Chapter 12: MRP and ERP

Overview

• Focus: Understanding MRP, MRP2, and ERP systems, their inputs, outputs, benefits, and differences.

Materials Requirements Planning (MRP)

• Definition: A computer-based information system for operations management to manage materials.
• Purpose: Translates master schedule requirements into time-phased requirements for subassemblies, components, and raw materials.
• Complexity: Useful for complex products to avoid human errors.

Demand Types

• Independent Demand: Demand from the market, e.g., 100,000 cars per year.
• Dependent Demand: Demand for subcomponents based on independent demand, e.g., 400,000 tires if each car needs 4.
• Characteristics:
  • Independent Demand: Uncertain, affected by market conditions.
  • Dependent Demand: Certain, predictable once independent demand is known.

MRP Inputs

1. Master Schedule: Specifies what, when, and in what quantities finished products are needed.
2. Bill of Materials (BOM): Lists raw materials, parts, and subassemblies needed to produce one unit.
3. Inventory Records: Information on existing inventory.

MRP Outputs

• Primary Reports: Planned order schedules.
• Secondary Reports: Performance control reports, inventory transactions.

MRP Benefits

• Reduces in-process inventory.
• Tracks material requirements and evaluates capacity needs.

MRP System Requirements

• Need for accurate and up-to-date master schedules, BOMs, and inventory records.

Manufacturing Resource Planning (MRP2)

• Definition: Expands MRP with integration into financial planning, marketing, engineering, purchasing, and manufacturing.
• Process: Involves production planning and capacity planning.
• Capability: Allows for 'what if' analysis and assists managers in planning capacity requirements.

Enterprise Resource Planning (ERP)

• Definition: Evolution of MRP and MRP2 to integrate financial, manufacturing, and human resources onto a single system.
• Features:
  • Provides real-time data access to decision-makers.
  • Tools for planning and monitoring business processes.

ERP Applications

• Used across various services: professional services, postal services, retail banking, healthcare, education, engineering, logistics, and real estate.

Conclusion

• ERP is the next step following MRP and MRP2, offering comprehensive integration across enterprise functions.

Reading Assignment

• "The ABCs of ERP" for more detailed information on ERP systems.