Chapter 14 MRP to ERP

Independent vs. dependent demand, MRP inputs and processing, Closed-loop MRP, MRP II, ERP
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Traditional I/C Problems

Reorder point (when to order)

Assumes known, linear demand (sawtooth) Assumes rough knowledge of lead time Uses safety stock (or safety time) as buffer Each item planned independently Focuses on mechanics of formula Assumes linear (constant) usage Always results in inventory
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EOQ (how much to order)

Rev. 03/02/05

MRP

Material Requirements Planning (MRP)

Father of MRP: Joseph Orlicky (???? - ????) Dependent vs. independent demand concept Manufacturing Bill of Materials (BOM) Accurate, well-managed Master Production Schedule (MPS) to drive MRP Computer software to explode BOMs Computer hardware speed and data capacity
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Other requirements

Rev. 09/25/06

Key MRP Inputs

Master Production Schedule (MPS)

Well managed Build Plan Parent/child relationships Single level vs. multi-level Structured for manufacturing

Bill of Materials (or recipes)

On hand inventory (available to use) Material on order (from supplier)

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Key MRP Inputs

Planning factors

Lead time Lot sizing algorithm or rule Optional adjustments

Safety stock Safety time Yield Shrinkage etc.

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MRP Processing

Answers both questions

When to order How much to order

Proceeds one level at a time (level-bylevel) Nets and plans action only when lowest level in any BOM is reached
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Lot Sizing Algorithms

Lot for lot

Seeks to balance supply and demand May have minimums, maximums, multiples Variations are Least Unit Cost, Least Total Cost, Part Period Balancing

Fixed order quantity

Economic Order Quantity (EOQ)

Period Order Quantity Fixed Period Requirements Wagner-Whitin

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MRP Summary - 1

Big number-cruncher Follows rules using built-in logic and tables Predicts shortages Gross requirements derived from planned order releases of parent items Processes level-by-level Nets requirements and plans for an item at lowest level of use in any BOM
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MRP Summary - 2

First suggests pull-ins, push-outs, cancellations Then creates planned orders (not released) Provides action and/or exception messages High-speed computers now mean process in minutes rather than hours Planner needs to evaluate results before acting
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Problems with MRP

Computer model

Decisions may be based on inaccurate data

Inventory-building features have crept in

Safety stock Safety time EOQ

Represents a push system

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Resource Planning Systems

MRP Closed loop MRP MRP II ERP SCM Next emphasis > E-commerce

Rev. 03/02/05

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Closed Loop MRP and MRP II

Oliver Wight

(???? 1983)

Sold concepts to American management

Closed Loop MRP

Feedback any changes in due dates and quantities Must have accurate due dates

Manufacturing Resource Planning (MRP II)

Rev. 09/25/06

Integrate Long Range, Intermediate Range, Short Range, and Real-time planning
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ERP and SCM

Enterprise Resource Planning (ERP)

Coined by Gartner Group Extends integrated planning to Customer Service, Forecasting, Quality, Human Resources, Accounting, Project Management Extends planning to other organizations Tightly couples suppliers and customers
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Supply Chain Management (SCM)

Rev. 03/02/05

ERP Software Vendors - 2001

Enterprise Resource Planning (ERP)

SAP
Oracle
Baan PeopleSoft
J.D. Edwards

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ERP Software Vendors - 2005

Enterprise Resource Planning (ERP)

SAP Oracle

PeopleSoft

J.D. Edwards

Baan (financial and legal problems followed by acquisition)

Rev. 04/01/08

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ERP Software Vendors - 2008

Enterprise Resource Planning (ERP)

SAP
Oracle
Infor Global Solutions (SSA ERP - formerly Baan)
The Sage Group

04/01/08

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