27/07/2022

Material Requirements Outline

Planning (MRP)
and ERP 14 ►

►
Global Company Profile:
Wheeled Coach
Dependent Demand
► Dependent Inventory Model
Requirements
PowerPoint presentation to accompany
Heizer and Render ► MRP Structure
Operations Management, Global Edition, Eleventh Edition
Principles of Operations Management, Global Edition, Ninth Edition ► MRP Management
PowerPoint slides by Jeff Heyl

© 2014
© 2014
Pearson
Pearson
Education
Education 14 - 1 © 2014 Pearson Education 14 - 2

Outline - Continued Learning Objectives

When you complete this chapter you
► Lot-Sizing Techniques should be able to:
► Extensions of MRP
1. Develop a product structure
► MRP In Services
2. Build a gross requirements plan
► Enterprise Resource Planning (ERP)
3. Build a net requirements plan
4. Determine lot sizes for lot-for-lot, EOQ,
and POQ

© 2014 Pearson Education 14 - 3 © 2014 Pearson Education 14 - 4

Learning Objectives MRP for Wheeled Coach

When you complete this chapter you
should be able to: ► Largest manufacturer of
ambulances in the world
5. Describe MRP II ► International competitor
6. Describe closed-loop MRP
► 12 major ambulance designs
7. Describe ERP
► 18,000 different inventory items
► 6,000 manufactured parts
► 12,000 purchased parts

© 2014 Pearson Education 14 - 5 © 2014

© 2014
Pearson
Pearson
Education
Education 14 - 6

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MRP for Wheeled Coach Dependent Demand

► Four Key Tasks

For any product for which a schedule
► Material plan must meet both the can be established, dependent
requirements of the master schedule demand techniques should be used
and the capabilities of the production
facility
► Plan must be executed as designed
► Minimize inventory investment
► Maintain excellent record integrity

© 2014
© 2014
Pearson
Pearson
Education
Education 14 - 7 © 2014 Pearson Education 14 - 8

Dependent Demand Dependent Demand

Benefits of MRP ▶ The demand for one item is related to the
demand for another item
1. Better response to customer orders
▶ Given a quantity for the end item, the
2. Faster response to market changes demand for all parts and components can
3. Improved utilization of facilities and be calculated
labor ▶ In general, used whenever a schedule can
4. Reduced inventory levels be established for an item
▶ MRP is the common technique

© 2014 Pearson Education 14 - 9 © 2014 Pearson Education 14 - 10

Dependent Inventory Model Master Production Schedule

Requirements (MPS)
▶ Specifies what is to be made and when
Effective use of dependent demand
inventory models requires the following ▶ Must be in accordance with the aggregate
production plan
▶ Inputs from financial plans, customer demand,
1. Master production schedule engineering, supplier performance
2. Specifications or bill of material ▶ As the process moves from planning to
3. Inventory availability execution, each step must be tested for
feasibility
4. Purchase orders outstanding
▶ The MPS is the result of the production planning
5. Lead times
process
© 2014 Pearson Education 14 - 11 © 2014 Pearson Education 14 - 12

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Master Production Schedule The Planning Process

(MPS)
▶ MPS is established in terms of specific products
▶ Schedule must be followed for a reasonable
length of time
▶ The MPS is quite often fixed or frozen in the
near term part of the plan
▶ The MPS is a rolling schedule
▶ The MPS is a statement of what is to be
produced, not a forecast of demand

Figure 14.1
© 2014 Pearson Education 14 - 13 © 2014 Pearson Education 14 - 14

The Planning Process The Planning Process

Production Marketing
Finance
Capacity Customer
Cash flow Master production
Inventory demand
schedule

Change
master
production
schedule?
Supply Chain Sales & Operations Material
Procurement Planning Human Resources requirements plan
Supplier Generates an Staff planning
performance aggregate plan

Schedule and
Master production execute plan
schedule

Figure 14.1 Figure 14.1

© 2014 Pearson Education 14 - 15 © 2014 Pearson Education 14 - 16

Aggregate Master Production Schedule

Production Plan (MPS)
Figure 14.2
Can be expressed in any of the following
Months January February terms:
Aggregate Plan 1,500 1,200
(Shows the total
quantity of amplifiers) 1. A customer order in a job shop (make-to-
Weeks 1 2 3 4 5 6 7 8 order) company
Master Production Schedule
(Shows the specific type and
quantity of amplifier to be
2. Modules in a repetitive (assemble-to-
produced order or forecast) company
240-watt amplifier 100 100 100 100
150-watt amplifier 500 500 450 450
3. An end item in a continuous (stock-to-
75-watt amplifier 300 100 forecast) company

© 2014 Pearson Education 14 - 17 © 2014 Pearson Education 14 - 18

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MPS Example Bills of Material

▶ List of components, ingredients, and
Master Production Schedule for Chef John’s Buffalo Chicken
TABLE 14.1
Mac & Cheese materials needed to make product
GROSS REQUIREMENTS FOR CHEF JOHN’S BUFFALO MAC & CHEESE
▶ Provides product structure
Day 6 7 8 9 10 11 12 13 14 And so on
Quantity 450 200 350 525 235 375 ▶ Items above given level are called parents
▶ Items below given level are called
components or children

© 2014 Pearson Education 14 - 19 © 2014 Pearson Education 14 - 20

BOM Example BOM Example

For an order of 50 Awesome speaker kits

Level Product structure for “Awesome” (A) Level Product structure for “Awesome” (A)
Part B: 2 x number of As = (2)(50) = 100
0 A 0 C:
Part 3 x number of As = A (3)(50) = 150
Part D: 2 x number of Bs
1 B(2) C(3) 1 B(2) + 2 x number of Fs = (2)(100) + (2)(300)
C(3) = 800
Part E: 2 x number of Bs
+ 2 x number of Cs = (2)(100) + (2)(150) = 500
2 E(2) E(2) F(2) Part
2 F: 2 x number
E(2) of Cs = (2)(150) =
E(2) F(2)300
Part G: 1 x number of Fs = (1)(300) = 300

3 D(2) G(1) D(2) 3 D(2) G(1) D(2)

© 2014 Pearson Education 14 - 21 © 2014 Pearson Education 14 - 22

Bills of Material Bills of Material

▶ Modular Bills ▶ Planning Bills
▶ Modules are not final products but ▶ Also called “pseudo” or super bills
components that can be assembled into ▶ Created to assign an artificial parent to the
multiple end items BOM
▶ Can significantly simplify planning and ▶ Used to group subassemblies to reduce the
scheduling number of items planned and scheduled
▶ Used to create standard “kits” for production

© 2014 Pearson Education 14 - 23 © 2014 Pearson Education 14 - 24

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Bills of Material Accurate Inventory Records

▶ Phantom Bills ▶ Accurate inventory records are
▶ Describe subassemblies that exist only absolutely required for MRP (or any
temporarily dependent demand system) to operate
▶ Are part of another assembly and never go correctly
into inventory
▶ Generally MRP systems require more
▶ Low-Level Coding than 99% accuracy
▶ Item is coded at the lowest level at which it
occurs
▶ BOMs are processed one level at a time

© 2014 Pearson Education 14 - 25 © 2014 Pearson Education 14 - 26

Purchase Orders Outstanding Lead Times for Components

▶ A by-product of well-managed ▶ The time required to purchase,
purchasing and inventory control produce, or assemble an item
department ▶ For production – the sum TABLE 14.2

▶ Outstanding purchase orders must of the move, setup, and Lead Times for Awesome
Speaker Kits (As)
assembly or run times
accurately reflect quantities and COMPONENT LEAD TIME

scheduled receipts ▶ For purchased items – A 1 week

B 2 weeks
the time between the
C 1 week
recognition of a need D 1 week
and when its available E 2 week
for production F 3 weeks
G 2 weeks

© 2014 Pearson Education 14 - 27 © 2014 Pearson Education 14 - 28

Time-Phased Product
Structure Figure 14.3
MRP Structure
Figure 14.4
Must have D and E Data Files
Start production of D Output Reports
completed here so
production can begin MRP by
on B BOM Master period report
1 week production schedule
2 weeks to
D produce MRP by
date report
B
2 weeks Lead times
E (Item master file) Planned order
A report

2 weeks 1 week
Inventory data
E Purchase advice
2 weeks 1 week Material
requirement
G C planning
3 weeks programs
F (computer and Exception reports
Purchasing data software)
1 week Order early or late
D or not needed
| | | | | | | |
Order quantity too
1 2 3 4 5 6 7 8 small or too large
Time in weeks
© 2014 Pearson Education 14 - 29 © 2014 Pearson Education 14 - 30

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Determining Gross Determining Gross

Requirements Requirements
▶ Starts with a production schedule for the end ▶ From the BOM, every Item A requires 2 Item
item – 50 units of Item A in week 8 Bs – 100 Item Bs are required in week 7 to
▶ Using the lead time for the item, determine the satisfy the order release for Item A
week in which the order should be released – ▶ The lead time for the Item B is 2 weeks –
a 1 week lead time means the order for 50 release an order for 100 units of Item B in
units should be released in week 7 week 5
▶ This step is often called “lead time offset” or ▶ The timing and quantity for component
“time phasing” requirements are determined by the order
release of the parent(s)

© 2014 Pearson Education 14 - 31 © 2014 Pearson Education 14 - 32

Determining Gross Gross Requirements Plan

Requirements Gross Material Requirements Plan for 50 Awesome Speaker Kits (As)
TABLE 14.3
with Order Release Dates Also Shown
▶ The process continues through the entire WEEK
LEAD
BOM one level at a time – often called A. Required date
1 2 3 4 5 6 7 8
50
TIME

“explosion” Order release date 50 1 week

B. Required date 100
▶ By processing the BOM by level, items with Order release date 100 2 weeks

multiple parents are only processed once, C. Required date 150

Order release date 150 1 week
saving time and resources and reducing E. Required date 200 300
confusion Order release date 200 300 2 weeks
F. Required date 300
▶ Low-level coding ensures that each item Order release date 300 3 weeks

appears at only one level in the BOM D. Required date 600 200
Order release date 600 200 1 week
G. Required date 300
Order release date 300 2 weeks

© 2014 Pearson Education 14 - 33 © 2014 Pearson Education 14 - 34

ITEM ON HAND ITEM ON HAND

Net Requirements Plan

A
B
10
15
E
F
10
5
Net Requirements Plan
C 20 G 0
D 10

© 2014 Pearson Education 14 - 35 © 2014 Pearson Education 14 - 36

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Determining Net Requirements Determining Net Requirements

▶ Starts with a production schedule for the end ▶ Following the lead time offset procedure, the
item – 50 units of Item A in week 8 planned order release for Item A is now 40 units
in week 7
▶ Because there are 10 Item As on hand, only
40 are actually required – (net requirement) = ▶ The gross requirement for Item B is now 80 units
(gross requirement – on-hand inventory) in week 7
▶ The planned order receipt for Item A in week ▶ There are 15 units of Item B on hand, so the net
8 is 40 units – 40 = 50 – 10 requirement is 65 units in week 7
▶ A planned order receipt of 65 units in week 7
generates a planned order release of 65 units in
week 5

© 2014 Pearson Education 14 - 37 © 2014 Pearson Education 14 - 38

Determining Net Requirements Gross Requirements Schedule

▶ A planned order receipt of 65 units in week 7 Figure 14.5
A S
generates a planned order release of 65 units
in week 5 B C B C
Master schedule
▶ The on-hand inventory record for Item B is Lead time = 4 for A
Master schedule for A
Lead time = 6 for S
Master schedule for S
for B
sold directly
updated to reflect the use of the 15 items in Periods 5 6 7 8 9 10 11 8 9 10 11 12 13 1 2 3
inventory and shows no on-hand inventory in 40 50 15 40 20 30 10 10

week 8
▶ This is referred to as the Gross-to-Net
calculation and is the third basic function of the
MRP process Periods 1 2 3 4 5 6 7 8
Therefore, these are
40+10 15+30
Gross requirements: B 10 40 50 20 the gross
=50 =45
requirements for B
© 2014 Pearson Education 14 - 39 © 2014 Pearson Education 14 - 40

Net Requirements Plan MRP Planning Sheet

The logic of net requirements

Gross + Allocations
requirements

Total requirements

On Scheduled Net
– + = requirements
hand receipts
Figure 14.6

Available inventory

© 2014 Pearson Education 14 - 41 © 2014 Pearson Education 14 - 42

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Safety Stock MRP Management

▶ BOMs, inventory records, purchase and ▶ MRP dynamics
production quantities may not be perfect ▶ Facilitates replanning when changes occur
▶ Consideration of safety stock may be prudent ▶ System nervousness can result from too
▶ Should be minimized and ultimately many changes
eliminated ▶ Time fences put limits on replanning
▶ Typically built into projected on-hand ▶ Pegging links each item to its parent
inventory allowing effective analysis of changes

© 2014 Pearson Education 14 - 43 © 2014 Pearson Education 14 - 44

MRP Management Lot-Sizing Techniques

▶ MRP limitations ▶ Lot-for-lot techniques order just what is
required for production based on net
▶ MRP does not do detailed scheduling–it requirements
plans
▶ May not always be feasible
▶ Works best in product-focused, repetitive
▶ If setup costs are high, lot-for-lot can be
environments expensive
▶ Requires fixed lead time and infinite size ▶ Economic order quantity (EOQ)
time buckets
▶ EOQ expects a known constant demand and
MRP systems often deal with unknown and
variable demand

© 2014 Pearson Education 14 - 45 © 2014 Pearson Education 14 - 46

Lot-Sizing Techniques Lot-Sizing Techniques

▶ Periodic order quantity (POQ) orders ▶ Dynamic lot sizing techniques
quantity needed for a predetermined time ▶ Balance lot size and setup costs
period ▶ Part period balancing (least total cost)
▶ Interval = EOQ / average demand per period
▶ Least unit cost
▶ Order quantity set to cover the interval
▶ Least period cost (Silver-Meal)
▶ Order quantity calculated when order is
released ▶ Dynamic programming approach
▶ No extra inventory ▶ Wagner-Whitin

© 2014 Pearson Education 14 - 47 © 2014 Pearson Education 14 - 48

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Lot-for-Lot Example Lot-for-Lot Example

No on-hand inventory is carried through the system
WEEK 1 2 3 4 5 6 7 8 9 10 TotalWEEK
holding cost1 = $0
2 3 4 5 6 7 8 9 10
Gross Gross
There are seven35setups for this
35 30 40 0 10 40 30 0 30 55 30 40 0 item
10 in this
40 30 plan
0 30 55
requirements requirements
Scheduled
Total ordering cost = 7 x $100 = $700
Scheduled
receipts receipts
Projected on Projected on
35 35 0 0 0 0 0 0 0 0 0 35 35 0 0 0 0 0 0 0 0 0
hand hand
Net Net
0 30 40 0 10 40 30 0 30 55 0 30 40 0 10 40 30 0 30 55
requirements requirements
Planned order Planned order
30 40 10 40 30 30 55 30 40 10 40 30 30 55
receipts receipts
Planned order Planned order
30 40 10 40 30 30 55 30 40 10 40 30 30 55
releases releases

Holding cost = $1/week; Setup cost = $100; Lead time = 1 week Holding cost = $1/week; Setup cost = $100; Lead time = 1 week

© 2014 Pearson Education 14 - 49 © 2014 Pearson Education 14 - 50

EOQ Lot Size Example EOQ Lot Size Example

Annual demand D = 1,404
WEEK 1 2 3 4 5 6 7 8 9 10
Holding cost = 3751 units
WEEK 2
x3$1 (including
4 5 6
577units
8
on9 10
hand at end of week 10)
Gross Gross
35 30 40 0 10 40 30 0 30 55 Ordering 35 30 40 0 10 40 30 0 30 55
requirements requirements cost = 4 x $100 = $400
Scheduled Total cost = $375 + $400 = $775
Scheduled
receipts receipts
Projected on Projected on
35 35 0 43 3 3 66 26 69 69 39 35 35 0 43 3 3 66 26 69 69 39
hand hand
Net Net
0 30 0 0 7 0 4 0 0 16 0 30 0 0 7 0 4 0 0 16
requirements requirements
Planned order Planned order
73 73 73 73 73 73 73 73
receipts receipts
Planned order Planned order
73 73 73 73 73 73 73 73
releases releases

Holding cost = $1/week; Setup cost = $100; Lead time = 1 week Holding cost = $1/week; Setup cost = $100; Lead time = 1 week
Average weekly gross requirements = 27; EOQ = 73 units Average weekly gross requirements = 27; EOQ = 73 units
© 2014 Pearson Education 14 - 51 © 2014 Pearson Education 14 - 52

POQ Lot Size Example POQ Lot Size Example

Setups = 3 x $100 = $300
WEEK 1 2 3 4 5 6 7 8 9 10 WEEK 1 2 3 4 5 6 7 8 9 10
Holding cost = (40 + 70 + 30 + 55) units x $1 = $195
Gross Gross
requirements
35 30 40 0 10 40 30 0 30 55 Total cost= $30035+ $195
requirements
30 = $495
40 0 10 40 30 0 30 55

Scheduled Scheduled
receipts receipts
Projected on Projected on
35 35 0 40 0 0 70 30 0 0 55 35 35 0 40 0 0 70 30 0 0 55
hand hand
Net Net
0 30 0 0 10 0 0 55 0 0 30 0 0 10 0 0 55 0
requirements requirements
Planned order Planned order
70 80 0 85 0 70 80 0 85 0
receipts receipts
Planned order Planned order
70 80 85 70 80 85
releases releases

EOQ = 73 units; Average weekly gross requirements = 27; EOQ = 73 units; Average weekly gross requirements = 27;
POQ interval = 73/27 ≅ 3 weeks POQ interval = 73/27 ≅ 3 weeks
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Lot-Sizing Summary Lot-Sizing Summary

▶ In theory, lot sizes should be recomputed
For these three examples whenever there is a lot size or order
COSTS
quantity change
SETUP HOLDING TOTAL ▶ In practice, this results in system
Lot-for-lot $700 $0 $700
nervousness and
EOQ $400 $375 $775
POQ $300 $195 $495
instability
▶ Lot-for-lot should
be used when
low-cost setups can
be achieved
© 2014 Pearson Education 14 - 55 © 2014 Pearson Education 14 - 56

Lot-Sizing Summary Extensions of MRP

▶ Lot sizes can be modified to allow for scrap,
process constraints, and purchase lots ▶ MRP II
▶ Use lot-sizing with care as it can cause ▶ Closed-Loop MRP
considerable distortion of requirements at lower
levels of the BOM ▶ Capacity Planning
▶ When setup costs are significant and demand is
reasonably smooth, POQ or EOQ should give
reasonable results

© 2014 Pearson Education 14 - 57 © 2014 Pearson Education 14 - 58

Material Requirements Material Resource Planning

Planning II TABLE 14.4 Material Resource Planning (MRP II)
Weeks
LT 5 6 7 8

▶ Requirement data can be Computer 1 100

Labor Hrs: .2 each 20
enriched by other resources Machine Hrs: .2 each 20

▶ Generally called MRP II or Scrap: 1 ounce fiberglass each

Payables: $0 each
6.25
$0
lb

Material Resource Planning PC Board (1 each) 2 100

Labor Hrs: .15 each 15
▶ Outputs can include scrap, Machine Hrs: .1 each 10
packaging waste, effluent, Scrap: .5 ounces copper each 3.125 lb
Payables: raw material at $5 each $500
carbon emissions Processors (5 each) 4 500

▶ Data used by purchasing, production Labor Hrs: .2 each 100

Machine Hrs: .2 each 100
scheduling, capacity planning, inventory, Scrap: .01 ounces of acid waste each 0.3125 lb
warehouse management Payables: processors at $10 each $5,000

© 2014 Pearson Education 14 - 59 © 2014 Pearson Education 14 - 60

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Closed-Loop MRP System Capacity Planning

Figure 14.7
▶ Feedback from the MRP system
▶ Load reports show resource
Aggregate Plan

OK?
NO Priority Management Capacity Management
requirements for work centers
Develop Master Production
Schedule
Evaluate Resource Availability
(Rough Cut)
▶ Work can be moved between work
OK?
NO OK? YES Planning centers to smooth the load or bring it
Prepare Materials
Requirements Pan
Determine Capacity Availability
within capacity
OK? YES
Execution
Detailed Production Implement Input/Output Control (in repetitive
Activity Control systems JIT
(Shop Scheduling/Dispatching) techniques
are used)

© 2014 Pearson Education 14 - 61 © 2014 Pearson Education 14 - 62

Smoothing Tactics Order Splitting

1. Overlapping
▶ Develop a capacity plan for a work cell at
► Sends part of the work to following operations Wiz Products
before the entire lot is complete
▶ There are 12 hours available each day
► Reduces lead time
▶ Each order requires 1 hour
2. Operations splitting
► Sends the lot to two different machines for the same Day 1 2 3 4 5
operation
Orders 10 14 13 10 14
► Shorter throughput time but increased setup costs
3. Order or lot splitting
► Breaking up the order into smaller lots and running
part earlier (or later) in the schedule
© 2014 Pearson Education 14 - 63 © 2014 Pearson Education 14 - 64

Order Splitting Order Splitting

Figure 14.8
UTILIZATION: 2 orders moved to day 1 from day
CAPACITY CAPACITY OVER/ PRODUCTION NEW Capacity exceeded 2 (a day early)
on days 2, 3, and 5 Available 1 order forced to overtime
UNITS REQUIRED AVAILABLE (UNDER) PLANNER’S PRODUCTION
DAY ORDERED (HOURS) (HOURS) (HOURS) ACTION SCHEDULE capacity or to day 6
2 orders moved to
1 10 10 12 (2) 12 day 4 (a day early)
2 14 14 12 2 Split order: 12 14 – 14 –
Standard labor-Hours
Standard labor-Hours

move 2 units to
12 – 12 –
day 1
3 13 13 12 1 Split order: 13 10 – 10 –
move one unit
to day 6 or 8– 8–
request
overtime 6– 6–
4 10 10 12 (2) 12 4– 4–
5 14 14 12 2 Split order: 12 2–
move 2 units to
2–
day 4 0– 0–
61 1 2 3 4 5 1 2 3 4 5
Days Days
(a) (b)

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MRP in Services MRP in Services

▶ Some services or service items are (a) PRODUCT STRUCTURE TREE Figure 14.9

directly linked to demand for other Buffalo Chicken Mac & Cheese

services
▶ These can be treated as dependent
Garnish with Buffalo Chicken Baked Buffalo Chicken Mac
mix, Blue Cheese, Scallions & Cheese

demand services or items Unbaked Buffalo Chicken

Mac & Cheese
▶ Restaurants
▶ Hospitals Buffalo Chicken Mix

▶ Hotels Grated
Smoked Blue Cooked Mac &
Buffalo Pepper Chopped
Pulled Cheese Elbow Cheese Milk
Sauce Jack Scallions
Chicken Crumbles Macaroni Base
Cheese

© 2014 Pearson Education 14 - 67 © 2014 Pearson Education 14 - 68

Distribution Resource Planning

MRP in Services
(b) BILL OF MATERIALS
(DRP)
Production Specifications Buffalo Chicken Mac & Cheese (6 portions)
Unit Total Labor
Using dependent demand techniques
Ingredients Quantity Measure Cost Cost Hrs. through the supply chain
Elbow Macaroni (large, uncooked) 20.00 oz. $ 0.09 $ 1.80
Cheese-Pepper Jack (grated) 10.00 oz. 0.17 1.70
► Expected demand or sales forecasts
Mac and Cheese Base (from 32.00 oz. 0.80 25.60
refrigerator) become gross requirements
Milk 4.00 oz. 0.03 0.12
► All other levels are computed
Smoked Pulled Chicken 2.00 lb. 2.90 5.80
Buffalo Sauce 8.00 oz. 0.09 0.72 ► DRP pulls inventory through the system
Blue Cheese Crumbles 4.00 oz. 0.19 0.76
► Small and frequent replenishments
Scallions 2.00 oz. 0.18 0.36
0.2 hrs

© 2014 Pearson Education 14 - 69 © 2014 Pearson Education 14 - 70

Enterprise Resource Planning Enterprise Resource Planning

(ERP) (ERP)
▶ An extension of the MRP system to tie in ▶ ERP modules include
customers and suppliers ▶ Basic MRP
1. Allows automation and integration of many ▶ Finance
business processes
▶ Human resources
2. Shares common data bases and business
practices ▶ Supply chain management (SCM)
3. Produces information in real time ▶ Customer relationship management (CRM)
▶ Sustainability
▶ Coordinates business from supplier
evaluation to customer invoicing
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Figure 14.10 ERP and MRP Figure 14.10 ERP and MRP
Customer Relationship Management

Sales Order Shipping

(order entry, Distributors,
Invoicing product configuration, retailers,
sales management) and end users

© 2014 Pearson Education 14 - 73 © 2014 Pearson Education 14 - 74

Figure 14.10 ERP and MRP Figure 14.10 ERP and MRP
Master
Production
Schedule

Inventory Bills of
Management Material
MRP

Work
Orders
Supply-Chain Management
Vendor Communication
(schedules, EDI, advanced shipping notice,
Purchasing Routings e-commerce, etc.)
and and
Lead Times Lead Times
Table 13.6

© 2014 Pearson Education 14 - 75 © 2014 Pearson Education 14 - 76

Enterprise Resource Planning

Figure 14.10 ERP and MRP
Finance/
Accounting (ERP)
Accounts
Receivable ▶ ERP systems have the potential to
▶ Reduce transaction costs
General ▶ Increase the speed and accuracy of
Ledger
information
▶ Facilitates a strategic emphasis on JIT
Accounts
Payable systems and supply chain integration
▶ Can be expensive and time-consuming
Payroll
to install
Table 13.6

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SAP’s ERP Modules ERP in the Service Sector

▶ ERP systems have been developed for
health care, government, retail stores,
hotels, and financial services
▶ Also called efficient consumer response
(ECR) systems
▶ Objective is to tie sales to buying,
inventory, logistics, and production

© 2014 Pearson Education Figure 14.11 14 - 79 © 2014 Pearson Education 14 - 80

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