MRP, MRPII & ERP

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Master production schedule (MPS) factors
• Aggregate sales and operations plan
• This covers medium-term projections, without detailing individual orders, and identifies
the range of products that are expected to be manufactured.
• Materials requirements planning (MRP)
• The MPS can be broken down into requirements for each batch production run under a
materials requirements plan. The material requirements plan enables ordering of the
right net quantity of items at the right time.
• Capacity requirements planning (CRP)
• This examines the availability and capacity of machines to meet projected manufacturing
demands.
Benefits of continuous flow manufacturing (CFM)

• Simplify the manufacturing operation into product or process flows

• Organise manufacturing operations so that one day resembles the
next
• Establish flow or cycle times that are consistent with total man hours
• Use activity based costing methods to analyse in detail potential areas
of cost savings
 Materials requirements planning
• ‘a set of logically related procedures, decision rules, and records
designed to translate a master production schedule (MPS) into time-
phased net requirements, and the planned coverage of such
requirements for each component inventory item needed to
implement this schedule’
Main elements of an MRP system
Structure of a bill of materials
 Information contained in a BOM
• Quantity required
The quantity is one of the most important parts of the BOM because it tells us how many
parts are needed for a product.
• Item identification number
This tells us which part to order. It can be a catalogue number, unique product code, or any
other identification number.
• Description of item
This provides a check that the correct item is being ordered.
• Cost
This is included to show how much each part is per item and the total cost of all like parts.
• Total product cost
 Information in MRP inventory records
• Each item of stock
part number, part description, supplier’s lead time for supply
• Stock location
normally held on a location file following delivery
• Transaction records relating to each stock item
stored on a transaction file and may be linked to a purchasing management system such as
SAP or ORACLE
 Preparing an MRP schedule

• The first step is ‘exploding’ the bill of materials

• this lists how many we need of each item forming part of the finished product
• The next step is ‘netting’
• any stock on hand is subtracted from the gross requirement determined through
explosion
• The final step is ‘offsetting’
• this determines when manufacturing should start so that the finished items are available
when required
 Benefits of The MRP system
• Provides accurate and timely information to purchasing staff
• A scheduling tool in that it tells planners if due dates remain valid
• Anticipates shortages and/or slow moving stock
• Communicates priorities (what is wanted and in what sequence)
• Professional business discipline with the ability to build on and
expand
A closed-loop MRPII system
Implementation and effectiveness (Oliver Wright)
 ERP (Edgar F Codd, 1969)
• Enterprise resource planning is the practice of consolidating an
enterprise’s planning, manufacturing, logistics, supply chain, sales and
marketing efforts into one management system.,
• ERP combines all systems to form a single, integrated, software
program that operates off a single database enabling the sharing of
information and enhanced communication.
 Features of an ERP solution

• Flexible
An ERP system should be flexible to respond to the changing needs of an
enterprise.
• Modular
The ERP system has to have modular application architecture
• Comprehensive
It should be able to support a variety of organisational functions and must be
suitable for a wide range of business organisations
• Beyond the company
It should not be confined to the organisational boundaries; rather, it should
support online connectivity to the other business entities within the overall
organisation.
 ERP system considerations

• Who are our stakeholders?

• Which processes are most important now and why?
• Does the system meet our needs or go beyond them?
• Do we integrate over stages and if we do what sequence should we use?
• Who will be responsible for change management?
• Who will be our change champions?
• What is our business culture and what are its strengths?
• How can we maximise those strengths?
• What are our weak areas and how will we address issues caused by them?
• What will be the toughest changes and how will we address them?