12 MRP and ERP

Dr. Ron Lembke

Historical Perspective
ERP- Enterprise
Resource Planning
MRP II Manufacturing
Resource Planning
mrp material
requirements
planning

MRP Crusade (1975)

Material Requirements Planning
Make sure you have enough parts when
you need them

Take future demands, factor in lead times

(time phase), compare to on hand, order
Determine order size and timing
Control and plan purchasing vs. OSWO
inventory management

Closed-Loop MRP

Capacity Consideration:
Part routings
Calculate loads on each work station
See if scheduled load exceeds capacity
Lead-time long enough to allow some
shuffling to make plan feasible

MRP II -- Manufacturing
Resource Planning

A method for the effective planning of all

resources of a manufacturing company (APICS
def.)

Financial accounting incorporated

Sales
Operations Planning
Simulate capacity requirements of different possible
Master Production Schedules

1989, $1.2B MRPII sales in U.S., one third of total software sales

Success?

MRP Crusade
Begins

ERP differences
Material planning
Capacity planning
Product design
Information warehousing

All functions in the entire company operate

off of one common set of data
Instantaneous updating, visibility

ERP Sales

Y2K: Worldwide sales of top 10 vendors

1995 $2.8 B
1996 $4.2 B
1997 $5.8 B

$3.2 B SAP

Fortune survey: 44% reported spending

at least 4 times as much on
implementation as on software

ERP Challenges

Modules assume best practices:

Change software to reflect company ($)
Change company to follow software (?)

Accuracy of data
Drives entire system
Ownership of / responsibility for

Ability to follow structure

ERP Novel?

Goal-like novel
Hero learns more about ERP,
deciding if it is right for his
company
Company rushes through
installation
General introduction to ERP
systems, what they do, how
different from MRP
SAP R/3 screen shots

The Heart of the Matter - mrp

System for organizing WIP releases

Work in Process work that has been started, but

not yet finished
Consider Lead Time (LT)for each item
Look at BOM to see what parts needed

Bill of Materials what goes into what

Release so they will arrive just as needed

Example Snow Shovel

Order quantity is 50 units

LT is one week

MRP Table
1
Gross Requirements

10

Scheduled receipts (begin)

Projected Available
Balance (ending)

40 10

50

4 54 44 44 4

Net Requirements

Planned Order Receipts

Planned Order Releases
6 units short

MRP Table
1
Gross Requirements

10

Scheduled receipts (begin)

Projected Available
Balance (ending)

40 10

50

4 54 44 44 4

Net Requirements

Planned Order Receipts

Planned Order Releases
Order 50 units week earlier

50
50

Ending Inventory
1
Gross Requirements

10

Scheduled receipts (begin)

Projected Available
Balance (ending)

40 10

50

4 54 44 44 4 44

Net Requirements

Planned Order Receipts

Planned Order Releases
Ending inventory

50
50

Terminology

Projected Available balance

Not on-hand (that may be greater)

Tells how many will be available
Available to Promise the units arent spoken for
yet, we can assign them to a customer

Planned order releases scheduled receipts

Only when material has been committed to their

production
Move to scheduled receipts as late as possible
Preserves flexibility

1605 Snow Shovel

1605
Snow Shovel

314 scoop assembly

118 Shaft (wood)

14127
Rivet (4)

048
Scoop-shaft
connector

062 Nail (4)

13122
Top Handle
Assy

314 scoop assembly

314 scoop assembly

019 Blade (steel)

2142 Scoop (aluminum)

14127 Rivet (6)

13122 Top Handle Assembly

13122 Top Handle Assembly

11495 Welded
Top handle bracket
Assembly

457 Top handle

(wood)
1118
Top handle
Coupling (steel)

129 Top Handle

Bracket (steel)

082 Nail (2)

BOM Explosion

Process of translating net requirements

into components part requirements
Take into account existing inventories
Consider also scheduled receipts

BOM Explosion Example

Need to make 100 shovels
We are responsible for handle
assemblies.

13122 Top Handle Assembly

13122 Top Handle Assembly

11495 Welded
Top handle bracket
Assembly

457 Top handle

(wood)
1118
Top handle
Coupling (steel)

129 Top Handle

Bracket (steel)

082 Nail (2)

Net Requirements
Part Description
Top handle assy
Top handle
Nail (2 required)
Bracket Assy
Top bracket
Top coupling

Inv
25
22
4
27
15
39

Sch Gross
Rec Req
-100
25
50
--15

Net
Req
75

Net Requirements
Part Description
Top handle assy
Top handle
Nail (2 required)
Bracket Assy
Top bracket
Top coupling

Inv
25
22
4
27
15
39

Sch
Rec
-25
50
--15

Gross
Req
100
75
150
75

Net
Req
75
28
96
48

13122 Top Handle Assembly

13122 Top Handle Assembly

11495 Welded
Top handle bracket
Assembly

457 Top handle

(wood)
1118
Top handle
Coupling (steel)

129 Top Handle

Bracket (steel)

082 Nail (2)

Net Requirements
Part Description
Top handle assy
Top handle
Nail (2 required)
Bracket Assy
Top bracket
Top coupling

Sch
Inv
25
22
4
27
15
39

Gross
Rec Req
-100
25 75
50 150
-75
-48
15 48

Net
Req
75
28
96
48
33
--

Timing of Production

This tells us how many of each we need

Doesnt tell when to start
Start as soon as possible?
Dependent events (oh no, not that!)

13122 Top Handle Assy

Order policy: Lot-for-lot

13122 Top handle

LT = 2
Gross Req

2
20

25 25

4
10

Sch receipts
Proj. Avail Bal
(ending)
Net Req

Planned Order Receipt

Planned Order Release

5
5

6 7
20 5

9 10
35 10

13122 Top Handle Assy-2

Order policy: Lot-for-lot

13122 Top handle

LT = 2
Gross Req

2
20

4
10

6 7
20 5

9 10
35 10

25 25

0
5

0 0
20 5

0 0
35 10

Sch receipts
Proj. Avail Bal
(ending)
Net Req

Pl Order Rec
Pl Order Rel

20

20 5
5

35 10

35 10

13122 Top Handle Assy -3

Order policy: Lot-for-lot

13122 Top handle

LT = 2
Gross Req

2
20

4
10

6 7
20 5

9 10
35 10

25 25

0
5

0 0
20 5

0 0
35 10

Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
Pl Order Rel

5
5

20

20 5
5

35 10

35 10

457 Top Handle

13122 Top handle
LT = 2
Gross Req

2
20

4
10

6 7
20 5

9 10
35 10

25 25

0
5

0 0
20 5

0 0
35 10

Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec

Pl Order Rel

One handle for

Each assembly

LT = 2
Gross Req

Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
Pl Order Rel

2
5

3
25

22 22

20 5

20

4
20

5
5

35 10

35 10

7 8
35 10

10

457 Top Handle

Order policy: Lot-for-lot

LT = 2
Gross Req

2
5

Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
Pl Order Rel

3
25

22 22 17

4
20

5
5

7 8
35 10

10

457 Top Handle

Order policy: Lot-for-lot

LT = 2
Gross Req
Sch receipts
Proj. Avail Bal
(ending)
Net Req

2
5

4
20

5
5

7 8
35 10

10

22 17 17 0 0
18 10

25
22 22 17 42

Pl Order Rec
Pl Order Rel

18 10
18 10

082 Nail (2 required)

13122 Top handle
LT = 2
Gross Req

2
20

4
10

6 7
20 5

9 10
35 10

25 25

0
5

0 0
20 5

0 0
35 10

Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec

Pl Order Rel

Two nails for

Each assembly

LT = 1
Lot Size = 50
Gross Req

Sch receipts

50

Proj. Avail Bal

(ending)
Net Req
Pl Order Rec
Pl Order Rel

4 54

2
10

20

20 5
5

4 5
40 10

35 10

35 10

7 8
70 20

10

082 Nail (2 required)

LT = 1
Lot Size = 50
Gross Req

Sch receipts

50

Proj. Avail Bal

(ending)
Net Req

2
10

4 54 44 44

4 5
40 10

4
6

Pl Order Rec
Pl Order Rel

50
50

7 8
70 20

10

082 Nail (2 required)

LT = 1
Lot Size = 50
Gross Req

Sch receipts

50

Proj. Avail Bal

(ending)
Net Req

2
10

4 54 44 44

4 5
40 10

Pl Order Rec
Pl Order Rel

44 44 24
6
26
50

50

7 8
70 20

50
50

10

11495 Bracket Assembly

13122 Top handle
LT = 2
Gross Req

2
20

4
10

6 7
20 5

9 10
35 10

25 25

0
5

0 0
20 5

0 0
35 10

Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec

Pl Order Rel

One bracket for

Each assembly

LT = 2
Gross Req

Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
Pl Order Rel

27

20 5

20

35 10

35 10

10

11495 Bracket Assembly

13122 Top handle
LT = 2
Gross Req

2
20

4
10

6 7
20 5

9 10
35 10

25 25

0
5

0 0
20 5

0 0
35 10

Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec

Pl Order Rel

One bracket for

Each assembly

LT = 2
Gross Req

Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
Pl Order Rel

27

2
5

20 5

20

35 10

35 10

10

11495 Bracket Assembly

13122 Top handle
LT = 2
Gross Req

2
20

4
10

6 7
20 5

9 10
35 10

25 25

0
5

0 0
20 5

0 0
35 10

Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec

Pl Order Rel

One bracket for

Each assembly

LT = 2
Gross Req

Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
Pl Order Rel

27

2
5

20 5

20

4
20

5
5

35 10

35 10

7 8
35 10

10

11495 Bracket Assembly

Order policy: Lot-for-lot

LT = 2
Gross Req

2
5

4
20

5
5

7 8
35 10

10

27 27 22 22

0
3

0 0
35 10

Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
Pl Order Rel

3
3

35 10

35 10

129 Top Bracket

LT = 2
Gross Req

2
5

4
20

5
5

7 8
35 10

10

Sch receipts
Proj. Avail Bal
(ending)
Net Req

27

22 22

Pl Order Rec
Pl Order Rel

LT = 1
Gross Req

Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
Pl Order Rel

15

3
3

35 10

35 10

35 10

5 6 7
35 10

10

129 Top handle bracket

LT = 1
Gross Req

3
3

5 6 7
35 10

Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
Pl Order Rel

15 15 15 12 12
23 10
23 10
23 10

10

1118 Top handle coupling

LT = 2
Gross Req

2
5

4
20

5
5

7 8
35 10

10

Sch receipts
Proj. Avail Bal
(ending)
Net Req

27

22 22

Pl Order Rec
Pl Order Rel

LT = 3
Safety Stock = 20
Gross Req

Sch receipts
Proj. Avail Bal
(ending)
Net Req
Pl Order Rec
Pl Order Rel

39

35 10

35 10

35 10

3
3

5
6
35 10

10

1118 Top handle coupling

LT = 3
Safety Stock = 20
Gross Req
Sch receipts
Proj. Avail Bal
(ending)
Net Req

3
3

15
39 39 54 51 51 16
4

Pl Order Rec
Pl Order Rel

5 6 7
35 10

4
4

10

1118 Top handle coupling

LT = 3
Safety Stock = 20
Gross Req
Sch receipts
Proj. Avail Bal
(ending)
Net Req

3
3

10

15
39 39 54 51 51 20 20 20 20 20 20
4 10

Pl Order Rec
Pl Order Rel

5 6 7
35 10

4
4

10

10

Other considerations

Safety stock if uncertainty in demand or supply

quantity

Safety LT if uncertainty in arrival time

Dont let available go down to 0

Place order earlier than necessary

Order quantities

EOQ Economic Order Quantity, Fixed Size

If thats not enough, order what you need, OR order
two or more of the Fixed Size
Lot-For-Lot, Periodic Order quantity, others