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Materials Requirements Planning

Independent and Dependent Demand


Independent Demand

Dependent Demand

C(2)

B(4)

D(2)

E(1)

D(3)

F(2)

Independent demand is uncertain.


Dependent demand is certain.

Dependent Demand
Dependent demand: Demand for items that are
subassemblies or component parts to be used in
production of finished goods.
Once the independent demand is known, the dependent
demand can be determined.

Demand Characteristics
Independent demand

Dependent demand

100 x 1 =
100 tabletops

100 x 4 = 400 table legs

100 tables
Continuous demand

Discrete demand
400

300

No. of tables

No. of tables

400

200
100
1

3
Week

300
200
100

5
M T W Th F

M T W Th F

Material Requirements Planning


Defined
Materials requirements planning (MRP) is a
computerized inventory planning and control system
for determining when (no earlier and no later) and how
many of each of the parts, components, and materials
should be ordered or produced.
It translates master schedule requirements for end
items
into
time-phased
requirements
for
subassemblies, components and raw materials.

Dependent demand drives MRP


MRP is a software system

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

Aggregate
production
plan

Firm orders
from known
customers

Engineering
design
changes

Master production
Schedule (MPS)

Bill of
material
file

Material
planning
(MRP
computer
program)

Forecasts
of demand
from random
customers

Inventory
transactions

Inventory
record file

Secondary reports
Primary reports
Planned order schedule for
inventory and production
control (work orders,
purchase orders),
rescheduling notices

Exception reports
Planning reports
Reports for performance
control
The McGraw-Hill Companies, Inc., 2004

MRP System
MRP Inputs

MRP Processing

MRP Outputs
Changes
Order releases

Master
schedule

Planned-order
schedules
Primary
reports

Bill of
materials

Inventory
records

MRP computer
programs

Exception reports

Planning reports

Secondary
reports

Performancecontrol
reports

Inventory
transaction

MRP Inputs 1:
Master Production Schedule
Drives MRP process with a schedule of finished products;
states which end items are to be produced, when these
are needed, and in what quantities.
Quantities may consist of a combination of customer
orders & demand forecasts
Quantities represent what needs to be produced, not what
can be produced

Master Production Schedule (MPS)


Time-phased plan specifying how many and when the
firm plans to build each end item
Aggregate Plan
(Product Groups)

MPS
(Specific End Items)

Master Production Schedule


Shows items to be produced
Derived from aggregate plan
Example:
Item / Week
Clipboard
Lapdesk
Lapboard
Pencil Case

Oct 3 Oct. 10 Oct. 17 Oct.24 Oct. 31


85
95
120
100
100
0
50
0
50
0
75
120
47
20
17
125
125
125
125
125

MRP Inputs 2: Bill-of-Materials


Bill of materials (BOM): One of the three primary inputs of
MRP; a listing of all of the raw materials, parts,
subassemblies, and assemblies needed to produce one
unit of a product.
Product structure tree: Visual depiction of the requirements
in a bill of materials, where all components are listed by
levels.

Product Structure Tree: Example 1


Level
0
1

Chair
Leg
Assembly

2 Legs (2)

Cross
bar

Seat

Back
Assembly

Side Cross
Back
Rails (2) bar Supports (3)

Product Structure Tree: Example 2


Bicycle(1)
P/N 1000
Handle Bars (1)
P/N 1001

Frame Assembly (1)


P/N 1002

Wheels (2)
P/N 1003

Frame (1)
P/N 1004

Product Drawing: Example 3


Clipboard

Top clip (1)

Pivot (1)

Bottom clip (1)

Spring (1)

Rivets (2)
Finished clipboard

Pressboard (1)

Product Structure Tree ( Example 3)


Clipboard

Pressboard
(1)

Top Clip
(1)

Level 0

Clip Assy
(1)

Bottom Clip
(1)

Rivets
(2)

Pivot
(1)

Level 1

Spring
(1)

Level 2

MRP Inputs 3: Inventory Records File


One of the three primary inputs of MRP
Includes information on the inventory status of
each item by time period
Gross requirements
Scheduled receipts
Amount on hand
Lead times
Lot sizes
And more....

MRP Terminology (1 of 3)
Gross requirements
Scheduled receipts

Projected on hand
Net requirements

Planned-order receipts
Planned-order releases

MPR Terminology (2 of 3)
Gross requirements
Total expected demand
Scheduled receipts
Open orders scheduled to arrive
Projected on hand

Expected inventory on hand at the beginning


of each time period

MRP Processing Terminology (3 of 3)


Net requirements
Actual amount needed in each time period
Gross requirements available inventory
Planned-order receipts
Quantity expected to be received at the beginning of the
period
Offset by lead time

Planned-order releases
Planned amount to be ordered in each time period

MRP Processing Logic:


Assembly Time Chart
Procurement of
raw material D Fabrication
of part E
Subassembly A
Procurement of
raw material F
Procurement of
part C

Final assembly
and inspection

Procurement of
part H
Fabrication
of part G

Procurement of
raw material I

Subassembly B

10

11

Weeks

Calculation of Gross Requirements


A

S
C

10 11
15

Lead time = 4 for A


Master schedule for A

Periods

6 7
40

Periods
Gross requirements: B

8
50

10

40+10
= 50

Lead time = 6 for S


Master schedule for S

40 50 20

9 10 11 12 13
40
20
30

7
15+30
= 45

Master schedule
for S sold directly

1 2
10 10

Therefore, these are


the gross
requirements for B

The MRP Matrix


ITEM NAME OR NO.
LLC - LOW LEVEL CODE
LOT SIZE QTY MADE IN
LY - LEAD TIME

Gross Requirements
Scheduled Receipts
Projected on Hand
Net Requirements

Planned Order
Receipts
Planned Order
Releases

Beg Inv

PERIOD
2
3
4

Derived from MPS or


planned order releases of the
parent
On order and scheduled to be
received
Anticipated quantity on hand
at the end of the period
Gross requirements net of
inventory and scheduled
receipts
When orders need to be
received
When orders need to be
placed to be received on time

MRP Processing:
Example 1-School Mate Products

Master Production Schedule

Clipboard
Lapdesk

85
0

95
60

120
0

100
60

100
0

Item Master File (nventory record file


On hand
On order
(sch receipt)
LLC
Lot size
Lead time

CLIPBOARD
25
175 (Period 1)

LAPDESK
20
0

PRESSBOARD
150
0

0
L4L
1

0
Mult 50
1

1
Min 100
1

School Mate Products


Product Structure Record

Clipboard

Level 0

Clip Assy
(1)

Pressboard
(1)

Rivets
(2)

Level 1

Lapdesk

Pressboard
(2)

Trim
(3)

Level 0

Beanbag
(1)

Glue
(4 oz)

Level 1

School Mate Products


ITEM: CLIPBOARD

LLC: 0

LOT SIZE: L4L

Gross Requirements

85

95

120

100

100

Scheduled Receipts

175

Projected on Hand
Net Requirements
Planned Order Receipts
Planned Order Releases

LT: 1

PERIOD

25

School Mate Products


ITEM: CLIPBOARD

LLC: 0

LOT SIZE: L4L

Gross Requirements

85

95

120

100

100

Scheduled Receipts

175

Projected on Hand
Net Requirements

LT: 1

PERIOD

25

115
0

Planned Order Receipts


Planned Order Releases

(25 + 175) = 200 units available


(200 - 85) = 115 on hand at the end of Period 1

School Mate Products


ITEM: CLIPBOARD

LLC: 0

LOT SIZE: L4L

Gross Requirements

85

95

120

100

100

Scheduled Receipts

175

Projected on Hand
Net Requirements

LT: 1

PERIOD

25

115

20

Planned Order Receipts


Planned Order Releases

115 units available


(115 - 85) = 20 on hand at the end of Period 2

School Mate Products


ITEM: CLIPBOARD

LLC: 0

LOT SIZE: L4L

Gross Requirements

85

95

120

100

100

Scheduled Receipts

175
115

20

100

Projected on Hand
Net Requirements

LT: 1

PERIOD

25

Planned Order Receipts


Planned Order Releases

100
100

20 units available
(20 - 120) = -100 100 additional Clipboards are required
Order must be placed in Period 2 to be received in Period 3

School Mate Products


ITEM: CLIPBOARD

LLC: 0

LOT SIZE: L4L

Gross Requirements

85

95

120

100

100

Scheduled Receipts

175
115

20

100

100

100

100

100

100

100

100

Projected on Hand
Net Requirements

LT: 1

PERIOD

25

Planned Order Receipts


Planned Order Releases

100

Following the same logic Gross Requirements in Periods 4


and 5 develop Net Requirements, Planned Order Receipts, and
Planned Order Releases

School Mate Products


ITEM: LAPDESK

LLC: 0

LOT SIZE: MULT 50

LT: 1

Gross Requirements

Net Requirements
Planned Order Receipts
Planned Order Releases

2
0

Scheduled Receipts
Projected on Hand

PERIOD

20

60

4
0

60

5
0

School Mate Products


ITEM: LAPDESK

LLC: 0

LOT SIZE: MULT 50

LT: 1

Gross Requirements

PERIOD
1

60

60

20

10

10

40

50

50

50

Scheduled Receipts
Projected on Hand
Net Requirements

20

Planned Order Receipts


Planned Order Releases

50

50

Following the same logic, the Lapdesk MRP matrix is


completed as shown

School Mate Products


ITEM: CLIPBOARD
LOT SIZE: L4L

LLC: 0
LT: 1

Planned Order Releases


ITEM: LAPDESK
LOT SIZE: MULT 50

LLC: 0
LT: 1

Planned Order Releases

ITEM: PRESSBOARD LLC: 0


LOT SIZE: MIN 100
LT: 1
Gross Requirements
Scheduled Receipts
Projected on Hand
150
Net Requirements
Planned Order Receipts
Planned Order Releases

PERIOD
3

100

100

100

PERIOD
3

50

50

PERIOD
3

School Mate Products


ITEM: CLIPBOARD
LOT SIZE: L4L

LLC: 0
LT: 1

Planned Order Releases


ITEM: LAPDESK
LOT SIZE: MULT 50

LLC: 0
LT: 1

Planned Order Releases

ITEM: PRESSBOARD LLC: 0


LOT SIZE: MIN 100
LT: 1
Gross Requirements
Scheduled Receipts
Projected on Hand
150
Net Requirements
Planned Order Receipts
Planned Order Releases

PERIOD
3

100

100

100

x1

x1

PERIOD
3

x1
1
50

x2
1
100

50

x2

PERIOD
2
3
4
100
200
100

5
0

School Mate Products


ITEM: CLIPBOARD
LOT SIZE: L4L

LLC: 0
LT: 1

Planned Order Releases


ITEM: LAPDESK
LOT SIZE: MULT 50

LLC: 0
LT: 1

Planned Order Releases

ITEM: PRESSBOARD LLC: 0


LOT SIZE: MIN 100
LT: 1
Gross Requirements
Scheduled Receipts
Projected on Hand
150
Net Requirements
Planned Order Receipts
Planned Order Releases

PERIOD
3

100

100

100

PERIOD
3

50

50

1
100

PERIOD
2
3
4
100
200
100

50

100

50
50
100
150

0
150
150
100

0
100
100

5
0
0

School Mate Products


Planned Order Report

PERIOD
ITEM

Clipboard
Lapdesk
Pressboard

50
100

100

100
50
100

100

150

MRP Processing:
Example 2
Item
X
A
B
C
D

X
A(2)
C(3)

B(1)
C(2)

On-Hand Lead Time (Weeks)


50
2
75
3
25
1
10
2
20
2

D(5)

Requirements include 95 units (80 firm orders and 15 forecast) of X


in week 10

A(2)

It takes
2 As for
each X

X
LT=2
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20

Day:
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release

10
95

50 50

50

50

50

50

50

50

50

50
45
45

45
90
75 75

75

75

75

75

75

75
15
15

15
45
25 25

25

25

25

25

20
40

45
10 10

10

10

35

25

10
35
35
40

40
40
100

20 20

20

20

20

80

20

20
80
80

25
20
20

X
LT=2

A(2)

B(1)

It takes
1 B for
each X

Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20

Day:
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release

10
95

50 50

50

50

50

50

50

50

50

50
45
45

45
90
75 75

75

75

75

75

75

75
15
15

15
45
25 25

25

25

25

25

20
40

45
10 10

10

10

35

25

10
35
35
40

40
40
100

20 20

20

20

20

80

20

20
80
80

25
20
20

X
LT=2

A(2)

C(3)

It takes 3
Cs for
each A

B(1)

Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20

Day:
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release

10
95

50 50

50

50

50

50

50

50

50

50
45
45

45
90
75 75

75

75

75

75

75

75
15
15

15
45
25 25

25

25

25

25

20
40

45
10 10

10

10

35

25

10
35
35
40

40
40
100

20 20

20

20

20

80

20

20
80
80

25
20
20

X
LT=2

A(2)

C(3)

B(1)

C(2)

It takes 2
Cs for
each B

Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20

Day:
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release

10
95

50 50

50

50

50

50

50

50

50

50
45
45

45
90
75 75

75

75

75

75

75

75
15
15

15
45
25 25

25

25

25

25

20
40

45
10 10

10

10

35

25

10
35
35
40

40
40
100

20 20

20

20

20

80

20

20
80
80

25
20
20

X
LT=2

A(2)

C(3)

B(1)

C(2)

D(5)

It takes 5
Ds for each
B

Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20

Day:
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release

10
95

50 50

50

50

50

50

50

50

50

50
45
45

45
90
75 75

75

75

75

75

75

75
15
15

15
45
25 25

25

25

25

25

20
40

45
10 10

10

10

35

25

10
35
35
40

40
40
100

20 20

20

20

20

80

20

20
80
80

25
20
20

MRP Outputs
Planned orders (schedule indicating the amount and
timing of orders)
Work orders
Purchase orders
Order releases (authorization for the execution of
planned orders)
Changes to previous plans or existing schedules
(revision of due dates or order quantities, or
cancellations of orders)
Action notices
Rescheduling notices

Other Considerations
Safety Stock
Lot sizing
Lot-for-lot ordering (L4L)
Economic order quantity
Part Period Balancing
Wagner-Whitin algorithm
& others

Which one to use? The one that is least costly!

Benefits of MRP
Reduced inventories without reduced customer service
Ability to track material requirements
Ability to evaluate capacity requirements
Means of allocating production time
Increased customer satisfaction due to meeting delivery
schedules
Faster response to market changes
Improved labor and equipment utilization.
Better inventory planning and scheduling

Extensions of MRP

Extensions of MRP
Closed loop MRP
Capacity planning - load reports
MRP II - Manufacturing Resources Planning
Enterprise Resources Planning

MRP and The Production Planning


Process
Forecast &
Firm Orders

Aggregate
Production
Planning

Material
Requirements
Planning

Master
Production
Scheduling

Resource
Availability

No, modify MPS


Capacity
Requirements
Planning

Realistic?

Yes

Shop
Floor
Schedules

Closed Loop MRP

Capacity Planning
Capacity requirements planning: The process of
determining short-range capacity requirements.
Load reports: Department or work center reports that
compare known and expected future capacity
requirements with projected capacity availability.
Time fences: Series of time intervals during which
order changes are allowed or restricted.

Capacity Requirements Planning


(CRP)
Computerized system that projects load from
material plan
Creates load profile
Identifies underloads and overloads

Capacity
Usually expressed as standard machine
hours or labor hours
Capacity = (no. machines or workers)
x (no. shifts) x (utilization)
x (efficiency)

Capacity Terms
Load reports
Department or work center reports that compare known
and expected future capacity requirements with projected
capacity availability.
Load profile
Compares released and planned orders with work center
capacity
Capacity
Productive capability; includes utilization and efficiency
Utilization
% of available working time spent working

More Capacity Terms


Efficiency
Refers to how well a machine or worker porforms
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 % = (load/capacity)x100%

Capacity Requirements Planning


MRP planned
order
releases

Routing
file

Capacity
requirements
planning

Load profile for


each machine center

Open
orders
file

Capacity Planning
Develop a tentative
master production
schedule

Use MRP to
simulate material
requirements
Convert material
requirements to
resource requirements

Revise tentative
master production
schedule
No

Is shop
capacity
adequate?
Yes

Firm up a portion
of the MPS

No

Can
capacity be
changed to meet
requirements

Yes

Change
capacity

Determining Loads and Capacities


2 copiers, 2 operators
5 days/wk, 8 hr/day
1/2 hr meals, 1/2 hr maintenance per day
The machines are new, so efficiency is estimated at 100%
Utilization
= 7/8 = 87.5%
Daily capacity
= 2 machines x 2 shifts
x 8 hours/shift x 100% efficiency
x 87.5% utilization
= 28 hours or 1,680 minutes

Determining Loads
and Capacities
JOB
NO.

NO. OF
COPIES

SETUP
TIME (MIN)

RUN TIME
(MIN/UNIT)

TOTAL TIME

10
20
30
40
50

500
1,000
5,000
10,000
2,000

5.2
10.6
3.4
11.2
15.3

0.08
0.10
0.12
0.14
0.10

5.2 + (500 x 0.08) =


45.2
10.6 + (1,000 x 0.10) = 110.6
3.4 + (5,000 x 0.12) = 603.4
11.2 + (10,000 x 0.14) = 1,411.2
15.3 + (2,000 x 0.10) = 215.3
2385.7 min

Load percent = 2,385.7 / 1,680 = 1.42 x 100% = 142%


Add another shift:
Daily capacity = 2 machines x 3 shifts x 8 hours/shift
x 100% efficiency x 87.5% utilization
= 42 hours or 2,520 minutes
Revised load percent = 2,385.7 / 2,520 = 0.9467 x 100% = 94.67%

Hours of capacity

Initial Load Profile


120
110
100
90
80
70
60
50
40
30
20
10
0

Normal
capacity

Time (weeks)

Remedies for Underloads


1. Acquire more work
2. Pull work ahead that is scheduled for later time
periods
3. Reduce normal capacity

Remedies for Overloads

Eliminate unnecessary requirements


Reroute jobs to alternative machines or work centers
Change lot-sizing or safety stock requirements
Split lots between two or more machines
Send pieces to the second operation before the entire lot has
completed the first operation
Increase normal capacity
Subcontract
Increase the efficiency of the operation
Push work back to later time periods
Revise master schedule

Hours of capacity

Adjusted Load Profile


120
110
100
90
80
70
60
50
40
30
20
10
0

Pull ahead
Overtime

Work
an
extra
shift

Push back
Push back

Time (weeks)

Normal
capacity

Manufacturing Resources Planning- MRP II


Expanded MRP with emphasis placed on integration of:
Financial planning
Marketing
Engineering
Purchasing
Manufacturing
Human resources

Manufacturing Resources Planning


(MRP II)
Goal: Plan and monitor all resources of a
manufacturing firm (closed loop):
manufacturing
marketing
finance
engineering
Simulate the manufacturing system

MRP II
Manufacturing

Master
production schedule

Marketing
Production
plan

MRP

Rough-cut
capacity planning

Capacity req.
planning

Adjust
production plan
Yes

Problems?

No

Requirements
schedules

No
Problems?

Adjust master schedule

Market
Demand

Finance

Yes

MRP II

Manufacturing Resource
Planning
(MRP II)

Customer
orders

Aggregate
production
plan

Forecast

No

Feasible?

Yes
Master production
schedule

Material requirements
planning

Capacity requirements
planning

No

Feasible?

Feedback

Yes

Purchase
orders

Work
orders

Inventory

Shop floor
control

Manufacture

Manufacturing
Resource Planning
(MRP II)
Aggregate
production
plan

Forecast

Customer
orders

Aggregate
production
plan

Forecast

No

Feasible?

Customer
orders

Yes
Master production
schedule

Material requirements
planning

No

Capacity requirements
planning

Feasible?
No

Feasible?

Feedback

Yes
Master
production
schedule

Yes

Purchase
orders

Work
orders

Inventory

Shop floor
control

Manufacture

Manufacturing
Resource Planning
(MRP II)
Master production
schedule

Customer
orders

Aggregate
production
plan

Forecast

No

Feasible?

Yes
Master production
schedule

Material requirements
planning

Material requirements
planning

Capacity requirements
planning

Capacity requirements
planning

No

Feasible?

Feedback

Yes

No
Feasible?

Yes

Purchase
orders

Work
orders

Inventory

Shop floor
control

Manufacture

Manufacturing
Resource Planning
(MRP
II)
Purchase
Work
orders

Customer
orders

Aggregate
production
plan

Forecast

No

Feasible?

Yes
Master production
schedule

orders

Material requirements
planning

Capacity requirements
planning

Shop floor
control

Inventory

No

Feasible?

Feedback

Yes

Purchase
orders

Work
orders

Inventory

Shop floor
control

Manufacture

Manufacture

Manufacturing
Resource Planning
(MRP II)

Customer
orders

Aggregate
production
plan

Forecast

No

Feasible?

Yes
Master production
schedule

Material requirements
planning

Capacity requirements
planning

No

Feasible?

Feedback

Yes

Purchase
orders

Work
orders

Inventory

Shop floor
control

Manufacture

Enterprise Resource Planning (ERP)


The next step in the evolution that began with MRP
and evolved into MRP II
ERP system is a computer system that integrates
application programs in accounting, sales,
manufacturing, human resources and other
functions in the firm.

ERP provides a system to capture and make data


available in real time do decision makers and other
users in the organization

ERP
MRP II with ties to customers and suppliers
(connects with supply-chain and customer
management applications)

Integrates financial, manufacturing and human


resources on a single computer system.
Provides tools for planning and monitoring various
business processes

Enterprise Resource Planning (ERP)


Attempts to integrate all departments and functions
across a company onto a single computer system that
can serve all those different departments particular needs
Organizes and manages a companys business
processes by sharing information across functional areas
Standardized record-keeping permit information sharing
and communication throughout the organization

Enterprise Resource Planning - ERP


Such an integration is accomplished through a
database shared by all the application programs

ERP
ERP allows companies to:
1. Automate and integrate many of their business
processes
2. Share a common database and business
practices throughout the enterprise
3. Produce information in real time
ERP systems also include:
1. Supply Chain Management software and
2. Customer Relationship Management software

ERP Modules

ERPs Central Database


Finance &
Accounting

Sales
&
Marketing

ERP Data
Repository

Human
Resources

Production &
Materials
Management

ERP Strategy Considerations


High initial cost
High cost to maintain
Future upgrades
Training

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