Chapter 14 MRP to ERP

1
Chapter 14 MRP to ERP

• Independent vs. dependent demand, MRP inputs and
  processing, Closed-loop MRP, MRP II, ERP

2
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
• EOQ (how much to order)
• Focuses on mechanics of formula
• Assumes linear (constant) usage
• Always results in inventory

3
MRP

• Material Requirements Planning (MRP)
• Father of MRP Joseph Orlicky (???? - ????)
• Dependent vs. independent demand concept
• Other requirements
• 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

4
Key MRP Inputs

• Master Production Schedule (MPS)
• Well managed Build Plan
• Bill of Materials (or recipes)
• Parent/child relationships
• Single level vs. multi-level
• Structured for manufacturing
• On hand inventory (available to use)
• Material on order (from supplier)

5
Key MRP Inputs

• Planning factors
• Lead time
• Lot sizing algorithm or rule
• Optional adjustments
• Safety stock
• Safety time
• Yield
• Shrinkage
• etc.

6
MRP Processing

• Answers both questions
• When to order
• How much to order
• Proceeds one level at a time (level-by-level)
• Nets and plans action only when lowest level in
  any BOM is reached

7
Lot Sizing Algorithms

• Lot for lot
• Seeks to balance supply and demand
• Fixed order quantity
• May have minimums, maximums, multiples
• Economic Order Quantity (EOQ)
• Variations are Least Unit Cost, Least Total Cost,
  Part Period Balancing
• Period Order Quantity
• Fixed Period Requirements
• Wagner-Whitin

8
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

9
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

10
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

11
Resource Planning Systems

• MRP
• Closed loop MRP
• MRP II
• ERP
• SCM
• Next emphasis gt E-commerce

12
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)
• Integrate Long Range, Intermediate Range, Short
  Range, and Real-time planning

13
ERP and SCM

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

14
ERP Software Vendors - 2001

• Enterprise Resource Planning (ERP)
• SAP
• Oracle
• Baan
• PeopleSoft
• J.D. Edwards

15
ERP Software Vendors - 2005

• Enterprise Resource Planning (ERP)
• SAP
• Oracle
• PeopleSoft
• J.D. Edwards
• Baan (financial and legal problems followed by
  acquisition)

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ERP Software Vendors - 2008

• Enterprise Resource Planning (ERP)
• SAP
• Oracle
• Infor Global Solutions (SSA ERP - formerly Baan)
• The Sage Group