Supply Chain: Chapter 6

Advantages of ERP

Utilizes the idea of centralized and shared database management to tie the entire organization together; deal directly with suppliers and customers able to access inventory and delivery info; eliminates the inconsistency created when different functional areas use different systems, Bullwhip effect is minimized along with supply chain inventories

Resource Requirement Planning (RRP)

a long-range capacity planning module, checks whether aggregate resources are capable of satisfying the aggregate production. Resources considered include gross labor hours & machine hours

Match or tracking capacity strategy

Moderate strategy that adjusts capacity in small amounts in response to demand and changing market conditions

rough-cut (or Medium Range) capacity plan (RCCP)

used to check feasibility of MPS (Master Production Schedule). Converts MPS from production needed to capacity required, then compares it to capacity available

Difference between DRP and MRP

while MRP (Dependent demand situation) is driven by the production schedule... DRP (independent Demand setting) is driven by customer demand of the finished goods

Lot Size

MRP: order size for MRP logic

Components

MRP: parts demanded by a parent.

MRP (Material Requirements Planning)

A computer-based materials management system that calculates the exact quantities, need dates, & planned order releases for subassemblies & materials required to manufacture a final product. Disadvantage: - loss of visibility, especially acute for products with a deep BOM, & ignores capacity & shop floor conditions.

Major ERP applications

Accounting and finance, Customer relationship management, Human resource management, Manufacturing, Supplier relationship management, Supply chain management:

Enterprise Resource Planning Systems (ERP)

Broadly used industrial term to describe the multi-module application software for managing an enterprise's functional activities, suppliers and customers;

Single integrator solution

ERP Implementation: pick all the desired applications from a single vendor

Best of breed

ERP Implementation: pick the best application for each individual function. The resulting system includes several different applications that must be integrated to work as a single coordinated system to achieve the global scope required by the ERP

Projected on-hand inventory

MRP: Projected closing inventory at end of period. Beginning inventory minus gross requirement, plus scheduled receipt & planned receipt & planned receipt from planned order releases.

Safety Stock

MRP: Protects against uncertainties in demand supply, quality, & lead time

Pegging

MRP: Relates gross requirements for a part to the planned order releases

Planned order release

MRP: Specific order to be released to the shop or to the supplier.

Net requirement

MRP: The unsatisfied item requirement for a specific time period. Gross requirement for period minus current on-hand inventory.

Time Bucket

MRP: Time period used on the MRP. Days or weeks

Single integrator implementation problems

Lack of adequate resources, Lack of proper training, Lack of communication, incompatible system environment

Scheduled receipt

MRP: A committed order awaiting delivery for a specific period.

Gross requirement

MRP: A time-phased requirement prior to netting out on-hand inventory & lead-time

Parent

MRP: Item generating demand for lower-level components.

Planning Factor

MRP: Number of components needed to produce a unit of the parent item

Firmed Planned order

MRP: Planned order that the MRP computer logic system does not automatically change when conditions change to prevent system nervousness

Explosion

MRP: Process of converting a parent item's planned order releases into component gross requirements

Low-level coding

MRP: assigns the lowest level on BOM to all common components to avoid duplicate MRP computations

Lag capacity strategy

a reactive approach that adjusts its capacity in response to demand... conservative approach that can often result in excess inventory and idle capacity; In favorable market conditions it does not add capacity until the firm is operating at full capacity

Capacity requirement planning (CRP)

a short-range capacity planning technique that is used to check the feasibility of the material requirements plan

Distribution requirements planning (DRP)

a time-phased finished good inventory replenishment plan in a distribution network; logical extension of the MRP system & ties physical distribution to manufacturing planning and control system

Disadvantage of Best of Breed

multiple software infrastructures and databases may have to be used to link the multiple applications obtained from different vendors; May severely affect the ability of the system to update the databases rapidly and efficiently

Excess (or insufficient) capacity

prevents firm from taking advantage of the efficiency of manufacturing planning & control system

Lead Capacity Strategy

proactive approach that adds or subtracts capacity in anticipation of future market conditions and demand