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MRP
SCM 302 - MRP & ERP
Chapter 14 2
Chapter 14 3
Chapter 14 4
• Benefits of MRP
1. Better response to customer orders
2. Faster response to market changes
3. Improved utilization of facilities
and labor
4. Reduced inventory levels
SCM 302 - MRP & ERP
Chapter 14 5
Figure 14.1
SCM 302 - MRP & ERP
Chapter 14 6
MRP by
BOM Master period report
2 production schedule
MRP by
date report
Lead times
3
(Item master file) Planned order
report
Inventory data
Purchase advice
4 Material
requirement
planning
programs
(computer and Exception reports
Purchasing data software)
5 Order early or late
or not needed
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Chapter 14 8
Chapter 14 9
x1 x1 x1 x1 x1
Viewfinder
Front Back Flash Sub Optics/Imaging
Sub
Enclosure Enclosure Assembly Sub Assembly
Assembly
x5 x2 x1 x1 x1 x1
Imaging
Plastic Shutter Sub Electronic Lens Sub
Lens Prism
Housing Assembly Sub Assembly
Assembly
Why did I not “break down” the Flash Sub Assembly into its components?
SCM 302 - MRP & ERP
Chapter 14 10
Chapter 14 11
• Some products might have a component (e.g. A1) that shows up at various levels.
• The component is assigned a level code equal to the lowest level where it appears
SCM 302 - MRP & ERP
Chapter 14 12
x1 x1 x1 x1 x1
Viewfinder
Front Back Flash Sub Optics/Imaging Sub
Sub
Enclosure Enclosure Assembly Assembly
Assembly
(3 weeks) (3 weeks) (4 weeks) (3 weeks)
(3 weeks)
x5 x2 x1 x1 x1 x1
Imaging
Plastic Shutter Sub Electronic Lens Sub
Lens Prism
Housing Assembly Sub Assembly
(4 weeks) (5 weeks)
(3 weeks) (4 weeks) Assembly (4 weeks)
(5 weeks)
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1 2 3 4 5 6 7 8
Time in weeks
SCM 302 - MRP & ERP
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Chapter 14 15
• Lot for Lot (L4L) and Fixed Order Quantity (FOQ) are lot sizing rules
• Many others
• Tradeoff: make only what you need only when you need it but reduce the
number of times you have to incur set up costs
Lead times and lot size rules are referred to as “planning factors”
SCM 302 - MRP & ERP
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Week 1 2 3 4 5 6 7 8 9 10
MPS
Replenishment1 500 500 500 500
MPS Order
Releases 500 500 500 500
This only shows the end-result of the MPS table: the MPS replenishment schedule.
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Chapter 14 18
Week 1 2 3 4 5 6 7 8 9 10
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Chapter 14 21
Week 1 2 3 4 5 6 7 8 9 10
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C D E
F I J K
SCM 302 - MRP & ERP
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A B
C D E F G H
F I J K K L
SCM 302 - MRP & ERP
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MRP Shortcomings
1. MRP ignores uncertainty in end-item forecasts, lead times
• Solution: Hold safety stock or safety lead times (e.g. 2 weeks instead of 3 weeks)
• Which parts? How much?
• Minimize safety stock when possible
2. MRP does not check on resource capacities to see if plan is feasible
• Lead times are not lot size dependent
• Solution: Check capacity, iterate back and forth
• MRP II and rough cut capacity planning
• Load reports help smooth work between work centers
3. MRP exhibits system nervousness
• Plans continuously change as forecasts continue to get updated
• Solution: Implement frozen zones if possible
• Decreases changes to plan but reduces flexibility of business to react to changes in forecasts etc.
• Need to balance desire for constant plan with need for flexibility
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MRP in Services
• Some services or service items
are directly linked to demand for
other services
• These can be treated as
dependent demand services or
items
• Restaurants
• Hospitals
• Hotels
• See MyOMLab video: “Meal
Planning at the Amway Center.”
SCM 302 - MRP & ERP
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