Material Requirements Planning (MRP)
Material
Requirements
Planning (MRP)
Budi Harsanto
Dept. of Management & Business, Faculty of Economics, Universitas Padjadjaran
budi.harsanto@fe.unpad.ac.id
Review Last Topic
• INVENTORY MANAGEMENT
– Probabilistic Models and Safety Stock
– Single Period Model
2
Today Outline
• MRP
– Dependent Demand
– Dependent Inventory Model
Requirements
– MRP Structure
– MRP Management
– Lot Sizing Technique
3
Operations
Management
Chapter 14 –
Material Requirements
Planning (MRP) and
ERP PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
Benefts of MRP
1. Better response to customer
orders
2. Faster response to market
changes
3. Improved utilization of facilities
and labor
4. Reduced inventory levels
Dependent Demand
The demand for one item is
related to the demand for
another item
Given a quantity for the end
item, the demand for all parts
and components can be
calculated
In general, used whenever a
schedule can be established for
an item
Dependent Demand
Efective use of dependent
demand inventory models requires
the following
1.
2.
3.
4.
5.
Master production schedule
Specifcations or bill of material
Inventory availability
Purchase orders outstanding
Lead times
Master Production Schedule
(MPS)
Specifes what is to be made and when
Must be in accordance with the
aggregate production plan
Inputs from fnancial plans, customer
demand, engineering, supplier
performance
As the process moves from planning to
execution, each step must be tested for
feasibility
The MPS is the result of the production
planning process
Master Production Schedule
(MPS)
MPS is established in terms of specifc
products
Schedule must be followed for a
reasonable length of time
The MPS is quite often fxed or frozen in
the near term part of the plan
The MPS is a rolling schedule
The MPS is a statement of what is to be
produced, not a forecast of demand
The Planning Process
Production
Capacity
Inventory
Marketing
Customer
demand
Procurement
Supplier
performance
Management
Return on
investment
Capital
Finance
Cash fow
Human resources
Manpower
planning
Aggregate
production
plan
Master
production
schedule
Engineering
Design
completion
Change
production
plan?
Figure 14.1
The Planning Process
Master
production
schedule
Change
requirements?
Change
master
production
schedule?
Material
requirements
plan
Change
capacity?
Capacity
requirements
plan
No
Realistic?
Yes
Is capacity
plan being
met?
Is
execution
meeting
the plan?
Execute capacity
plans
Execute
material plans
Figure 14.1
Aggregate
Production Plan
Months
Aggregate Production Plan
(Shows the total
quantity of amplifers)
Weeks
Master Production Schedule
(Shows the specifc type and
quantity of amplifer to be
produced
240-watt amplifer
150-watt amplifer
75-watt amplifer
January
1,500
1
2
100
3
February
1,200
4
100
500
6
100
500
300
5
7
8
100
450
450
100
Figure 14.2
Master Production Schedule
(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-toorder or forecast) company
An end item in a continuous (stockto-forecast) company
Focus for Diferent
Process Strategies
Make to Order
(Process Focus)
Number of
end items
Stock to Forecast
(Product Focus)
Schedule fnished
product
Typical focus of the
master production
schedule
Schedule modules
Schedule orders
Number of
inputs
Examples:
Figure 14.3
Assemble to
Order or Forecast
(Repetitive)
Print shop
Motorcycles
Machine shop
Autos, TVs
Fine-dining restaurant Fast-food restaurant
Steel, Beer, Bread
Lightbulbs
Paper
MPS Examples
For Nancy’s Specialty Foods
Gross Requirements for Crabmeat Quiche
Day
Amount
6
50
7
8
100
9
47
10
60
11
12
110
13
75
14 and so on
Gross Requirements for Spinach Quiche
Day
7
8
9
Amount 100 200 150
10
11
12
60
13
75
14
15
100
16 and so on
Table 14.1
Bills of Material
List of components, ingredients,
and materials needed to make
product
Provides product structure
Items above given level are called
parents
Items below given level are called
children
BOM Example
Level
Product structure for “Awesome” (A)
0
A
1
2
3
Std. 12” Speaker kit
B(2) Std. 12” Speaker kit
E(2)
D(2)
C(3) w/ amp-booster
F(2) Std. 12” Speaker
E(2)
Packing box and
installation kit of wire,
bolts, and screws
booster
assembly
G(1)
D(2)
Amp-booster
12” Speaker
12” Speaker
BOM Example
Level
Product structure for “Awesome” (A)
0
A
Part
Part
Part
B:
C:
1
D:
2
3
2
x number of As =
(2)(50) =
xBnumber
of As =
(3)(50) =
(2) Std. 12” Speaker kit
x number of Bs
+ 2 x number of Fs =
Part E:
2 x number
2
E(2) of Bs
E(2)
+ 2 x number of Cs =
Part F: 2 x number of Cs
= (2)(150) =
Packing box and
Part G:
Fs =
(1)(300)
installation
kit of wire, =
3 D1(2)x number of
bolts, and screws
C(3)
100
Std. 12” Speaker kit
150
w/ amp-booster
(2)(100) + (2)(300) =
F(2) Std. 12” Speaker
G(1)
booster
(2)(100)
+ (2)(150) =
assembly
300
300 D(2)
Amp-booster
12” Speaker
12” Speaker
Bills of Material
Modular Bills
Modules are not fnal products but
components that can be
assembled into multiple end items
Can signifcantly simplify planning
and scheduling
Bills of Material
Planning Bills (Pseudo Bills)
Created to assign an artifcial
parent to the BOM
Used to group subassemblies to
reduce the number of items
planned and scheduled
Used to create standard “kits” for
production
Bills of Material
Phantom Bills
Describe subassemblies that exist
only temporarily
Are part of another assembly and
never go into inventory
Low-Level Coding
Item is coded at the lowest level at
which it occurs
BOMs are processed one level at a
time
Accurate Records
Accurate inventory records are
absolutely required for MRP (or
any dependent demand system)
to operate correctly
Generally MRP systems require
99% accuracy
Outstanding purchase orders
must accurately refect
quantities and scheduled
receipts
Lead Times
The time required to purchase,
produce, or assemble an item
For production – the sum of the
order, wait, move, setup, store,
and run times
For purchased items – the time
between the recognition of a
need and the availability of the
item for production
Time-Phased Product
Structure
Must have D and E
completed here so
production can
begin on B
Start production of D
1 week
D
2 weeks
to
produce
B
2 weeks
E
A
2 weeks
1 week
E
1 week
2 weeks
G
C
3 weeks
F
1 week
D
|
|
|
1
2
3
|
|
4
5
Time in weeks
|
|
|
6
7
8
Figure 14.4
MRP Structure
Data Files
Output Reports
BOM
MRP by
period report
Master
production
schedule
Lead times
Planned order
report
(Item master fle)
Inventory data
Purchasing data
Figure 14.5
MRP by
date
report
Material
requirement
planning
programs
(computer and
software)
Purchase advice
Exception reports
Order early or
late or not
needed
Order quantity
too small or too
large
Determining Gross
Requirements
Starts with a production schedule for
the end item – 50 units of Item A in
week 8
Using the lead time for the item,
determine the week in which the order
should be released – a 1 week lead
time means the order for 50 units
should be released in week 7
This step is often called “lead time
ofset” or “time phasing”
Determining Gross
Requirements
From the BOM, every Item A requires 2
Item Bs – 100 Item Bs are required in
week 7 to satisfy the order release for
Item A
The lead time for the Item B is 2 weeks
– release an order for 100 units of Item
B in week 5
The timing and quantity for component
requirements are determined by the
order release of the parent(s)
Determining Gross
Requirements
The process continues through the
entire BOM one level at a time – often
called “explosion”
By processing the BOM by level, items
with multiple parents are only
processed once, saving time and
resources and reducing confusion
Low-level coding ensures that each
item appears at only one level in the
BOM
Gross Requirements Plan
A.
B.
C.
E.
F.
G.
G.
1
2
3
4
Required date
Order release date
Required date
Order release date
Required date
Order release date
Required date
Order release date
Required date
Order release date
Required date
Order release date
Required date
Order release date
5
6
7
8
Week
Lead Time
50
100
100
200 300
600
300
300
600
300
150
200 300
300
200
200
150
50
1 week
2 weeks
1 week
2 weeks
3 weeks
1 week
2 weeks
Table 14.3
Net Requirements Plan
Net Requirements Plan
Determining Net
Requirements
Starts with a production schedule for
the end item – 50 units of Item A in
week 8
Because there are 10 Item As on hand,
only 40 are actually required – (net
requirement) = (gross requirement on- hand inventory)
The planned order receipt for Item A in
week 8 is 40 units – 40 = 50 - 10
Determining Net
Requirements
Following the lead time ofset
procedure, the planned order release
for Item A is now 40 units in week 7
The gross requirement for Item B is
now 80 units in week 7
There are 15 units of Item B on hand,
so the net requirement is 65 units in
week 7
A planned order receipt of 65 units in
week 7 generates a planned order
release of 65 units in week 5
Determining Net
Requirements
A planned order receipt of 65 units in
week 7 generates a planned order
release of 65 units in week 5
The on-hand inventory record for Item
B is updated to refect the use of the
15 items in inventory and shows no onhand inventory in week 8
This is referred to as the Gross-to-Net
calculation and is the third basic
function of the MRP process
Net Requirements Plan
The logic of net requirements
Gross
requirements
+
Allocations
Total requirements
–
On
hand
+
Scheduled
receipts
Available inventory
=
Net requirements
Gross Requirements
Schedule
Figure 14.6
S
A
B
B
C
Master schedule
for B
Lead time = 6 for S
Master schedule for S
sold directly
Lead time = 4 for A
Master schedule for A
Periods
5
6
7
40
Periods
Gross requirements: B
8
9 10 11
50
15
1
2
40+10
3
10 =50 40
C
8
9 10 11 12 13
40
4
50
5
20
6
20
7
15+30
=45
30
8
1
2
3
10 10
Therefore, these
are the gross
requirements for
B
MRP Planning Sheet
Figure 14.7
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 onhand inventory
MRP Management
MRP is a dynamic system
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 efective analysis of
changes
Lot-Sizing Techniques
Lot-for-lot techniques order just
what is required for production
based on net requirements
May not always be feasible
If setup costs are high, lot-for-lot can
be expensive
Economic order quantity (EOQ)
EOQ expects a known constant
demand and MRP systems often deal
with unknown and variable demand
Lot-Sizing Techniques
Part Period Balancing (PPB) looks
at future orders to determine most
economic lot size
The Wagner-Whitin algorithm is a
complex dynamic programming
technique
Assumes a fnite time horizon
Efective, but computationally
burdensome
MRP in Services
Some services or service items
are directly linked to demand for
other services
These can be treated as
dependent demand services or
items
Restaurants
Hospitals
Hotels
MRP in Services
(a) PRODUCT STRUCTURE TREE
Veal
picante
#10001
Helper one;
Work
Center #2
Figure 14.10
Cooked
linguini
#20002
Uncooked
linguini
#30004
Spinach
#20004
Chef;
Work
Center #1
Prepared veal
and sauce
#20003
Sauce
#3000
6
Asst. Chef;
Work
Center #3
Veal
#3000
5
MRP in Services
(b) BILL OF MATERIALS
Part
Number
Description
Quantity
Unit of
Measure
Unit
cost
10001
Veal picante
1
Serving
—
20002
Cooked linguini
1
Serving
—
20003
Prepared veal and sauce
1
Serving
—
20004
Spinach
0.1
Bag
30004
Uncooked linguini
0.5
Pound
—
30005
Veal
1
Serving
2.15
30006
Sauce
1
Serving
0.80
0.94
MRP in Services
(c) BILL OF LABOR FOR VEAL PICANTE
Labor Hours
Work Center
Operation
Labor Type
Setup Time
Run Time
1
Assemble dish Chef
.0069
.0041
2
Cook linguini
Helper one
.0005
.0022
3
Cook veal
and sauce
Assistant Chef
.0125
.0500
Enterprise Resource Planning
(ERP)
An extension of the MRP system
to tie in customers and suppliers
1. Allows automation and integration
of many business processes
2. Shares common data bases and
business practices
3. Produces information in real time
Coordinates business from
supplier evaluation to customer
invoicing
Enterprise Resource Planning
(ERP)
ERP modules include
Basic MRP
Finance
Human resources
Supply chain management (SCM)
Customer relationship
management (CRM)
ERP and MRP
Figure 14.11
ERP and MRP
Customer Relationship Management
Invoicing
Figure 14.11
Sales Order
(order entry,
product
confguration,
sales management)
Shipping
Distributors,
retailers,
and end users
ERP and MRP
Master
Production
Schedule
Inventory
Management
Bills of
Material
MRP
Work
Orders
Purchasing
and
Lead Times
Table 13.6
Figure 14.11
Routings
and
Lead Times
ERP and MRP
Supply Chain Management
Vendor Communication
(schedules, EDI, advanced shipping notice,
e-commerce, etc.)
Figure 14.11
ERP and MRP
Finance/
Accounting
Accounts
Receivable
General
Ledger
Accounts
Payable
Payroll
Table 13.6
Figure 14.11
Enterprise Resource Planning
(ERP)
ERP can be highly customized to
meet specifc business
requirements
Enterprise application integration
software (EAI) allows ERP systems
to be integrated with
Warehouse management
Logistics
Electronic catalogs
Quality management
Enterprise Resource Planning
(ERP)
ERP systems have the potential to
Reduce transaction costs
Increase the speed and accuracy of
information
Facilitates a strategic emphasis on
JIT systems and integration
Advantages of ERP Systems
1. Provides integration of the supply chain,
production, and administration
2. Creates commonality of databases
3. Can incorporate improved best
processes
4. Increases communication and
collaboration between business units
and sites
5. Has an of-the-shelf software database
6. May provide a strategic advantage
Disadvantages of ERP
Systems
1. Is very expensive to purchase and even
more so to customize
2. Implementation may require major
changes in the company and its
processes
3. Is so complex that many companies
cannot adjust to it
4. Involves an ongoing, possibly never
completed, process for implementation
5. Expertise is limited with ongoing stafng
problems
SAP’s ERP Modules
Figure 14.12
Cash to Cash
Covers all fnancial related activity:
Accounts receivable
General ledger
Accounts payable
Treasury
Promote to Deliver
Covers front-end
customer-oriented
activities:
Marketing
Quote and order
processing
Transportation
Documentation and
labeling
After sales service
Warranty and
guarantees
Design to Manufacture
Covers internal production activities:
Design
Shop foor
engineering
reporting
Production
Contract/project
engineering
management
Plant
Subcontractor
maintenance
Recruit
to Hire
management
Covers all HR- and payroll-oriented
activity:
Time and attendance Payroll
Travel and expenses
Cash management
Asset management
Procure to Pay
Covers sourcing
activities:
Vendor sourcing
Purchase
requisitioning
Purchase ordering
Purchase contracts
Inbound logistics
Supplier invoicing/
matching
Supplier payment/
settlement
Supplier
performance
Dock to Dispatch
Covers internal inventory management:
Warehousing
Forecasting
Distribution planning
Replenishment planning
Physical inventory
Material handling
Example I
Sebuah perusahaan kayu yang membuat produk X
menerima 2 pesanan, yaitu sebesar 100 unit yang
harus selesai pada awal minggu ke-4 dan sebesar
150 unit yang harus selesai pada awal minggu ke8. Produk X terdiri dari 4 unit bagian A dan 2 unit
bagian B. Bagian A dibuat sendiri oleh perusahaan
yang membutuhkan waktu selama 1 minggu.
Bagian B dipesan dari luar dengan lead time 2
minggu.Untuk merakit produk X dibutuhkan waktu
1 minggu. Persediaan bagian A ada 70 unit.
Tentukan rencana kebutuhan material untuk
membuat produk tersebut,
a. Dengan metode lot for lot ordering
b. Dengan metode lot size ordering dengan ELS
workshe
produk A 470 unit dan ELS produk B 320 unit.
et
Example II
Demand
Supra
7th week: 15 units
X-Trim
8th week: 10 units.
IR , Lot Size & Lead
Time
SUPRA: 5, lot4lot (1),
2
X: 5, 25, 1
F: 10, 30, 1
M: 0, 1, 1
W: 2, 12, 3
X-TRIM: 2, 1, 2
K: 3, 1, 1
Q: 15, 30, 1
Requirements
Planning (MRP)
Budi Harsanto
Dept. of Management & Business, Faculty of Economics, Universitas Padjadjaran
budi.harsanto@fe.unpad.ac.id
Review Last Topic
• INVENTORY MANAGEMENT
– Probabilistic Models and Safety Stock
– Single Period Model
2
Today Outline
• MRP
– Dependent Demand
– Dependent Inventory Model
Requirements
– MRP Structure
– MRP Management
– Lot Sizing Technique
3
Operations
Management
Chapter 14 –
Material Requirements
Planning (MRP) and
ERP PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
Benefts of MRP
1. Better response to customer
orders
2. Faster response to market
changes
3. Improved utilization of facilities
and labor
4. Reduced inventory levels
Dependent Demand
The demand for one item is
related to the demand for
another item
Given a quantity for the end
item, the demand for all parts
and components can be
calculated
In general, used whenever a
schedule can be established for
an item
Dependent Demand
Efective use of dependent
demand inventory models requires
the following
1.
2.
3.
4.
5.
Master production schedule
Specifcations or bill of material
Inventory availability
Purchase orders outstanding
Lead times
Master Production Schedule
(MPS)
Specifes what is to be made and when
Must be in accordance with the
aggregate production plan
Inputs from fnancial plans, customer
demand, engineering, supplier
performance
As the process moves from planning to
execution, each step must be tested for
feasibility
The MPS is the result of the production
planning process
Master Production Schedule
(MPS)
MPS is established in terms of specifc
products
Schedule must be followed for a
reasonable length of time
The MPS is quite often fxed or frozen in
the near term part of the plan
The MPS is a rolling schedule
The MPS is a statement of what is to be
produced, not a forecast of demand
The Planning Process
Production
Capacity
Inventory
Marketing
Customer
demand
Procurement
Supplier
performance
Management
Return on
investment
Capital
Finance
Cash fow
Human resources
Manpower
planning
Aggregate
production
plan
Master
production
schedule
Engineering
Design
completion
Change
production
plan?
Figure 14.1
The Planning Process
Master
production
schedule
Change
requirements?
Change
master
production
schedule?
Material
requirements
plan
Change
capacity?
Capacity
requirements
plan
No
Realistic?
Yes
Is capacity
plan being
met?
Is
execution
meeting
the plan?
Execute capacity
plans
Execute
material plans
Figure 14.1
Aggregate
Production Plan
Months
Aggregate Production Plan
(Shows the total
quantity of amplifers)
Weeks
Master Production Schedule
(Shows the specifc type and
quantity of amplifer to be
produced
240-watt amplifer
150-watt amplifer
75-watt amplifer
January
1,500
1
2
100
3
February
1,200
4
100
500
6
100
500
300
5
7
8
100
450
450
100
Figure 14.2
Master Production Schedule
(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-toorder or forecast) company
An end item in a continuous (stockto-forecast) company
Focus for Diferent
Process Strategies
Make to Order
(Process Focus)
Number of
end items
Stock to Forecast
(Product Focus)
Schedule fnished
product
Typical focus of the
master production
schedule
Schedule modules
Schedule orders
Number of
inputs
Examples:
Figure 14.3
Assemble to
Order or Forecast
(Repetitive)
Print shop
Motorcycles
Machine shop
Autos, TVs
Fine-dining restaurant Fast-food restaurant
Steel, Beer, Bread
Lightbulbs
Paper
MPS Examples
For Nancy’s Specialty Foods
Gross Requirements for Crabmeat Quiche
Day
Amount
6
50
7
8
100
9
47
10
60
11
12
110
13
75
14 and so on
Gross Requirements for Spinach Quiche
Day
7
8
9
Amount 100 200 150
10
11
12
60
13
75
14
15
100
16 and so on
Table 14.1
Bills of Material
List of components, ingredients,
and materials needed to make
product
Provides product structure
Items above given level are called
parents
Items below given level are called
children
BOM Example
Level
Product structure for “Awesome” (A)
0
A
1
2
3
Std. 12” Speaker kit
B(2) Std. 12” Speaker kit
E(2)
D(2)
C(3) w/ amp-booster
F(2) Std. 12” Speaker
E(2)
Packing box and
installation kit of wire,
bolts, and screws
booster
assembly
G(1)
D(2)
Amp-booster
12” Speaker
12” Speaker
BOM Example
Level
Product structure for “Awesome” (A)
0
A
Part
Part
Part
B:
C:
1
D:
2
3
2
x number of As =
(2)(50) =
xBnumber
of As =
(3)(50) =
(2) Std. 12” Speaker kit
x number of Bs
+ 2 x number of Fs =
Part E:
2 x number
2
E(2) of Bs
E(2)
+ 2 x number of Cs =
Part F: 2 x number of Cs
= (2)(150) =
Packing box and
Part G:
Fs =
(1)(300)
installation
kit of wire, =
3 D1(2)x number of
bolts, and screws
C(3)
100
Std. 12” Speaker kit
150
w/ amp-booster
(2)(100) + (2)(300) =
F(2) Std. 12” Speaker
G(1)
booster
(2)(100)
+ (2)(150) =
assembly
300
300 D(2)
Amp-booster
12” Speaker
12” Speaker
Bills of Material
Modular Bills
Modules are not fnal products but
components that can be
assembled into multiple end items
Can signifcantly simplify planning
and scheduling
Bills of Material
Planning Bills (Pseudo Bills)
Created to assign an artifcial
parent to the BOM
Used to group subassemblies to
reduce the number of items
planned and scheduled
Used to create standard “kits” for
production
Bills of Material
Phantom Bills
Describe subassemblies that exist
only temporarily
Are part of another assembly and
never go into inventory
Low-Level Coding
Item is coded at the lowest level at
which it occurs
BOMs are processed one level at a
time
Accurate Records
Accurate inventory records are
absolutely required for MRP (or
any dependent demand system)
to operate correctly
Generally MRP systems require
99% accuracy
Outstanding purchase orders
must accurately refect
quantities and scheduled
receipts
Lead Times
The time required to purchase,
produce, or assemble an item
For production – the sum of the
order, wait, move, setup, store,
and run times
For purchased items – the time
between the recognition of a
need and the availability of the
item for production
Time-Phased Product
Structure
Must have D and E
completed here so
production can
begin on B
Start production of D
1 week
D
2 weeks
to
produce
B
2 weeks
E
A
2 weeks
1 week
E
1 week
2 weeks
G
C
3 weeks
F
1 week
D
|
|
|
1
2
3
|
|
4
5
Time in weeks
|
|
|
6
7
8
Figure 14.4
MRP Structure
Data Files
Output Reports
BOM
MRP by
period report
Master
production
schedule
Lead times
Planned order
report
(Item master fle)
Inventory data
Purchasing data
Figure 14.5
MRP by
date
report
Material
requirement
planning
programs
(computer and
software)
Purchase advice
Exception reports
Order early or
late or not
needed
Order quantity
too small or too
large
Determining Gross
Requirements
Starts with a production schedule for
the end item – 50 units of Item A in
week 8
Using the lead time for the item,
determine the week in which the order
should be released – a 1 week lead
time means the order for 50 units
should be released in week 7
This step is often called “lead time
ofset” or “time phasing”
Determining Gross
Requirements
From the BOM, every Item A requires 2
Item Bs – 100 Item Bs are required in
week 7 to satisfy the order release for
Item A
The lead time for the Item B is 2 weeks
– release an order for 100 units of Item
B in week 5
The timing and quantity for component
requirements are determined by the
order release of the parent(s)
Determining Gross
Requirements
The process continues through the
entire BOM one level at a time – often
called “explosion”
By processing the BOM by level, items
with multiple parents are only
processed once, saving time and
resources and reducing confusion
Low-level coding ensures that each
item appears at only one level in the
BOM
Gross Requirements Plan
A.
B.
C.
E.
F.
G.
G.
1
2
3
4
Required date
Order release date
Required date
Order release date
Required date
Order release date
Required date
Order release date
Required date
Order release date
Required date
Order release date
Required date
Order release date
5
6
7
8
Week
Lead Time
50
100
100
200 300
600
300
300
600
300
150
200 300
300
200
200
150
50
1 week
2 weeks
1 week
2 weeks
3 weeks
1 week
2 weeks
Table 14.3
Net Requirements Plan
Net Requirements Plan
Determining Net
Requirements
Starts with a production schedule for
the end item – 50 units of Item A in
week 8
Because there are 10 Item As on hand,
only 40 are actually required – (net
requirement) = (gross requirement on- hand inventory)
The planned order receipt for Item A in
week 8 is 40 units – 40 = 50 - 10
Determining Net
Requirements
Following the lead time ofset
procedure, the planned order release
for Item A is now 40 units in week 7
The gross requirement for Item B is
now 80 units in week 7
There are 15 units of Item B on hand,
so the net requirement is 65 units in
week 7
A planned order receipt of 65 units in
week 7 generates a planned order
release of 65 units in week 5
Determining Net
Requirements
A planned order receipt of 65 units in
week 7 generates a planned order
release of 65 units in week 5
The on-hand inventory record for Item
B is updated to refect the use of the
15 items in inventory and shows no onhand inventory in week 8
This is referred to as the Gross-to-Net
calculation and is the third basic
function of the MRP process
Net Requirements Plan
The logic of net requirements
Gross
requirements
+
Allocations
Total requirements
–
On
hand
+
Scheduled
receipts
Available inventory
=
Net requirements
Gross Requirements
Schedule
Figure 14.6
S
A
B
B
C
Master schedule
for B
Lead time = 6 for S
Master schedule for S
sold directly
Lead time = 4 for A
Master schedule for A
Periods
5
6
7
40
Periods
Gross requirements: B
8
9 10 11
50
15
1
2
40+10
3
10 =50 40
C
8
9 10 11 12 13
40
4
50
5
20
6
20
7
15+30
=45
30
8
1
2
3
10 10
Therefore, these
are the gross
requirements for
B
MRP Planning Sheet
Figure 14.7
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 onhand inventory
MRP Management
MRP is a dynamic system
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 efective analysis of
changes
Lot-Sizing Techniques
Lot-for-lot techniques order just
what is required for production
based on net requirements
May not always be feasible
If setup costs are high, lot-for-lot can
be expensive
Economic order quantity (EOQ)
EOQ expects a known constant
demand and MRP systems often deal
with unknown and variable demand
Lot-Sizing Techniques
Part Period Balancing (PPB) looks
at future orders to determine most
economic lot size
The Wagner-Whitin algorithm is a
complex dynamic programming
technique
Assumes a fnite time horizon
Efective, but computationally
burdensome
MRP in Services
Some services or service items
are directly linked to demand for
other services
These can be treated as
dependent demand services or
items
Restaurants
Hospitals
Hotels
MRP in Services
(a) PRODUCT STRUCTURE TREE
Veal
picante
#10001
Helper one;
Work
Center #2
Figure 14.10
Cooked
linguini
#20002
Uncooked
linguini
#30004
Spinach
#20004
Chef;
Work
Center #1
Prepared veal
and sauce
#20003
Sauce
#3000
6
Asst. Chef;
Work
Center #3
Veal
#3000
5
MRP in Services
(b) BILL OF MATERIALS
Part
Number
Description
Quantity
Unit of
Measure
Unit
cost
10001
Veal picante
1
Serving
—
20002
Cooked linguini
1
Serving
—
20003
Prepared veal and sauce
1
Serving
—
20004
Spinach
0.1
Bag
30004
Uncooked linguini
0.5
Pound
—
30005
Veal
1
Serving
2.15
30006
Sauce
1
Serving
0.80
0.94
MRP in Services
(c) BILL OF LABOR FOR VEAL PICANTE
Labor Hours
Work Center
Operation
Labor Type
Setup Time
Run Time
1
Assemble dish Chef
.0069
.0041
2
Cook linguini
Helper one
.0005
.0022
3
Cook veal
and sauce
Assistant Chef
.0125
.0500
Enterprise Resource Planning
(ERP)
An extension of the MRP system
to tie in customers and suppliers
1. Allows automation and integration
of many business processes
2. Shares common data bases and
business practices
3. Produces information in real time
Coordinates business from
supplier evaluation to customer
invoicing
Enterprise Resource Planning
(ERP)
ERP modules include
Basic MRP
Finance
Human resources
Supply chain management (SCM)
Customer relationship
management (CRM)
ERP and MRP
Figure 14.11
ERP and MRP
Customer Relationship Management
Invoicing
Figure 14.11
Sales Order
(order entry,
product
confguration,
sales management)
Shipping
Distributors,
retailers,
and end users
ERP and MRP
Master
Production
Schedule
Inventory
Management
Bills of
Material
MRP
Work
Orders
Purchasing
and
Lead Times
Table 13.6
Figure 14.11
Routings
and
Lead Times
ERP and MRP
Supply Chain Management
Vendor Communication
(schedules, EDI, advanced shipping notice,
e-commerce, etc.)
Figure 14.11
ERP and MRP
Finance/
Accounting
Accounts
Receivable
General
Ledger
Accounts
Payable
Payroll
Table 13.6
Figure 14.11
Enterprise Resource Planning
(ERP)
ERP can be highly customized to
meet specifc business
requirements
Enterprise application integration
software (EAI) allows ERP systems
to be integrated with
Warehouse management
Logistics
Electronic catalogs
Quality management
Enterprise Resource Planning
(ERP)
ERP systems have the potential to
Reduce transaction costs
Increase the speed and accuracy of
information
Facilitates a strategic emphasis on
JIT systems and integration
Advantages of ERP Systems
1. Provides integration of the supply chain,
production, and administration
2. Creates commonality of databases
3. Can incorporate improved best
processes
4. Increases communication and
collaboration between business units
and sites
5. Has an of-the-shelf software database
6. May provide a strategic advantage
Disadvantages of ERP
Systems
1. Is very expensive to purchase and even
more so to customize
2. Implementation may require major
changes in the company and its
processes
3. Is so complex that many companies
cannot adjust to it
4. Involves an ongoing, possibly never
completed, process for implementation
5. Expertise is limited with ongoing stafng
problems
SAP’s ERP Modules
Figure 14.12
Cash to Cash
Covers all fnancial related activity:
Accounts receivable
General ledger
Accounts payable
Treasury
Promote to Deliver
Covers front-end
customer-oriented
activities:
Marketing
Quote and order
processing
Transportation
Documentation and
labeling
After sales service
Warranty and
guarantees
Design to Manufacture
Covers internal production activities:
Design
Shop foor
engineering
reporting
Production
Contract/project
engineering
management
Plant
Subcontractor
maintenance
Recruit
to Hire
management
Covers all HR- and payroll-oriented
activity:
Time and attendance Payroll
Travel and expenses
Cash management
Asset management
Procure to Pay
Covers sourcing
activities:
Vendor sourcing
Purchase
requisitioning
Purchase ordering
Purchase contracts
Inbound logistics
Supplier invoicing/
matching
Supplier payment/
settlement
Supplier
performance
Dock to Dispatch
Covers internal inventory management:
Warehousing
Forecasting
Distribution planning
Replenishment planning
Physical inventory
Material handling
Example I
Sebuah perusahaan kayu yang membuat produk X
menerima 2 pesanan, yaitu sebesar 100 unit yang
harus selesai pada awal minggu ke-4 dan sebesar
150 unit yang harus selesai pada awal minggu ke8. Produk X terdiri dari 4 unit bagian A dan 2 unit
bagian B. Bagian A dibuat sendiri oleh perusahaan
yang membutuhkan waktu selama 1 minggu.
Bagian B dipesan dari luar dengan lead time 2
minggu.Untuk merakit produk X dibutuhkan waktu
1 minggu. Persediaan bagian A ada 70 unit.
Tentukan rencana kebutuhan material untuk
membuat produk tersebut,
a. Dengan metode lot for lot ordering
b. Dengan metode lot size ordering dengan ELS
workshe
produk A 470 unit dan ELS produk B 320 unit.
et
Example II
Demand
Supra
7th week: 15 units
X-Trim
8th week: 10 units.
IR , Lot Size & Lead
Time
SUPRA: 5, lot4lot (1),
2
X: 5, 25, 1
F: 10, 30, 1
M: 0, 1, 1
W: 2, 12, 3
X-TRIM: 2, 1, 2
K: 3, 1, 1
Q: 15, 30, 1