Supply Chain Management Ch.

15 Summary
Material Requirements Planning: a computerized inventory control and production planning
system
When to Use MRP
1. Dependent Demand
2. Discrete Demand
3. Complex Products
4. Erratic Orders
5. Assembly-to-Order

Assembly-to-Order: a manufacturing environment in which previously completed

subassemblies are configured to order
MRP Process Inputs
1. Master Production Schedule
Master Production Schedule: a schedule of finished products that drives the MRP process
Cumulative Lead Time: the total length of time needed to manufacture a product
Quantities in MPS
• The quantities represent production, not demand
• The quantities may consist of a combination of customer orders and demand forecasts
• The quantities represent what needs to be produced, not what can be produced
• The quantities represent end items that may or may not be finished goods

2. Product Structure File

Product Structure File: a file that contains a computerized bill of material for every item
produced
Bill of Material: a list of all the materials, parts and assemblies that make up a product
Types of Bills of Material
• Phantom Bill- subassemblies that are immediately consumed
• K-Bill- groups small, loose parts under one item number
• Modular Bill- bills used to plan the production of products with many optional features
• Time-Phased Bill- assembly chart shown against a time scale (forward or backward
scheduling)
 3. Item Master File
Item Master File: a database of information on every item produced, ordered or inventoried
Cycle Counting: taking physical count of inventory at various cycles during the year
MRP Process
1. Exploding the bill of material
2. Netting out inventory- process of adding and subtracting on-hand quantities and
scheduled receipts from gross requirements
3. Lot sizing- determining the quantities in which items are usually made or purchased
4. Time-phasing requirements- subtracting an item’s lead time from its due date to
determine when to order an item

Period Order Quantity: a lot sizing technique that orders at set time intervals
Capacity Requirements Planning: creates a load profile that identifies underloads and
overloads
CRP Process Inputs
1. The planned order releases
2. The routing file
3. An open orders file
Capacity: the maximum ability to produce
Utilization: the percent available time spent working
Efficiency: how well a machine or worker performs compared to a standard output level
Load: the standard hours of work assigned to a facility
Load Percent: the ratio of load to capacity
Load Profiles: a graphic comparison of load vs capacity

Leveling Underloads
1. Acquiring more work
2. Pulling work ahead that is scheduled for later periods
3. Reducing normal capacity
Leveling Overloads
1. Eliminate unnecessary requirements
2. Rerouting jobs to alternative machines
3. Splitting lots between two or more machines
4. Increasing normal capacity
5. Increasing efficiency of the operation
6. Pushing work back to later time periods
7. Revising the master schedule
Load Leveling: the process of balancing underloads and overloads

Relaxing MRP Assumptions

1. Material is not always the most constraining resource
2. Lead times vary
3. Not every transaction needs to be recorded
4. The shop floor may require a more sophisticated scheduling system
5. Scheduling in advance may not be appropriate for on-demand production

Enterprise Resource Planning: software that organizes and manages a company’s business
processes by sharing information across functional areas
ERP Modules
• Finance/Accounting
• Sales/Marketing
• Production/Materials Management
• Human Resources
ERP Implementation
1. Analyze business processes
2. Choose modules to implement
3. Align level of sophistication
4. Finalize delivery and access
5. Link with external partners
Customer Relationship Management: software that plans and executes business processes
involving customer interaction
Product Lifecycle Management: software that manages the product development process,
product lifecycles and design collaborations with suppliers and customers