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Chapter 15

Resource Planning
Russell and Taylor
Operations Management, 8th Edition

Lecture Outline

Material Requirements Planning (MRP) Slide 4


Capacity Requirements Planning (CRP) Slide 45
Enterprise Resource Planning (ERP) Slide 58
Customer Relationship Management (CRM)
Slide 63
Supply Chain Management (SCM) Slide 64
Product Lifecycle Management (PLM) Slide 65

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Learning Objectives
Discuss the differences between independent and dependent
demand systems
Describe the inputs and outputs to an MRP system, and execute
the MRP process
Determine resource capacity and load percent, and perform load
leveling on capacitated resources
Explain the hierarchical planning process for resources as a
closed loop system, and discuss the assumptions on which this
process is based
Describe basic ERP systems and the scope of their
implementations, including the connection to SCM, CRM and PLM
Discuss the issues, advantages and drawbacks of the enterprise
IT software systems that run todays global businesses
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Resource
Planning
for
Manufacturing

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Material Requirements Planning (MRP)


Computerized inventory control and production
planning system
When to use MRP?

Dependent demand items


Discrete demand items
Complex products
Job shop production
Assemble-to-order environments

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Demand Characteristics
Independent demand

Dependent demand

100 x 1 =
100 tabletops

100 x 4 = 400 table legs

100 tables
400

Continuous demand
400
300
No. of tables

No. of tables

300

Discrete demand

200
100

3
Week

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200
100

5
M T W Th F

M T W Th F

15-6

Material
Requirements
Planning

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MRP Inputs and Outputs


Inputs
Master production
schedule
Product structure file
Item master file

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Outputs
Planned order
releases
Work orders
Purchase orders
Rescheduling notices

15-8

Master Production Schedule


Drives MRP process with a schedule of finished
products
Quantities represent production not demand
Quantities may consist of a combination of
customer orders and demand forecasts
Quantities represent what needs to be produced,
not what can be produced
Quantities represent end items that may or may
not be finished products

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Master Production Schedule


Cumulative lead time
total length of time needed to manufacture a product

Time fence
Management-specified date within which no changes
are allowed in the MPS

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Product Structure
Product structure file
contains computerized bill of material for every item
produced

Bill of Material
list of all materials, parts and assemblies needed to
make an item
includes quantities, parent-component relationships &
order quantities

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Master Production Schedule


MPS ITEM
Pencil Case
Clipboard
Lapboard
Lapdesk

1
125
85
75
0

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PERIOD
2
3
4
125
95
120
50

125
120
47
0

125
100
20
50

5
125
100
17
0

15-12

Product Structures

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Product Structure Tree

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Product Structure

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Multilevel Indented BOM


LEVEL

0----1----2---2---2---2--1---1---

ITEM

Clipboard
Clip Assembly
Top Clip
Bottom Clip
Pivot
Spring
Rivet
Press Board

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UNIT OF MEASURE

QUANTITY

ea
ea
ea
ea
ea
ea
ea
ea

1
1
1
1
1
1
2
1

15-16

Specialized BOMs
Phantom bills
Transient subassemblies
Never stocked
Immediately consumed in next stage

K-bills (kit numbers)


Group small, loose parts under pseudo-item number
Reduces paperwork, processing time, and file space

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Specialized BOMs
Modular bills
Plan production of products with many optional
features
Product assembled from major subassemblies and
customer options
Modular bill kept for each major subassembly
Simplifies forecasting and planning
X10 automobile example
3 x 8 x 3 x 8 x 4 = 2,304 configurations
3 + 8 + 3 + 8 + 4 = 26 modular bills

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Modular BOMs

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Item Master File


DESCRIPTION
Item
Pressboard
Item no.
7341
Item type
Purch
Product/sales class
Comp
Value class
B
Buyer/planner
RSR
Vendor/drawing
07142
Phantom code
N
Unit price/cost
1.25
Pegging
Y
LLC
1

2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

INVENTORY POLICY
Lead time
Annual demand
Holding cost
Ordering/setup cost
Safety stock
Reorder point
EOQ
Minimum order qty
Maximum order qty
Multiple order qty
Policy code

1
5000
1
50
0
39
316
100
500
1
3

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Item Master File


PHYSICAL INVENTORY
On hand
Location
On order
Allocated
Cycle
Last count
Difference

150
W142
100
75
3
9/5
-2

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USAGE/SALES
YTD usage/sales
MTD usage/sales
YTD receipts
MTD receipts
Last receipt
Last issue

1100
75
1200
0
8/25
10/5

CODES
Cost acct.
Routing
Engr

00754
00326
07142

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MRP Processes
Exploding the bill of material
Netting out the inventory
Netting
the process of subtracting on-hand quantities and
scheduled receipts from gross requirements to
produce net requirements

Lot sizing
determining the quantities in which items are usually
made or purchased

Time-phasing requirements
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MRP Matrix

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MRP Example
Master Production Schedule

Clipboard
Lapdesk

85
0

95
60

120
0

100
60

100
0

Item Master File


On hand
On order
(sch receipt)
LLC
Lot size
Lead time

CLIPBOARD
25
175 (Period 1)

LAPDESK
20
0

PRESSBOARD
150
0

0
L4L
1

0
Mult 50
1

1
Min 100
1

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MRP Example

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MRP - 1
ITEM: CLIPBOARD

LLC: 0

LOT SIZE: L4L

LT: 1

PERIOD
1

Gross Requirements

85

95

Scheduled Receipts

175

Projected on Hand

120

100

100

25

Net Requirements
Planned Order Receipts
Planned Order Releases

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MRP - 2
ITEM: CLIPBOARD

LLC: 0

LOT SIZE: L4L

LT: 1

PERIOD
1

Gross Requirements

85

95

Scheduled Receipts

175

Projected on Hand
Net Requirements

25

120

100

100

115
0

Planned Order Receipts


Planned Order Releases

(25 + 175) = 200 units available


(200 - 85) = 115 on hand at the end of Period 1

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MRP - 3
ITEM: CLIPBOARD

LLC: 0

LOT SIZE: L4L

LT: 1

PERIOD
1

Gross Requirements

85

95

Scheduled Receipts

175

Projected on Hand
Net Requirements

25

115

20

120

100

100

Planned Order Receipts


Planned Order Releases

115 units available


(115 - 85) = 20 on hand at the end of Period 2

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MRP - 4
ITEM: CLIPBOARD

LLC: 0

LOT SIZE: L4L

LT: 1

PERIOD
1

Gross Requirements

85

Scheduled Receipts

175

Projected on Hand
Net Requirements

25

95

120

100

100

115

20

100

Planned Order Receipts


Planned Order Releases

100
100

20 units available
(20 - 120) = -100 100 additional Clipboards are required
Order must be placed in Period 2 to be received in Period 3

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MRP - 5
ITEM: CLIPBOARD

LLC: 0

LOT SIZE: L4L

LT: 1

PERIOD
1

Gross Requirements

85

Scheduled Receipts

175

Projected on Hand
Net Requirements

25

95

120

100

100

115

20

100

100

100

100

100

100

100

100

Planned Order Receipts


Planned Order Releases

100

Following the same logic Gross Requirements in Periods 4 and 5


develop Net Requirements, Planned Order Receipts, and Planned
Order Releases

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MRP - 6
ITEM: LAPDESK

LLC: 0

LOT SIZE: MULT 50

LT: 1

Gross Requirements

PERIOD
1

2
0

60

4
0

60

Scheduled Receipts
Projected on Hand

20

Net Requirements
Planned Order Receipts
Planned Order Releases

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5
0

MRP - 7
ITEM: LAPDESK

LLC: 0

LOT SIZE: MULT 50

LT: 1

Gross Requirements

PERIOD
1

60

60

20

10

10

40

50

50

50

Scheduled Receipts
Projected on Hand
Net Requirements

20

Planned Order Receipts


Planned Order Releases

50

50

Following the same logic, the Lapdesk MRP matrix is


completed as shown

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MRP - 8
ITEM: CLIPBOARD
LOT SIZE: L4L

LLC: 0
LT: 1

Planned Order Releases


ITEM: LAPDESK
LOT SIZE: MULT 50

LLC: 0
LT: 1

Planned Order Releases

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100

100

100

PERIOD
3

50

ITEM: PRESSBOARD LLC: 0


LOT SIZE: MIN 100
LT: 1
Gross Requirements
Scheduled Receipts
Projected on Hand
Net Requirements
Planned Order Receipts
Planned Order Releases

PERIOD
3

50

PERIOD
3

150

15-35

MRP 9
ITEM: CLIPBOARD
LOT SIZE: L4L

LLC: 0
LT: 1

Planned Order Releases


ITEM: LAPDESK
LOT SIZE: MULT 50

LLC: 0
LT: 1

100

100

100

PERIOD
3

x2

100

x1

x1

PERIOD
3

100

200

100

50

ITEM: PRESSBOARD LLC: 0


LOT SIZE: MIN 100
LT: 1

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x1

Planned Order Releases

Gross Requirements
Scheduled Receipts
Projected on Hand
Net Requirements
Planned Order Receipts
Planned Order Releases

PERIOD
3

50

x2

150

15-36

MRP 10
ITEM: CLIPBOARD
LOT SIZE: L4L

LLC: 0
LT: 1

Planned Order Releases


ITEM: LAPDESK
LOT SIZE: MULT 50

LLC: 0
LT: 1

100

100

100

PERIOD
3

150

x1

x1

PERIOD
3

100

100

200

100

50

50
50
100
150

0
150
150
100

0
100
100

1
50

ITEM: PRESSBOARD LLC: 0


LOT SIZE: MIN 100
LT: 1

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x1

Planned Order Releases

Gross Requirements
Scheduled Receipts
Projected on Hand
Net Requirements
Planned Order Receipts
Planned Order Releases

PERIOD
3

x2

100

50

x2

15-37

MRP - 11
Planned Order Report

ITEM
Clipboard
Lapdesk
Pressboard

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PERIOD
1
50
100

100

100
50
100

100

150

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Lot Sizing in MRP Systems


Lot-for-lot ordering policy
Fixed-size lot ordering policy

Minimum order quantities


Maximum order quantities
Multiple order quantities
Economic order quantity
Periodic order quantity

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Advanced Lot Sizing Rules: L4L

Total cost of L4L = (4 X $60) + (0 X $1) = $240


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Advanced Lot Sizing Rules: EOQ


EOQ

2(30)(60
60
minimum order quantity
1

Total cost of EOQ = (2 X $60) + [(10 + 50 + 40) X $1)] = $220

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Advanced Lot Sizing Rules: POQ


POQ Q / d 60 / 30 periods
2
worth of requirements

Total cost of POQ = (2 X $60) + [(20 + 40) X $1] = $180

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Planned Order Report


Item
On hand
On order
Allocated
DATE
9-26
9-30
10-01
10-08
10-10
10-15
10-23
10-27
Key:

#2740
100
200
50

ORDER NO.

Date
Lead time
Lot size
Safety stock
SCHEDULED
GROSS REQS.
RECEIPTS

AL 4416
AL 4174
GR 6470
SR 7542
CO 4471
GR 6471
GR 6471
GR 6473

PROJECTED
ON HAND

25
25
50
200
75
50
25
50

AL = allocated
CO = customer order
PO = purchase order

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50
25
0
- 50
150
75
25
0
- 50

9 - 25 - 05
2 weeks
200
50
ACTION

Expedite SR 10-01

Release PO 10-13

WO = work order
SR = scheduled receipt
GR = gross requirement
15-43

MRP Action Report


Current date 9-25-08

ITEM

DATE

#2740
#3616
#2412
#3427
#2516
#2740
#3666

10-08
10-09
10-10
10-15
10-20
10-27
10-31

ORDER NO. QTY.


7542

200

7648

100
200
50

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ACTION
Expedite
Move forward
Move forward
Move backward
De-expedite
Release
Release

SR
PO
PO
PO
SR
PO
WO

15-44

10-01
10-07
10-05
10-25
10-30
10-13
10-24

Capacity Requirements
Planning (CRP)
Creates a load profile
Identifies under-loads and over-loads
Inputs
Planned order releases
Routing file
Open orders file

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CRP

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Relaxing MRP Assumptions


Material is not always the most constraining
resource
Lead times can vary
Not every transaction needs to be recorded
Shop floor may require a more sophisticated
scheduling system
Scheduling in advance may not be appropriate
for on-demand production.

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Enterprise Resource Planning (ERP)


Software that organizes and manages a
companys business processes by

sharing information across functional areas


integrating business processes
facilitating customer interaction
providing benefit to global companies

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Organizational Data Flows

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ERPs Central Database

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Selected Enterprise Software Vendors

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ERP Implementation
Analyze business processes
Choose modules to implement

Which processes have the biggest impact on


customer relations?
Which process would benefit the most from
integration?
Which processes should be standardized?

Align level of sophistication


Finalize delivery and access
Link with external partners

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Customer Relationship Management (CRM)


Software that
Plans and executes business processes
Involves customer interaction
Changes focus from managing products to managing
customers
Analyzes point-of-sale data for patterns used to
predict future behavior

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Supply Chain Management


Software that plans and executes business
processes related to supply chains
Includes
Supply chain planning
Supply chain execution
Supplier relationship management

Distinctions between ERP and SCM are becoming


increasingly blurred

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Product Lifecycle Management (PLM)


Software that
Incorporates new product design and development
and product life cycle management
Integrates customers and suppliers in the design
process though the entire product life cycle

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ERP and Software Systems

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Thank you

Copyright 2014 John Wiley & Sons, Inc.


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