In this chapter we will discuss: Definitions of MRP systems, MRP versus order point systems, MRP example, MRP elements, operating an MRP system, the successful MRP system, enterprise resource planning systems.
Operations Management Contemporary Concepts and Cases Chapter Sixteen Material Requirements Planning and ERP McGrawHill/Irwin Copyright © 2011 by The McGrawHill Companies, Inc. All rights reserved Chapter 16 Outline Definitions of MRP Systems MRP versus Order Point Systems MRP Example MRP Elements Operating an MRP System The Successful MRP System Enterprise Resource Planning Systems 162 Introduction to MRP Used to manage dependent demand items – Raw materials and purchased parts – Work in process (WIP) Driven by the master schedule (which is driven by S&OP) End items ‘exploded’ into all requirements for components using bill of materials (BOM) Schedule offset based on lead times Is a push system used when the master schedule is constantly changing 163 Definitions of MRP Systems Developed by Joe Orlicky at IBM, 1975 – IBM 370 was the first computer with the capacity to handle MRP calculations Types of MRP – – – Type I: An inventory control system (MRP) Type II: Manufacturing Resource Planning system (MRPII) Type III: Enterprise Resource Planning (ERP) system 164 Definitions of MRP Systems Three principal functions of MRP (Orlicky): Inventory – – – Order the right part Order in the right quantity Order at the right time Priorities – Order with the right due date – Keep the due date valid Capacity – – – A complete load An accurate (valid) load An adequate time span for visibility of future load 165 Closed Loop MRP System (Fig 16.1) Firm orders from Customers Sister plants Stock replenishment Engineering Design changes BO M S & OP Forecast of Demand Master schedule Rough-cut capacity planning MRP Parts Explosion Inventory Records Inv Transactions Shop Orders Purchase Orders Capacity planning Vendors Raw Materials Shop-floor control Operations Product 166 Comparison of MRP & Order-Point Systems Attribute MRP Order Point Demand Dependent Independent Order philosophy Requirements Replenishment Forecast Based on master schedule Based on past demand Control concept Control all items ABC Objectives Meet manufacturing needs Meet customer needs Lot sizing Discrete EOQ Demand pattern Lumpy but predictable Random Types of inventory Work in process and raw materials Finished goods and spare parts 167 MRP Elements Inputs Master Schedule Bill of Materials (BOM) Inventory Records Capacity Planning (feasibility) Planned Order Releases (outputs) – – Purchasing (buy) Shop Floor Control (make) 168 MRP Inputs Master schedule Product structure file (bill of materials, BOM) – – Parts & subassemblies of product Sequence of operations Inventory master file – – Item master information Balances & ordering information 169 MRP Example of BOM Top Leg Short Rail Long Rail 1610 Inventory Records Item master segment – Information that is fairly constant (part number, etc.) Inventory status segment – Materials plan for each item Subsidiary data segment – – Outstanding orders Demand history, etc Records must be accurate, i.e., counting required 1617 Counting Inventory (1) In the past, inventory was counted to learn how much was on hand Now, inventory is counted to confirm the computer records Two basic methods of counting inventory – Annual count (all at once) – Cycle counting 1618 Counting Inventory (2) Annual Count – – – Shut down and have everyone count Hire a counting firm Problems No guarantee of accuracy Lost production or work Boring! – Advantage Everything done at once (as/of date) 1619 Counting Inventory (3) Cycle Counting – Count continuously throughout year – Use ABC methods to set priorities and frequency of counting – Count by calendar or ‘trigger’ – Problems Not everything is counted at once May interfere with normal work – Advantages More accurate Less disruptive 1620 Counting Inventory (4) The Future? RFIS/RFIT/RFID – – – – – Chip imbedded in items Transmits when polled Everything done from base station “Smart Shelves” know what is on them Problems Cost/market penetration May not read – Advantages No explicit counting Continuous tracking 1621 Capacity Planning Purpose is to aid management in checking on the validity of the master schedule Two ways it can be done – Roughcut capacity (resource) planning – Shop loading Alternative is finite capacity scheduling 1622 Purchasing Greatly enhanced by use of MRP Past due orders largely eliminated Order expediting eliminated Can provide vendors with reports of planned future orders Can use EDI to communicate directly with vendors 1623 Shop Floor Control Purposes – – Release orders to the shop floor Manage the orders on their way through the factory Can use Manufacturing Execution System (MES) Set job priorities (dispatching rules) Manage lead times on basis of priority – Both expedite and deexpedite orders Requires valid due dates 1624 Operating an MRP System Should MRP carry “safety stock”? How much “safety stock” should be carried? Issue of “safety lead time” Danger of “informal” system driving out the “formal” system 1625 Required Elements for a Successful MRP System Implementation planning Adequate computer support Accurate data Management support User knowledge 1626 Operating a Successful MRP System Accurate inventory records Stable master production schedule Realistic master production schedule Good control of engineering change orders (impacts BOM) Good interface with capacity planning (CRP) Reports that are useful 1627 Enterprise Resource Planning (ERP) Systems Extension and integration of all functions through a common database – Forces standard systems throughout the organization ERP used to coordinate decisions along the supply chain Expensive and timeconsuming to implement 1628 Enterprise Resource Planning (ERP) Systems Major largescale ERP software vendors – SAP (Systems, Applications & Products) – Oracle See: www.erpfans.com 1629 Summary Definitions of MRP Systems MRP versus Order Point Systems MRP Example MRP Elements Operating an MRP System The Successful MRP System Enterprise Resource Planning Systems 1630 End of Chapter Sixteen 1631 ... Forces standard systems throughout the organization ERP? ?used? ?to? ?coordinate decisions along the supply chain Expensive? ?and? ?timeconsuming? ?to? ? implement 1628 Enterprise Resource Planning (ERP) Systems Major largescale? ?ERP? ?software ... Capacity planning Vendors Raw Materials Shop-floor control Operations Product 166 Comparison of MRP & Order-Point Systems Attribute MRP Order Point Demand Dependent Independent Order philosophy Requirements. .. IBM 370 was the first computer with the capacity? ?to? ? handle MRP calculations Types of MRP – – – Type I: An inventory control system (MRP) Type II: Manufacturing Resource? ?Planning? ?system (MRPII) Type III: Enterprise Resource? ?Planning? ? (ERP) system