Flashcards
11. Dependent Demand - MRP
Cards in this deck (18)
- 1What is dependent demand?⇒ Dependent demand is based on the forecasting of independent demand, despite its low accuracy (sometimes at best 60-70%). Dependent demand relates to what and how to keep in inventory but also depends on the business model that is implemented.
- 2What is MRP?⇒ Material requirements planning ensures that a firm meets its performance requirements by scheduling the replenishment of stock (inventory orientation) and the delivery due date (order orientation) in a way which minimizes costs. Included in MRP are product configuration (bill of materials) and dependencies, which are relatively complex processes.
- 3What is ERP⇒ ERP (Enterprise Resource Planning) is used by ‘larger’ companies and their supply network, developed from MRP-II and enabled by advances in software and ICT. Its factual implementation can be a huge operation, however. Although its impact on organizations is underestimated. Yet, ERP does not account for industrial networks (e.g. organizations) or a link to the ‘shop floor’. It also requires a considerable investment in training and expertise.
- 4What is MRP used for?• MRP is used for planning and scheduling of:
1. Independent demand: Product (service) level, based on forecasts
2. Specific orders: Custom or specific orders. Data is generated by sales and not by forecasts
3. Demand for (spare) parts and components: Independent of demand for products and services and only partially predictable - 5How does MRP (directly) connect to independent demand?The end products and parts / components become the independent demand input for a master production schedule. In its simplest form, it determines purchase orders, material plans and work orders (jobs). It also might include resources, limited capacity and trial runs for the optimal schedule.
- 6What is included in MRP? (image)
- 7Explain what 'bills of materials' includesThe bills of materials include a complete product description, and a description of materials, parts and components. It is often also called production structure, production configuration, production architecture, or simply ‘production tree’.
- 8Distinguish between MRP-I and MRP-II• Materials requirements planning (MRP-I) does not include capacity planning and does include a directive bill of materials.
• Manufacturing resource planning (MRP-II) includes capacity planning and a closed loop process. - 9Define the 'explosion' processMRP software uses information from inventory records, the master schedule and bill of materials. The process of calculating the exact requirements for each item is referred to as the explosion process, which works from top level down in BOM and considers on-hand balances and schedules orders.
- 10List the MRP 'explosion' process1. Requirements for end products are retrieved from MPS (‘gross requirements’)
2. On-hand balance with schedule of orders to calculate ‘net requirements’
3. Using net requirements, calculates when orders should be received to meet these requirements
4. Find schedule for when orders are actually released (lead-time)
5. Move to items at Level 1 of BOM
6. Gross requirements for each level 1 item are calculated from planned-order release schedule for parents of each item
7. Net requirements, planned-order receipts and planned-order releases are calculated as described in steps 2-4
8. Repeat for all items in bill of materials - 11How to optimize lot size for MRP1. Economic order quantity: Not designed for MRP as it is a system of discrete time periods. Lot sizes by EOQ do not always cover an entire period
2. Least total cost method (LTC): Dynamic lot-sizing technique that calculates order quantity by comparing carrying costs and setup costs for various lot sizes, and then selecting a lot in which these are most nearly equal. LTC is influenced by the length of planning horizon.
3. Least unit cost method: A dynamic lot-sizing technique that adds ordering and inventory carrying cost for each trial lot size by dividing by number of units in each lot size, and picking the lot size with the lowest unit cost. - 12The development of ERP, and its objectives• ERP has developed from MRP-II. It advances in software and ICT and enables customers and suppliers to be linked.
• The objectives of ERP are the following:
1. Co-ordination of all business activities
2. Automation and integration of business processes
3. Sharing of common database
4. Producing information in real time
5. Decisions and databases integrated so that decisions in one part of the organization are reflected - 13Benefits of ERPAll-in-one database
Integrity of information:
• Enables access to the same data
• Avoids different representations of (similar) data by different users
• Reduces administrative tasks (potentially reducing administrative jobs
Other jobs can be done faster potentially
Creates new ways to do business - 14Disadvantages of ERP• ERP systems are complex and expensive
• May require major changes in processes → transaction based
• Expertise
• Rigidity - 15Examples of components of ERP systemsFinancial: Cash forecast, profit analysis, standard costing
Human Resources: Personnel plan, payroll
Operations: Inventory, MRP, project management, shipping
Sales and marketing: Orders, pricing, sales plan - 16Extended ERP components1. Business intelligence: Information that people use to support their decision-making efforts
2. CRM: Involves managing all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization’s profitability
3. SCM: Involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability
4. E-business: Means conducting business on the internet, not only buying and selling, but also serving customers and collaborating with business partners - 17The complexity of ERP• The implementation of ERP can be a complex project. It requires a huge investment in training and knowledge transfer (consultant, software house).
→ In the experience of many companies, ERP technology could not support their business. Their organizations could not make the changes needed to benefit from - 18Other approaches to information systems
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- Business and Management 2A (Operations Management) Flashcards on 11. Dependent Demand - MRP, created by Nina Olsson on 27/11/2017.
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