11 material requirements planning and enterprise resources planning:

MRP

• help determine what, when and how much to produce or purchase.

• focused on dependent demand: that arises from production plans of other things (comp, sub asses

• Constrast with independent demand, which comes directly from consumer order (eg FG)

• Inventory: Stock of any item or resource used in an organization.

  • Types:

    • Raw Materials (Raw M)

    • Semi-finished goods (Work In Progress - WIP)

    • Finished goods

Key inputs to MRP

1. Bill of materials (BOM): hierarchical structure showing parent-child relation and usage quantities.

   • eg item= a=1B+4C

   • item assigned low levels codes planning order

2. inventory records:

   • include item #, lot-sizing method, lead time, safety stock, on hand inv, scheduled receipts.

3. MPS: plan for end items based on demand forecasts and customers orders

Lot sizing methods

• Lot for Lot (l4l): orderPurchase or variable production costs.

• FOQ: Order in Fixed multiple Storage and capital costs associated with maintaining inventory.

• POQ: order for demand over a fixed # of periods.

Key Terminology Developing the MPS:

• Steps:

  1. Determine projected requirement (max of forecast and actual order)

  2. calc projected available balance:

     • PaB=Oh-SS

  3. Determine MPS quantity & MPS start (based lot sizing and lead time)

MRP procedure:

• procedure:

  1. plan by level based on low-level code.

  2. steps:

     • determine gross req

     • cal PAB

  3. determine planned reciepts and POR

     • PR: qaunity needed to satisfy GR

     • POR: PR offset by lead time.

  4. Scenarios:

     • planning for items w/no inventory and using L4L and lead time=0.

     • adjusting gross req when producing multiple parent items

     • incorp exisiting inv (PAB) into calc

• Classes:

  • A: Top 20% of items (highest dollar volume).

  • B: Next 30% of items.

  • C: Remaining 50% of items (lowest dollar volume).

• Control Strategy: Frequent reviews for A-class items, less frequent reviews for B & C.

  • Example: Home theater systems and computers categorized as A due to high monthly dollar usage.

MRII

• expanded version of MRP includes capacity requirements planning and additional planning functions.

  • sales and op planning:

  • produc control

  • costing

  • inv manage

    • acc(payable/receivable)

• ERP:

  • erp: is an enterprise-wide system that integrates all business function

  • operation, sales, finance, HR, etc.

• two main purpose:

  • 1. trans processing: real time business transactions using a central database.

  • 2. decision support: provides tools and info to assist management decision making

Supply chain management:

• Continuous Review System (Q System): supply chain is a network of interrelated processes across firms involved in producing and delivering good/services to end consumers.

• SCM: total system approach to managing material, service, and info flows across supply chain.

SCM responsibility:

• 1. strategy and design: design supply network: Facility location, # of suppliers, capacities.

  • sourcing decisions: make or buy, supplier selector

• 2. planning and operations:

  • demand forecasting: planning production, inv and distribution

  • transportation management

  • order fulfillment and IT support.

Time Between Orders (TBO) The bullwhip effect:

• DEF: An increase in order variability as we move up supply chain

• causes: behavioral, overreaction, lack of systems thinking

• systematic

  • demand forecast updating: leads to order inflation.

Continuous Review System: Decision Variables

• Order Quantity: Use EOQ.

• Reorder Point (R): Based on demand during lead time.

• Service Level: Set reorder point to meet desired service level (e.g., 95%).

• When Demand is Uncertain:

  • Demand during lead time (DDLT) assumed normally distributed.

  • Reorder point incorporates safety stock to maintain service level.

    • Example: Daily demand = 60 units, lead time = 6 days. Compute R to maintain a 95% service level.