Chapter 12 Solutions

lOMoARcPSD|19891251
CHAPTER 12:
MRP AND ERP
Answers to Discussion and Review Questions

1. Independent demand refers to demand for end items; dependent demand refers to usage
of subassemblies and component parts which is dependent on demand for a “parent” item.
Independent demand is often random and therefore somewhat unpredictable; dependent demand
is derived from demand for end items.
2. MRP is appropriate when requirements planning must be accomplished for items with
derived demand. It is best suited to situations in which demand is “lumpy” rather than continual,
and where lead times are fairly well known.
3. a. A master schedule specifies the quantity and timing planned for finished goods.
b. A bill of materials indicates the components and their quantities needed to make
and/or assemble one unit of an end item.
c. An inventory status file maintains a record of inventories on-hand and on-order
as well as other information concerning suppliers, lead times, order sizes, and so on.
d. The gross requirement for an end item or component indicates how much of that
item will be needed.
e. The net requirement for an item is its gross requirement minus the quantity of
that item expected to be on-hand.
f.A time-phased plan is essentially a product-tree with the various components displayed
on a time-scale utilizing lead times.
4. Safety stock is not normally needed for dependent demand items below the end-item
level because the usage of these items are calculated from the quantities established for the end
item in the master schedule. However, in practice, there are a number of reasons to carry safety
stock in an MRP system. Some of these reasons include scrap, defective units, late deliveries due
to longer than expected production time of components or late deliveries of parts from the
suppliers. Maintaining safety stock is important for multi-level items because a shortage for a
lower level item in the BOM will cause a shortage for the end-item. However, if safety stock is
carried for all dependent demand items, the main advantage of MRP will be lost.
6. Because of the pyramid relationship that exists for components in an MRP system, it is
not realistic to attempt to provide safety stock at all levels because this would result in huge
carrying costs. Moreover, because shortage at any level will mean shortages from that point up to
the top of the tree, safety stock at lower levels provides only minimal protection. Instead, on
items subject to lead time variability, orders are submitted a bit earlier than needed, thereby
gaining some “safety time” to compensate for the possibility of increased lead time.
7. A net change system is one that is updated as changes occur, while a regenerative system
is updated periodically. The regenerative system is best suited to systems which are fairly stable.
It affords lower processing costs than a net change system but it permits a lag between the time a
change occurs and the time it can be recorded. Hence, under a regenerative system, management
may not have the latest information for planning and control.
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8. Successful MRP requires accurate inputs (master schedules, bills of materials, and
inventory records). It also requires a computer to process information and generate material
requirements plans.
11. MRP II is a second-generation approach to planning that incorporates MRP. It has a
broader scope to manufacturing resource planning in that it links business planning, production
planning, and the master schedule. [See Figure 15–16.]
12. The term lot sizing refers to selecting a lot size to order. In the case of uniform demand,
an EOQ approach will yield an appropriate lot size. Under lumpy demand, it usually makes sense
to time orders so that they arrive as needed. The EOQ amount, though, may not equal the quantity
needed at a particular point in time. Lot-for-lot ordering is often used instead. However, some
other lot size may yield lower total costs. Because of the variations in timing and quantity
generally inherent in lumpy demand cases, there may not be a single approach which will
consistently yield a reasonably good answer.
13. Planned order receipts refers to a plan for future ordering; scheduled receipts indicates an
actual order has been made and when it is expected to arrive.
14. In the 1970s, manufacturers began to recognize the importance of the difference between
independent demand which is relatively stable and dependent demand which is rather “lumpy” by
nature. Earlier EOQ models which worked well for independent demand items did not work very
well for the more “lumpy” dependent demand items. Hence, MRP was developed to handle the
more “lumpy” dependent demand items. Adjustments still have to be made under MRP, but it was
developed to handle seasonal variations better than the older EOQ models.
15. MRP II (Manufacturing Resource Planning) involves an effort to expand the scope of
production resource planning to include other functional areas of the firm in the planning process
such as marketing, finance, and purchasing. The integration of these areas in the formulation of
the resource plan allows the company to develop a plan that works and is acceptable to different
areas of the company. On the other hand, ERP is an expanded effort to integrate standardized
record keeping that will permit information sharing among different departments in order to make
better decisions more rapidly and to manage the system more effectively. While MRP II builds
links between the overall business plan, aggregate plan and the master production schedule, ERP
attempts to link and synchronize various independent databases within the firm and integrate
them into one system.
16. The unforeseen costs of MRP include the following:
a. Training: The workers have to be trained to learn and become proficient with a new system
and its processes.
b. Integration and testing: Integrating the computer systems associated with different areas of
the firm and testing the links between various corporate areas and systems.
c. Data conversion and data analysis
d. Consultant fees
e. Solving implementation problems on an ongoing basis
f. Dealing with disappointing short-term results
g. Competition for high quality workers especially in the IT field.
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Taking Stock
1. The cost of implementation: This includes the actual cost of the software, training and
implementation costs, cost of getting every department to cooperate, cost of integration and
testing, cost of data conversion, cost of data analysis, and cost of employee salaries.
The potential benefits of implementing ERP:
a. faster access to data
b. ability to collect and analyze data
c. ability to respond to customer’s questions and needs in a faster, timely fashion
d. integration of company’s databases
e. integration of financial data
f. standardization of manufacturing processes
g. standardization of human resources information
h. automation of the tasks involved in performing various business processes (taking an order
from a customer)
i. Everyone in the company has access to the same database, thus are able to see the same
computer screen providing wealth of real-time information.
2. The executives of the organization with input from different functional departments (marketing,
operations, finance) must be involved in designing and implementing an ERP system. The
representatives of the functional departments (usually fairly high level) with the supervision and
consultation of top management should be involved in the design, development and
implementation of the MRP II plan.
A truly integrative ERP will involve the entire organization, therefore everyone in the
organization will need to be trained. However, the level and the intensity of training will depend
on the job.
3. The technology of ERP software allowed many companies to integrate their databases, which in turn
allowed easier tracking of orders, faster response to customers’ inquiries, integration of financial
data and standardization of the manufacturing processes.
The easier to use the system, the less the training costs, the fewer mistakes, the faster response to
customers’ needs. The complete integration of the system will enable the company to access different
databases simultaneously, resulting in the utilization of more complete set of information to make
decisions.
The ERP system may be unreliable in a couple of different ways. First, if the computer system keeps on
crashing or going down, it becomes difficult to complete certain tasks in an efficient manner. The second
type of unreliability deals with the actual data and information stored in the system not being accurate or
reliable. The lack of reliability of the second type will not only lead to many customer service problems,
but will also result in employees using the system losing faith. These employees will utilize other sources
of information to make decisions because the formal ERP system has let them down too many times.
Instructor’s Manual, Chapter 12 346

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Beg.
Master Week 1 2 3 4 5 6 7 8
Inv.
Schedule for:
Quantity
Week
Beg.
1 2 3 4 5 6 7 8
Inv.
Gross requirements
Scheduled receipts
On hand
Net requirements
Planned order receipts
Planned order releases
Week
Beg.
1 2 3 4 5 6 7 8
Inv.
Gross requirements
Scheduled receipts
On hand
Net requirements
Week
Beg.
1 2 3 4 5 6 7 8
Inv.
Gross requirements
Scheduled receipts
On hand
Net requirements
Week
Beg.
1 2 3 4 5 6 7 8
Inv.
Gross requirements
Scheduled receipts
On hand
Net requirements

lOMoARcPSD|19891251
Solutions
1. a. F: 2 G: 1 H: 1
J: 2 x 2 = 4 L: 1 x 2 = 2 A: 1 x 4 = 4
D: 2 x 4 = 8 J: 1 x 2 = 2 D: 1 x 2 = 2
Totals: F = 2; G = 1; H = 1; J = 6; D = 10; L = 2; A = 4
1. b.
Stapler
Top Assembly Base Assembly
Cover Spring Slide Assembly Base Strike Pad Rubber Pad 2
Slide Spring
2. a. B: 20 x 2 = 40 – 10 = 30 C: 20 x 1 = 20 – 10 = 10 D: 20 x 3 = 60 – 25 = 35
E: 30 x 2 = 60 – 12 = 48 E: 10 x 2 = 20 E: 35 x 2 = 70
Total: 48 + 20 + 70 = 138
b. End Item
B(2) C D(3)
E(2) F(3) G(2) E(2) H(4) E(2)
Total LT 4 5 5 5 6 5
The longest sequence is 6 weeks. Week 11 – 6 weeks = Week 5.
3. End Item
L(2) C K(3)
B(2) J(3) G(2) B(2) H(4) B(2)
b.
Total LT: 5 6 7 6 6 6

lOMoARcPSD|19891251
Solutions (continued)
The longest lead time is 7 weeks. Thus, 8 – 7 = 1, the beginning of week 1.
a. L: 2 x 40 = 80 C: 1 x 40 = 40 K: 3 x 40 = 120
–10 –15 –20
70 25 100
B: 2 x 70 = 140 B: 2 x 25 = 50 B: 2 x 100 = 200
–30
110 Total: 110 + 50 + 200 = 360
9. Saw
A(2) B C(3)
E(3) D D(2) F(3) E(2) D(2)
D
A
E
F
B
Saw
D
D
C
E
1 2 3 4 5 6 7 8
week

lOMoARcPSD|19891251
9. (continued)
Master Beg.
Week 1 2 3 4 5 6 7 8
Schedule for Inv.
Saws Quantity 50
Week
Beg.
Item: Saw LT = 2 wks. 1 2 3 4 5 6 7 8
Inv.
Gross requirements 50
Scheduled receipts
Projected on hand 15
Net requirements 35
Planned order receipt 35
Planned order release 35
Week
Beg.
Item: A(2) LT = 1 wk. 1 2 3 4 5 6 7 8
Inv.
Scheduled receipts
Net requirements 60
Beg.
Item: C(3) LT = 2 wks. 1 2 3 4 5 6 7 8
Inv.
Scheduled receipts
Net requirements 75
Beg.
Item: E(3) & E(2) LT = 1 wk. 1 2 3 4 5 6 7 8
Inv.
Gross requirements 150 180
Scheduled receipts
Net requirements 140 180
Planned order receipt 140 180
Planned order release 140 180

lOMoARcPSD|19891251
9. c.
Beg.
E LT = 1 wk. 1 2 3 4 5 6 7 8
Inv.
Scheduled receipts
Projected on hand 10 10 30 130 80
Net requirements 140 180
Planned order receipt 20 100 100 100
Planned order release 20 100 100 100
10. Robot
B C(3)
E F G G(2) H
Master Beg.
Week 1 2 3 4 5 6 7 8
Schedule for Inv.
Robot Quantity 40
Beg.
Item: Robot LT = 2 wks. 1 2 3 4 5 6 7 8
Inv.
Scheduled Receipts
Projected on hand 10 10 10 10 10 10 10
Net Requirements 30
Planned order receipts 30
Planned order releases 30

lOMoARcPSD|19891251
10. (continued)
Beg.
Item: C(3) LT = 1 wk. 1 2 3 4 5 6 7 8
Inv.
Scheduled receipts
Net Requirements 70
Beg.
Item: G(2C + 1 Robot) LT = 2 wks. 1 2 3 4 5 6 7 8
Inv.
Scheduled receipts
Projected on hand 15 15 15 15 35 5 5 5 5
Net requirements 125

lOMoARcPSD|19891251
12. a.
Golf
Cart
Top Base
Supports (4) Cover Motor Body Seats (2)
Frame Controls Wheels (4)
Supports
Top
b.
Cover
Cart
Motor
Frame
Controls Body Base
Wheels
Seats
2 3 4 5 6 7
week

lOMoARcPSD|19891251
12. c.
Master Beg.
Week 1 2 3 4 5 6 7 8
Schedule for Inv.
golf carts Quantity 200
Beg.
Item: Gold Cart LT = 1 wk. 1 2 3 4 5 6 7 8
Inv.
Scheduled receipts
Projected on hand
Beg.
Item: Top LT = 1 wk. 1 2 3 4 5 6 7 8
Inv.
Scheduled receipts
Item: Supports (4) LT = 1 Beg.

1 2 3 4 5 6 7 8
wk. Inv.
Scheduled receipts

lOMoARcPSD|19891251
12. c. (continued)
Beg.
Item: Cover LT = 1 wk. 1 2 3 4 5 6 7 8
Inv.
Scheduled receipts
Projected on hand
Beg.
Item: Base LT = 1 wk. 1 2 3 4 5 6 7 8
Inv.
Scheduled receipts
Projected on hand 20 20 20 20 20 20
Beg.
Item: Motor LT = 2 wks. 1 2 3 4 5 6 7 8
Inv.
Scheduled receipts
Projected on hand 300 300 300 300 300 120 120 120
Net requirements (120)

lOMoARcPSD|19891251
12. c. (Continued)
Beg.
Item: Body LT = 3 wks. 1 2 3 4 5 6 7 8
Inv.
Scheduled receipts
Beg.
Item: Seats LT = 2 wks. 1 2 3 4 5 6 7 8
Inv.
Scheduled receipts
Beg.
Item: Frame LT = 1 wk. 1 2 3 4 5 6 7 8
Inv.
Scheduled receipts
Projected on hand 35 35 35
Net requirements 95

lOMoARcPSD|19891251
12. c. (Continued)
Beg.
Item: Controls LT = 1 wk. 1 2 3 4 5 6 7 8
Inv.
Scheduled receipts
Projected on hand
Beg.
Item: Wheel Assemblies LT = 1 wk. 1 2 3 4 5 6 7 8
Inv.
Scheduled receipts
Projected on hand 240 240 240
13. a.
Master Beg.
Week 1 2 3 4 5 6 7 8 9
Schedule for Inv.
golf carts Quantity 100 100 100
b.
Beg.
Item: Golf cart LT = 1 wk. 1 2 3 4 5 6 7 8 9
Inv.
Gross requirements 100 100 100
Scheduled receipts
Projected on hand
Net requirements 100 100 100
Planned order receipts 100 100 100
Planned order releases 100 100 100

lOMoARcPSD|19891251
13. b. (continued)
Beg.
Week 1 2 3 4 5 6 7 8 9
Inv.
Quantity 100 100 100
Beg.
Item: Tops LT = 1 wk. 1 2 3 4 5 6 7 8 9
Inv.
Scheduled receipts
Beg.
Item: Base LT = 1 wk. Inv. 1 2 3 4 5 6 7 8 9

Scheduled receipts
c. Master schedule for golf carts
Beg.
Week 1 2 3 4 5 6 7 8 9
Inv.
Beg.
Item: Golf Cart LT = 1 wk. 1 2 3 4 5 6 7 8 9
Inv.
Scheduled receipts
Projected on hand
Planned order releases 100 100

lOMoARcPSD|19891251
13. c. (continued)
Beg.
Week 1 2 3 4 5 6 7 8 9
Inv.
Beg.
Item: Bases LT = 1 wk. 1 2 3 4 5 6 7 8 9
Inv.
Scheduled receipts
Projected on hand 20 20 20 50 100 50 100 50
Planned order receipts 30 50 50 50 50 50
Planned order releases 30 50 50 50 50 50

Chapter 12 Solutions

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Answers to Discussion and Review Questions

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345 Operations Management, 11/e

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Instructor’s Manual, Chapter 12 346

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347 Operations Management, 11/e

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Top Assembly Base Assembly

Cover Spring Slide Assembly Base Strike Pad Rubber Pad 2

E(2) F(3) G(2) E(2) H(4) E(2)

B(2) J(3) G(2) B(2) H(4) B(2)

Instructor’s Manual, Chapter 12 348

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E(3) D D(2) F(3) E(2) D(2)

349 Operations Management, 11/e

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Instructor’s Manual, Chapter 12 350

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351 Operations Management, 11/e

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Instructor’s Manual, Chapter 12 352

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Supports (4) Cover Motor Body Seats (2)

Frame Controls Wheels (4)

353 Operations Management, 11/e

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Item: Supports (4) LT = 1 Beg.

Instructor’s Manual, Chapter 12 354

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355 Operations Management, 11/e

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Instructor’s Manual, Chapter 12 356

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357 Operations Management, 11/e

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Gross requirements 100 100 100

Instructor’s Manual, Chapter 12 358

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359 Operations Management, 11/e

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