Chapter 12: Materials Requirement Planning (MRP) and Enterprise Resource Planning (ERP)

Strategic CHALLENGES of ERP system

1. Development cost of proprietary software 2. Cost and time required for employee training 3. Cost of future software upgrades.

Strategic OPPURTUNIES of ERP system

1. Increased flexibility 2. Strengthened relationships with customers and suppliers. 3. Identification or opportunities for continuous improvement. 4. Improved supply chain management through integrated planning and information sharing.

Primary Inputs for Materials Requirements Planning

1. Master Schedule 2. Bill of Materials 3. Inventory Records

Primary Outputs of Materials Requirement Planning

1. Planned Orders 2. Order Releases 3. Order Changes

3 Key Questions in planning for Depended Demand

1. What components are needed? 2. How many are needed? 3. When are they needed?

Enterprise Resource Planning (ERP)

A comprehensive planning system that offers an integrate approval approach to planning for all functional areas of a business. They are implemented in stages using combination of general and industry specific software modules.

Material Requirements Planning (MRP)

A computer-based info system designed to manage dependent demand. (Like the new coke machines)

Bill of Materials

A listing of all the components needed to produce one unit of product.

Dependent Demand

Demand for components to be used in the production of a finished product.

Manufacturing Resources Planning (MRP II)

Expanded approach to production planning that involves other functional areas and planning for capacity as well as material requirements.

Projected on Hand

Expected inventory to be on hand at the beginning of time period.(part of Materials Required Processing System Processing)

Distribution Resource Planning (DRP)

Extends concept of time-phased requirements to the management of the supply chain of a business. Focuses on the flow of finished products from a business to the final customer.

Net Requirements

Gross requirements less scheduled requirements and projected on hand.(part of Materials Required Processing System Processing)

Scheduled Requirements

Open orders previously scheduled to arrive in the period(part of Materials Required Processing System Processing)

Low-Level Coding

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

Planned Order Releases

The specific quantity of a component that should be ordered in a specific time bucket using standard lead time data. These are used for components from both outside vendors and in-house production.

Cumulative Lead Time

The sum of the lead times required to complete the sequential phases of a production process from component acquisition to finished product.

Capacity Requirements Planning (CRP)

The use of the MRP concept to determine short-range capacity requiremnts. Key output is load reports for each manufactoring work center or department.

Gross Requirements

Total expected demand for component during the time period (part of Materials Required Processing System Processing)

Net-Change Systems

Updated continuously as new information becomes available

Regenerative Systems

Updated periodically on a set schedule using batches of information.

Planned Order Receipts

the specific quantity of a component that should be ordered to be on hand at the beginning of a time bucket

Product Structure Tree

A visual depiction of the bill of materials that lists all required components of level or the point at which they are first needed.