Material Requirement Planning and Master Prod Schedule

Chapter 15
Resource Planning
Russell and Taylor
Operations and Supply Chain 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
2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
15-2
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
15-3
Resource
Planning
for
Manufacturing
15-4
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
15-5
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
200
100
5
M T W Th F
M T W Th F
15-6
Material
Requirements
Planning
15-7
MRP Inputs and Outputs

Inputs
Master production
schedule
Product structure file
Item master file
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
15-9

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
15-10
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
15-11

MPS ITEM
Pencil Case
Clipboard
Lapboard
Lapdesk
1
125
85
75
0
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
15-13
Product Structure Tree
15-14
Product Structure
15-15
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
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
15-17
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
15-18
Modular BOMs
15-19
Time-phased Bills
An assembly chart shown against a time scale
15-20
Time-phased Bills
Forward scheduling
start at todays date and schedule forward to
determine the earliest date the job can be finished. If
each item takes one period to complete, the
clipboards can be finished in three periods
Backward scheduling
start at the due date and schedule backwards to
determine when to begin work. If an order for
clipboards is due by period three, we should start
production now
15-21
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
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
15-22
Item Master File

PHYSICAL INVENTORY
On hand
Location
On order
Allocated
Cycle
Last count
Difference
150
W142
100
75
3
9/5
-2
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
15-23
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
15-24
MRP Matrix
15-25
MRP Example
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
15-26
MRP Example
15-27
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
15-28
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

(25 + 175) = 200 units available

(200 - 85) = 115 on hand at the end of Period 1
15-29
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

115 units available

(115 - 85) = 20 on hand at the end of Period 2
15-30
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

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
15-31
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

100
Following the same logic Gross Requirements in Periods 4 and 5

develop Net Requirements, Planned Order Receipts, and Planned
Order Releases
15-32
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
15-33
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

50
50
Following the same logic, the Lapdesk MRP matrix is

completed as shown
15-34
MRP - 8
ITEM: CLIPBOARD
LOT SIZE: L4L
LLC: 0
LT: 1

ITEM: LAPDESK
LOT SIZE: MULT 50
LLC: 0
LT: 1
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
PERIOD
3
50
PERIOD
3
150
15-35
MRP 9
ITEM: CLIPBOARD
LOT SIZE: L4L
LLC: 0
LT: 1

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

LOT SIZE: MIN 100
LT: 1
x1
Gross Requirements
Scheduled Receipts
Projected on Hand
Net Requirements
PERIOD
3
50
x2
150
15-36
MRP 10
ITEM: CLIPBOARD
LOT SIZE: L4L
LLC: 0
LT: 1

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

LOT SIZE: MIN 100
LT: 1
x1
Gross Requirements
Scheduled Receipts
Projected on Hand
Net Requirements
PERIOD
3
x2
100
50
x2
15-37
MRP - 11
Planned Order Report
ITEM
Clipboard
Lapdesk
Pressboard
PERIOD
1
50
100
100
100
50
100
100
150
15-38
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
15-39
Advanced Lot Sizing Rules: L4L
Total cost of L4L = (4 X $60) + (0 X $1) = $240

15-40
Advanced Lot Sizing Rules: EOQ

EOQ
2(30)(60
minimum order quantity
60
1
Total cost of EOQ = (2 X $60) + [(10 + 50 + 40) X $1)] = $220
15-41
Advanced Lot Sizing Rules: POQ

worth of requirements
POQ Q / d 60 / 30 periods
2
Total cost of POQ = (2 X $60) + [(20 + 40) X $1] = $180
15-42
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
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
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
15-45
CRP
15-46
Calculating Capacity
Maximum capability to produce
Rated Capacity
Theoretical output that could be attained if a process were
operating at full speed without interruption, exceptions, or
downtime
Effective Capacity
Takes into account the efficiency with which a particular
product or customer can be processed and the utilization of
the scheduled hours or work
Effective Daily Capacity = (no. of machines or workers) x
(hours per shift) x (no. of shifts) x (utilization) x ( efficiency)
15-47
Calculating Capacity
Utilization
Percent of available time spent working
Efficiency
How well a machine or worker performs compared
to a standard output level
Load
Standard hours of work assigned to a facility
Load Percent
Ratio of load to capacity
Load Percent =
load
capacity
x 100%
15-48
Load Profiles
Graphical comparison of load versus capacity
Leveling underloaded conditions:
Acquire more work
Pull work ahead that is scheduled for later time
periods
Reduce normal capacity
Load leveling
Process of balancing underloads and overloads
15-49
Reducing Over-load Conditions
Eliminate unnecessary requirements

Reroute jobs to alternative machines, workers,
or work centers
Split lots between two or more machines
Increase normal capacity
Subcontract
Increase efficiency of the operation
Push work back to later time periods
Revise master schedule
15-50
Copy Courier
Two high-speed copiers that can be operated by one operator.

2 shifts per day
8 hours/shift , 5 days/week.
No breaks during the day
30 minutes for lunch or dinner
Machine service time = 30 minutes at the beginning of each
shift
Machine efficiency = 90%.
Capacity
2 copiers * 2 shifts * 8 hrs/day * 7/8 utilization * .90 efficiency = 1512
minutes/day
15-51
Copy Courier
Job No. of Setup Time Run Time
Copies (min) (min/unit)
10 500 5.2 0.08
20 1000 10.6 0.10
30 5000 3.4 0.12
40 4500 11.2 0.14
50 2000 15.3 0.10
15-52
Load Calculations
Job
10
20
30
40
50
Setup + Run x No. Copies Job Time

5.2 + (500 X 0.08) = 45.20
10.6 + (1000 X 0.10) = 110.60
3.4 + (5000 X 0.12) = 603.40
11.2 + (4500 X 0.14) = 641.20
15.3 + (2000 X 0.10) = 215.30
1,615.70 min
15-53
Loading
Capacity
2 copiers * 2 shifts * 8 hrs/day * 7/8 utilization * .90 efficiency
= 1512 minutes/day
Load percent = 1615.70/1512 = 1.068 X 100% = 106.8%
Overloaded by 6.8%.
Extends working day by approximately 36 minutes
Load percent = 99%.
Increase efficiency to 97%.
15-54
Initial Load Profile
15-55
Adjusted Load Profile
15-56
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.
15-57
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
15-58
Organizational Data Flows
15-59
ERPs Central Database
15-60
Selected Enterprise Software Vendors
15-61
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
15-62
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
15-63
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
15-64
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
15-65
ERP and Software Systems
15-66
Connectivity
Application programming interfaces (APIs)
give other programs well-defined ways of speaking to
them
Enterprise Application Integration (EAI) solutions

EDI is being replaced by XML, business language
of Internet
Service-oriented architecture (SOA)
collection of services that communicate with each other
within software or between software
15-67
Copyright 2014 John Wiley & Sons, Inc.

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15-68

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Chapter 15

Material Requirements Planning (MRP) Slide 4

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

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

Material Requirements Planning (MRP)

Dependent demand items

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

100 x 4 = 400 table legs

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

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

MRP Inputs and Outputs

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

Master Production Schedule

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

Master Production Schedule

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

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

Master Production Schedule

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

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

Product Structure Tree

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

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

Multilevel Indented BOM

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

K-bills (kit numbers)

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

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

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

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

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

Item Master File

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

Item Master File

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

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

Item Master File

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

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

LOT SIZE: L4L

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

LOT SIZE: L4L

Planned Order Receipts

(25 + 175) = 200 units available

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

LOT SIZE: L4L

Planned Order Receipts

115 units available

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

LOT SIZE: L4L

Planned Order Receipts

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

LOT SIZE: L4L

Planned Order Receipts

Following the same logic Gross Requirements in Periods 4 and 5

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

LOT SIZE: MULT 50

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

LOT SIZE: MULT 50

Planned Order Receipts

Following the same logic, the Lapdesk MRP matrix is

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

Planned Order Releases

Planned Order Releases