Resource Planning System

Resource Planning System
Chapter 6
Introduction
• Resource planning is the process of determining the
production capacity required to meet demand.
• Capacity refers to the maximum workload that an
organization is capable of completing in a given
period of time.
• A discrepancy between an organization’s capacity and
demand results in an inefficiency.
• The goal of resource planning is to minimize this
discrepancy.
Introduction
• Problem: A missed due date or stock-out
cascades downstream, magnifying the bullwhip.
Introduction
Boeing’s 787
Dreamliner production
schedule was significantly
affected by shortages of
fasteners, essentially bolts
that secure sections of the
fuselage together.
Introduction
• Operations managers are continuously involved in
resource and operations planning to balance capacity
and output.
• Firms generally run their operations at less than 100
percent capacity.
To allow time for scheduled repairs
Maintenance and to meet unexpected increases in
demand.
Resource Planning Common Problems
• Manual data entry is eating up your time
• manual tasks become increasingly error prone
• Stand-alone software systems are slowing you
down
• Integrated software can consolidate the information
available across various departments
• Efficiency is suffering due to poor
communication
• It can lead to misallocation of resources can lead to
lost orders, the late delivery
– One piece (Common channel) software
Resource Planning Common Problems
• Projects inside the company are competing for

resources
• Prioritize the projects and their activities.
• Resources need to be in the same location to work
effectively
• Not working in the same location as the project team
can impact on the effectiveness of your resources,
but thankfully the cloud can solve this problem
Operations planning
• Operational Planning can be divided into three
categories:
Long-range
Intermediate or medium-range and
Short-range planning
Operations planning
• Long-Range Planning:
Usually cover a year or more,
Tend to be more general
Involve major strategic decisions in capacity, such as the construction
of new facilities and purchase of capital equipment.
The aggregate production plan (APP) is a long-range materials plan.
• Medium-range plans
normally span six to eighteen months.
Can adjust minor changes in capacity such as changes in employment
levels, production scheduling
Master production schedule (MPS) is a medium-range plan
• Short-range plans
usually cover a few days to a few weeks.
Plans are the most detailed and specify the exact end items and
quantities to make on a weekly, daily or hourly basis.
Material requirements planning (MRP) is a short-range materials plan
Operations planning
Rough-Cut planning
A printer Company makes computer printers.
Each printer requires an average of 24 labor-
hours.
The company makes plan for orders. This plan
provides a weekly capacity of 5,000 labor-hours.
Does enough capacity exist to execute the MPS?

If not, what changes do you recommend?
Rough-Cut planning
24 x 100
5000 x 2400
Aggregate Production Plan(APP)
• Planning process that translates annual business plans and
demand forecasts into a production plan for all products.
• In simple terms, aggregate planning is an attempt to balance
capacity and demand in such a way that costs are
minimized.
• Aggregate production plans are typically stated in terms of
product families or groups.
A product family consists of different products that share similar
characteristics, components or manufacturing processes.
Aggregate resources could be total number of workers, hours of
machine time, or tons of raw materials.
• Planning horizon of APP- at least one year.
• Aggregate planning does not distinguish among sizes,
colors, features
• Aggregate plans serve as a foundation for future short-
range planning, such as production scheduling,
sequencing, and loading.
• It Includes costs relevant to the aggregate planning
decision include inventory, setup, machine operation,
hiring, firing, training, & overtime costs
• Three basic production strategies in APP :

o Chase Strategy
o Level Strategy
o Mixed Production Strategy
Chase Strategy –
 Produces exactly what is needed each period
Adjusts capacity to match demand period by period.
Finished goods inventory remains constant but the workforce
fluctuates from month to month.
The major advantage of a chase strategy is that it allows inventory
to be held to the lowest level possible
Works well for make-to-order firms.
Firm hires & lays off workers to match demand.
 It assumes that workers can be hired and trained easily to perform
the job
Hiring, training and termination costs are significant cost
components in the chase production strategy
Chase Strategy –
It is basically “Chasing demand” by doing it dynamically and
quickly.
Produce products or services just-in-time
Typical for services industry
Example: An Aggregate Production Plan for the ATV Corporation
The ATV Corporation makes three models of all-terrain vehicles: Model

A, Model B and Model C. Model A uses a 0.4-liter engine, Model B
uses a 0.5-liter engine and Model C uses a 0.6-liter engine. The
aggregate production plan is the twelve-month plan that combines all
three models together in total monthly production. The planning horizon
is twelve months. The APP determines the size of the workforce, which
is the constrained resource.
On average, one unit of ATV requires eight labor hours to produce,
and a worker contributes 160 hours (8 hours × 5 days × 4 weeks) per
month
120 x 8 960/160
Level Strategy –
 Maintains a steady production rate and/or a steady employment
level.
 In order to satisfy changes in customer demand, the firm must
raise or lower finished inventory levels in anticipation of
increased or decreased levels of forecast demand.
 Level strategy is a strategy the firm maintains a constant capacity
over a period of time irrespective of the fluctuations in demand.
 This strategy is used when the skill level, training required, or the
cost of hiring people and terminating them is high.
Level Strategy –
 The firm maintains a level workforce and a steady rate of output
when demand is low. This allows the firm to maintain higher
inventory levels than are currently needed.
 As demand increases, the firm is able to continue a steady
production rate/steady employment level, while allowing the
inventory surplus to absorb the increased demand
 Works well for make-to-stock firms.
Quarter Sales Forecast (lb)
Spring 80,000
Summer 50,000
Fall 120,000
Winter 150,000
• Hiring cost = $100 per worker

• Firing cost = $500 per worker
• Inventory carrying cost = $0.50 pound per quarter
• Production per employee = 1,000 pounds per quarter
• Beginning work force = 100 workers
• Chase Demand Strategy
Sales Production Workers Workers Workers
Quarter Forecast Plan Needed Hired Fired
Spring 80,000 80,000 80 - 20
Summer 50,000 50,000 50 - 30
Fall 120,000 120,000 120 70 -
Winter 150,000 150,000 150 30 -
100 50
Cost = (100 workers hired x $100) + (50 workers fired x $500)

= $10,000 + 25,000 = $35,000
Production per employee = 1,000 pounds per quarter

Level Strategy
Sales Production
Quarter Forecast Plan Inventory
Spring 80,000 100,000 20,000
Summer 50,000 100,000 70,000
Fall 120,000 100,000 50,000
Winter 150,000 100,000 0
400,000 140,000
Cost = 140,000 pounds x 0.50 per pound = $70,000

Master Production Scheduling
Master Production Schedule (MPS) - A detailed disaggregation
of the aggregate production plan, listing the exact end items to be
produced by a specific period.
More detailed than APP & easier to plan under stable

demand.
Planning horizon is shorter than APP, but longer than the
lead time to produce the item.
Note: For the service industry, the master production
schedule may just be the appointment log or book, where
capacity (e.g., skilled labor or professional service) is
balanced with demand.
• Start with Aggregate plan
(Aggregate Sales & Ops Plan)
Output level designed to meet targets
• Disaggregates
 Converts into specific schedule for each item
• Example:
• APP = Total number of Automobiles
• MPS = Disaggregate into different Models of automobile
 Plan for Model A, Model B, Model C
• APP = Total number of furniture items
• MPS = Disaggregate into various furniture items
 Plan for chairs, tables, beds, cabinets
Corporate Strategy
Aggregate Unit Aggregate Planning

Demand (Plan. Hor.: 1 year, Time Unit: 1 month)
Capacity and Aggregate Production Plans
End Item Master Production Scheduling

Demand (Plan. Hor.: a few months, Time Unit: 1 week)
SKU-level Production Plans
Manufacturing Materials Requirement Planning

and Procurement (Plan. Hor.: a few months, Time Unit: 1 week)
lead times
Component Production lots and due dates
Part process Shop floor-level Production Control
plans (Plan. Hor.: a day or a shift, Time Unit: real-time)
Capacity Company Product Economic

Consts. Policies Charact. Considerations
Placed Orders Master Production

Forecasted Demand Schedule:
Current and Planned MPS When & How Much
Availability, eg., to produce for each
•Initial Inventory, product
•Initiated Production,
•Subcontracted quantities
Planning Time
Horizon unit
Capacity
Planning
System nervousness - small changes in the upper-level-production plan
cause major changes in the lower-level production plan.
Example: If the demand for the current month gets double, then,
 Production plan should be revised
 Purchase order should be revised
 Component assembly order should be revised
• It will cause a ripple effect of change within the firm as well as in all
supply chain
• Firms use a time fence system to deal with nervousness
• The Time fence system separating the planning horizon into two
segments:
1. Firmed Segment (AKA demand time fence) from current period to
several weeks into future. Can only be altered by senior
management.
2. Tentative segment (AKA planning time fence), from end of firmed
segment to several weeks into the future.
6+
weeks
4-6
2-4 weeks
1-2 weeks
weeks
+/- 5% +/- 10% +/- 20%
No Change
Change Change Change
Frozen
Firm
Full
Open
• Available-to-Promise (ATP) Quantity
ON HAND = 200 Committed Orders = 200
How many can he promise

200 Planned Production For sales in next week?
Available-to-Promise (ATP) Quantity –
• The uncommitted portion of the firm’s planned production.
• The difference between confirmed customer orders & the quantity
the firm planned to produce.
• The MPS also provides vital information on whether additional
orders can be accepted for delivery in specific periods.
• The available-to-promise quantity allow the sales personnel to
quickly negotiate new orders and delivery due dates with
customers.
• It is the means by which we are able to give reliable delivery
promises to customers.
Three basic methods of calculating the available-

to-promise quantities:
1. Discrete available-to-promise
2. Cumulative available-to-promise without look ahead, &
3. Cumulative available-to-promise with look ahead.
• Discrete available-to-promise (ATP :D)
Planned Beginning
Production Inventory
• Remember these terms;

• MPS = Master Production Schedule
• ATP = Available to Promise Quantity
• CCO = Committed Customer Orders
ATP = On-hand + Supply - Demand

• Calculating Discrete Available-to-Promise
Quantities
1. Add the Beginning Inventory to the MPS for Period 1,
subtracting the Committed Customer Orders from Period 1
MPS up to, but not including the period of the next scheduled
production run.
2. For all subsequent periods, there are two possibilities:
 If no MPS has been scheduled for the period (if MPS is

zero), the ATP is zero.
 If an MPS has been scheduled for the period, the ATP is

the MPS minus the sum of all the CCOs from that period
up to the period of the next scheduled MPS.
3. If an ATP for any period is negative, the deficit must be

subtracted from the most recent(previous) positive ATP, and the
ATP quantities must then be revised to reflect these changes.
4. A negative available to promise means that more

production has been committed to customer orders than
is available.
• Model A
• Add the Beginning Inventory to the MPS for Period 1, subtracting the
Committed Customer Orders from Period 1 up to but not including the
period of the next scheduled MPS.
• ATP = On-hand + Supply - Demand
• ATP1 = BI + MPS1 − CCO1 = 30 + 10 − 10 = 30

• If an MPS has been scheduled for the period, the ATP is the MPS minus
the sum of all the CCOs from that period up to the period of the next
scheduled MPS.
• ATP2 = MPS2 − CCO2 = 10 − 0 = 10
• ATP3 = MPS3 − CCO3 − CCO4 = 20 − 28 − 0 = −8
• Revising: ATP2 = 10 − 8 = 2 and ATP3 = −8 + 8 = 0
10 -8
• If an ATP for any period is negative, the deficit must be subtracted from
the most recent positive ATP, and the quantities must be revised to reflect
these changes.
• Revising: ATP2 = 10 − 8 = 2 and ATP3 = −8 + 8 = 0
• ATP4 = 0 (no scheduled MPS)

• ATP5 = MPS5 − CCO5 − CCO6 − CCO7 = 20 − 0 − 20 − 0 = 0
• ATP8 = MPS8 − CCO8 = 20 − 10 = 10
• CHECK: The sum of the BI and MPS quantities for all periods
must equal the sum of all CCOs and ATPs
• Calculate ATP for Model B
Add the Beginning Inventory to the MPS for Period 1, subtracting the Committed
Customer Orders from Period 1 up to but not including the period of the next
scheduled MPS.
ATP = On-hand + Supply - Demand
If an MPS has been scheduled for the period, the ATP is the MPS minus
the sum of all the CCOs from that period up to the period of the next
scheduled MPS.
• ATP1 = BI + MPS1 − CCO1 = 30 + 10 − 20 = 20

• ATP2 = MPS2 − CCO2 − CCO3 = 10 − 10 − 7 = −7 (use 7 units from
ATP1) Revising: ATP1 = 20 − 7 = 13 and ATP2 = −7 + 7 = 0
• ATP4 = MPS4 − CCO4 − CCO5 = 20 − 0 − 0 = 20
• ATP6 = MPS6 − CCO6 − CCO7 = 20 − 20 − 18 = −18 (use 18 units from
ATP4 since ATP5 = 0) Revising: ATP4 = 20 − 18 = 2 and ATP6 = −18 +
18 = 0
• ATP8 = MPS8 − CCO8 = 20 − 0 = 20
Dependent & Independent Demand
Independent Demand
• The demand for final products & has a demand pattern affected by trends,
seasonal patterns, & general market conditions.
• However, if the components or subassemblies are sold as service parts to
customers for repairing their ATVs, then they are independent demand items.
• The demand for finished products
• Does not depend on the demand of other products
Dependent Demand
• Describes the internal demand for parts based on the demand of the final
product in which the parts are used.
• It is the demand derived from finished products-
• It is the demand for component parts based on the number of end items
being produced.
• Subassemblies, components, & raw materials are examples of dependent
demand items.
Bill of Material (BOM)
• Engineering document that shows a listing of all component parts and
subassemblies making up the end item. Or
• A bill of materials (BOM) is an extensive list of raw materials,
components and assemblies required to construct, manufacture or
repair a product or service.
• Planning Factor- the exact quantity of each component required for
making a higher-level part or assembly.
• Multilevel Bill of Materials
• Shows the parent-component relationships.
• The multilevel bill of materials can be presented as an indented bill of
materials. At each level of indentation, the level number increases by
one.
• Super Bill of Materials (AKA planning BOM, pseudo BOM,
phantom BOM, or family BOM) useful for planning purpose.
• Instead of planning factor, the percentage of each option is used.
Bill of Material (BOM)
Super Bill of Materials (AKA planning BOM, pseudo BOM,
phantom BOM, or family BOM) useful for planning purpose. Instead
of planning factor, the percentage of each option is used.
Material Requirement Planning (MRP)
Lead Time = 2 weeks
BI 1 2 3 4 5 6 7 8
Gross 110 145 228 450 - 154 227
Requirement
Schedule 150
Receipt
On Hand 350 350 390 245 17 0 0 0
Net 0 0 0 433 0 154 227
Requirement
Planned 0 0 0 433 0 154 227
Order receipt
Planned 433 154 227
Order Release
• Once the independent demand of the final product is known
• The dependent demand item requirements can be calculated using
material requirements planning (MRP) software.
• MRP- is a production planning, scheduling, and inventory control
system used to ensure right quantity of material are available when
needed.
• A computer-based materials management system.
• Determines quantity & timing of dependent demand items
o Calculates
How much is needed? (the exact quantities),
When is needed? (need dates),
When to order? (planned order releases for subassemblies).
MRP Inputs MRP Processing MRP Outputs
Changes
Order releases
Master
schedule Planned-order
schedules
Primary
reports Exception reports
Bill of Planning reports
materials MRP computer Secondary
Performance-
programs reports control
reports
Inventory
records Inventory
transaction
Data Files Output Reports
MRP by period
BOM Master report
production schedule
MRP by date
report
Lead times
(Item master file) Planned order

report
Inventory data
Purchase advice
Material
requirement
planning programs
(computer and
software) Exception reports
Purchasing data
Order early or late or
not needed
Order quantity too

small or too large
Extension of MRP- MRP-II
• Closed-loop MRP- MRP that integrate aggregate production
planning, master production scheduling and capacity requirements
planning.
• The system contains an information feedback feature that enables
plans to be continuously checked and adjusted.
• The development of closed-loop MRP was a second generation
of MRP by adding capacity requirements planning and the
progress of orders.
• Demand/Forecast MPS MRP Capacity Planning
• MRP-II- It further evolved into manufacturing resource planning
(MRP-II) by including resource planning and other aspects.
• MRP system provides input to the capacity plan, MPS, and production
planning process.
MRP-II
MRP-II
Production plan
Priority Planning Capacity Planning
Desired Resource
master production planning
schedule First cut Planning
No
Realistic? capacity
Yes
Material Capacity
requirements requirements
(detailed) (detailed)
MRP-II
Priority Control Capacity Control

(detailed scheduling) (work center throughput)
Input/output
Dispatch list report Execution
No No
Is Is
specific capacity Yes average
adequate capacity
? adequate
Execute ?
the plan
MRP requires:
 The independent demand information.
 Parent-component relationships from the bill of materials.
 Inventory status of the final product & all of the
components.
 Planned order releases (output of the MRP system)
Advantage of MRP- provides planning information
Disadvantage of MRP- loss of visibility,

• especially acute for products with a deep bill of
materials, & ignore capacity & shop floor conditions.
• Poor information and lack of understanding of the
impact of average lot sizes and lead times can cause
implementation failure and costly reimplementation.
MRP & ERP
MRP & ERP
Customer Relationship Management
Sales Order Shipping

(order entry, Distributors,
Invoicing product configuration, retailers,
sales management) and end users
MRP & ERP
Master
Production
Schedule
Inventory Bills of
Management Material
MRP
Work
Orders
Purchasing Routings
and and
Lead Times Lead Times
Table 13.6
MRP & ERP
Supply Chain Management
Vendor Communication
(schedules, EDI, advanced shipping notice,
e-commerce, etc.)
Figure 14.11
MRP & ERP
Finance/
Accounting
Accounts
Receivable
General
Ledger
Accounts
Payable
Payroll
Table 13.6
Figure 14.11
Important Terms in MRP
• Parent: The item generating the demand for lower level
components. Level 0 is the final product. It is the parent of
all Level 1 components.
• Components: The parts demanded by a parent.
E.g: Piston assembly” is a component of “engine assembly.”
• Gross requirement: Gross requirements are the total of
independent and dependent demand for a component
before the netting of on-hand inventory and scheduled
receipts.
• The total requirement for raw materials, other
components, and subassemblies required to produce a
certain item
• Net requirement: the amount of material required for the
coming productive period, after netting the scheduled
receipts and the on-hand inventory, from the gross
requirements.
• In simple terms, we add up the orders scheduled to arrive
and the material that we have in store and then subtract it
from the total of the gross requirements
• Net requirement = gross requirement – (current on-hand inventory +
scheduled receipts)
• Scheduled receipt: A committed order awaiting delivery for a
specific period.
• Pre-ordered materials scheduled to arrive at some point in the
future.
• Planned order release: A specific order to be released to the
supplier including expected lead time to ensure that it is
available on the need date.
• Projected on-hand inventory: The projected inventory at the
end of the period.
• Time bucket: The time period used on the MRP. It is usually
expressed in days or weeks.
• Explosion: The process of converting a parent item’s planned
order releases into component gross requirements.
• Planning factor: The number of components needed to produce
one unit of the parent item.
• Pegging: Relates gross requirements for a component to the
planned order releases. It shows the relationship between
demand and incoming supply.
o The process of identifying the parent items that have generated a given
set of material requirements for an item
o Tracing upward the bill of material from the component to the parent
item.
• Safety stock: Protects against uncertainties in demand, supply,

quality and lead time.
• Low-level coding: Assigns the lowest level on the bill of
materials to all common components to avoid duplicate MRP
computations
Enterprise Resource Planning (ERP)
• The typical ERP system is an umbrella system that
ties together a variety of specialized systems using a
common, shared, centralized database
• ERP modules include
 Basic MRP
 Finance
 Production
 Human resources
 Supply chain management (SCM)
 Customer relationship management (CRM)
Advantages of ERP
• ERP uses a single database and to provide a broader scope and up-to-
date information.
• ERP helps organizations reduce supply chain inventories due to the
added visibility throughout the entire supply chain.
– Supply chain visibility leads to reductions of the bullwhip effect and
helps to better plan production and end-product deliveries to customers.
• ERP systems enable the firm to automate the steps of a manufacturing
process.
• Process standardization eliminates redundant resources and increases
productivity.
• Performance can be monitored across the entire organization using the
same measurements and standards.
• The use of a single software platform and database also allows the
ERP system to integrate financial, production, supply and customer
order information
Disadvantages of ERP System
• A substantial capital investment is needed to purchase
and implement the system.
– Total cost of ERP ownership includes hardware, software,
professional services, training and other internal staff costs.
• ERP systems are very complex and have proven
difficult to implement, particularly in large multi-
business unit organizations.
• The adopting firm must restructure its processes to be
compatible with the new ERP system.
• This has resulted in a very unusual situation where a
software system determines the business practices and
processes a firm should implement
ERP Cost Breakdown
• Where it is hosted
• Number of Users
• Application Required
• Customization Level
ERP Cost Breakdown
• Product Selection Costs
o Number of modules
o The more modules you need, the more it’ll cost, so businesses
should add modules wisely.
o Licensing costs
o There are going to be monthly/yearly licensing costs associated
with the product. This is usually in the form of number
users/month or number of users/year.
o Infrastructure
o Where you going to host your software on your own
infrastructure or on the cloud of software company.
ERP Cost Breakdown
• Implementing your ERP system:
o Consultation costs
o The software company will do a business and/or gap analysis of
your company. This stage then requires a fee for the time and
input of the consultants involved.
o Development costs
o Next, the ERP provider company has to modify the software
you chose earlier to fit your requirements. This will include
configuring it, adding customizations for new features, as well
as creating integrations with other software.
o Training
o After the product is developed, your users will have to go
through training to make sure it works correctly both in
function and in workflow.
ERP Software Provider
• There are hundreds of ERP
software providers, each
targeting a specific market
segment and industry type.
• SAP, Oracle, PeopleSoft,
JD Edwards and Baan have
been among the most
popular ERP providers.
• Microsoft has also gained a
foothold in the ERP market
with its purchase of “Great
Plains” in 2001 and
“Navision” in 2002.
ERP Implementation in Hershey
• One of the leading chocolate
manufacturer across world,
Founded in 1876 by Milton
Hershey.
• The company was running on
“legacy systems”, needed
modernization of IT System to:
o Solve Y2K Problem
o Have better coordinated deliveries to
retailers
• Harshey’s management decided to
replace existing systems with modules
from three IT partners:
o SAP's R/3 ERP software
o Manugistics SCM software
o Seibel's CRM software
• Management decided to go with “Big

Bang “approach instead of “phased
“approach
• Overall Project Cost: $112 million
• Implementation Time: Shift to the
new system by the end of year
1999.
• The recommended implementation
time for the project was 4 yrs. and
Hershey demanded for 2.5 yrs.
• Decided to go with “Big Bang”
approach instead of “phased”
approach.
• Project Expectations:
o Fine-tune deliveries to suppliers.
o Upgrade and standardize companies
business processes.
o Efficient customer driven processes
capable of managing changing
customer needs.
o Reduce order cycle times and boost
inventory accuracy.
o Reduce inventory costs.
• Project Results in Failure:
o Order Cycle time Doubled
o 15 days delay in orders to customers
o Accumulating Inventories increased 25%
o Stock Price declined to 8% in one day.
o Profits declined 18%
o Sales Declined 12%
o Failed to deliver $100 million orders on Halloween.
“Enterprise software isn’t just software.

It requires changing the way you do
business.”
• What went wrong:
o Squeezed deadlines:
o Project originally scheduled for 4 years
o Company forced the implementation to 30 months
o Wrong timing:
o The company went live at their busiest time
o Released the solution just before the Halloween
o Big-Bang Approach:
o To quicken the implementation process, Hershey opted for Big Bang
o implementation.
o Simultaneously implemented a customer-relations package and a logistics
package even without testing some of the modules
o Un-entered data:
o Surge Storage capacity not recorded as storage points in the ERP
o Orders from many retailers and distributors could not be fulfilled, even
though Hershey had the finished product stocked in its warehouses.
• Lessons Learned:
o Go Slow:
o The evolutionary way
o Test each module before release
o Data is King:
o Data migration is important
o Discipline in inventory
o Big-Bang Approach:
o Oversight Matters.
o Management should keep a close watch

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Resource Planning System

• Projects inside the company are competing for

Does enough capacity exist to execute the MPS?

• Three basic production strategies in APP :

The ATV Corporation makes three models of all-terrain vehicles: Model

• Hiring cost = $100 per worker

Cost = (100 workers hired x $100) + (50 workers fired x $500)

Production per employee = 1,000 pounds per quarter

Cost = 140,000 pounds x 0.50 per pound = $70,000

More detailed than APP & easier to plan under stable

Aggregate Unit Aggregate Planning

Capacity and Aggregate Production Plans

End Item Master Production Scheduling

SKU-level Production Plans

Manufacturing Materials Requirement Planning

Capacity Company Product Economic

Placed Orders Master Production

How many can he promise

Three basic methods of calculating the available-

• Remember these terms;

ATP = On-hand + Supply - Demand

2. For all subsequent periods, there are two possibilities:

 If no MPS has been scheduled for the period (if MPS is

 If an MPS has been scheduled for the period, the ATP is

3. If an ATP for any period is negative, the deficit must be

4. A negative available to promise means that more

• ATP1 = BI + MPS1 − CCO1 = 30 + 10 − 10 = 30

• Revising: ATP2 = 10 − 8 = 2 and ATP3 = −8 + 8 = 0

• ATP4 = 0 (no scheduled MPS)

• ATP1 = BI + MPS1 − CCO1 = 30 + 10 − 20 = 20

(Item master file) Planned order

Order quantity too

Priority Planning Capacity Planning

Priority Control Capacity Control

Advantage of MRP- provides planning information

Disadvantage of MRP- loss of visibility,

Customer Relationship Management

Sales Order Shipping

Supply Chain Management

• Safety stock: Protects against uncertainties in demand, supply,

• Management decided to go with “Big

“Enterprise software isn’t just software.

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