Dec 14, 2015
OverviewOverview Dependent demandDependent demand Master production scheduleMaster production schedule Bill of materialsBill of materials MRPMRP
Time-phased product structureTime-phased product structure Gross material requirements planGross material requirements plan Net requirements planNet requirements plan
Lot-sizing techniquesLot-sizing techniques Extensions of MRPExtensions of MRP
Furniture Mfg.Furniture Mfg. Produces 3-types of Produces 3-types of
chairschairs Ladder-back chairLadder-back chair Kitchen chairKitchen chair Desk chairDesk chair
Master Production Master Production ScheduleSchedule
200
Ladder-back chair
Kitchen chair
Desk chair
1 2
April May
670670
3 4 5 6 7 8
200
150
120
200
150
200
120
Aggregate production plan for chair family
670670
Bill of MaterialsBill of Materials
• List of components & quantities needed List of components & quantities needed to make product to make product
• Provides product structure (tree)Provides product structure (tree)– Parents: Items above given levelParents: Items above given level– Children: Items below given levelChildren: Items below given level
Bill of MaterialsBill of Materials
Seat cushion
Seat-frame boards
Front legs A
Ladder-back chair
Back legs
Leg supports
Back slats
Bill of MaterialsBill of Materials
Back slats Seat cushion
Seat-frame boards
Leg supports
Front legs
Back legs A
Ladder-back chairJ (4)
Seat-frameboards
C (1)Seat
subassembly
D (2)Frontlegs
B (1)Ladder-backsubassembly
E (4)Leg
supports
AALadder-backLadder-back
chairchair
I (1)Seat
cushion
H (1)Seat
frame
G (4)Backslats
F (2)Backlegs
Dependent vs. Independent Dependent vs. Independent DemandDemand
Demand for chairsDemand for chairs A finished productA finished product IndependentIndependent
Demand for front legsDemand for front legs A component or subassemblyA component or subassembly DependsDepends on the demand for chairs on the demand for chairs
(parent)(parent)
Materials WithIndependent Demand
Materials WithDependent Demand
DemandSource Company Customers Parent Items
MaterialType Finished Goods WIP & Raw Materials
Method ofEstimatingDemand
Forecast & BookedCustomer Orders
Calculated
PlanningMethod EOQ & POQ MRP
Dependent vs. Independent Dependent vs. Independent DemandDemand
Requirements for Effective Use of Requirements for Effective Use of Dependent Demand Inventory Dependent Demand Inventory
ModelsModels
master production schedulemaster production schedule
specifications or bills-of-specifications or bills-of-
materialmaterial
inventory availabilityinventory availability
purchase orders outstandingpurchase orders outstanding
lead timeslead times
Cooperstown Cars, Inc.Cooperstown Cars, Inc.
Produces Produces
toy carstoy cars BodyBody
Axles (2)Axles (2)
Wheels (4)Wheels (4)
Toy Car
WheelAssembly(2)
Body
Axle (1) Wheels (2)
Bill of Materials for Toy Car
Cooperstown Cars, Inc.Cooperstown Cars, Inc.
- Each - Each component component has a has a known lead known lead timetime
Toy Car
LT = 1
WheelAssembly(2)
LT = 1
Body
LT = 2
Axle (1)
LT = 2
Wheels (2)
LT = 1
Bill of Materials for Toy Car
Cooperstown Cars, Inc.Cooperstown Cars, Inc. Demand for Toy Car in Week 8 is 100 Demand for Toy Car in Week 8 is 100
Schedule production for:Schedule production for: Toy car assemblyToy car assembly Wheel assemblyWheel assembly BodyBody AxleAxle WheelsWheels
Time-Phased Product Time-Phased Product StructureStructure
1 week ToyCar
WheelAssembly
Body
2 weeks
0 1 2 3 4
Time in Weeks
Time-Phased Product Time-Phased Product StructureStructure
1 week
1 week ToyCar
WheelAssembly
Body
2 weeks
0 1 2 3 4
Time in Weeks
Time-Phased Product Time-Phased Product StructureStructure
1 week
1 week ToyCar
WheelAssembly
Body
Axles
Wheels
2 weeks
1 week
2 weeks
1 2 3 4 5
Time in Weeks
1 2 3 4 5 6 7 8Toy Car Required Date
Order release dataWheel assembly Required Date
Order release dataBody Required Date
Order release dataAxle Required Date
Order release dataWheels Required Date
Order release data
WeekGross Requirements Plan
1 2 3 4 5 6 7 8Toy Car Required Date 100
Order release dataWheel assembly Required Date
Order release dataBody Required Date
Order release dataAxle Required Date
Order release dataWheels Required Date
Order release data
WeekGross Requirements Plan
1 2 3 4 5 6 7 8Toy Car Required Date 100
Order release data 100Wheel assembly Required Date
Order release dataBody Required Date
Order release dataAxle Required Date
Order release dataWheels Required Date
Order release data
WeekGross Requirements Plan
1 2 3 4 5 6 7 8Toy Car Required Date 100
Order release data 100Wheel assembly Required Date 200
Order release dataBody Required Date
Order release dataAxle Required Date
Order release dataWheels Required Date
Order release data
WeekGross Requirements Plan
1 2 3 4 5 6 7 8Toy Car Required Date 100
Order release data 100Wheel assembly Required Date 200
Order release data 200Body Required Date
Order release dataAxle Required Date
Order release dataWheels Required Date
Order release data
WeekGross Requirements Plan
1 2 3 4 5 6 7 8Toy Car Required Date 100
Order release data 100Wheel assembly Required Date 200
Order release data 200Body Required Date 100
Order release dataAxle Required Date
Order release dataWheels Required Date
Order release data
WeekGross Requirements Plan
1 2 3 4 5 6 7 8Toy Car Required Date 100
Order release data 100Wheel assembly Required Date 200
Order release data 200Body Required Date 100
Order release data 100Axle Required Date
Order release dataWheels Required Date
Order release data
WeekGross Requirements Plan
1 2 3 4 5 6 7 8Toy Car Required Date 100
Order release data 100Wheel assembly Required Date 200
Order release data 200Body Required Date 100
Order release data 100Axle Required Date 200
Order release data 200Wheels Required Date
Order release data
WeekGross Requirements Plan
1 2 3 4 5 6 7 8Toy Car Required Date 100
Order release data 100Wheel assembly Required Date 200
Order release data 200Body Required Date 100
Order release data 100Axle Required Date 200
Order release data 200Wheels Required Date 400
Order release data 400
WeekGross Requirements Plan
1 2 3 4 5 6 7 8Toy Car Gross requirements 100
Scheduled receiptsProjected on-hand | 20 20 20 20 20 20 20 20 20Planned order receiptsPlanned order releases
Net Requirements PlanWeek
1 2 3 4 5 6 7 8Toy Car Gross requirements 100
Scheduled receiptsProjected on-hand | 20 20 20 20 20 20 20 20 20Planned order receipts 80Planned order releases
Net Requirements PlanWeek
1 2 3 4 5 6 7 8Toy Car Gross requirements 100
Scheduled receiptsProjected on-hand | 20 20 20 20 20 20 20 20 20Planned order receipts 80Planned order releases 80
Net Requirements PlanWeek
1 2 3 4 5 6 7 8Toy Car Gross requirements 100
Scheduled receiptsProjected on-hand | 20 20 20 20 20 20 20 20 20Planned order receipts 80Planned order releases 80
Wheel assembly Gross requirements 160Scheduled receiptsProjected on-hand |10Planned order receiptsPlanned order releases
Net Requirements PlanWeek
1 2 3 4 5 6 7 8Toy Car Gross requirements 100
Scheduled receiptsProjected on-hand | 20 20 20 20 20 20 20 20 20Planned order receipts 80Planned order releases 80
Wheel assembly Gross requirements 160Scheduled receiptsProjected on-hand |10 10 10 10 10 10 10 10Planned order receiptsPlanned order releases
Net Requirements PlanWeek
1 2 3 4 5 6 7 8Toy Car Gross requirements 100
Scheduled receiptsProjected on-hand | 20 20 20 20 20 20 20 20 20Planned order receipts 80Planned order releases 80
Wheel assembly Gross requirements 160Scheduled receiptsProjected on-hand |10 10 10 10 10 10 10 10Planned order receipts 150Planned order releases 150
Net Requirements PlanWeek
1 2 3 4 5 6 7 8Toy Car Gross requirements 100
Scheduled receiptsProjected on-hand | 20 20 20 20 20 20 20 20 20Planned order receipts 80Planned order releases 80
Body Gross requirements 80Scheduled receiptsProjected on-hand |40 40 40 40 40 40 40 40Planned order receiptsPlanned order releases
Net Requirements PlanWeek
1 2 3 4 5 6 7 8Toy Car Gross requirements 100
Scheduled receiptsProjected on-hand | 20 20 20 20 20 20 20 20 20Planned order receipts 80Planned order releases 80
Body Gross requirements 80Scheduled receiptsProjected on-hand |40 40 40 40 40 40 40 40Planned order receipts 40Planned order releases 40
Net Requirements PlanWeek
1 2 3 4 5 6 7 8Wheel assembly Gross requirements 160
Scheduled receiptsProjected on-hand |10 10 10 10 10 10 10 10Planned order receipts 150Planned order releases 150
Axles Gross requirements 150Scheduled receiptsProjected on-hand | 15Planned order receiptsPlanned order releases
Net Requirements PlanWeek
1 2 3 4 5 6 7 8Wheel assembly Gross requirements 160
Scheduled receiptsProjected on-hand |10 10 10 10 10 10 10 10Planned order receipts 150Planned order releases 150
Axles Gross requirements 150Scheduled receiptsProjected on-hand | 15 15 15 15 15 15 15Planned order receipts 135Planned order releases
Net Requirements PlanWeek
1 2 3 4 5 6 7 8Wheel assembly Gross requirements 160
Scheduled receiptsProjected on-hand |10 10 10 10 10 10 10 10Planned order receipts 150Planned order releases 150
Axles Gross requirements 150Scheduled receiptsProjected on-hand | 15 15 15 15 15 15 15Planned order receipts 135Planned order releases 135
Net Requirements PlanWeek
1 2 3 4 5 6 7 8Wheel assembly Gross requirements 160
Scheduled receiptsProjected on-hand |10 10 10 10 10 10 10 10Planned order receipts 150Planned order releases 150
Wheels Gross requirements 300Scheduled receiptsProjected on-hand | 30Planned order receiptsPlanned order releases
Net Requirements PlanWeek
1 2 3 4 5 6 7 8Wheel assembly Gross requirements 160
Scheduled receiptsProjected on-hand |10 10 10 10 10 10 10 10Planned order receipts 150Planned order releases 150
Wheels Gross requirements 300Scheduled receiptsProjected on-hand | 30 30 30 30 30 30 30Planned order receipts 270Planned order releases
Net Requirements PlanWeek
1 2 3 4 5 6 7 8Wheel assembly Gross requirements 160
Scheduled receiptsProjected on-hand |10 10 10 10 10 10 10 10Planned order receipts 150Planned order releases 150
Wheels Gross requirements 300Scheduled receiptsProjected on-hand | 30 30 30 30 30 30 30Planned order receipts 270Planned order releases 270
Net Requirements PlanWeek
1 2 3 4 5 6 7 8Wheels Gross requirements 150 120 150 120
Scheduled receiptsProjected on-hand | 30Planned order receiptsPlanned order releases
Net Requirements PlanWeek
More complexity/Scheduled receiptsMore complexity/Scheduled receipts
1 2 3 4 5 6 7 8Wheels Gross requirements 150 120 150 120
Scheduled receipts 200Projected on-hand | 30Planned order receiptsPlanned order releases
Net Requirements PlanWeek
More complexity/Scheduled receiptsMore complexity/Scheduled receipts
1 2 3 4 5 6 7 8Wheels Gross requirements 150 120 150 120
Scheduled receipts 200Projected on-hand | 30Planned order receiptsPlanned order releases
Net Requirements PlanWeek
More complexity/Scheduled receiptsMore complexity/Scheduled receipts
Explanation:Gross requirements are the total demand for wheels. Projected on-hand inventory in week 1 is 30 + 200 – 150
1 2 3 4 5 6 7 8Wheels Gross requirements 150 120 150 120
Scheduled receipts 200Projected on-hand | 30 80Planned order receiptsPlanned order releases
Net Requirements PlanWeek
More complexity/Scheduled receiptsMore complexity/Scheduled receipts
Projected on-hand inventory balance at
end of week t
Inventory on hand at end of
week t - 1
Gross requirements
in week t
Scheduled or planned receipts in
week t
= + –
1 2 3 4 5 6 7 8Wheels Gross requirements 150 120 150 120
Scheduled receipts 200Projected on-hand | 30 80 80 80 80Planned order receiptsPlanned order releases
Net Requirements PlanWeek
More complexity/Scheduled receiptsMore complexity/Scheduled receipts
Lot-Sizing RulesLot-Sizing Rules
When there is a net requirement, how much
should we order?
•Lot-for-lot – L4L
•Economic Order Quantity – EOQ
•Part Period Balancing - PPB
•Wagner-Whitin Algorithm
Lead time = 1 week 1 2 3 4 5 6 7 8Wheels Gross requirements 150 120 150 120
Scheduled receipts 200Projected on-hand | 30 80 80 80 80Planned order receiptsPlanned order releases
Net Requirements PlanWeek
Lot-Sizing Rules: L4LLot-Sizing Rules: L4L
L4L- order the amount needed to fulfill requirementsL4L- order the amount needed to fulfill requirements
Lead Time = 1 week 1 2 3 4 5 6 7 8Wheels Gross requirements 150 120 150 120
Scheduled receipts 200Projected on-hand | 30 80 80 80 80Planned order receipts 40Planned order releases 40
Net Requirements PlanWeek
Lot-Sizing Rules: L4LLot-Sizing Rules: L4L
Lead Time = 1 week 1 2 3 4 5 6 7 8Wheels Gross requirements 150 120 150 120
Scheduled receipts 200Projected on-hand | 30 80 80 80 80 0 0Planned order receipts 40 150Planned order releases 40 150
Net Requirements PlanWeek
Lot-Sizing Rules: L4LLot-Sizing Rules: L4L
Lead Time = 1 week 1 2 3 4 5 6 7 8Wheels Gross requirements 150 120 150 120
Scheduled receipts 200Projected on-hand | 30 80 80 80 80 0 0 0Planned order receipts 40 150 120Planned order releases 40 150 120
Net Requirements PlanWeek
Lot-Sizing Rules: L4LLot-Sizing Rules: L4L
Lead time = 1 week 1 2 3 4 5 6 7 8Wheels Gross requirements 150 120 150 120
Scheduled receipts 200Projected on-hand | 30 80 80 80 80Planned order receiptsPlanned order releases
Net Requirements PlanWeek
Lot-Sizing Rules: EOQLot-Sizing Rules: EOQ
EOQ- order the EOQEOQ- order the EOQ
yearunitswkunitsD /3510/5.678/)120150120150(
11652
100)3510(22*
H
DSQ
yearunitweekunitH
S
//52$//1$
100$
Lead time = 1 week 1 2 3 4 5 6 7 8Wheels Gross requirements 150 120 150 120
Scheduled receipts 200Projected on-hand | 30 80 80 80 80Planned order receipts 116Planned order releases 116
Net Requirements PlanWeek
Lot-Sizing Rules: EOQLot-Sizing Rules: EOQEOQ- order the EOQEOQ- order the EOQ
yearunitswkunitsD /3510/5.678/)120150120150(
11652
100)3510(22*
H
DSQ
yearunitweekunitH
S
//52$//1$
100$
Lead time = 1 week 1 2 3 4 5 6 7 8Wheels Gross requirements 150 120 150 120
Scheduled receipts 200Projected on-hand | 30 80 80 80 80 76Planned order receipts 116Planned order releases 116
Net Requirements PlanWeek
Lot-Sizing Rules: EOQLot-Sizing Rules: EOQ
EOQ- order the EOQEOQ- order the EOQ
yearunitswkunitsD /3510/5.678/)120150120150(
11652
100)3510(22*
H
DSQ
80+116-120 = 76
yearunitweekunitH
S
//52$//1$
100$
Lead time = 1 week 1 2 3 4 5 6 7 8Wheels Gross requirements 150 120 150 120
Scheduled receipts 200Projected on-hand | 30 80 80 80 80 76 76Planned order receipts 116 116Planned order releases 116 116
Net Requirements PlanWeek
Lot-Sizing Rules: EOQLot-Sizing Rules: EOQ
EOQ- order the EOQEOQ- order the EOQ
yearunitswkunitsD /3510/5.678/)120150120150(
11652
100)3510(22*
H
DSQ
yearunitweekunitH
S
//52$//1$
100$
Lead time = 1 week 1 2 3 4 5 6 7 8Wheels Gross requirements 150 120 150 120
Scheduled receipts 200Projected on-hand | 30 80 80 80 80 76 76 42Planned order receipts 116 116 116Planned order releases 116 116 116
Net Requirements PlanWeek
Lot-Sizing Rules: EOQLot-Sizing Rules: EOQ
EOQ- order the EOQEOQ- order the EOQ
yearunitswkunitsD /3510/5.678/)120150120150(
11652
100)3510(22*
H
DSQ
yearunitweekunitH
S
//52$//1$
100$
Lead time = 1 week 1 2 3 4 5 6 7 8Wheels Gross requirements 150 120 150 120
Scheduled receipts 200Projected on-hand | 30 80 80 80 80 76 76 42 38Planned order receipts 116 116 116Planned order releases 116 116 116
Net Requirements PlanWeek
Lot-Sizing Rules: EOQLot-Sizing Rules: EOQ
EOQ- order the EOQEOQ- order the EOQ
yearunitswkunitsD /3510/5.678/)120150120150(
11652
100)3510(22*
H
DSQ
yearunitweekunitH
S
//52$//1$
100$
Inventory records Inventory transactions
Bills of materialsRoutings
Time standards
MRPMRPexplosionexplosion
Master production schedule
Customer orders Forecasts
MRP IIMRP II
Material requirements plan
Inventory records Inventory transactions
Bills of materialsRoutings
Time standards
MRPMRPexplosionexplosion
Master production schedule
Customer orders Forecasts
MRP MRP IIII
Material requirements plan
Inventory records Inventory transactions
Bills of materialsRoutings
Time standards
MRPMRPexplosionexplosion
Master production schedule
Manufacturing resource planCost and
financial data
Customer orders Forecasts
MRP MRP IIII
Material requirements plan
Inventory records Inventory transactions
Bills of materialsRoutings
Time standards
MRPMRPexplosionexplosion
Master production schedule
Manufacturing resource planCost and
financial data
Purchasing reports
Financial/ accounting
reports
Sales and marketing
reports
Human resource reports
Manufacturing reports
Customer orders Forecasts
MRP MRP IIII
Extensions to MRPExtensions to MRPEnterprise Resource Enterprise Resource
PlanningPlanning
MRP II with ties to customers and MRP II with ties to customers and supplierssuppliers
ProductProduct BMW X5 sport activity BMW X5 sport activity
vehiclevehicle
Application: Application: mySAP™ AutomotivemySAP™ Automotive
Goal: Goal: Tight supplier network in Tight supplier network in
order to ensure just-in-order to ensure just-in-time productiontime production
Compress Customer Order Compress Customer Order CycleCycle
Improve Inventory Improve Inventory AccuracyAccuracy
Why use ERPWhy use ERP
Automotive Industry is competitiveAutomotive Industry is competitive
Global competitionGlobal competition
Trend toward make-to-order manufacturing -- Trend toward make-to-order manufacturing -- filling individual customer requirements rather filling individual customer requirements rather than make-to-stockthan make-to-stock new demands on new demands on manufacturers and dealersmanufacturers and dealers
Potential cost reductionPotential cost reduction
Customers want what they want, when they Customers want what they want, when they want it.want it.
Key success factors in Key success factors in the Automotive Industrythe Automotive Industry
Speed: speed in product development, speed in product Speed: speed in product development, speed in product assembly, and speed in product delivery to dealers and assembly, and speed in product delivery to dealers and customers. customers.
Manufacturers must closely manage armies of suppliers Manufacturers must closely manage armies of suppliers and partners to make certain that the correct systems and and partners to make certain that the correct systems and components are delivered where and when they are components are delivered where and when they are needed. needed.
Collaboration among all the industry players -- suppliers, Collaboration among all the industry players -- suppliers, OEMs, dealers, and customers -- is essential.OEMs, dealers, and customers -- is essential.
Linking complex business processes into a logical flow, Linking complex business processes into a logical flow, maximizing efficiency and satisfying customers' maximizing efficiency and satisfying customers' expectations.expectations.
Business BenefitsBusiness Benefits
End-to-end integration of SAP and End-to-end integration of SAP and non-SAP products. non-SAP products.
Offers a Offers a single data platformsingle data platform for for EngineeringEngineering PlanningPlanning supply chain managementsupply chain management ProcurementProcurement customer relationship managementcustomer relationship management..
Business BenefitsBusiness Benefits Cost reduction of 3% to 6% per vehicle Cost reduction of 3% to 6% per vehicle
by changing the supply chain from the by changing the supply chain from the traditional push paradigmtraditional push paradigm
New level of collaboration and efficiency.New level of collaboration and efficiency.
Groups processes and functions by market Groups processes and functions by market segmentssegments OEMs, suppliers and aftermarket, or sales and OEMs, suppliers and aftermarket, or sales and
service. service.
How it worksHow it works
mySAP™ Automotive generates delivery mySAP™ Automotive generates delivery schedules to meet assembly-line planning schedules to meet assembly-line planning and sequencing directives.and sequencing directives.
Long-horizon forecasts and short-horizon Long-horizon forecasts and short-horizon J-I-T delivery schedules are sent to J-I-T delivery schedules are sent to suppliers.suppliers. Electronic Data Interchange (EDI)Electronic Data Interchange (EDI) mySAP™ Automotive Supplier Portal mySAP™ Automotive Supplier Portal
(Internet)(Internet)
How it worksHow it works BMW gets an advance shipping BMW gets an advance shipping
notificationnotification Exact information on part counts and Exact information on part counts and
delivery datesdelivery dates
Upon receipt parts are transferred Upon receipt parts are transferred
directly to the linedirectly to the line
Additional benefitsAdditional benefits Monitoring the production status in real Monitoring the production status in real
timetime Recording production confirmation and Recording production confirmation and
parts consumption every 3 minutes and parts consumption every 3 minutes and adjustment of inventoryadjustment of inventory
Costs are posted to calculate the value of Costs are posted to calculate the value of work in progresswork in progress
Seamless collaboration between business Seamless collaboration between business partners across the supply chain allows partners across the supply chain allows EngineeringEngineering High-volume productionHigh-volume production Highly customized productsHighly customized products