Chapter 6: Resource Planning Systems (SCM 301)
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1. 3 basic production strategies for APP: Chase strategy, level
strategy, and mixed strategy.
2. 3 Categories of Operations Planning: Long-range
Intermediate
Short-range
3. Advantage of MRP: Provides production and planning
information for entire planning horizon.
4. Advantages of ERP Systems: - Added visibility reduce SC
inventories.
- Helps to standardize manufacturing processes.
- Measure performance and communicate via a standardized
method.
- Allows organizations to communicate information about
operational changes to other SC members.
5. Aggregate Production Plan: Hierarchical Planning: Process
that translates annual business plans and demand forecasts
into a production plan for a product family (products that
share similar characteristics) in a plant or facility leading to
APP.
6. Aggregate Scheduling Goals: Meet demand, use capacity
efficiently, meet inventory policy, and minimize cost (labor,
inventory, plant & equipment, and subcontract).
7. Available-To-Promise (ATP) Quantity: The difference between
confirmed customer orders and quantity the firm planned to
produce.
8. Bill of Materials (BOM): Document that shows an inclusive
listing of all component parts and assemblies making up the
final product.
9. Capacity: Maximum workload that an organization is capable of
completing in a given period of time.
10. Capacity requirement planning (CRP): A short-range capacity
planning technique that is used to check the feasibility of the
material requirement plan.
11. Chase: Match production to customer order rate by hiring and
laying off employees.
12. Chase Strategy: MAKE-TO-ORDER. Adjusts capacity to match
demand, firm hires and lays off workers to match demand.
Finished goods inventory remains constant. Generally product
one-of-a-kind, specialty products, require highly skilled labor,
can be problematic when highly skilled workers are needed in
a tight labor market, negative impact on workers (layoffs) and
assumes training to be quick.
13. Closed-loop: Incorporates the aggregate production plan, the
master production schedule material requirements plan, and
capacity requirements plan.
14. Cloud Computing: Software vendors offer cloud-based
services where end-users log on to remote servers without
installing any software or storing data on local hard drives.
15. Components: Parts demanded by a parent.
16. Costs relevant to the aggregate planning decision include...:
inventory, setup, machine operations, hiring, firing, training, and
overtime costs.
17. Dependent Demand (BOM): The internal demand for parts
based on the demand of the final product in which the parts
are used (subassemblies).
18. Disadvantage of MRP: LOSS OF VISIBILITY, especially acute
for products with a deep BOM and ignores capacity and ship
floor conditions.
19. Disadvantages of ERP System: - Substantial time and capital
investment.
- Complexity.
- Firms adapt processes to meet ERP system.
20. Disadvantages of Legacy MRP: Global business environment
needed to access real-time information on customer's
requirements, production levels, and available capacities,
company-wide inventory levels.
Legacy systems were implemented to gather data for
transactional purposes and lacked analytical capabilities
required for today's complex global environment.
21. Distributions Requirements Planning (DRP): A time-phased
finished good inventory replenishment plan in a distribution
network.
A logical extension of the MRP system and ties physical
distribution to manufacturing planning and control system.
MRP operates in dependent demand situation, whereas the
DRP operates in an independent setting.
22. Enterprise Resource Planning System (ERP): Integrates the
internal operations of an enterprise with a common software
platform and centralized database system.
With a shared, centralized database system, ERP is capable of
automating business processes rapidly and accurately.
Provides means for SCM to share information so that scarce
resources can be fully utilized to meet demand, while
minimizing SC inventories.
23. Explosion: Process of converting a parent item's planned order
releases into component gross requirements.
24. Firmed planned order: Planned order that MRP computer
logic system does not automatically change when conditions
change to prevent system nervousness.
25. Goal of Aggregate Planning: Specify the optimal combination
of product rate, workforce level, and inventory on hand.
26. Gross requirements: A time-phased requirement prior to
netting out on-hand inventory and lead-time.
27. Indented BOM: Multilevel BOM which sows the parent-
component relationships and the specific units of components
known as the planning factor.
28. Independent Demand (BOM): Demand for final products
affected by trends, seasonal patterns, and general market
conditions.
29. Inputs of MSP: Beginning inventory, forecast, and custom
orders.
30. Intermediate (MPS): Plan spans six to eighteen months. Shows
quantity and timing of end items (master production schedule:
MPS).
31. Key strategies for meeting demand: Chase, level, and mixed.
32. Lag Capacity Strategy: A reactive approach that adjusts its
capacity in response to demand.
33. Lead Capacity Strategy: A proactive approach that adds or
subtracts capacity in anticipation of future market conditions
and demand.
34. Legacy MRP System: Broad label to describe an older
information system that usually works at an operational level
to schedule production.
35. Level: Stable workforce with constant output, inventory and
backlogs absorb fluctuations in demand.
36. Level Strategy: MAKE-TO-STOCK. Relies on a constant output
rate while varying inventory and backlog according to
fluctuating demand. Firm relies on fluctuating finished goods
and backlogs to meet demand. Inventory carrying and stock
out costs are major cost concerns. Works well when highly
skilled workers are needed in a tight labor market.
37. Long-Range (APP): Aggregate Planning Plan (APP) usually
covers a year or more, involves the construction of facilities
and major equipment purchase.
38. Long-range planning period for Aggregate Planning: > = 12
months
39. Lot size: Order size for MRP logic.
40. Low-level coding: Assigns the lowest level on BOM to all
common components to avoid duplicate MRP computations.
41. Major ERP applications include: accounting and finance,
customer relationship management, human resource
management, manufacturing, supplier relationship
management, and supply chain management.
42. Master Scheduling Process: A detailed dis-aggregation of the
APP, listing the exact end items to be produced by a specific
period.
43. Match or tracking Capacity Strategy: A moderate strategy that
adjusts capacity in small amounts in response to demand and
changing market conditions.
44. Material Requirements Plan (MRP): The logic for determining
the number of parts, components, and materials needed to
produce a product. Provides time scheduling information
specifying when each of the materials, parts, and components
should be ordered or produced. DEPENDENT DEMAND
DRIVES MRP.
45. Medium-range capacity plan, or rough-cut capacity plan
(RCCP): USED TO CHECK FEASIBILITY OF MPS. Converts MPS
from production needed to capacity required, then compares
it to capacity available.
46. Mixed: Some combination of the two - stable workforce,
variable hours - vary output through overtime of flexible
schedules.
47. Mixed Production Strategy: MULTIPLE PRODUCTS. Maintains
stable workforce while other short-term means, such as
overtime, subcontracting, and part time helpers to manage a
short-term demand. Complementary products (with different
demand cycles) may be produced, additional shift may be
scheduled, and works well with firms producing multiple
products.
48. MPS for Service Industries: MPS may just be the appointment
book, where capacity is balanced with demand.
49. MPS vs APP: MPS is more detailed than APP and easier to plan
under stable demand.
Planning horizon is shorter than APP, but longer than the lead
time to product the item.
50. MRP Inputs: 1. MPS
2. Inventory records
3. BOM - list of components and quantities needed to make
the products, provides product structure (tree of parents and
children).
51. MRP: Projected on-hand inventory: Projected closing
inventory at end of period. Beginning inventory minus gross
requirement, plus scheduled receipt and planned receipt and
planned receipt from planned order releases.
52. MRP Requirements: - The independent demand information.
- Parent-component relationships from the BOM (bill of
materials).
- Inventory status of final product and components.
- Planned order releases (MOST IMPORTANT OUTPUT OF
THE MRP SYSTEM).
53. Net requirements: The unsatisfied item requirement for a
specific time period. Gross requirement for period minus
current on-hand inventory.
54. Operations managers are continuously involved in...:
Balancing capacity and output.
55. Operations Planning: Usually Hierarchical and can be divided
into three broad categories.
56. Operations Planning: Distribution Requirement Planning
(DRP): Describes the time-phased net requirements from
warehouses and distribution centers. Links production with
distribution planning.
57. Operations Planning: Enterprise Requirements Planning
(ERP): Extension of MRP II.
58. Operations Planning: Manufacturing resource planning (MRP
II): Combined MRP with MPS, rough-cut capacity planning,
capacity requirement planning, and other operations planning
software modules.
59. Operations Planning: Material Requirements Plan (MRP):
System of converting the end items from the master
production schedule into a set of time-phased component
part requirements.
60. Outputs of MSP: Projected inventory, master production
schedule, and uncommitted inventory.
61. Parent: Item generating demand by a parent.
62. Pegging: Related gross requirements for a part to the planned order releases.
63. Planned order release: Specific order to be released to the shop or to the supplier.
64. Planning factor: Number of components needed to produce a unit of the parent item.
65. Planning Horizon of APP: Takes at least one year and is usually rolled forward by three months every quarter.
66. Primary Reports: Planned order schedules for inventory and production control.
67. Problem: A missed due date or stock-out may cascade downstream, MAGNIFYING THE BULLWHIP EFFECT.
68. Product group or broad category: Family (aggregation)
69. Production Planning System: External to Firm: External capacity, competitor's behavior, raw material availability, market demand, and
economic conditions.
70. Production Planning System: Internal to Firm: Current physical capacity, current workforce, inventory levels, and activities required for
production.
71. Rapid Growth of Enterprise Resource Planning Systems: Rapid development of computer and information technology over the last
two decades has contributed positively to the growth of ERP.
72. Resource Planning: Process of determining the capacity required to meet demand.
73. Resource Requirement Planning (RRP): A long-range capacity planning module, checks whether aggregate resources are capable of
satisfying the aggregate production. Resources considered include gross labor hours and machine hours.
74. Safety stock: Protects against uncertainties in demand supply, quality, and lead time.
75. Scheduled receipt: A committed order awaiting delivery for a specific period.
76. Secondary Reports: Exception reports, planning reports, and performance control reports.
77. Short-Range (MRP): Plan covers a few days to a few weeks. Detailed planning process for components and parts to support the
master production schedule (materials requirement planning: MRP).
78. Supper BOM: AKA planning BOM, pseudo BOM, phantom BOM, or family BOM.

Enables the firm to forecast the total demand end products.

79. Time bucket: Time period used on the MRP. Days or weeks.
80. Two prominent ERP providers: Oracle and SAP.