Assignment Date : May 26, 2019

MRP and ERP

Michael (2101645202)
Samuel Samudera S (2101651760)
LA25
Questions/Main Ideas: Notes :
Dependent Demand = Dependent demand techniques should be used for any product for which
a schedule can be established.
= The demand for one item is related to the demand for another item.
MRP is the common technique.
= Benefits of MRP:
-Better response to customer orders.
-Faster response to market changes.
-Improved utilization of facilities and labor.
-Reduced inventory level.
= Effective use of dependent demand inventory models requires the
following master production schedule, specifications or bill of material,
inventory availability, purchase orders outstanding, and lead times.
Master Production = Specifies what is to be made and when.
Schedule (MPS) = Must be in accordance with the aggregate production plan.
= Inputs from financial plans, customer demand, engineering, labor
availability, inventory fluctuations, supplier performance.
= The process moves from planning to execution, each step must be tested
for feasibility.
= MPS is established in terms of specific products, it disaggregates the
aggregate plan.
= Schedule must be followed for a reasonable length of time.
=MPS is quite often fixed or frozen in the near-term part of the plan, MPS
is a rolling schedule, and statement of what is to be produced but not a
forecast of demand.
= MPS can be expressed in any of the following terms:
-A customer order in a job shop (make-to-order) company.
-Modules in a repetitive (assemble-to-order or forecast) company.
-An end item in a continuous (stock-to-forecast) company.
Bills of Material = List of components, ingredients, and materials needed to make product.
= Provides product structure:
-Items above given level/parents
-Items below given level/components or children
= Types of Bills of Material:
-Modular Bills, simplify planning and scheduling
-Planning Bills, created to assign an artificial parent to the BOM
-Phantom Bills, describe subassemblies that exist only temporarily
-Low-level Coding, BOMs are processed one level at a time.
Accurate Inventory = Absolutely required for MRP (or any dependent demand system) to
Records operate correctly.
= MRP systems require more than 99% accuracy.
Purchase Orders = A by-product of well-managed purchasing and inventory control
Outstanding department.
= Must accurately reflect quantities and scheduled receipts.

Lead Times for = Time required to purchase, produce, or assemble an item.

Components = For production: the sum of the move, setup, and assembly or run times.
= For purchased items: the time between the recognition of a need and
when it is available for production.
Safety Stock = BOMs, inventory records, purchase and production quantities may not
be perfect.
= Consideration of safety stock may be prudent.
= Should be minimized and ultimately eliminated.
= Typically built into projected on-hand inventory.
MRP Management = MRP Dynamics:
-Facilitates replanning when changes occur.
-System nervousness, can result from too many changes.
-Time fences, put limits on replanning.
-Pegging, links each item to its parent allowing effective analysis
changes.
= MRP Limitations:
-MRP does not do detailed scheduling it plans.
-Work best in product-focused, repetitive environments.
-Requires fixed lead time and infinite size time buckets.
Lot-Sizing Techniques = Lot-for-lot, orders just what is required for production based on net
requirements.
= Economic order quantity, expects a known constant demand and MRP
systems often deal with unknown and variable demand.
= Periodic order quantity, orders quantity needed for a predetermined time
period.
= Dynamic lot sizing techniques:
-Balance lot size and setup costs
-Part period balancing (least total costs)
-Least unit cost
-Least period cost
= Dynamic programming approach:
-Wagner-within
Extensions of MRP = MRP II
= Closed-Loop MRP
= Capacity Planning
Enterprise Resource = An extension of the MRP system to tie in customers and suppliers.
Planning (ERP) = Coordinates business from supplier evaluation to customer invoicing.
= ERP modules includes basic MRP, Finance, Human resources, Supply-
chain management, Customer relationship management, and
sustainability.
= ERP systems have potential to reduce transaction costs and increase the
speed and accuracy of information.
= ERP can be expensive to install and time consuming.
ERP in the Service = Have been developed for health care, government, retail stores, hotels,
Sector and financial services. In the grocery Industry called Efficient Consumer
Response. ERP is use to tie sales to buying, inventory, logistics, and
production.
Summary:
So, to conclude all the MRP and ERP system is related to each other. To build and MRP system we
need Bills of Material and the Dependent Demand. In building a good MRP systems there are
components that must be fulfilled like the Lead Time components, Stock safety, and Lots-Sizing
techniques. MRP also has and can be extended, ERP is the extended system for MRP witch tie in
customers and suppliers. The ERP is needed when the MRP need to be extended. So, both of the MRP
and ERP is related when there is a situation for the MRP to be extended.