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Links to related training, expert systems / development tools and further reading below:
Relevant Training Course / In-house Workshop Highlights:
You may also be interested in the associated courses:
Expert Systems / Tools:
Available on request:
Manufacturing / Supply Chain Gap Analysis
Relevant Further Reading: The following further articles were mentioned in this paper:
a. Permanently Maintained Website Articles:
b. Previously Featured Articles from our Archives (Up to 2 per organisation available on request):
B014: Effective Bill of Material Design
T020: Close Scheduling (Reducing Throughput Time)
M006: Hitting the Numbers (The worst way to run Operations)
Manufacturing Resource Planning (MRP 2)
Links on the left to related training and (for topics highlighted in red) further reading
MRP 2 which is the acronym for Manufacturing Resources Planning is sometimes denoted as MRPII or MRP II. It is the underlying principle for most materials planning & scheduling systems contained in Enterprise Resources Planning (ERP) software. It is basically an MRP1 system plus detailed process scheduling; costing (product costing and inventory costing). In addition some definitions include the management of the purchase "on order" situation.
One key operational objective of an MRP2 system is to produce a "work-to list", (a scheduled, prioritised, detailed list of work to do, by individual resource (work centre)), which is achievable in terms of both materials available and capacity available. (More information on scheduling and an explanation of scheduling jargon is available in our archive article: Previous Techniques T020: Close scheduling techniques, reducing throughput time.)
Scheduling systems, as implemented in MRP2 software, vary considerably in sophistication, but generally work by calculating the total load generated on each resource in each time period by the Master Production Schedule, in one of several ways, based on two themes, both of which assume infinite capacity:
Recognition by a number of software suppliers that this process was in their view weak, spawned the resurgence of more sophisticated capacity planning processes such as "Advanced Planning & Scheduling Systems".
In these finite capacity planning systems the load is compared to the capacity available in each period and work is forward scheduled using available capacity from the work order planned start date. A "work-to" list is produced which in theory tells you when the work will be complete, if you do what the work-to list tells you to do. Of course using forward scheduling this may be later than when the work order is required (the MRP due date). (Further information on capacity planning is contained in the article Capacity Management.)
In total we have identified 11 degrees of sophistication, implemented in various software, which can be applied to scheduling. (We cover this subject in more detail in M23 Capacity Management.)
This takes the MRP1 purchase requests and converts them into purchase orders or refreshed schedules. Then it records receipts against those orders. In ERP systems this data is then made available to the purchase ledger accounting systems to pay suppliers.
Most MRP2 systems contain some form of standard and / or actual costing system. Again these vary in sophistication but in principle the cost of each operation above is accumulated to give a cost of the complete process for an item and then via the Bills of Materials to give a total product cost (adding materials costs at each level) to produce a "rolled up cost". We cover this subject in more detail in M13 Manufacturing Accounting for Beginners.
In ERP systems stock balances can be valued to provide inventory values.
Additional Data Required
In additional to those parameters mentioned in MRP1, essential data which needs maintenance are:
Routes (Routings / Methods of Manufacture)
The method of manufacture must be specified and maintained as a series of operation stages. A process planning manager once said to me "We document and tell them how we think they should make it. But they know better!" This is not a problem to an MRP2 system provided they tell us how they make it. That company was ISO accredited! Clearly the New Product Introduction must define the method of manufacture and there must be an effective specification change procedure for the Process method as well as the Bill of Material. (This will be covered by a future article.)
For each operation in a route an operation time should be specified. If we are to do effective capacity planning and shop loading, the times in the routes must be reasonable (+/- 10%). The best way of achieving this is to feedback the actual time taken. However even this has some difficulties:
Work centres (Resources)
In some more sophisticated (some might say complex) MRP2 systems and Advanced Planning & Scheduling Systems in order to improve the precision of scheduling, there are other parameters such as:
Often these can be set as defaults for a work centre rather than specified on each individual routing (and it is our preference to use these defaults). They can also be used in combination to calculate &/or override the default fixed lead-time for the item held on the Bills of Materials. These additional parameters can be used to further refine the scheduling of each operation. This topic is covered in more detail in Previous Technique T020: Close Scheduling (Reducing Throughput Time).
Maybe it is because we do really good business rescuing them, but the problems we find are so common as to suggest that the general success rate of MRP 2 implementation is appalling. Typical problems we encounter include:
The Forrester Effect
(See Lean Supply Chains)
To alleviate the Forrester Effect:
End of the month
Wily old production managers know that if they build WIP, they can pull despatches out of the hat at the end of the month to meet the month end figures. Unfortunately having done it once they have to keep doing it, which completely destroys the flow of work. There are two solutions to this problem:
(See "Demand Management", but this problem is discussed in detail in Previous Malpractice M006: Hitting the Numbers (The worst way to run Operations)
Key Success Factors
The single most beneficial method of avoiding degeneracy in MRP / ERP systems, (and we are not saying this just because we provide this), is to ensure that education and training is refreshed periodically. If people understand why they are doing things they will generally help, or at least avoid hindering.
Other factors include:
Links to related training and further reading below:
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Whilst great care has been taken to provide relevant, accurate, practical, advice based on our considerable process design and development experience, this will almost certainly require interpretation into the context of your unique business. Please be careful in doing so and if in doubt seek expert advice. We would welcome your feedback!
© SM Thacker & Associates 2012