Planning Requirements and Resources

Planning Requirements and Resources

 

  • Material Requirements Planning (MRP) – MRP systems attempt to support the activities of manufacturing, maintenance, or use by meeting the needs of the master schedule.  To determine needs, MRP systems need an accurate bill of materials for each final product or project.
    • MRP Inputs
      • Master production schedule – The whole MRP system is driven by the requirement forecast by time period (the master production schedule), which details how many end items are to be produced during a specified time period
      • Structured bill of materials (BOM) – uses information from the engineering and/or process records to detail the subcomponents necessary to manufacture one finished item.
      • Inventory record – contains information such as open orders. Lead times, and lot sixe policy so that the quantity and timing of orders can be calculated

 

The logic of MRP allows for simultaneous determination of how much and when to order.  The calculations hinge on the assumptions that all information is accurate and known with certainty and that the material will be ordered as required.

 

    • MRP Lot Sizing – Lot-sizing rules must be assigned to each item before the MRP plan can be computed.  The selection of a lot-sizing rule is important because it affects inventory holding costs and operations costs such as set-up costs.
      • Lot-for-lot – based on producing net requirements for each period, and does not take into account setup or inventory carrying cost, nor does it consider capacity limitations,
      • Economic order quantity (EOQ) – balances inventory carrying costs and set-up costs for each lot.
      • Least-total-cost (LTC) – compares the cost implications of various lot-sizing alternatives and selects the lot size that provides the least total cost.
      • Least-unit-cost – factors inventory holding and setup costs into the unit cost.
  • Capacity Requirement Planning (CRP) – translates the MRP plan into the required human and machine resources by workstation and time bucket.  CRP compares the required resources against a file of available resources.  If insufficient capacity exists, the manager must adjust the capacity or the mater production schedule.  The feedback loop to the master schedule results in the term closed-loop MRP to describe this development.
  • Manufacturing Resource Planning (MRP II) – links the firm’s planning processes with the financial system.  MRPII systems combine the capability of “what if” production scenario testing with financial and cash flow projections to help achieve the sales and profitability objectives of the firm.
  • Enterprise Resource Planning (ERP) Systems – software that allows all areas of a firm (production, sales, finance, marketing, human resources and supply) to combine and analyze information.  Fully Implemented ERP systems allow supply to be aware of orders received by sales, manufacturing to be aware of raw materials delivery status, sales to understand product or service lead times and availability, and financial transactions and commitments to be communicated directly into the financial accounting system.
  • Supply Implications of MRP – Procurement people must understand the production processes both of their own organizations and of their own suppliers.  The tighter nature of MRP-using organizations increases the responsibility of supply to be creative and flexible in providing assistance to minimize the inevitable problems which occur in supply lines.  The MRP system provides purchasers with an information window to production scheduling so that they are better able to use judgment in dealing with suppliers.