Enterprise resource planning: Material Requirements Planning (MRP) Operations planning

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1 Enterprise resource planning: Material Requirements Planning (MRP) Operations planning

2 Material Requirements Planning Demand for a finished product is independent of all other parts/products Demand for a component part is dependent on some other parts/products Material planning is concerned with planning to meet dependent demand. ERP 2

3 MRP procedure Gross requirements: dependent demand for a part. Gross requirements Scheduled receipts Projected available balance Net requirements Planned order receipts Planned order releases ERP 3

4 Planned order releases: start period for a new batch. Planned order receipts: delivery period for a new batch. Gross requirements Scheduled receipts Projected available balance Net requirements Planned order receipts Planned order releases ERP 4

5 To get from gross requirements to planned order releases we need to know what is available: Scheduled receipts, WIP that will be available Beginning inventory (on-hand) Gross requirements Scheduled receipts 50 Projected available balance 20 Net requirements Planned order receipts Planned order releases ERP 5

6 Project inventory balances forward to determine when net requirements occur. Gross requirements Scheduled receipts 50 Projected available balance Net requirements 0 Planned order receipts Planned order releases ERP 6

7 Project inventory balances forward to determine when net requirements occur. Gross requirements Scheduled receipts 50 Projected available balance Net requirements 0 0 Planned order receipts Planned order releases ERP 7

8 Project inventory balances forward to determine when net requirements occur. This operation is called netting. Gross requirements Scheduled receipts 50 Projected available balance Net requirements Planned order receipts Planned order releases ERP 8

9 Plan on receiving a batch of parts (Planned Order Receipt) to cover any net requirements. We assume a lot sizing rule for this part EOQ = 50. Gross requirements Scheduled receipts 50 Projected available balance Net requirements Planned order receipts 50 Planned order releases ERP 9

10 Plan on releasing the batch of parts in advance so it will be completed when needed. This operation is called lead time offsetting. The planning lead time for this part is 1 period. Gross requirements Scheduled receipts 50 Projected available balance Net requirements Planned order receipts 50 Planned order releases 50 ERP 10

11 The same procedure is applied to period 4. Gross requirements Scheduled receipts 50 Projected available balance Net requirements Planned order receipts Planned order releases ERP 11

12 The same procedure is applied to period 5. Gross requirements Scheduled receipts 50 Projected available balance Net requirements Planned order receipts Planned order releases ERP 12

13 The same procedure is applied to period 6. Gross requirements Scheduled receipts 50 Projected available balance Net requirements Planned order receipts Planned order releases ERP 13

14 Low-level coding Determines order of MRP calculations Each BOM level is assigned a number Products are at level 0 Each part is assigned the number of the lowest level at which it appears in any BOM Calculate plans for level 0 first, then level 1, etc. Px Py level 0 B B(2) level 1 B is assigned a LLC = 1 level 2 is assigned a LLC = 2 ERP 14

15 Objective: find material plans (planned order releases) for all parts Data requirements MPS and BOMs Item master file: stable part data (lead time, lot-sizing, etc.) Subordinate IMF: transient part data (Current inventory and plans) Gross requirements are ultimately derived from MPS. But in calculations, the gross requirements for a part depend only on the planned order releases of the parent parts. ERP 15

16 Example Px B Py B(2) level 0 level 1 level 2 Product Px LT = 1 MPS 50 Planned order releases Product Py LT = 1 MPS 30 Planned order releases ERP 16

17 Offset MPS by lead time to get planned order releases Px B Py B(2) level 0 level 1 level 2 Product Px LT = 1 MPS 50 Planned order releases Product Py LT = 1 MPS 30 Planned order releases ERP 17

18 Planned order releases for Px and Py serve as basis for gross requirements of B Px B Py B(2) level 0 level 1 level 2 Product Px LT = 1 MPS 50 Planned order releases Product Py LT = 1 MPS 30 Planned order releases Part B LT = 2; EOQ = 100 Gross requirements ERP 18

19 Planned order releases for Px and Py serve as basis for gross requirements of B Px B Py B(2) level 0 level 1 level 2 Product Px LT = 1 MPS 50 Planned order releases Product Py LT = 1 MPS 30 Planned order releases Part B LT = 2; EOQ = 100 Gross requirements 0 50 ERP 19

20 Planned order releases for Px and Py serve as basis for gross requirements of B Px B Py B(2) level 0 level 1 level 2 Product Px LT = 1 MPS 50 Planned order releases Product Py LT = 1 MPS 30 Planned order releases Part B LT = 2; EOQ = 100 Gross requirements ERP 20

21 pply EOQ lot-sizing rule for part B. Px B Py B(2) level 0 level 1 level 2 Part B LT = 2; EOQ = 100 Gross requirements Scheduled receipts 100 Projected available balance 5 Net requirements Planned order receipts Planned order releases ERP 21

22 pply EOQ lot-sizing rule for part B. Px B Py B(2) level 0 level 1 level 2 Part B LT = 2; EOQ = 100 Gross requirements Scheduled receipts 100 Projected available balance Net requirements 0 0 Planned order receipts Planned order releases ERP 22

23 pply EOQ lot-sizing rule for part B. Px B Py B(2) level 0 level 1 level 2 Part B LT = 2; EOQ = 100 Gross requirements Scheduled receipts 100 Projected available balance Net requirements Planned order receipts Planned order releases ERP 23

24 pply EOQ lot-sizing rule for part B. Px B Py B(2) level 0 level 1 level 2 Part B LT = 2; EOQ = 100 Gross requirements Scheduled receipts 100 Projected available balance Net requirements Planned order receipts 100 Planned order releases ERP 24

25 pply EOQ lot-sizing rule for part B. Px B Py B(2) level 0 level 1 level 2 Part B LT = 2; EOQ = 100 Gross requirements Scheduled receipts 100 Projected available balance Net requirements Planned order receipts 100 Planned order releases 100 ERP 25

26 pply EOQ lot-sizing rule for part B. Px B Py B(2) level 0 level 1 level 2 Part B LT = 2; EOQ = 100 Gross requirements Scheduled receipts 100 Projected available balance Net requirements Planned order receipts Planned order releases ERP 26

27 Gross requirements for depend upon Px and B Px B Py B(2) level 0 level 1 level 2 Product Px LT = 1 MPS 50 Planned order releases Product B LT = 2 Planned order receipts Planned order releases Part LT = 3; EOQ = 200 Gross requirements ERP 27

28 Gross requirements for depend upon Px and B Px B Py B(2) level 0 level 1 level 2 Product Px LT = 1 MPS 50 Planned order releases Product B LT = 2 Planned order receipts Planned order releases Part LT = 3; EOQ = 200 Gross requirements ERP 28

29 pply EOQ lot-sizing rule for part. Px B Py B(2) level 0 level 1 level 2 Part LT = 3; EOQ = 200 Gross requirements Scheduled receipts 200 Projected available balance Net requirements Planned order receipts Planned order releases ERP 29

30 Rolling horizon and action bucket MRP looks forward for a fixed number of periods In the example the lot size is 50 units and LT = 1 Gross requirements Scheduled receipts 50 Projected available balance Net requirements Planned order receipts Planned order releases ERP 30

31 MRP looks forward for a fixed number of periods In the example the lot size is 50 units and LT = 1 New gross requirements in period 7 are Gross requirements Scheduled receipts 50 Projected available balance Net requirements Planned order receipts Planned order releases ERP 31

32 MRP looks forward for a fixed number of periods In the example the lot size is 50 units and LT = 1 New gross requirements in period 7 are 40 new planned order release is generated Gross requirements Scheduled receipts 50 Projected available balance Net requirements Planned order receipts Planned order releases ERP 32

33 The planned order release of 50 units in period 2 (the action bucket) requires an action: the planner checks that the parts are still needed the planner checks the availability of parts and capacity Gross requirements Scheduled receipts 50 Projected available balance Net requirements Planned order receipts Planned order releases ERP 33

34 The planned order release of 50 units in period 2 (the action bucket) requires an action: the planner checks that the parts are still needed the planner checks parts and capacity availability the order is released the planned order receipt becomes a scheduled receipt Gross requirements Scheduled receipts Projected available balance Net requirements Planned order receipts Planned order releases ERP 34

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