13 - Manufacturing Resource Planning: Dr. Ron Tibben-Lembke

13 - Manufacturing Resource Planning
Dr. Ron Tibben-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
Electronic Data Interchange
My computer talks to yours, tells you exactly what I want to order, when You fill out a form, very compressed message sent, viewed as form Software, hardware expensive to implement
Sample Purchase Transaction ST88850*1 BEG*00*NE*00498765**010698 PID*X*08*MC**Large Widget P01**5*DZ*4.55*TD CTT*1 SE*1*1 Transaction Set identifier Beginning of Segment Description of Product Baseline Item Data Transaction Totals End of Segment
XML

Xtensible Markup Language
XML provides self-describing information. Much easier, faster to implement or modify than EDI. Expected to replace EDI. Standardization through RosettaNet efforts
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
Historical Perspective
User PCs
Application Server(s)
Database Server(s)
ERP Sales
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
3 Reasons for ERP

1. Legacy systems outdated and need replacing anyway 2. Desire for greater communication between locations 3. Reconfigure business to take advantage of current and future communications and computing breakthroughs
Why ERP?
Flexibility
High
Common Client Multiple Processes Common Client Best Practices
Multiple Clients Multiple Processes Multiple Clients Mostly Best Practices
Low
High
Centralization
Low
ERP Considerations
1. Control: how much centralization, drill-down visibility? 2. Structure: How large & dispersed, how tightly integrated does it need to be? 3. Database: desired structure, accessibility 4. Customization: out/in source, how willing? Ability to modify in real time. Creating in-house experts vs. continued consulting dependence 5. Best practices: how willing to embrace?
Source: Carol A. Ptak ERP: Tools, Techniques and Applications for Integrating the Supply Chain, St. Lucie Press, APICS Series on Resource Management, 1999, p. 252.
How do we
System for organizing WIP releases

Consider LT for each item Look at BOM to see what parts needed 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 Scheduled receipts (begin) Projected Available Balance (ending) Net Requirements Planned Order Receipts Planned Order Releases
6 units short
2 10
40 10
50
4 54 44 44 4
MRP Table
1
Order 50 units week earlier
2 10
40 10
50
4 54 44 44 4
6 50 50
Ending Inventory
1
Ending inventory
2 10
40 10
50
4 54 44 44 4 44
6 50 50
Terminology
Projected Available balance
Not on-hand (that may be greater) Tells how many will be available (in ATP sense) Only when material has been committed to their production Move to scheduled receipts as late as possible Preserves flexibility
Planned order releases scheduled receipts
1605 Snow Shovel

1605 Snow Shovel
314 scoop assembly
14127 Rivet (4)
048 Scoop-shaft connector
062 Nail (4) 13122 Top Handle Assy
118 Shaft (wood)
314 scoop assembly

314 scoop assembly
019 Blade (steel)
14127 Rivet (6)
2142 Scoop (aluminum)
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.

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

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!) Front schedule Cutting approach Back schedule
13122 Top Handle Assy
13122 Top handle LT = 2 Gross Req Sch receipts Proj. Avail Bal (ending) Net Req Pl Order Rec Pl Order Rel
2 20
4 10
6 7 20 5
9 10 35 10
25 25
5 5 5
13122 Top Handle Assy-2
13122 Top handle LT = 2 Gross Req Sch receipts Proj. Avail Bal (ending) Net Req Pl Order Rec Pl Order Rel
2 20
4 10
6 7 20 5
9 10 35 10
25 25
0 5 5
0 0 20 20
0 0 35 10 35 10
20
35 10
13122 Top Handle Assy -3

13122 Top handle LT = 2 Gross Req Sch receipts Proj. Avail Bal (ending) Net Req Pl Order Rec Pl Order Rel 5 25 25 5 5 0 5 5 20 5 0 0 0 20 5 20 5 35 10 0 0 0 35 10 35 10
2 20
4 10
6 7 20 5
9 10 35 10
457 Top Handle

13122 Top handle LT = 2 Gross Req Sch receipts Proj. Avail Bal (ending) Net Req Pl Order Rec Pl Order Rel 5 25 25 5 5 0 5 5 20 5 0 0 0 20 5 20 5 35 10 0 0 0 35 10 35 10 1 2 20 3 4 10 5 6 7 20 5 8 9 10 35 10
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
4 20
5 5
7 8 35 10
10
22 22
457 Top Handle
2 5
3 25
4 20
5 5
7 8 35 10
10
22 22 17
457 Top Handle
2 5
3 25
4 20
5 5
7 8 35 10
10
22 22 17 42
22 17 17 18 10 18 10 18 10
082 Nail (2 required)

Two nails for Each assembly
LT = 1 Lot Size = 50 Gross Req Sch receipts Proj. Avail Bal (ending) Net Req Pl Order Rec Pl Order Rel
1 50 4 54
2 10
4 5 40 10
7 8 70 20
10
1 50
2 10
4 5 40 10
7 8 70 20
10
4 54 44 44
4 6 50 50
1 50
2 10
4 5 40 10
7 8 70 20
10
4 54 44 44
44 6 50
26 20
50
1 50
2 10
4 5 40 10
7 8 70 20
10
4 54 44 44
44 44 24 6 26 50 50
50
11495 Bracket Assembly

One bracket for Each assembly
LT = 2 Gross Req Sch receipts Proj. Avail Bal (ending) Net Req Pl Order Rec Pl Order Rel 27
10

2 5
10

2 5
4 20
5 5
7 8 35 10
10
2 5
4 20
5 5
7 8 35 10
10
22 22
2 3 3 35 10 35 10
35 10
129 Top Bracket

LT = 2 Gross Req Sch receipts Proj. Avail Bal (ending) Net Req Pl Order Rec Pl Order Rel 3 27 22 22 2 3 3 35 10 35 10 35 10 1 2 5 3 4 20 5 5 6 7 8 35 10 9 10
3 3
5 6 7 35 10
10
129 Top handle bracket
3 3
5 6 7 35 10
10
15 15 15 12 12 23 10 23 10 23 10
1118 Top handle coupling

LT = 2 Gross Req Sch receipts Proj. Avail Bal (ending) Net Req Pl Order Rec Pl Order Rel 3 27 22 22 2 3 3 35 10 35 10 35 10 1 2 5 3 4 20 5 5 6 7 8 35 10 9 10
LT = 3 Safety Stock = 20 Gross Req Sch receipts Proj. Avail Bal (ending) Net Req Pl Order Rec Pl Order Rel 39
3 3
5 6 35 10
10
LT = 3 Safety Stock = 20 Gross Req Sch receipts Proj. Avail Bal (ending) Net Req Pl Order Rec Pl Order Rel
2 15
3 3
5 6 7 35 10
10
39 39 54 51 51 16 4 4 4
LT = 3 Safety Stock = 20 Gross Req Sch receipts Proj. Avail Bal (ending) Net Req Pl Order Rec Pl Order Rel
2 15
3 3
5 6 7 35 10
10
39 39 54 51 51 20 20 20 20 20 20 4 10 4 4 10 10
Other considerations
Safety stock if uncertainty in demand or supply quantity
Dont let available go down to 0
Safety LT if uncertainty in arrival time of supply
Place order earlier than necessary
Order quantities
EOQ, Lot-For-Lot, Periodic Order quantity, others
MRP Priorities
First:
Get installed, part of ongoing managerial process, get users trained Understand critical linkages with other areas Achieve high levels of data integrity Link MRP with front end, engine, back end
Then:
Determine order quantities more exactly Buffering concepts Nervousness
Ordering Policies
Dependent Demand
Not independent demand Discrete not continuous Lumpy may have surges
Complexity
Reduces costs ordering & holding Anything other than lot-for-lot Increases lumpiness downstream
Assumptions
All requirements must be available at start of period All future requirements must be met, and cant be backordered System operated on periodic basis (e.g. weekly) Requirements properly offset for LTs Parts used uniformly through a period
Use average inventory levels for holding cost
Example Demands
Try several lot-sizing methods
Economic Order Quantity Periodic Order Quantity Part Period Balancing Wagner Within
Order cost = $300 per order = CP Inventory Carrying cost = $2 / unit/ week = CH Avg Demand = 92.1 / wk = D
Week number Requirements 1 2 3 4 5 6 7 8 9 10 11 12 10 10 15 20 70 180 250 270 230 40 0 10
EOQ
Minimizes total ordering & holding costs Assumes demand same every period
Economic Lot Size:
2CP D ELS CH
Definitely not always true for this use
Where:

Avg. demand and holding cost need same time units (e.g. per week)
D = avg demand CP = ordering cost CH = holding cost
EOQ
Sqrt( 2 * 300 * 92.1 / 2) = 166
Week number Requirements Order Quant Begin Inv Ending Inv
1 10 166
2 10
3 15
4 20
5 70
6 7 8 9 180 250 270 230
10 40
11 0
12 10
EOQ
Week number Requirements Order Quant Begin Inv Ending Inv 1 10 166 156 146 131 111 41 2 10 3 15 4 20 5 6 7 8 9 10 70 180 250 270 230 40 166 223 270 230 166 27 0 0 0 126 126 116 11 0 12 10
166 156 146 131 111 207 250 270 230 166 126 126
Ordering cost = 6 * 300 = Inv carry cost = 1,532.5 * 2 = Total
$1,800 $3,065 $4,865
Periodic Order Quantities
EOQ
Gave good tradeoff between ordering & holding resulted in a lot of leftovers.
Only order enough to get through a certain number of periods no leftovers How many? EOQ / avg. demand
166 / 92.1 = 1.805 ~ 2 weeks worth
Periodic Order Quantities

Week No. 1 Req. 10 Orders 20 Begin 20 End 10 Avg Inv

2 10 10 0 5
3 15 35 35 20 28
4 20
5 6 7 8 9 10 11 12 70 180 250 270 230 40 0 10 250 520 270 10 20 250 180 520 270 270 40 10 10 0 180 0 270 0 40 0 10 0 10 215 90 395 135 155 20 10 5
15
Ordering cost = 6 * 300 = Inv carry cost =1,082.5 * 2 = Total
$1,800 $2,145 $3,945
Part Period Balancing (Least Total Cost)
Increase the quantity until holding costs equal the ordering cost
2 10 3 15 4 20 5 6 7 8 9 10 11 12 70 180 250 270 230 40 0 10
Week No. 1 Req. 10
Order 10 holding = 10/2*2 = 10 Order 20 holding = 10 + 10*1.5*2 = $40 Order 35 = 40 + 15*2.5*2 = $115 Order 55 = 115 + 20*3.5*2 = $255 Order 125 = 255 + 70*4.5*2 = $85
Part Period Balancing

Week No. 1 Req. 10 Orders 55

2 10 0
3 15 0
4 20 0
5 6 7 8 9 10 11 12 70 180 250 270 230 40 0 10
Week 5: Order 70: Holding = 10*0.5*2 = $10 Order 250: 10 + 180*1.5*2 = $550 So I could:
Order 250 units, pay $300 in ordering and $540 holding, for a total of $840, Order 70 now, 180 next week, and pay $600 in ordering and $10 + 180*0.5*2=180 in holding = $790 Seems like the second option is best.

Week No. 1 Req. 10 Orders 55 2 10 0 3 15 0 4 20 0 5 6 7 8 9 10 11 12 70 180 250 270 230 40 0 10 70 180 250 270
When should we place a separate order? If 1.5*$2*D > 300. D>300/3 = 100 Whenever demand is >= 100, we might as well place a separate order. What about week 9? Order 230: holding = 230*0.5*2 = $230 Order 270: = 230 + 40*1.5*2 = $350 Order 280: = 350 + 10*3.5*2 = $420

Week No. 1 Req. 10 Orders 55 Begin 55 End 45 2 10 0 45 35 3 15 0 35 20 4 20 0 20 0 5 6 7 8 9 10 11 12 70 180 250 270 230 40 0 10 70 180 250 270 280 0 0 0 70 180 250 270 280 50 10 10 0 0 0 0 50 10 10 0
Wagner-Within
Mathematically optimal Work back from planning period farthest in the future Consider all possibilities:
Order for 5, 4 and 5, 3 and 4, then 5, etc. Uses dynamic programming similar to linear programming
Simulation Experiments
What is best under real-world conditions?

Multiple levels to be concerned about Real-time changes

13 - Manufacturing Resource Planning: Dr. Ron Tibben-Lembke

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

13 - Manufacturing Resource Planning: Dr. Ron Tibben-Lembke

Uploaded by

Copyright:

Available Formats

13 - Manufacturing Resource Planning

Dr. Ron Tibben-Lembke

MRP Crusade (1975)

MRP II -- Manufacturing Resource Planning

MRP Crusade Begins

Electronic Data Interchange

Xtensible Markup Language

Worldwide sales of top 10 vendors

Modules assume best practices:

Ability to follow structure

3 Reasons for ERP

Common Client Multiple Processes Common Client Best Practices

Multiple Clients Multiple Processes Multiple Clients Mostly Best Practices

System for organizing WIP releases

Example Snow Shovel

Projected Available balance

Planned order releases scheduled receipts

1605 Snow Shovel

314 scoop assembly

14127 Rivet (4)

048 Scoop-shaft connector

062 Nail (4) 13122 Top Handle Assy

118 Shaft (wood)

314 scoop assembly

019 Blade (steel)

14127 Rivet (6)

2142 Scoop (aluminum)

13122 Top Handle Assembly

11495 Welded Top handle bracket Assembly

Process of translating net requirements into components part requirements

BOM Explosion Example

13122 Top Handle Assembly

11495 Welded Top handle bracket Assembly

13122 Top Handle Assembly

11495 Welded Top handle bracket Assembly

This tells us how many of each we need

13122 Top Handle Assy

13122 Top Handle Assy-2

13122 Top Handle Assy -3

457 Top Handle

One handle for Each assembly

457 Top Handle

457 Top Handle

082 Nail (2 required)

Two nails for Each assembly

082 Nail (2 required)

082 Nail (2 required)

082 Nail (2 required)

11495 Bracket Assembly

One bracket for Each assembly

11495 Bracket Assembly

One bracket for Each assembly

11495 Bracket Assembly

One bracket for Each assembly

11495 Bracket Assembly

129 Top Bracket

129 Top handle bracket

1118 Top handle coupling

1118 Top handle coupling

1118 Top handle coupling

Safety stock if uncertainty in demand or supply quantity

Dont let available go down to 0

Safety LT if uncertainty in arrival time of supply