Chapter 11

Report
Enterprise
Resource
Planning
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Enterprise Resource
Planning (ERP)
 Organizes and manages a
company’s business processes by
sharing information across
functional areas
 Connects with supply-chain and
customer management
applications
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ERP Modules
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ERP Modules
Figure 12.1
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ERP’s Central Database
Finance &
Accounting
Sales
&
Marketing
ERP Data
Repository
Production &
Materials
Management
Human
Resources
Figure 12.2
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ERP Implementation
 First step is to analyze business
processes
 Which processes have the biggest
impact on customer relations?
 Which process would benefit the
most from integration?
 Which processes should be
standardized?
 Use of Internet portals can aid
implementation
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Customer Relationship
Management (CRM)
 Plans and executes business
processes that involve customer
interaction
 Changes focus from managing
products to managing customers
 Point-of-sale data is analyzed for
patterns used to predict future
behavior
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Supply Chain Management
 Supply chain planning
 Supply chain execution
 Supplier relationships
 Distinctions between ERP and
SCM are becoming increasingly
blurred
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Collaborative Product
Commerce (CPC)
 New product design and
development and product life
cycle management
 Integrates customers and
suppliers in the design process
though the entire product life cycle
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Collaborative Product
Commerce (CPC)
Customer Relationship
Management (CRM)
Collaborative
Design
Collaborative
Product
Commerce
(CPC)
Product
Design
Collaborative
Manufacture
Manufacture
&
Delivery
DFMA
Collaborative
Design
Collaborative
Manufacture
Enterprise
Resource
Planning
(ERP)
Time to Customer
Time to Market
Customers
Suppliers
Figure 12.3
Supply Chain
Management (SCM)
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Connectivity
 A very difficult problem
 Enterprise Application Integration
(EAI) solutions
 EDI is being replaced by XML
 A continuing issue
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ERP and MRP
 MRP (material requirements planning)
was the precursor to ERP
 Primarily a production planning and
control system
 MRP evolved to MRP II (manufacturing
resource planning)
 ERP and ERP II continue to extend the
links through all business processes
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Material Requirements
Planning
 Computerized inventory control &
production planning system
 Schedules component items when
they are needed - no earlier and no
later
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When to Use MRP
 Dependent and discrete items
 Complex products
 Job shop production
 Assemble-to-order environments
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Demand Characteristics
Independent demand
Dependent demand
100 x 1 =
100 tabletops
100 x 4 = 400 table legs
100 tables
Continuous demand
Discrete demand
400 –
300 –
No. of tables
No. of tables
400 –
200 –
100 –
1
2
3
Week
4
300 –
200 –
100 –
5
M T W Th F
M T W Th F
Figure 12.4
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Material
Requirements
Planning
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Material
Requirements
Planning
Product
structure
file
Master
production
schedule
Material
requirements
planning
Item
master
file
Planned
order
releases
Figure 12.5
Work
orders
Purchase
orders
Rescheduling
notices
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Master Production
Schedule
 Drives MRP process with a schedule of
finished products
 Quantities represent production not
demand
 Quantities may consist of a combination of
customer orders & demand forecasts
 Quantities represent what needs to be
produced, not what can be produced
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Master Production
Schedule
MPS ITEM
Clipboard
Lapdesk
Lapboard
Pencil Case
1
85
0
75
125
PERIOD
2
3
4
95
50
120
125
120
0
47
125
100
50
20
125
5
100
0
17
125
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Product Structure Tree
Clipboard
Pressboard
(1)
Top Clip
(1)
Level 0
Clip Ass’y
(1)
Bottom Clip
(1)
Rivets
(2)
Pivot
(1)
Level 1
Spring
(1)
Level 2
Figure 12.6
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Product Structure Tree
Clipboard
Top clip (1)
Pivot (1)
Bottom clip (1)
Spring (1)
Rivets (2)
Finished clipboard
Pressboard (1)
Figure 12.6
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Indented Bill of Material
LEVEL
0----1----2---2---2---2--1---1---
ITEM
Clipboard
Clip Assembly
Top Clip
Bottom Clip
Pivot
Spring
Rivet
Press Board
UNIT OF MEASURE
QUANTITY
ea
ea
ea
ea
ea
ea
ea
ea
1
1
1
1
1
1
2
1
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Specialized BOMS
 Phantom bills
Transient subassemblies
Never stocked
Immediately consumed in next stage
 K-bills
Group small, loose parts under
pseudo-item number
Reduces paperwork
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Specialized BOMS
 Modular bills
 Product
assembled from major
subassemblies & customer options
 Modular bill kept for each major
subassembly
 Simplifies forecasting & planning
 X10 Automobile example
 3 x 8 x 3 x 8 x 4 = 2,304 configurations
 3 + 8 + 3 + 8 + 4 = 26 modular bills
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Modular Bills of Material
X10
Automobile
Engines
(1 of 3)
Exterior color
(1 of 8)
Interior
(1 of 3)
Interior color
(1 of 8)
Body
(1 of 4)
4-Cylinder (.40)
Bright red (.10)
Leather (.20)
Grey (.10)
Sports coupe (.20)
6-Cylinder (.50)
White linen (.10)
Tweed (.40)
Light blue (.10)
Two-door (.20)
8-Cylinder (.10)
Sulphur yellow (.10)
Plush (.40)
Rose (.10)
Four-door (.30)
Neon orange (.10)
Off-white (.20)
Station wagon (.30)
Metallic blue (.10)
Cool green (.10)
Emerald green (.10)
Black (.20)
Jet black (.20)
Brown (.10)
Champagne (.20)
B/W checked (.10)
Figure 12.7
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Item Master File
DESCRIPTION
INVENTORY POLICY
Item
Pressboard
Item no.
734
Item type
Purch
Product/sales class Comp
Value class
B
Buyer/planner
RSR
Vendor/drawing
07142
Phantom code
N
Unit price/cost
1.25
Pegging
Y
LLC
1
Lead time
Annual demand
Holding cost
Ordering/setup cost
Safety stock
Reorder point
EOQ
Minimum order qty
Maximum order qty
Multiple order qty
Policy code
1
5000
1
50
0
39
316
100
500
3
Table 12.4
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Item Master File
PHYSICAL INVENTORY
On hand
Location
On order
Allocated
Cycle
Last count
Difference
USAGE/SALES
100
W142
100
75
3
9/5
-2
YTD usage/sales
MTD usage/sales
YTD receipts
MTD receipts
Last receipt
Last issue
1100
75
1200
0
8/25
10/5
CODES
Cost acct.
Routing
Engr
00754
00326
07142
Table 12.4
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Basic MRP
Processes
1. Exploding the bill of material
2. Netting out inventory
3. Lot sizing
4. Time-phasing requirements
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The MRP Matrix
ITEM NAME OR NO.
LLC - LOW LEVEL CODE
LOT SIZE QTY MADE IN
LY - LEAD TIME
1
PERIOD
2
3
4
5
Gross Requirements
Derived from MPS or planned
order releases of the parent
Scheduled Receipts
On order and scheduled to be
received
Projected on Hand
Net Requirements
Beg Inv
Anticipated quantity on hand at
the end of the period
Gross requirements net of
inventory and scheduled
receipts
Planned Order Receipts
When orders need to be
received
Planned Order Releases
When orders need to be placed
to be received on time
Table 12.5
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School Mate Products
Master Production Schedule
Clipboard
Lapdesk
1
2
3
4
5
85
0
95
60
120
0
100
60
100
0
Item Master File
On hand
On order
(sch receipt)
LLC
Lot size
Lead time
CLIPBOARD
25
175 (Period 1)
LAPDESK
20
0
PRESSBOARD
150
0
0
L4L
1
0
Mult 50
1
1
Min 100
1
Example 12.1
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School Mate Products
Product Structure Record
Clipboard
Level 0
Clip Ass’y
(1)
Pressboard
(1)
Rivets
(2)
Level 1
Lapdesk
Pressboard
(2)
Trim
(3’)
Level 0
Beanbag
(1)
Glue
(4 oz)
Level 1
Example 12.1
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School Mate Products
ITEM: CLIPBOARD
LLC: 0
LOT SIZE: L4L
1
2
3
4
5
Gross Requirements
85
95
120
100
100
Scheduled Receipts
175
Projected on Hand
LT: 1
PERIOD
25
Net Requirements
Planned Order Receipts
Planned Order Releases
Example 12.1
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School Mate Products
ITEM: CLIPBOARD
LLC: 0
LOT SIZE: L4L
1
2
3
4
5
Gross Requirements
85
95
120
100
100
Scheduled Receipts
175
Projected on Hand
Net Requirements
LT: 1
PERIOD
25
115
0
Planned Order Receipts
Planned Order Releases
(25 + 175) = 200 units available
(200 - 85) = 115 on hand at the end of Period 1
Example 12.1
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School Mate Products
ITEM: CLIPBOARD
LLC: 0
LOT SIZE: L4L
1
2
3
4
5
Gross Requirements
85
95
120
100
100
Scheduled Receipts
175
Projected on Hand
Net Requirements
LT: 1
PERIOD
25
115
20
0
0
Planned Order Receipts
Planned Order Releases
115 units available
(115 - 85) = 20 on hand at the end of Period 2
Example 12.1
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School Mate Products
ITEM: CLIPBOARD
LLC: 0
LOT SIZE: L4L
1
2
3
4
5
Gross Requirements
85
95
120
100
100
Scheduled Receipts
175
115
20
0
0
0
100
Projected on Hand
Net Requirements
LT: 1
PERIOD
25
Planned Order Receipts
Planned Order Releases
100
100
20 units available
(20 - 120) = -100 — 100 additional Clipboards are required
Order must be placed in Period 2 to be received in Period 3
Example 12.1
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School Mate Products
ITEM: CLIPBOARD
LLC: 0
LOT SIZE: L4L
1
2
3
4
5
Gross Requirements
85
95
120
100
100
Scheduled Receipts
175
115
20
0
0
0
0
0
100
100
100
100
100
100
100
100
Projected on Hand
Net Requirements
LT: 1
PERIOD
25
Planned Order Receipts
Planned Order Releases
100
Following the same logic Gross Requirements in Periods 4
and 5 develop Net Requirements, Planned Order Receipts, and
Planned Order Releases
Example 12.1
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School Mate Products
ITEM: LAPDESK
LLC: 0
LOT SIZE: MULT 50
LT: 1
Gross Requirements
PERIOD
1
2
0
60
3
4
0
60
5
0
Scheduled Receipts
Projected on Hand
20
Net Requirements
Planned Order Receipts
Planned Order Releases
Example 12.1
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School Mate Products
ITEM: LAPDESK
LLC: 0
LOT SIZE: MULT 50
LT: 1
Gross Requirements
PERIOD
1
2
3
4
5
0
60
0
60
0
20
10
10
0
0
0
40
50
50
50
Scheduled Receipts
Projected on Hand
Net Requirements
20
Planned Order Receipts
Planned Order Releases
50
50
Following the same logic, the Lapdesk MRP matrix is
completed as shown
Example 12.1
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School Mate Products
ITEM: CLIPBOARD
LOT SIZE: L4L
LLC: 0
LT: 1
1
Planned Order Releases
ITEM: LAPDESK
LOT SIZE: MULT 50
LLC: 0
LT: 1
Planned Order Releases
ITEM: PRESSBOARD LLC: 0
LOT SIZE: MIN 100
LT: 1
Gross Requirements
Scheduled Receipts
Projected on Hand
150
Net Requirements
Planned Order Receipts
Planned Order Releases
1
2
PERIOD
3
4
100
100
100
2
PERIOD
3
4
5
4
5
50
50
1
PERIOD
3
2
5
Example 12.1
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School Mate Products
ITEM: CLIPBOARD
LOT SIZE: L4L
LLC: 0
LT: 1
1
Planned Order Releases
ITEM: LAPDESK
LOT SIZE: MULT 50
LLC: 0
LT: 1
Planned Order Releases
ITEM: PRESSBOARD LLC: 0
LOT SIZE: MIN 100
LT: 1
Gross Requirements
Scheduled Receipts
Projected on Hand
150
Net Requirements
Planned Order Receipts
Planned Order Releases
2
PERIOD
3
4
100
100
100
x1
x1
2
PERIOD
3
4
5
x1
1
50
x2
1
100
5
50
x2
PERIOD
2
3
4
100
200
100
5
0
Example 12.1
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School Mate Products
ITEM: CLIPBOARD
LOT SIZE: L4L
LLC: 0
LT: 1
1
Planned Order Releases
ITEM: LAPDESK
LOT SIZE: MULT 50
LLC: 0
LT: 1
Planned Order Releases
ITEM: PRESSBOARD LLC: 0
LOT SIZE: MIN 100
LT: 1
Gross Requirements
Scheduled Receipts
Projected on Hand
150
Net Requirements
Planned Order Receipts
Planned Order Releases
1
2
PERIOD
3
4
100
100
100
2
PERIOD
3
4
50
50
1
100
PERIOD
2
3
4
100
200
100
50
100
50
50
100
150
0
150
150
100
0
100
100
5
5
5
0
0
Example 12.1
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School Mate Products
Planned Order Report
PERIOD
ITEM
Clipboard
Lapdesk
Pressboard
1
50
100
2
3
4
100
100
50
100
100
150
5
Example 12.1
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MRP Outputs
 Planned orders
Work orders
Purchase orders
 Changes to previous plans or
existing schedules
Action notices
Rescheduling notices
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Planned Order Report
Item
On hand
On order
Allocated
DATE
9-26
9-30
10-01
10-08
10-10
10-15
10-23
10-27
#2740
100
200
50
ORDER NO.
Date
Lead time
Lot size
Safety stock
SCHEDULED
GROSS REQS.
RECEIPTS
AL 4416
AL 4147
GR 6470
SR 7542
CO 4471
GR 6471
GR 6471
GR 6473
Key: AL = allocated
CO = customer order
PO = purchase order
PROJECTED
ON HAND
25
25
50
200
75
50
25
50
WO = work order
SR = scheduled receipt
GR = gross requirement
50
25
0
- 50
150
75
25
0
- 50
9 - 25 - 02
2 weeks
200
50
ACTION
Expedite SR 10-01
Release PO 10-13
Table 12.6
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MRP Action Report
Current date 9-25-02
ITEM
DATE
#2740
#3616
#2412
#3427
#2516
#2740
#3666
10-08
10-09
10-10
10-15
10-20
10-27
10-31
ORDER NO. QTY.
7542
200
7648
100
200
50
ACTION
Expedite
Move forward
Move forward
Move backward
De-expedite
Release
Release
SR
PO
PO
PO
SR
PO
WO
10-01
10-07
10-05
10-25
10-30
10-13
10-24
Table 12.7
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved.
Capacity Requirements
Planning (CRP)
 Computerized system that projects
load from material plan
 Creates load profile
 Identifies underloads and overloads
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Capacity
Usually expressed as standard
machine hours or labor hours
Capacity = (no. machines or workers)
x (no. shifts) x (utilization)
x (efficiency)
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Capacity Terms
 Load profile
Compares released and planned
orders with work center capacity
 Capacity
Productive capability; includes
utilization and efficiency
 Utilization
% of available working time spent
working
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More Capacity Terms
 Efficiency
 Load
The standard hours of work
assigned to a facility
 Load percent
The ratio of load to capacity
Load % = (load/capacity)x100%
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Capacity Requirements
Planning
MRP planned
order
releases
Routing
file
Capacity
requirements
planning
Open
orders
file
Load profile for
each machine center
Figure 12.8
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Determining Loads
and Capacities
2 copiers, 2 operators
5 days/wk, 8 hr/day
1/2 hr meals, 1/2 hr maintenance per day
Efficiency
= 100%
Utilization
= 7/8 = 87.5%
Daily capacity = 2 machines x 2 shifts
x 8 hours/shift x 100% efficiency
x 87.5% utilization
= 28 hours or 1,680 minutes
Example 12.2
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved.
Determining Loads
and Capacities
JOB
NO.
NO. OF
COPIES
SETUP
TIME (MIN)
RUN TIME
(MIN/UNIT)
TOTAL TIME
10
20
30
40
50
500
1,000
5,000
10,000
2,000
5.2
10.6
3.4
11.2
15.3
0.08
0.10
0.12
0.14
0.10
5.2 + (500 x 0.08) =
45.2
10.6 + (1,000 x 0.10) = 110.6
3.4 + (5,000 x 0.12) = 603.4
11.2 + (10,000 x 0.14) = 1,411.2
15.3 + (2,000 x 0.10) = 215.3
2385.7 min
Load percent = 2,385.7 / 1,680 = 1.42 x 100% = 142%
Add another shift:
Daily capacity = 2 machines x 3 shifts x 8 hours/shift
x 100% efficiency x 87.5% utilization
= 42 hours or 2,520 minutes
Revised load percent = 2,385.7 / 2,520 = 0.9467 x 100% = 94.67%
Example 12.2
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved.
Hours of capacity
Initial Load Profile
120 –
110 –
100 –
90 –
80 –
70 –
60 –
50 –
40 –
30 –
20 –
10 –
0–
Normal
capacity
1
2
3
4
5
6
Time (weeks)
Figure 12.9
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Remedies for Underloads
1. Acquire more work
2. Pull work ahead that is scheduled
for later time periods
3. Reduce normal capacity
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Remedies for Overloads
1. Eliminate unnecessary requirements
2. Reroute jobs to alternative machines or
work centers
3. Split lots between two or more machines
4. Increase normal capacity
5. Subcontract
6. Increase the efficiency of the operation
7. Push work back to later time periods
8. Revise master schedule
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved.
Hours of capacity
Adjusted Load Profile
120 –
110 –
100 –
90 –
80 –
70 –
60 –
50 –
40 –
30 –
20 –
10 –
0–
Pull ahead
Overtime
1
2
Work
an
extra
shift
3
Push back
Push back
4
Normal
capacity
5
6
Time (weeks)
Figure 12.10
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved.
Relaxing MRP
Assumptions
 Material is not always the
constraining resource
 Lead times can vary
 Not every transaction needs to be
recorded
 JIT can be used with MRP
 The shop floor may require a more
sophisticated scheduling system
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved.
Manufacturing
Resource
Planning
(MRP II)
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved.
Manufacturing
Resource
Planning
(MRP II)
Customer
orders
Aggregate
production
plan
Forecast
No
Feasible?
Yes
Master production
schedule
Material requirements
planning
Capacity requirements
planning
No
Feasible?
Feedback
Yes
Purchase
orders
Work
orders
Inventory
Shop floor
control
Manufacture
Figure 12.11
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved.
Manufacturing
Resource
Planning
(MRP II)
Aggregate
production
plan
Forecast
No
Customer
orders
Aggregate
production
plan
Forecast
No
Feasible?
Customer
orders
Yes
Master production
schedule
Material requirements
planning
Capacity requirements
planning
Feasible?
No
Feasible?
Feedback
Yes
Master
production
schedule
Yes
Purchase
orders
Work
orders
Inventory
Shop floor
control
Manufacture
Figure 12.11
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved.
Manufacturing
Resource
Planning
(MRP II)
Master production
schedule
Customer
orders
Aggregate
production
plan
Forecast
No
Feasible?
Yes
Master production
schedule
Material requirements
planning
Material requirements
planning
Capacity requirements
planning
Capacity requirements
planning
No
Feasible?
Feedback
Yes
No
Feasible?
Yes
Purchase
orders
Work
orders
Inventory
Shop floor
control
Manufacture
Figure 12.11
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved.
Manufacturing
Resource
Planning
(MRP II)
Purchase
orders
Customer
orders
Aggregate
production
plan
Forecast
No
Feasible?
Yes
Master production
schedule
Work
orders
Material requirements
planning
Capacity requirements
planning
Shop floor
control
Inventory
No
Feasible?
Feedback
Yes
Purchase
orders
Work
orders
Inventory
Shop floor
control
Manufacture
Manufacture
Figure 12.11
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved.
Manufacturing
Resource
Planning
(MRP II)
Customer
orders
Aggregate
production
plan
Forecast
No
Feasible?
Yes
Master production
schedule
Material requirements
planning
Capacity requirements
planning
No
Feasible?
Feedback
Yes
Purchase
orders
Work
orders
Inventory
Shop floor
control
Manufacture
Figure 12.11
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved.

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