MRP II AND ERP

MRP II

1. Historia

MRP I

MRP II

ERP

2
MRP II
 MRP II
MANUFACTURING RESOURCES PLANNING

• MRP II evolved from MRP in the 1980s because manufacturers

recognized additional needs.
• It is an expanded scope of materials planning to include
capacity requirements planning, and to involve other functional
areas of the organization such as marketing and finance in the
planning process.
 MRP II
MANUFACTURING RESOURCES PLANNING

• MRP II systems are good at simulation and help answer "what

if" questions i.e., to foresee the consequences of their options
and other alternatives.
• One of the most important features of MRP II is its ability to
aid managers in capacity planning.
 Market
Marketing Operation
Demand
Finance
Production
Plan

Capacity
Planning

Adjust YES Problems?

Production plan
NO
Master Production
Schedule

MRP

Rough-cut
Capacity planning

Adjust YES
Master Schedule Problems?
NO
Requirements An Overview of MRP II
Schedule
 MRP II
MANUFACTURING RESOURCES PLANNING
Closed-Loop MRP
• A system used for production planning and inventory
control, with an information feedback feature that enables
plans to be checked and adjusted.
• It synchronize the purchasing or materials
procurement plans with the master production schedule.
• The system is called a closed loop MRP because of its
feedback feature, which is also referred to as “closing the
loop.” 
Closed-Loop MRP
Production Planning
Master Production Scheduling
Material Requirements Planning
Capacity Requirements Planning

No
Realistic? Feedback
Feedback

Yes
Execute:
Capacity Plans
Material Plans
 MRP II
MANUFACTURING RESOURCES PLANNING

CAPACITY REQUIREMENTS
PLANNING
• The process of determining short-range capacity
requirements.
• It is an important part of ensuring that a company
can meet production expectations.
 MRP II
MANUFACTURING RESOURCES PLANNING

CAPACITY REQUIREMENTS
PLANNING
• Key Inputs: Planned-order releases for MRP, the
current shop load, routing information, and job
times
• Key Output: Load reports for each work center
 An overview of the capacity
Develop a tentative master
production schedule planning process using MRP

Use MRP to simulate

material requirements

Revise tentative master

production schedule
Convert material
requirements to resource
requirements No

Can capacity be
Is shop No change to meet
capacity
adequate? requirements?

Yes Yes
Firm up a portion of the Change
MPS Capacity

A Hypothetical Department
Load Profile

Time Period
 MRP II
MANUFACTURING RESOURCES PLANNING

Distribution Resource Planning for the

Supply Chain
• Also referred to as distribution requirements planning.
• A method used for planning orders in a supply chain.
• Its goal is to achieve a balance of supply and demand
throughout the supply chain.
 MRP II
MANUFACTURING RESOURCES PLANNING

Distribution Resource Planning for the

Supply Chain
• It begins with a forecast of demand plus actual orders for
future periods at the distribution end of a supply chain.
• Other information needed includes the quantity and timing
of scheduled receipts at various points in the supply chain
as well as on-hand inventories, and any safety stock
requirements.
ERP
WHAT IS ERP?
ERP
ENTERPRISE RESOURCE PLANNING
• Software solution that addresses the enterprise needs,
taking a process view of the overall organization to meet
the goals, by tightly integrating all functions and under a
common software platform.
• It represents an expanded effort to integrate
standardized record keeping that will permit information
sharing among different areas of an organization in
order to manage the system more effectively.
WHAT IS ERP?
ERP
ENTERPRISE RESOURCE PLANNING
• ERP software provides a system to capture and make
data available in real time to decision makers and other
users throughout an organization.
• It provides a set of tools for planning and monitoring
various business processes to achieve the goals of the
organization.
• It composed of a collection of integrated modules.
Module Brief Description
Accounting/Finance A central component of most ERP systems. It provides
a range of financial reports, including general ledger,
accounts payable, accounts receivable, payroll, income
statements, and balance sheets.
Marketing Supports lead generation, target marketing, direct mail,
and sales.
Human Resources Maintains a complete database of employee information
such as date of hire, salary, contact information,
performance evaluations, and other pertinent
information.
An overview
Purchasing Facilitates vendor selection, price negotiation, making
of some ERP
purchasing decisions and bill payment.
software
Production Planning Integrates information on forecasts, orders, production modules
capacity, on-hand inventory quantities, bills of material,
work in process, schedules and production lead times.
Inventory Management Identifies inventory requirements, inventory availability,
replenishment rules, and inventory tracking.
Distribution Contains information on third-party shippers, shipping
and delivery schedules, delivery tracking.
Sales Information on orders, invoices, order tracking, and
shipping.
Supply Chain Facilitates supplier and customer management, supply
Management chain visibility, and event management
How Do ERP Systems Work?

Managers and
Stakeholders ERP
Financial
Reporting Applications
Human
Sales and
Resource Applications
Delivery
Management
Applications
Applications
Sales Force Central
Manufacturing Back-office
Customers And Customer Database
Applications Administrators Suppliers
Service Reps
And Workers

Service Human
Applications Resource Inventory
Management And Supply
Applications Applications

Employees

Source: Davenport, Thomas, “Putting the Enterprise into the Enterprise System”, Harvard Business Review, July-Aug. 1998.
An ERP Example: Before ERP

Orders
Parts
Sends report Customer
Demographic
Sales Dept. Files Customers

Checks for Parts

Calls back “Not in stock”
Accounting “We ordered the parts”
Files

Accounting
Invoices Sends report
Sends report accounting
Ships parts
Vendor
Warehouse
Order is placed
“We Need parts #XX”
with Vendor
Inventory
Purchasing Files
Files “We ordered the parts”
Purchasing
An ERP Example: After ERP

Orders Inventory Data

Parts If no parts,
order is placed
through DB

Customers Sales Dept. Accounting

Financial Data exchange;

Books invoice against PO

Order is submitted
to Purchasing. Database
Purchasing record Books inventory
order in DB against PO

Order is placed
with Vendor

Warehouse
Vendor Purchasing

Ships parts
And invoices accounting
 Why ERP?

• To integrate financial data

• To standardize manufacturing processes

• To standardize HR information

Source: Christopher Koch, “ABC: An Introduction to ERP,” Cio.com, Copyright 2008 CXO Media. Used with permission
 The Hidden Cost of ERP

1. Training
2. Integration and testing
3. Data conversion
4. Data analysis
5. Consultants ad infinitum
6. Replacing your best and brightest
7. Implementation teams can never be stop
8. Waiting for ROI
9. Post-ERP Depression
Source: Christopher Koch, “ABC: An Introduction to ERP,” Cio.com, Copyright 2008 CXO Media. Used with permission
 How do Companies Organize
their ERP Projects?

• The big bang

-The most ambitious and difficult of approaches to ERP

implementation, companies cast off all their legacy systems
at once and implement a single ERP system across the entire
company.

Source: Christopher Koch, “ABC: An Introduction to ERP,” Cio.com, Copyright 2008 CXO Media. Used with permission
 How do Companies Organize
their ERP Projects?

• Franchising strategy

-This approach suits large or diverse companies that do not

share many common processes across business units.
Independent ERP systems are installed in each unit, while
linking common processes such as financial bookkeeping,
across the enterprise.

Source: Christopher Koch, “ABC: An Introduction to ERP,” Cio.com, Copyright 2008 CXO Media. Used with permission
 How do Companies Organize
their ERP Projects?

• Slam-dunk

-ERP dictates the process design in this method, where the

focus is on just a few key processes, such as those contained
in an ERP system’s financial module.
The slam-dunk is generally for smaller companies expecting
to grow in ERP.

Source: Christopher Koch, “ABC: An Introduction to ERP,” Cio.com, Copyright 2008 CXO Media. Used with permission
Source: Condensed from Clive Weightmnd and Deloitte Consulting “ The Top 10 ERP Mistakes.” Copyright Clive Weightman. Used with permission)

The Top 10 ERP Mistakes

10. Believing the journey is complete at “go live”

9. Not planning for- and minimizing-the interim
performance dip after start up

8. Failing to balance the needs and power of

integration with seek quick business hits.
7. Staring too late to address all things data

(architecture, standards, management,

cleansing, and so on.)
Source: Condensed from Clive Weightmnd and Deloitte Consulting “ The Top 10 ERP Mistakes.” Copyright Clive Weightman. Used with permission)

The Top 10 ERP Mistakes

6. Failing to staff the team with “A” players from

business and technical sides of the organization,
including program management.

5. Starting without an effective and dedicated

senior governance council, including a single
executive sponsor.

4. Selecting a strong system integrator and then not

heeding its advice.
Source: Condensed from Clive Weightmnd and Deloitte Consulting “ The Top 10 ERP Mistakes.” Copyright Clive Weightman. Used with permission)

The Top 10 ERP Mistakes

3. Trying to create a solution incompatible with the

company’s culture.
2. Treating this as a technical project vs. a change

that balances people, process, and technology;

not using power of the new, integrated information.

1. Embarking on the journey without solid, approved

business case, including mechanisms to update the

business case continuously and to ensure the savings

are baked into operational budgets.
The difference among MRP,MRP II
and ERP