Page 81 - DCAP302_ENTERPRISE_RESOURCE_PLANNING

Unit 4: Manufacturing Perspective of ERP

MRP requires information on the lead times associated with each manufacturing or assembly notes
procedure that is required to produce the components and end products. Lead time is the time
required to assemble or manufacture the needed components into the end product (or higher-
level component), and thus is the time elapsed between the point at which all needed components
are present and the end of assembly or manufacturing. These lead times may be compiled per
unit of each component/product or may be based on predetermined batch sizes.

MRP combines the BOMs, the lead times, and estimates of demand for end products to generate
the Master Production Schedule, which details a schedule of assembly and production that
enables the manufacturer to meet the estimated demand. This schedule addresses only the final
level of assembly or production (resulting in end products), and includes both the timing and
quantities of production. The Master Production Schedule serves as the basis for all further
output information from MRP.
Using the Master Production Schedule as a starting point, it is a conceptually simple (but
computationally demanding) task to combine it with the data on lead times and BOMs to derive
a schedule of component (and possibly raw materials) requirements, through as many levels of
assembly and production as the manufacturer chooses. This schedule can account for such factors
as work-in-progress, current inventory of and pending orders for materials and components,
and direct demand for components as service items. Using this schedule of requirements, the
manufacturer must determine a material replenishment strategy that satisfies these requirements.
A wide variety of ordering rules and heuristics can be incorporated into computer-based MRP
models.
In addition to the material requirements, other useful data can be generated from the Master
Production Schedule. These include the projected inventory levels for any end product, the
projected schedule for any assembly or production process, and the projected utilization of
capacity for a particular production operation. Any of this information should aid in evaluating
current or potential materials replenishment strategies.
Production control systems often sound dauntingly technical and complicated. However, the
need for a system like MRP can be explained with a simple analogy (Slack et al. 1995). Imagine
that in 4 weeks time you are hosting a party for around 40 guests. You have decided to provide
beer, wine and soft drinks plus sandwiches and savoury snacks. Putting all of this together on the
night would involve some planing and production control. First, you would need some simple
estimates of your guests’ preferences for red or white wine, beer, fruit juice etc. Before shopping
for these items, you would take into account what you already had in stock in the house. Again,
shopping for the food at the party would involve identifying from your food recipes what
ingredients were required to make up the various dishes (subtracting what you already have
from your shopping list).

Then as well as specifying the quantity of your needs for materials and ingredients against likely
demand, you also need to think about the sequencing of the cooking and preparation. You can’t
do everything on the night, so you might choose for example to do some of the cooking a week
before and then freeze the results. This might mean shopping for some ingredients first, leaving
others till later. In short, to organize a party, you need to plan and control your acquisition of
materials and your process of production. You need to make decisions about the quantity and
timing of the purchasing and production of different ingredients, based on forecasts of the
numbers coming to the party and your recipes for making the finished products.
Although a production process is much more complex than organizing a party, production
control systems like MRP are designed to address similar problems. The front end produces the
master production schedule (MPS) (the equivalent of food and drink at the party). The MPS plans
the production of the goods offered to customers over a given planning horizon. The back end
handles factory scheduling and manages materials from suppliers (this equates with bringing
home the shopping and planning cooking and preparation). Material requirements planning

LoveLy professionaL university 75