
OM5-41 MRP & ERP
MRP: Problem 2 (b) - Solution
Week
1
2
3
4
5
6
7
8 Gross Requirements
5
10
18
0
10
6
0
14 Scheduled Receipts 20
Available On Hand 20 15 25 7 7
Net Requirements
Planned Order Receipts
Planned Order Release
OM5-42 MRP & ERP
MRP: Problem 2 (b) - Solution
Week
1
2
3
4
5
6
7
8 Gross Requirements
5
10
18
0
10
6
0
14 Scheduled Receipts 20
Available On Hand 20 15 25 7 7
Net Requirements 3
Planned Order Receipts
Planned Order Release
OM5-43 MRP & ERP
MRP: Problem 2 (b) - Solution
Week
1
2
3
4
5
6
7
8 Gross Requirements
5
10
18
0
10
6
0
14 Scheduled Receipts 20
Available On Hand 20 15 25 7 7
Net Requirements 3
Planned Order Receipts 15
Planned Order Release
OM5-44 MRP & ERP
MRP: Problem 2 (b) - Solution
Week
1
2
3
4
5
6
7
8 Gross Requirements
5
10
18
0
10
6
0
14 Scheduled Receipts 20
Available On Hand 20 15 25 7 7
Net Requirements 3
Planned Order Receipts 15
Planned Order Release 15
OM5-45 MRP & ERP
MRP: Problem 2 (b) - Solution
Week
1
2
3
4
5
6
7
8 Gross Requirements
5
10
18
0
10
6
0
14 Scheduled Receipts 20
Available On Hand 20 15 25 7 7 12
Net Requirements 3
Planned Order Receipts 15
Planned Order Release 15
OM5-46 MRP & ERP
MRP: Problem 2 (b) - Solution
Week
1
2
3
4
5
6
7
8 Gross Requirements
5
10
18
0
10
6
0
14 Scheduled Receipts 20
Available On Hand 20 15 25 7 7 12 6
Net Requirements 3
Planned Order Receipts 15
Planned Order Release 15
OM5-47 MRP & ERP
MRP: Problem 2 (b) - Solution
Week
1
2
3
4
5
6
7
8 Gross Requirements
5
10
18
0
10
6
0
14 Scheduled Receipts 20
Available On Hand 20 15 25 7 7 12 6 6
Net Requirements 3
Planned Order Receipts 15
Planned Order Release 15
OM5-48 MRP & ERP
MRP: Problem 2 (b) - Solution
Week
1
2
3
4
5
6
7
8 Gross Requirements
5
10
18
0
10
6
0
14 Scheduled Receipts 20
Available On Hand 20 15 25 7 7 12 6 6
Net Requirements 3 8
Planned Order Receipts 15
Planned Order Release 15
OM5-49 MRP & ERP
MRP: Problem 2 (b) - Solution
Week
1
2
3
4
5
6
7
8 Gross Requirements
5
10
18
0
10
6
0
14 Scheduled Receipts 20
Available On Hand 20 15 25 7 7 12 6 6 7
Net Requirements 3 8
Planned Order Receipts 15 15
Planned Order Release 15 15
OM5-50 MRP & ERP
MRP: Problem 3
• A company produces two products: Product A and Product Q. The owner has received an order from a customer of 103 units of product A for week 8 and 200 units of product Q for week 7. The product structures and other pertinent information are given below in the table as well as on top of each MRP table. Develop a materials requirements plan that will provide the customer the two products.
OM5-51 MRP & ERP
MRP: Problem 3
Item Lead Time (Weeks)
Direct Components
Lot-Sizing Rule
A 4 B(1), C(2) 1
Q 2 C(1), E(1) 1
B 3 ------ 1
C 2 D(1), E(2) 1
D 1 ------ 200
E 1 ------ 500
OM5-52 MRP & ERP
MRP: Problem 3 - Solution
Item: A On hand = 18 Safety Stock = 5 Allocated = 10 Therefore, Available-On-Hand = 18 – 5 – 10 = 3
Week 1 2 3 4 5 6 7 8
Gross Requirements
103 Scheduled Receipts
Available On Hand
3
Net Requirements
Planned Order Receipt
Planned order Release
OM5-53 MRP & ERP
MRP: Problem 3 – Solution (cont.)
Week 1 2 3 4 5 6 7 8
Gross Requirements
103 Scheduled Receipts
Available On Hand
3 3 3 3 3 3 3 3 Net Requirements
100 Planned Order Receipt
Planned order Release
OM5-54 MRP & ERP
MRP: Problem 3 – Solution (cont.)
Week 1 2 3 4 5 6 7 8
Gross Requirements
103 Scheduled Receipts
Available On Hand
3 3 3 3 3 3 3 3 Net Requirements
100 Planned Order Receipt
100 Planned order Release
OM5-55 MRP & ERP
MRP: Problem 3 – Solution (cont.)
Week 1 2 3 4 5 6 7 8
Gross Requirements
103 Scheduled Receipts
Available On Hand
3 3 3 3 3 3 3 3 Net Requirements
100 Planned Order Receipt
100 Planned order Release
100
OM5-56 MRP & ERP
MRP: Problem 3 – Solution (cont.)Item: Q On hand = 6 Safety Stock = 6 Allocated = 0 Therefore, Available-On-Hand = 6
Week 1 2 3 4 5 6 7 8
Gross Requirements
200 Scheduled Receipts
Available On Hand
0 0 0 0 0 0 0 Net Requirements
Planned Order Receipt
Planned order Release
OM5-57 MRP & ERP
MRP: Problem 3 – Solution (cont.)Item: Q On hand = 6 Safety Stock = 6 Allocated = 0
Week 1 2 3 4 5 6 7 8
Gross Requirements
200 Scheduled Receipts
Available On Hand
0 0 0 0 0 0 0 Net Requirements
200 Planned Order Receipt
Planned order Release
OM5-58 MRP & ERP
MRP: Problem 3 – Solution (cont.)Item: Q On hand = 6 Safety Stock = 6 Allocated = 0
Week 1 2 3 4 5 6 7 8
Gross Requirements
200 Scheduled Receipts
Available On Hand
0 0 0 0 0 0 0 Net Requirements
200 Planned Order Receipt
200 Planned order Release
OM5-59 MRP & ERP
MRP: Problem 3 – Solution (cont.)Item: Q On hand = 6 Safety Stock = 6 Allocated = 0
Week 1 2 3 4 5 6 7 8
Gross Requirements
200 Scheduled Receipts
Available On Hand
0 0 0 0 0 0 0 Net Requirements
200 Planned Order Receipt
200 Planned order Release
200
OM5-60 MRP & ERP
MRP: Problem 3 – Solution (cont.)Item: B On hand = 10 Safety Stock = 0 Allocated = 0
Week 1 2 3 4 5 6 7 8
Gross Requirements
100 Scheduled Receipts
Available On Hand
10 10 10 10 Net Requirements
Planned Order Receipt
Planned order Release
OM5-61 MRP & ERP
MRP: Problem 3 – Solution (cont.)Item: B On hand = 10 Safety Stock = 0 Allocated = 0
Week 1 2 3 4 5 6 7 8
Gross Requirements
100 Scheduled Receipts
Available On Hand
10 10 10 10 Net Requirements
90 Planned Order Receipt
Planned order Release
OM5-62 MRP & ERP
MRP: Problem 3 – Solution (cont.)Item: B On hand = 10 Safety Stock = 0 Allocated = 0
Week 1 2 3 4 5 6 7 8
Gross Requirements
100 Scheduled Receipts
Available On Hand
10 10 10 10 0 0 0 0 0 Net Requirements
90 Planned Order Receipt
90 Planned order Release
90
OM5-63 MRP & ERP
MRP: Problem 3 – Solution (cont.)Item: C On hand = 20 Safety Stock = 0 Allocated = 0
Week 1 2 3 4 5 6 7 8
Gross Requirements
200 200 Scheduled Receipts
Available On Hand
20 20 20 20 Net Requirements
Planned Order Receipt
Planned order Release
OM5-64 MRP & ERP
MRP: Problem 3 – Solution (cont.)Item: C On hand = 20 Safety Stock = 0 Allocated = 0
Week 1 2 3 4 5 6 7 8
Gross Requirements
200 200 Scheduled Receipts
Available On Hand
20 20 20 20 0 Net Requirements
180 Planned Order Receipt
180 Planned order Release
180
OM5-65 MRP & ERP
MRP: Problem 3 – Solution (cont.)Item: C On hand = 20 Safety Stock = 0 Allocated = 0
Week 1 2 3 4 5 6 7 8
Gross Requirements
200 200 Scheduled Receipts
Available On Hand
20 20 20 20 0 0 0 0 0 Net Requirements
180 200 Planned Order Receipt
180 200 Planned order Release
180 200
OM5-66 MRP & ERP
MRP: Problem 3 – Solution (cont.)
Item: D On hand = 0 Safety Stock = 0 Allocated = 0
Week 1 2 3 4 5 6 7 8
Gross Requirements
180 200 Scheduled Receipts
Available On Hand
0 0 Net Requirements
Planned Order Receipt
Planned order Release
OM5-67 MRP & ERP
MRP: Problem 3 – Solution (cont.)
Item: D On hand = 0 Safety Stock = 0 Allocated = 0
Week 1 2 3 4 5 6 7 8
Gross Requirements
180 200 Scheduled Receipts
Available On Hand
0 0 Net Requirements
180 Planned Order Receipt
Planned order Release
OM5-68 MRP & ERP
MRP: Problem 3 – Solution (cont.)
Item: D On hand = 0 Safety Stock = 0 Allocated = 0
Week 1 2 3 4 5 6 7 8
Gross Requirements
180 200 Scheduled Receipts
Available On Hand
0 0 Net Requirements
180 Planned Order Receipt
200 Planned order Release
OM5-69 MRP & ERP
MRP: Problem 3 – Solution (cont.)
Item: D On hand = 0 Safety Stock = 0 Allocated = 0
Week 1 2 3 4 5 6 7 8
Gross Requirements
180 200 Scheduled Receipts
Available On Hand
0 0 Net Requirements
180 Planned Order Receipt
200 Planned order Release
200
OM5-70 MRP & ERP
MRP: Problem 3 – Solution (cont.)
Item: D On hand = 0 Safety Stock = 0 Allocated = 0
Week 1 2 3 4 5 6 7 8
Gross Requirements
180 200 Scheduled Receipts
Available On Hand
0 0 20 20 20 20 20 20 20 Net Requirements
180 180 Planned Order Receipt
200 200 Planned order Release
200 200
OM5-71 MRP & ERP
MRP: Problem 3 – Solution (cont.)Item: E On hand = 30 Safety Stock = 0 Allocated = 0
Week 1 2 3 4 5 6 7 8
Gross Requirements
360 400 200 Scheduled Receipts
Available On Hand
30 30 Net Requirements
Planned Order Receipt
Planned Order Release
OM5-72 MRP & ERP
MRP: Problem 3 – Solution (cont.)Item: E On hand = 30 Safety Stock = 0 Allocated = 0
Week 1 2 3 4 5 6 7 8
Gross Requirements
360 400 200 Scheduled Receipts
Available On Hand
30 30 170 Net Requirements
330 Planned Order Receipt
500 Planned Order Release
500
OM5-73 MRP & ERP
MRP: Problem 3 – Solution (cont.)
Item: E On hand = 30 Safety Stock = 0 Allocated = 0
Week 1 2 3 4 5 6 7 8
Gross Requirements
360 400 200 Scheduled Receipts
Available On Hand
30 30 170 270 Net Requirements
330 230 Planned Order Receipt
500 500 Planned Order Release
500 500
OM5-74 MRP & ERP
MRP: Problem 3 – Solution (cont.)Item: E On hand = 30 Safety Stock = 0 Allocated = 0
Week 1 2 3 4 5 6 7 8
Gross Requirements
360 400 200 Scheduled Receipts
Available On Hand
30 30 170 270 270 Net Requirements
330 230 Planned Order Receipt
500 500 Planned Order Release
500 500
OM5-75 MRP & ERP
MRP: Problem 3 – Solution (cont.)
Item: E On hand = 30 Safety Stock = 0 Allocated = 0
Week 1 2 3 4 5 6 7 8
Gross Requirements
360 400 200 Scheduled Receipts
Available On Hand
30 30 170 270 270 70 70 70 70 Net Requirements
330 230 Planned Order Receipt
500 500 Planned Order Release
500 500
OM5-76 MRP & ERP
• Expanded MRP with and emphasis placed on integration
– Financial planning
– Marketing
– Engineering
– Purchasing
– Manufacturing
MRP II
OM5-77 MRP & ERP
MarketDemand
Productionplan
Problems?
Rough-cutcapacity planning
Yes No YesNo
Finance
Marketing
Manufacturing
Adjustproduction plan
Masterproduction schedule
MRP
Capacityplanning
Problems?Requirements
schedules
Ad
just
mas
ter
sch
edu
le
MRP II
OM5-78 MRP & ERP
• Enterprise resource planning (ERP): An expanded effort to integrate standardized record-keeping that will permit information sharing throughout the organization
ERP
OM5-79 MRP & ERP
MRP II and ERP Systems
• Expanded MRP with and emphasis placed on integration
– Financial planning
– Marketing
– Engineering
– Purchasing
– Manufacturing
– Other Capabilities
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