Resource Planning OPIM 310-Lecture #7 Instructor: Jose Cruz

Resource PlanningResource Planning

OPIM 310-Lecture #7Instructor: Jose Cruz

Enterprise Resource Enterprise Resource Planning (ERP)Planning (ERP)

Organizes and manages a Organizes and manages a company’s business processes by company’s business processes by sharing information across sharing information across functional areasfunctional areas

Connects with supply-chain and Connects with supply-chain and customer management customer management applicationsapplications

ERP’s Central DatabaseERP’s Central Database

Finance & Accounting

Sales &

Marketing

Human Resources

Production & Materials

ManagementERP Data

Repository

ERP and MRPERP and MRP

MRP (material requirements planning) MRP (material requirements planning) was the precursor to ERPwas the precursor to ERP

Primarily a production planning and Primarily a production planning and control systemcontrol system

MRP evolved to MRP II (manufacturing MRP evolved to MRP II (manufacturing resource planning)resource planning)

ERP and ERP II continue to extend the ERP and ERP II continue to extend the links through all business processeslinks through all business processes

Bills ofmaterials

Engineeringand process

designs

Material Requirements Plan Material Requirements Plan OutputOutput

Inventorytransactions

Inventoryrecords

Othersources

of demand

Authorizedmaster production

schedule

Materialrequirements

plan

MRPMRPexplosionexplosion

Bill of MaterialsBill of Materials

Figure 16.3

Seat cushion

Seat-frame boards

Front legs A

Ladder-back chair

Back legs

Leg supports

Back slats


J (4)Seat-frame

boards

I (1)Seat

cushion

H (1)Seat

frame

G (4)Backslats

F (2)Backlegs

C (1)Seat

subassembly

D (2)Frontlegs

B (1)Ladder-backsubassembly

E (4)Leg

supports

AALadder-backLadder-back

chairchair

Figure 16.3

Material Requirements Material Requirements PlanningPlanning

Computerized inventory control & Computerized inventory control & production planning systemproduction planning system

Schedules component items when Schedules component items when they are needed - no earlier and no they are needed - no earlier and no laterlater

When to Use MRPWhen to Use MRP

Dependent and discrete itemsDependent and discrete itemsComplex productsComplex productsJob shop productionJob shop productionAssemble-to-order environmentsAssemble-to-order environments

Demand CharacteristicsDemand Characteristics

11 22 33 44 55WeekWeek

400 400 –

300 300 –

200 200 –

100 100 –No

. o

f ta

ble

sN

o.

of

tab

les

Continuous demandContinuous demand

M T W Th F M T W Th FM T W Th F M T W Th F

400 400 –

300 300 –

200 200 –

100 100 –No

. o

f ta

ble

sN

o.

of

tab

les

Discrete demandDiscrete demand

Independent demandIndependent demand

100 tables100 tables

Dependent demandDependent demand

100 x 1 = 100 x 1 = 100 tabletops100 tabletops

100 x 4 = 400 table legs100 x 4 = 400 table legs

MRP OutputsMRP Outputs

Planned ordersPlanned ordersWork ordersWork ordersPurchase ordersPurchase orders

Changes to previous plans or Changes to previous plans or existing schedulesexisting schedules

Action noticesAction noticesRescheduling noticesRescheduling notices

Master Production ScheduleMaster Production Schedule

Ladder-back chair

Kitchen chair

Desk chair

1 2

April May

3 4 5 6 7 8

Aggregate production plan for chair family

200

670670

200

150

120

200

150

200

120

670670

Master Production ScheduleMaster Production Schedule

Drives MRP process with a schedule of Drives MRP process with a schedule of finished productsfinished products

Quantities represent production not Quantities represent production not demanddemand

Quantities may consist of a combination of Quantities may consist of a combination of customer orders & demand forecastscustomer orders & demand forecasts

Quantities represent what needs to be Quantities represent what needs to be produced, not what can be producedproduced, not what can be produced

Inventory RecordInventory RecordItem: CDescription: Seat subassembly

Lot Size: 230 unitsLead Time: 2 weeks

Gross requirements

1 2 3 4 5 6 7 8

Scheduled receipts

Projected on-hand inventory

Planned receipts

Planned order releases

Week

150150

230230

00

00

00

00

120120

00 00

150150

00

120120

00 00

37

0000



Gross requirements 150150

1

230230

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8

00Scheduled receipts


Planned receipts


37

Week

0000

Explanation:Gross requirements are the total demand for the two chairs. Projected on-hand inventory in week 1 is 37 + 230 – 150




1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

Explanation:Gross requirements are the total demand for the two chairs. Projected on-hand inventory in week 1 is 37 + 230 – 150 = 117 units.




1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000




1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

Projected on-hand inventory balance at end of week t

Inventory on hand at end of week t - 1

Gross requirements

in week t

Scheduled or planned receipts in

week t

= + –




1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 – – 33 – – 33 ––153153 ––273273 ––273273

Projected on-hand inventory balance at end of week t

Inventory on hand at end of week t - 1

Gross requirements

in week t

Scheduled or planned receipts in

week t

= + –

Item: CDescription: Seat subassembly



1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 ––33 – – 33 ––153153 – – 273273 – – 273273

Planned OrdersPlanned OrdersExplanation:Without a new order in week 4, there will be a shortage of three units: 117 + 0 + 0 – 120 = – 3 units.




1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117

Planned OrdersPlanned Orders




1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 227227

230230

Planned OrdersPlanned OrdersExplanation:Adding the planned receipt brings the balance to 117 + 0 + 230230 – 120 = 227 units.




1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 227227

230230

Planned OrdersPlanned OrdersExplanation:Adding the planned receipt brings the balance to 117 + 0 + 230230 – 120 = 227 units.




1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 227227

230230

230230

Planned OrdersPlanned OrdersExplanation:Offsetting for a two-week lead time puts the corresponding planned order release back to week 2.




1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 227227

230230

230230

Planned OrdersPlanned OrdersExplanation:Offsetting for a two-week lead time puts the corresponding planned order release back to week 2.




1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 227227

230230

230230

227227 7777 ––4343

Planned OrdersPlanned OrdersExplanation:The first planned order lasts until week 7, when projected inventory would drop to – 43.




1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 227227

230230

230230

227227 7777

230230

Planned OrdersPlanned OrdersExplanation:Adding the second planned receipt brings the balance to 77 + 0 + 230230 – 120 = 187.




1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 227227

230230

230230

227227 7777

230230

Planned OrdersPlanned OrdersExplanation:Adding the second planned receipt brings the balance to 77 + 0 + 230230 – 120 = 187.

187187




1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 227227

230230

230230

227227 7777

230230

187187

230230

Planned OrdersPlanned OrdersExplanation:The corresponding planned order release is for week 5.

Planned OrdersPlanned OrdersItem: CDescription: Seat subassembly



1

230230

117117

00

2

00

00

3

00

120120

4

00

5

00

150150

6

00

120120

7

00

8



Planned receipts


37

Week

0000

117117 117117 227227

230230

230230

227227 7777

230230

187187

230230

187187

Lot-Sizing RulesLot-Sizing Rules

• Fixed order Quantity (FOQ)- A rule that maintains Fixed order Quantity (FOQ)- A rule that maintains the same order quantity each time an order is the same order quantity each time an order is issued.issued.

• Periodic Order Quantity (POQ)- A rule that allows Periodic Order Quantity (POQ)- A rule that allows a different order quantity for each order issued a different order quantity for each order issued but tends to issue the order at predetermined but tends to issue the order at predetermined time intervals.time intervals.

• Lot For Lot (L4L)- A rule under which the lot size Lot For Lot (L4L)- A rule under which the lot size ordered covers the gross requirements of a ordered covers the gross requirements of a single weeksingle week

Lot-Sizing Rules Lot-Sizing Rules –– POQ POQItem: CDescription: Seat subassembly

Lot Size: P = 3Lead Time: 2 weeks

Gross requirements

1 2 3 4 5 6 7 8

Scheduled receipts


Planned receipts


Week

150150

230230

117117

120120 150150 120120

37 117117 117117




1

230230

117117

2 3

120120

4 5

150150

6

120120

7 8

Scheduled receipts


Planned receipts


37

Week

117117 117117

POQ lot

size

Gross requirements for weeks 4, 5, and 6

Inventory at end of week 3= –




1

230230

117117

2 3

120120

4 5

150150

6

120120

7 8

Scheduled receipts


Planned receipts


37

Week

117117 117117




1

230230

117117

2 3

120120

4 5

150150

6

120120

7 8

Scheduled receipts


Planned receipts


37

Week

117117 117117

(120 + 0 + 150)




1

230230

117117

2 3

120120

4 5

150150

6

120120

7 8

Scheduled receipts


Planned receipts


37

Week

117117 117117

(120 + 0 + 150) – 117




1

230230

117117

2 3

120120

4 5

150150

6

120120

7 8

Scheduled receipts


Planned receipts


37

Week

117117 117117

(120 + 0 + 150) – 117 = 153 units

153153




1

230230

117117

2 3

120120

4 5

150150

6

120120

7 8

Scheduled receipts


Planned receipts


37

Week

117117 117117

(120 + 0 + 150) – 117 = 153 units

153153




1

230230

117117

2 3

120120

4 5

150150

6

120120

7 8

Scheduled receipts


Planned receipts


37

Week

117117 117117

(120 + 0 + 150) – 117 = 153 units

153153

150150




1

230230

117117

2 3

120120

4 5

150150

6

120120

7 8

Scheduled receipts


Planned receipts


37

Week

117117 117117

(120 + 0 + 150) – 117 = 153 units

153153

150150

153153




1

230230

117117

2 3

120120

4 5

150150

6

120120

7 8

Scheduled receipts


Planned receipts


37

Week

117117 117117

(120 + 0) – 0 = 120 units

153153

150150

153153

150150 00 00 00

120120

120120




1

230230

117117

2 3

120120

4 5

150150

6

120120

7 8

Scheduled receipts


Planned receipts


37

Week

117117 117117

153153

150150

153153

150150 00 00 00

120120

120120

Lot-Sizing Rules Lot-Sizing Rules –– POQ POQ

Lot-Sizing Rules Lot-Sizing Rules –– L4L L4LItem: CDescription: Seat subassembly

Lot Size: L4LLead Time: 2 weeks

Gross requirements

1 2 3 4 5 6 7 8

Scheduled receipts


Planned receipts


Week

150150

230230

117117

120120 150150 120120

37 117117 117117




1

230230

117117

2 3

120120

4 5

150150

6

120120

7 8

Scheduled receipts


Planned receipts


37

Week

117117 117117

L4L lot

size

Gross requirements in week 4

Inventory balance at end of week 3= –




1

230230

117117

2 3

120120

4 5

150150

6

120120

7 8

Scheduled receipts


Planned receipts


37

Week

117117 117117

= 120 – 117 = 3L4L lot

size




1

230230

117117

2 3

120120

4 5

150150

6

120120

7 8

Scheduled receipts


Planned receipts


37

Week

117117 117117

3

= 120 – 117 = 3L4L lot

size




1

230230

117117

2 3

120120

4 5

150150

6

120120

7 8

Scheduled receipts


Planned receipts


37

Week

117117 117117

3

3

0

= 120 – 117 = 3L4L lot

size




1

230230

117117

2 3

120120

4 5

150150

6

120120

7 8

Scheduled receipts


Planned receipts


37

Week

117117 117117

3

3

0 00




1

230230

117117

2 3

120120

4 5

150150

6

120120

7 8

Scheduled receipts


Planned receipts


37

Week

117117 117117

3

3

0

150

00

150




1

230230

117117

2 3

120120

4 5

150150

6

120120

7 8

Scheduled receipts


Planned receipts


37

Week

117117 117117

3

3

0

150

00

150

0

120

120




1

230230

117117

2 3

120120

4 5

150150

6

120120

7 8

Scheduled receipts


Planned receipts


37

Week

117117 117117

3

3

0

150

00

150

0

120

120

0

Lot-Sizing Rules Lot-Sizing Rules –– L4L L4L

Lot-Sizing Rule ComparisonLot-Sizing Rule Comparison The FOQ rule generates high average The FOQ rule generates high average

inventory because it creates remnants.inventory because it creates remnants.

The POQ rule reduces The POQ rule reduces average on-hand inventory average on-hand inventory because it does a better because it does a better job of matching order job of matching order quantity to requirements.quantity to requirements.

The L4L rule minimizes The L4L rule minimizes inventory investment inventory investment but maximizes the number of orders placed.but maximizes the number of orders placed.

Safety StockSafety Stock

MRP OutputsMRP Outputs

Material requirements plan

Action notices Releasing new orders Adjusting due dates

Priority reports Dispatch lists Supplier schedules

Capacity reports Capacity requirements planning Finite capacity scheduling Input-output control

Manufacturing resources plan

Performance reportsCost and price data

Routings and time

standards

MRP MRP explosionexplosion


J (4)Seat-frame

boards

H (1)Seat

frame

I (1)Seat

cushion

C (1)Seat

subassembly

MRP ExplosionMRP ExplosionItem: Seat subassemblyLot size: 230 units

Lead time: 2 weeks


1

230230

117117

2 3

120120

4 5

150150

6

120120

7 8

Scheduled receipts


Planned receipts


37

Week

117117 117117

0 00 0

00 00 000 00 0

227 227 77 187 187

230230

230230

Item: Seat subassemblyLot size: 230 units

Lead time: 2 weeks


1 2 3

120120

4 5

150150

6

120120

7 8

Planned receipts


Week

0 00 0

230

230

230

230

MRP ExplosionMRP Explosion


Lead time: 2 weeks


1 2 3

120120

4 5

150150

6

120120

7 8

Planned receipts


Week

0 00 0

230

230

230

230


Item: Seat framesLot size: 300 units

Lead time: 1 week

Gross requirements

1

00

2 3 4 5 6 7 8

Scheduled receipts


Planned receipts


40

Week

00 00 00300 00 0

Item: Seat cushionLot size: L4L

Lead time: 1 week

Gross requirements

1

00

2 3 4 5 6 7 8

Scheduled receipts


Planned receipts


0

Week

00 00 000 00 0


Lead time: 2 weeks


1 2 3

120120

4 5

150150

6

120120

7 8

Planned receipts


Week

0 00 0

230

230

230

230


Lead time: 1 week


1

0

2 3 4 5 6 7 8

Scheduled receipts


Planned receipts


40

Week

230

0 0 0300 00 0


Lead time: 1 week


1

0

2 3 4 5 6 7 8

Scheduled receipts


Planned receipts


0

Week

230

0 0 00 00 0

Usage quantity: 1Usage quantity: 1 Usage quantity: 1Usage quantity: 1



Lead time: 2 weeks


1 2 3

120120

4 5

150150

6

120120

7 8

Planned receipts


Week

0 00 0

230

230

230

230


Lead time: 1 week


1

00

2 3

00

4 5 6 7 8

Scheduled receipts


Planned receipts


40

Week

230 2300

00 00 00300 00 0


Lead time: 1 week


1

00

2 3

00

4 5 6 7 8

Scheduled receipts


Planned receipts


0

Week

230 2300

00 00 000 00 0

Usage quantity: 1Usage quantity: 1 Usage quantity: 1Usage quantity: 1



Lead time: 2 weeks


1 2 3

120120

4 5

150150

6

120120

7 8

Planned receipts


Week

0 00 0

230

230

230

230


Lead time: 1 week


1

00

4040

2 3

00

4 5

00

6

00

7 8

Scheduled receipts


Planned receipts


40

Week

110110 110110

230 2300 0

00 00 00300 00 0

110 180 180 180 180

300

300


Lead time: 1 week


1

00

00

2 3

00

4 5

00

6

00

7 8

Scheduled receipts


Planned receipts


0

Week

00 00

230 2300 0

00 00 000 00 0

0 0 0 0 0

230

230

230

230



Lead time: 1 week

Gross requirements

1 2 3 4 5 6 7 8

Planned receipts


Week

300

300


Lead time: 1 week

Gross requirements

1 2 3 4 5 6 7 8

Planned receipts


Week

230

230

230

230

00 00 00 00230 2300 000 00 00 00230 2300 0



Lead time: 1 week

Gross requirements

1 2 3 4 5 6 7 8

Planned receipts


Week

300

300


Lead time: 1 week

Gross requirements

1 2 3 4 5 6 7 8

Planned receipts


Week

230

230

230

230

00 00 00 00230 2300 000 00 00 00230 2300 0

Gross requirements

1

00

2 3 4 5 6 7 8

Scheduled receipts

Planned receipts


200

Week

00 00 000 00 0


Item: Seat-frame boardsLot size: 1500 units

Lead time: 1 week



Lead time: 1 week

Gross requirements

1 2 3 4 5 6 7 8

Planned receipts


Week

300

300


Lead time: 1 week

Gross requirements

1 2 3 4 5 6 7 8

Planned receipts


Week

230

230

230

230

00 00 00 00230 2300 000 00 00 00230 2300 0


1

00

2 3

12001200

4 5

00

6

00

7 8

Scheduled receipts

Planned receipts


200

Week

0 00 0

00 00 000 00 0



Lead time: 1 week

Usage quantity: 4Usage quantity: 4



Lead time: 1 week

Gross requirements

1 2 3 4 5 6 7 8

Planned receipts


Week

300

300


Lead time: 1 week

Gross requirements

1 2 3 4 5 6 7 8

Planned receipts


Week

230

230

230

230

00 00 00 00230 2300 000 00 00 00230 2300 0


1

00

200200

2 3

12001200

4 5

00

6

00

7 8

Scheduled receipts

Planned receipts


200

Week

200200 200200

0 00 0

00 00 000 00 0

500 500 500 500 500

1500

1500



Lead time: 1 week

Figure 16.12Figure 16.12


Capacity Requirements Capacity Requirements Planning (CRP)Planning (CRP)

Computerized system that projects Computerized system that projects load from material planload from material plan

Creates load profileCreates load profile

Identifies underloads and overloadsIdentifies underloads and overloads

CapacityCapacity

Usually expressed as standard Usually expressed as standard machine hours or labor hoursmachine hours or labor hours

CapacityCapacity = (no. machines or workers)= (no. machines or workers)x (no. shifts) x (utilization)x (no. shifts) x (utilization)x (efficiency)x (efficiency)

Capacity TermsCapacity Terms

Load profileLoad profileCompares released and planned Compares released and planned

orders with work center capacity orders with work center capacity CapacityCapacity

Productive capability; includes Productive capability; includes utilization and efficiencyutilization and efficiency

UtilizationUtilization% of available working time spent % of available working time spent

workingworking

More Capacity TermsMore Capacity Terms

EfficiencyEfficiencyLoadLoad

The standard hours of work The standard hours of work assigned to a facilityassigned to a facility

Load percentLoad percentThe ratio of load to capacityThe ratio of load to capacity

Load % = Load % = ((load/capacityload/capacity)x100%)x100%

Capacity Requirements PlanningCapacity Requirements Planning

MRP plannedorder

releases

Routingfile

Capacityrequirements

planning

Openorders

file

Load profile foreach machine center

Initial Load ProfileInitial Load Profile

Figure 12.9Figure 12.9

Ho

urs

of

cap

acit

yH

ou

rs o

f ca

pac

ity

11 22 33 44 55 66

Time (weeks)Time (weeks)

NormalNormalcapacitycapacity

120 120 –

110 110 –

100 100 –

90 90 –

80 80 –

70 70 –

60 60 –

50 50 –

40 40 –

30 30 –

20 20 –

10 10 –

0 0 –

Remedies for UnderloadsRemedies for Underloads

1.1. Acquire more workAcquire more work

2.2. Pull work ahead that is scheduled Pull work ahead that is scheduled for later time periodsfor later time periods

3.3. Reduce normal capacityReduce normal capacity

Remedies for OverloadsRemedies for Overloads

1.1. Eliminate unnecessary requirementsEliminate unnecessary requirements

2.2. Reroute jobs to alternative machines or Reroute jobs to alternative machines or work centerswork centers

3.3. Split lots between two or more machinesSplit lots between two or more machines

4.4. Increase normal capacityIncrease normal capacity

5.5. SubcontractSubcontract

6.6. Increase the efficiency of the operationIncrease the efficiency of the operation

7.7. Push work back to later time periodsPush work back to later time periods

8.8. Revise master scheduleRevise master schedule

Adjusted Load ProfileAdjusted Load ProfileH

ou

rs o

f ca

pac

ity

Ho

urs

of

cap

acit

y

11 22 33 44 55 66

Time (weeks)Time (weeks)

NormalNormalcapacitycapacity

120 120 –

110 110 –

100 100 –

90 90 –

80 80 –

70 70 –

60 60 –

50 50 –

40 40 –

30 30 –

20 20 –

10 10 –

0 0 –

Pull aheadPull aheadPush backPush back

Push backPush backOvertime

Work an

extra shift

Documents

Resource Planning OPIM 310-Lecture #7 Instructor: Jose Cruz