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  Part Consideration: 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 .

$1.2B MRPII sales in U. one third of total software sales ..MRP II -.) Financial accounting incorporated  Sales  Operations Planning  Simulate capacity requirements of different possible Master Production Schedules   1989.S.Manufacturing Resource Planning  “A method for the effective planning of all resources of a manufacturing company” (APICS def.

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

e

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  1995 sales of top 10 vendors $2.8 B  Fortune $3.8 B  1996 $4.2 B SAP survey: 44% reported spending at least 4 times as much on implementation as on software .2 B  1997 $5.

ERP Challenges  Modules  Change assume “best practices:” software to reflect company ($)  Change company to follow software (?)  Accuracy  Drives of data entire system  Ownership of / responsibility for  Ability to follow structure .

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

3 Reasons for ERP 1. Desire for greater communication between locations 3. Reconfigure business to take advantage of current and future communications and computing breakthroughs . Legacy systems outdated and need replacing anyway 2.

Why ERP? Flexibility High Common Client Multiple Processes Common Client “Best Practices” Multiple Clients Multiple Processes Multiple Clients Mostly “Best Practices” Low High Low Centralization .

1999.ERP Considerations 1. Creating in-house experts vs. Structure: How large & dispersed. p. accessibility 4. Customization: out/in source. Database: desired structure. Ptak “ERP: Tools. 252. how tightly integrated does it need to be? 3. Control: how much centralization.” St. drill-down visibility? 2. . Best practices: how willing to embrace? Source: Carol A. continued consulting dependence 5. Lucie Press. Techniques and Applications for Integrating the Supply Chain. APICS Series on Resource Management. how willing? Ability to modify in real time.

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  Order – Snow Shovel quantity is 50 units  LT is one week .

MRP Table Gross Requireme 6 units short Scheduled receip .

MRP Table Gross Requireme Order 50 units week earlier Scheduled receip .

Ending Inventory Gross Requireme Ending inventory Scheduled receip .

Terminology  Projected  Available balance Not on-hand (that may be greater)  Tells how many will be available (in ATP sense)  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 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 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  Take of translating net requirements into components part requirements 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 -- .

not that!)  Front schedule Cutting approach  Back schedule .Timing of Production  This tells us how many of each we need  Doesn’t tell when to start  Start as soon as possible?  Dependent events (oh no.

13122 Top Handle Assy 13122 Top handle LT = 2 Gross Req .

13122 Top Handle Assy-2 13122 Top .

13122 Top Handle Assy -3 13122 Top handle LT = 2 Gross Req .

457 Top Handle 13122 Top handle LT = 2 Gross Req Sch receipts LT = 2 Proj. Avail Bal Gross Req (ending) Net Req One handle for Each assembly 25 .

457 Top Handle LT = 2 Gross Req .

457 Top Handle .

Avail50 (ending) Gross Req Net Req Two nails for Each assembly 25 .082 Nail (2 required) 13122 Top handle LT = 2 Gross Req Sch receipts LT = 1 Lot Size = Bal Proj.

082 Nail (2 required) LT = 1 Lot Size = .

082 Nail (2 required) LT = 1 Lot Size = .

082 Nail (2 required) LT = 1 Lot Size = .

11495 Bracket Assembly 13122 Top handle LT = 2 Gross Req Sch receipts LT = 2 Proj. Avail Bal Gross Req (ending) Net Req One bracket for Each assembly 25 .

Avail Bal Gross Req (ending) Net Req One bracket for Each assembly 25 .11495 Bracket Assembly 13122 Top handle LT = 2 Gross Req Sch receipts LT = 2 Proj.

11495 Bracket Assembly 13122 Top handle LT = 2 Gross Req Sch receipts LT = 2 Proj. Avail Bal Gross Req (ending) Net Req One bracket for Each assembly 25 .

11495 Bracket Assembly .

129 Top Bracket LT = 2 Gross Req .

129 Top handle bracket .

1118 Top handle coupling LT = 2 Gross Req LT = 3 Safety Stock .

1118 Top handle coupling LT = 3 .

1118 Top handle coupling LT = 3 .

Periodic Order quantity.Other considerations  Safety stock if uncertainty in demand or supply quantity  Don’t let available go down to 0  Safety supply LT if uncertainty in arrival time of order earlier than necessary  Place  Order quantities  EOQ. Lot-For-Lot. others .

engine.MRP Priorities  First:  Get installed. get users trained  Understand critical linkages with other areas  Achieve high levels of data integrity  Link MRP with front end. part of ongoing managerial process. back end  Then:  Determine order quantities more exactly  Buffering concepts  Nervousness .

Ordering Policies  Dependent  Not Demand 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. weekly)  Requirements properly offset for LTs  Parts used uniformly through a period  Use average inventory levels for holding cost .g. and can’t be backordered  System operated on periodic basis (e.

1 / wk = D .Example Demands  Try  several lot-sizing methods Economic Order Quantity  Periodic Order Quantity  Part Period Balancing  Wagner Within  Order cost = $300 per order = CP Carrying cost = $2 / unit/ week = CH  Inventory  Avg Demand = 92.

per week) = avg demand  C = ordering cost P C H = holding cost . demand and holding cost need same time units (e.EOQ  Minimizes total ordering & holding costs  Assumes demand same every period  Definitely  Economic Lot Size: 2C P D ELS = CH  Where: D not always true for this use  Avg.g.

1 / 2) = 166 Week numbe .EOQ  Sqrt( 2 * 300 * 92.

065 .865 W eek num $1.800 $3.532.EOQ    Ordering cost = 6 * 300 = Inv carry cost = 1.5 * 2 = Total $4.

 Only order enough to get through a certain number of periods – no leftovers  How many? EOQ / avg.Periodic Order Quantities  EOQ  Gave good tradeoff between ordering & holding  resulted in a lot of leftovers.1 = 1.805 ~ 2 weeks’ worth . demand  166 / 92.

Periodic Order Quantities Week No.800 $2. Req.145 .945 $1.5 * 2 = Total $3.082. Orders Begin End Avg Inv 1 10 20 20 10 15 2 10 10 0 5 3 15 35 35 20 28 4 20 5 70 250 20 250 0 180 10 215 6 180 7 250 520 180 520 0 270 90 395 8 270 9 230 270 270 270 0 40 135 155 10 40 40 0 20 11 0 10 10 10 12 10 10 10 0 5    Ordering cost = 6 * 300 = Inv carry cost =1.

Req. 1 10 the quantity until holding costs equal the ordering cost 2 10 3 15 4 20 5 70 6 180 7 250 8 270 9 230 10 40 11 0 12 10  Order 10 – holding = 10/2*2 = 10  Order 20 – holding = 10 + 10*1.Part Period Balancing (Least Total Cost)  Increase Week N o.5*2 = $255  Order 125 = 255 + 70*4.5*2 = $115  Order 55 = 115 + 20*3.5*2 = $85 .5*2 = $40  Order 35 = 40 + 15*2.

Orders 1 10 55 2 10 0 3 15 0 4 20 0 5 70 6 180 7 250 8 270 9 230 10 40 11 0 12 10     Week 5: Order 70: Holding = 10*0. . 180 next week. Req. and pay $600 in ordering and $10 + 180*0. for a total of $840. pay $300 in ordering and $540 holding.5*2=180 in holding = $790 Seems like the second option is best.Part Period Balancing Week N o.5*2 = $10 Order 250: 10 + 180*1. Order 70 now.5*2 = $550 So I could:    Order 250 units.

Orders 1 10 55 2 10 0 3 15 0 4 20 0 5 6 70 180 70 180 7 250 250 8 270 270 9 230 10 40 11 0 12 10  When should we place a separate order? If 1. Req.5*$2*D > 300.5*2 = $230  Order 270: = 230 + 40*1.  What about week 9?  Order 230: holding = 230*0.5*2 = $420 .Part Period Balancing Week No. we might as well place a separate order.5*2 = $350  Order 280: = 350 + 10*3. D>300/3 = 100  Whenever demand is >= 100.

Part Period Balancing Week No. Req. Orders Begin End 1 10 55 55 45 2 10 0 45 35 3 15 0 35 20 4 20 0 20 0 5 6 7 8 9 70 180 250 270 230 70 180 250 270 280 70 180 250 270 280 0 0 0 0 50 10 40 0 50 10 11 0 0 10 10 12 10 0 10 0 .

 Uses “dynamic programming” – similar to linear programming . 3 and 4. then 5.Wagner-Within  Mathematically optimal  Work back from planning period farthest in the future  Consider all possibilities:  Order for 5. etc. 4 and 5.

Simulation Experiments  What is best under real-world conditions?  Multiple levels to be concerned about  Real-time changes .

Sign up to vote on this title
UsefulNot useful