Chapter 12: MRP and ERP

Product structure tree

A visual depiction of the requirements in a bill of materials, where all components are listed by levels

ERP as a strategic planning tool

-Can improve supply chain management -Stronger links between their customers and their supplier -Makes the organization more capable of satisfying changing customer requirements -Offers opportunities for continuous improvement

Enterprise resource planning (ERP)

-ERP was the next step in an evolution that began with MRP and evolved into MRPII -ERP, like MRP II, typically has an MRP core -Represents an expanded effort to integrate standardized that will permit information sharing among different areas of an organization in order to manage the system more effectively -ERP systems are composed of a collection of integrated modules

ERP strategic implications

-High initial cost -High cost to maintain -Need for future upgrades -Intensive training required

MRP Inputs: Master Schedule

-One of three primary inputs in MRP; states which end items are to be produced, when these are needed, and in what quantities. -Managers like to plan far enough into the future so they have reasonable estimates of upcoming demands -The master schedule should cover a period that is at least equivalent to the cumulative lead time

The MRP is designed to answer three questions:

1. What is needed? 2. How much is needed? 3. When is it needed?

Material requirements planning (MRP):

A computer-based information system that translates master schedule requirements for end items into time-phased requirements for subassemblies, components, and raw materials.

MRP Inputs: Bill of Materials

A listing of all of the assemblies, subassemblies, parts, and raw materials needed to produce one unit of a product

Planned orders

A schedule indicating the amount and timing of future orders

Order releases

Authorizing the execution of planned orders

MRP Benefits

Enables managers to easily -determine the quantities of each component for a given order size -To know when to release orders for each component -To be alerted when items need attention Additional benefits -The ability to track material requirements -The ability to evaluate capacity requirements -A means of allocating production time -The ability to easily determine inventory usage via back flushing -Exploding an end item's BOM to determine the quantities of the components that were used to make the item

MRP Inputs: Inventory Records

Includes information on the status of each item by time period, called time buckets

Low-level coding

Restructuring the bill of material so that multiple occurrences of a component all coincide with the lowest level at which the component occurs

Changes

Revisions of the dates or quantities, or the cancellation of orders

Cumulative lead time

The sum of the lead times that sequential phases of a process require, from ordering of parts or raw materials to completion of final assembly.

MRP Requirements

To implement an effective MRP system requires: -A computer and the necessary software to handle computations and maintain records -Accurate and up-to-date --Master schedules --Bills of materials --Inventory records -Integrity of data files