ERP(Enterprise Resource Planning) & MRP

Transcription

1 ERP(Enterprise Resource Planning) & MRP Mr.Vijayakumar S 1

2 Session Objectives At the end of this session the delegate would have understood ERP ERP example SAP MRP and structure MRP1 & MRPII difference Lot size determination in MRP 2

3 ERP ERP is a complete enterprise wide business solution. It consists of software support modules such as marketing & sales,manufacturing,quality Intergration between modules is stressed without duplication of information This integration is accomplished through a database shared by all the application programs 3

4 Advantages of ERP Visibility of what is happening in all parts of Business Better control of operations which helps in continuous improvements The discipline of process based changes Capability to integrate total supplychain Better interaction with customer,supplier and other Business partners Improvement of Quality of Information 4

5 SAP Oracle Baan Peoplesoft ERP- Few known Brands 5

6 SAP AG S R/3 SAP AG, A German firm, is a world leader in ERP software. -Designed to operate in a threetier client/server configuration -Applications are fully integrated so that data are shared between all applications 6

7 R/3 System Major Functional Components Financial Accounting Sales & Distribution R/3 System Functional Components Human Resources Manufacturing & Logistics 7

8 Financial Accounting Accounts payable Accounts receivable Capital Investment. 8

9 Human Resources Payroll Benefits administration Applicant data administration Personnel development planning Workforce planning Schedule & shift planning Time management Travel expense accounting 9

10 Manufacturing & Logistics Materials management Plant maintenance Quality management Production planning & control Project management system 1

11 Sales and Distribution Prospect & customer management Sales order management Configuration management Distribution Export controls Shipping and transportation management Billing, invoicing, and rebate processing 11

12 ERP Implementation-Costs Software Personnel for Implementation Including changes needed to suit Business IT Infrastructure Training of Employees Cost of keeping alive and improvements 12

13 ERP Implementation Standard ERP package normally does not fit into company practices Many times the way process is done may need a change to suit ERP. This is where challenge of implementation comes Top management must be committed in ERP implementation Selecting ERP keeping long term costs and future changes needed is a important factor 13

14 MRP 14

15 Overview Resource Requirements Planning Material Requirements Planning (MRP) 15

16 Resource Requirements Planning Aggregate Planning Master Production Scheduling (MPS) Resource Requirements Planning Material Requirements Planning (MRP) Capacity Requirements Planning (CRP) 16

17 Material Requirements Planning (MRP) 17

18 MRP Assume a product has 1 items Procurement manager assuming 5% stock out, plans 95% of each item (service level) Probability that all 1 materials simultaneously available is =.95x.95x.. i.e. 6% He should expect 4 items to be short for assembly 18

19 Materials Requirements Planning (MRP) Computer based system Explodes Master Schedule (MPS) into required amounts of raw materials and subassemblies to support MPS Nets against current orders and inventories to develop production and purchased material ordering schedules Used for dependent items 19

20 Objectives of MRP Improve customer service Reduce inventory investment Improve plant operating efficiency 2

21 Inputs Service-Parts Orders and Forecasts Inventory Status File Master Production Schedule Bill of Materials File Elements of MRP MRP System Outputs Inventory Transaction Data Order Changes Planned Order Order Schedule Planning Performance Report Exception Reports 21

22 MRP Schematic PEMP- EMM Engineering design changes Bill of material file Firm orders from known customers Primary reports Planned order schedule for inventory and production control Aggregate product plan Master production Schedule (MPS) Material planning (MRP computer program) Forecasts of demand from random customers Secondary reports Inventory transactions Inventory record file Exception reports Planning reports Reports for performance control 22 The McGraw-Hill Companies, Inc., 24

23 MRP Computer Program Begins with number of end items needed Add service parts not included in MPS Explode MPS into gross requirements by consulting bill of materials file Modify gross requirements to get net requirements: Net Requirements = Gross Requirements + Allocated Inventory + Safety Stock - Inventory On Hand Offset orders to allow for lead time 23

24 Outputs of MRP Planned order schedule - quantity of material to be ordered in each time period Changes to planned orders - modifications to previous planned orders Secondary outputs: Exception reports Performance reports Planning reports 24

25 Material Requirements Planning System Based on a master production schedule, a material requirements planning system: Creates schedules identifying the specific parts and materials required to produce end items Determines exact unit numbers needed Determines the dates when orders for those materials should be released, based on lead times 25

26 Materials Parts Components Bill of Materials (BOM) File A Complete Product Description Production sequence Modular BOM Subassemblies Super BOM Fractional options 26

27 Inventory Records File Each inventory item carried as a separate file Status according to time buckets Pegging Identify each parent item that created demand 27

28 Primary MRP Reports PEMP- EMM256 Planned orders to be released at a future time Order release notices to execute the planned orders Changes in due dates of open orders due to rescheduling Cancellations or suspensions of open orders due to cancellation or suspension of orders on the master production schedule Inventory status data 28

29 Secondary MRP Reports Planning reports, for example, forecasting inventory requirements over a period of time Performance reports used to determine agreement between actual and programmed usage and costs Exception reports used to point out serious discrepancies, such as late or overdue orders 29

30 Lot-Sizing in MRP Lot-size is the quantity ordered/produced at one time Large lots are preferred because: Changeovers cost less and better capacity use Annual cost of purchase orders less Price breaks and transportation breaks can be utilized Small lots are preferred because: Lower inventory carrying cost Reduced risk of obsolescence Shorter cycle time to produce customer order 3

31 Economic Order Quantity (EOQ) does not consider quantity discounts does not always provide the most economical approach with lumpy demand Lot-for-Lot (LFL) Lot-Sizing Methods accommodates lumpy demand Period Order Quantity (POQ) The best method, resulting in least cost, depends on cost and demand patterns. 31

32 Example: Lot-Sizing Decision The net requirements for a material from an MRP schedule are: NET REQUIREMENTS WEEK 8 12 It costs $4 to change over the machines for this material in the affected work center. It costs $.4 per unit when one unit of this material must be carried in inventory from one week to the next. Identify the lot-sizing method that results in the least carrying and changeover costs for the 8-week schedule

33 Example: Lot-Sizing Decision Lot-for-Lot Method WEEK NET REQUIREMENTS BEGINNING INVENTORY PRODUCTION LOTS ENDING INVENTORY Carrying Cost = ($.4) = $ Changeover Cost = 6($4) = $2,4 Total = $2,4 33

34 Example: Lot-Sizing Decision Economic Order Quantity (EOQ) Method S = $4. D = [(Net Req. for 8 wks)/8 weeks)](5 weeks/year) = (64/8)(5) = 4, C = ($.4 per week)(5 weeks/year) = $2. 2 D S 2 (4, )(4 ) E O Q = = = C 2 34

35 Example: Lot-Sizing Decision Economic Order Quantity (EOQ) Method WEEK NET REQUIREMENTS BEGINNING INVENTORY PRODUCTION LOTS ENDING INVENTORY Carrying Cost = 4855($.4) = $1,942 Changeover Cost = 6($4) = $2,4 Total = $4,342 35

36 Example: Lot-Sizing Decision Period Order Quantity (POQ) Method POQ = (# Weeks/year)/(# Orders/year) = 5/(D/EOQ) = 5/(4,/1,265) = 1.58 or 2 weeks 36

37 Example: Lot-Sizing Decision Period Order Quantity (POQ) Method WEEK NET REQUIREMENTS BEGINNING INVENTORY PRODUCTION LOTS ENDING INVENTORY Carrying Cost = 29($.4) = $1,16 Changeover Cost = 4($4) = $1,6 Total = $2,76 37

38 Example: Lot-Sizing Decision Summary Carrying Chg.Ovr. Total Method Cost Cost Cost LFL 2,4 2,4 EOQ 1,942 2,4 4,342 POQ 1,16 1,6 2,76 38

39 MRP I to MRP II MRP I simply exploded demand (MPS) into required materials Triggering work order for inhouse parts & procurement notice for sourced items MRP II became Manufacturing Resource Planning which provides a closed-loop business management system Financial management Shop floor control Marketing Engineering Simulation studies 39

40 MRP and JIT MRP can be used in everything from custom job shops to assembly-line production JIT is more suited for repetitive Manufacturing The combination of MRP and JIT creates a hybrid manufacturing system and also called Flow manufacturing In JIT separate pull drawing from preceding stage happens 4

41 Summary Overview of ERP given Structure of MRP explained Lot size determination in MRP demonstrated MRP1 & MRPII difference highlighted 41

42 References Operations Management, 9 th edition, 22, Gaither and Frazier, South- Western/Thomson Learning Operations Management: For competitive advantage, 11 th edition 29 reprint, Chase, et al, TMH Special Indian edition 42