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Operations

Management
Chapter 14
Material Requirements
Planning (MRP) and ERP
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
2008 Prentice Hall, Inc.

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Material Requirements
Planning (MRP)
- Dependent demand technique that
uses
bill-of-material,
inventory,
expected receipts, and a master
production schedule to determine
material requirements in a production
process.

2008 Prentice Hall, Inc.

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Benefits of MRP
1. Better response to customer
orders
2. Faster response to market
changes
3. Improved utilization of facilities
and labor
4. Reduced inventory levels
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Dependent Demand
The demand for one item is related
to the demand for another item
Given a quantity for the end item,
the demand for all parts and
components can be calculated
In general, used whenever a
schedule can be established for an
item
MRP is the common technique
2008 Prentice Hall, Inc.

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COMPONENTS OF MRP
DEPENDENT INVENTORY MODEL
REQUIREMENTS:
1.
2.
3.
4.
5.
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Master production schedule


Specifications or bill of material
Inventory availability
Purchase orders outstanding
Lead times
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Master Production Schedule


(MPS)
Specifies what is to be produced and when
Must be in accordance with the aggregate
production plan
Inputs from financial plans, customer
demand, engineering, supplier performance
The MPS is the result of the production
planning process

2008 Prentice Hall, Inc.

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Master Production Schedule


(MPS)
MPS is established in terms of specific
products
Schedule must be followed for a
reasonable length of time (production
cycle)
The MPS is quite often fixed or frozen in
the near term part of the plan
The MPS is a rolling schedule
The MPS is a statement of what is to be
produced, not a forecast of demand
2008 Prentice Hall, Inc.

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Aggregate
Production Plan
Months
Aggregate Production Plan
(Shows the total
quantity of amplifiers)
Weeks

January

February

1,500

1,200

Master Production Schedule


(Shows the specific type and
quantity of amplifier to be
produced
240-watt amplifier
150-watt amplifier
75-watt amplifier

100

100
500

100
500

300

100
450

450
100
Figure 14.2

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MPS Examples
For Nancys Specialty Foods
Gross Requirements for Crabmeat Quiche
Day
Amount

6
50

8
100

9
47

10
60

11

12
110

13
75

14 and so on

Gross Requirements for Spinach Quiche


Day
Amount

7
8
9
100 200 150

10

11

12
60

13
75

14

15
100

16 and so on
Table 14.1

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Bills of Material
List of components, ingredients,
and materials needed to make
product
Provides product structure
Items above given level are called
parents
Items below given level are called
children
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BOM Example
Level

Product structure for Awesome (A)

Std. 12 Speaker kit w/

Std. 12 Speaker kit w/


C(3) amp-booster

B(2) Std. 12 Speaker kit

E(2)

D(2)

F(2) Std. 12 Speaker

E(2)
Packing box and
installation kit of wire,
bolts, and screws

booster assembly

G(1)

D(2)

Amp-booster
12 Speaker
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12 Speaker
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BOM Example
Level

Product structure for Awesome (A)

D(2)

Part B: 2 x number of As =
(2)(50) =
100
Std. 12 Speaker150
kit w/
C:
3
x
number
of
As
=
(3)(50)
=
BPart
Std.
12
Speaker
kit
C
(2)
(3)
amp-booster
Part D: 2 x number of Bs
+ 2 x number of Fs = (2)(100) + (2)(300) = 800
Part E:
E(2) 2 x number of Bs
E(2)
F(2) Std. 12 Speaker
booster
+ 2 x number of Cs = (2)(100) + (2)(150)
= assembly
500
Part F: 2 x number of Cs =
(2)(150) =
300
Packing box and
Part G: 1installation
x numberkitofofFs
=
(1)(300)
300
wire,
G(1) =
D(2)
bolts, and screws

Amp-booster
12 Speaker
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12 Speaker
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Accurate Records
Accurate inventory records are
absolutely required for MRP (or
any dependent demand system) to
operate correctly
Generally MRP systems require
99% accuracy, if not
Outstanding purchase orders must
accurately reflect quantities and
scheduled receipts
2008 Prentice Hall, Inc.

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Lead Times
The time required to purchase,
produce, or assemble an item
For production the sum of the
order, wait, move, setup, store, and
run times
For purchased items the time
between the recognition of a need
and the availability of the item for
production
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Time-Phased Product
Structure
Must have D and E
completed here so
production can
begin on B

Start production of D
1 week

2 weeks to
produce

2 weeks

2 weeks

1 week

1 week

2 weeks

C
3 weeks

1 week

D
|

2008 Prentice Hall, Inc.

4
5
Time in weeks

Figure 14.4
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Gross Requirements Plan


A schedule that shows
(1) WHEN a material must be ordered from
suppliers
(2) WHEN production must start to meets its
demand by a particular date

2008 Prentice Hall, Inc.

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Gross Requirements Plan


Week
1
A.

Required date
Order release date

B.

Required date
Order release date

C.

Required date
Order release date

E.

Required date
Order release date

F.

Required date
Order release date

G.

Required date
Order release date

G.

Required date
Order release date

7
50
100

100
150
200

300

200

300

300
600
300

600
300

300

200

200

150

8 Lead Time
50

1 week
2 weeks
1 week
2 weeks
3 weeks
1 week
2 weeks

Table 14.3
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Net Requirements Plan


It shows the result of adjusting gross
requirements for inventory on hand
and scheduled receipts.

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Net Requirements Plan

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Net Requirements Plan

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Gracias mi amigos. Tu tienes


preguntas?

2008 Prentice Hall, Inc.

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