Description
The documentation about Operations management covers topics like Manufacturing Resource Planning and material requirement planning, (MRP), MRP2, MRP in SAP business one, coordial MRP system in steel industry and IBM plant.
OPERATIONS MANAGEMENT
Manufacturing Resource Planning & Material Requirement Planning
1
Contents
1. What is MRP and MRPII?---------------------------------------------------Pg 3 2. MRP in SAP Business One--------------------------------------------------Pg 4 3. COORDIAL- MRP System in Steel Industry ----------------------------Pg13 4. IBM’s Rochester Plant-------------------------------------------------------Pg17
2
What is MRP?
• • • Materials requirements planning (MRP) is a means for determining the number of parts, components, and materials needed to produce a product (end item) Dependent vs. independent demand MRP provides time scheduling information specifying when each of the subassemblies, parts, and components should be ordered or produced o What, when, how many? • • • Dependent demand drives MRP MRP is an information system Critical input and data requirements: o Master Production Schedule (MPS) o Bill of Materials (BOM) o Inventory database • Many outputs – primary ones are: o Planned orders to be released at a future time. o Order release notices to execute the planned orders. o Changes in due dates of open orders due to rescheduling. o Cancellations or suspensions of open orders due to cancellation or suspension of orders on the master production schedule. o Inventory status data. Planned order releases
MRP II
In the 1980s, MRP technology was expanded to create a new approach called manufacturing resources planning, or MRP II. The techniques developed in MRP to provide valid production schedules proved so successful that organizations became aware that with valid schedules other resources could be better planned and controlled. MRP II has not replaced MRP, nor is it an improved version of it. Rather, it represents an effort to expand the scope of production resource planning and to involve other functional areas of the firm in the planning process such as marketing, finance, engineering, purchasing, and human resources. MRP II differs from MRP in that all of these functional areas have input into the master production schedule. From that point, MRP is used to generate
3
material requirements and help production managers plan capacity. MRP II systems often include simulation capabilities so managers can evaluate various options.
MRP in SAP Business One: A Business Scenario
Introduction MRP – Material Requirement Planning in SAP Business One creates recommendation for purchase orders and production orders based on some inputs such as Purchase Orders, Sales Orders, Inventory Status, Forecast, Bill of Material, Lead time, Minimum Order quantity, Parent dependent requirement, Parent Production Order, etc. Essentially, MRP works like an expert system, which determines how much would be purchased for a purchase item and produced for a manufactured item at a particular point in time. It can be said that it is an intelligent system! SAP Business One has about ten thousand installations worldwide and is a popular MRP solution for SMEs and SMBs. The customers in India include: ? Adi Media Private Ltd ? Agrasen Engineering Industries Limited ? Ankit Forgings A general illustration of MRP implementation using SAP Business One is as follows: Company ABC produces and sells item X. Item X is a produced (make) not a purchased (buy) item and it is managed by MRP. It is assumed that the components needed to produce Item X are in stock. It has a lead time of 6 days and a minimum order quantity of 10. As at today, the inventory status of item X is shown below. 1. 40 quantities of item X are in stock. 2. 60 quantities of item X are ordered as a result of a production order raised with due date in one month from today.
4
3. 30 quantities of item X are committed as a result of a sales order received with delivery date in two months from today. 4. 70 quantities of item X are available. This can be calculated from this formulae: Available = in stock – committed + ordered = 40 – 30 + 60 = 70
5
The planner knows from his prior knowledge of how the demand for item X flows, hence, he forecasts that, there will be a demand for 100 and 8 quantities of item X in the next 4 months and 6 months respectively. He also wants to plan for the next 8 months starting from today at an interval of 2 days. Furthermore, the MRP run for item X is
6
designed to consume the forecast, existing stock, production orders and sales orders.
Today’s Date: 19.07.2006 Forecast for 4 months: 100 units
7
Forecast for 6 months: 8 units
Scenario Generation or selecting an existing scenario
8
Entering the scenario details. In this case the planning horizon is of 8 months from 19.07.06 to 19.03.07 with a data interval of 2 days.
The data sources are selected as per the inputs available. The forecast input can be additionally mentioned as well along with the respective warehouses.
9
MRP Result
Typically, MRP result is made up of four major parameters: Initial stock (for the period), Receipt (for the period), Gross requirement (for the period) and Final stock (net requirement for the period). Using our business scenario, two due dates are worthy of note as it relates to the MRP result. 1. 18.8.06 (After one month)
10
2. 19.9.06 (After two months).
As at (1) above, there’s an initial stock of 40 (from today’s stock), a receipt of 60 and the final stock is 100. As at (2) above, initial stock is 100 (a summation of today’s stock of 40 and receipt of 60 from the purchase order). Gross requirement is 30, from the sales order. The final stock therefore is 70, which is initial stock – gross requirement. The MRP Recommendation report As earlier stated, MRP creates recommendation for purchase order and production order depending on whether the item in question is a purchase item or production item. Item X in our business scenario is a produced item, hence the order recommendation report for the business scenario will contain two lines of production orders as shown below.
11
Order Recommendation Report
12
The first line will be a recommendation for 30 quantities of item X while the second line will be for 10 quantities of item. Reason Line 1. Remember that we have 70 in stock for the gross requirement from the first forecast quantity (next 4 months) of 100. Line 2. Remember that we designed a gross requirement of 8 quantities of item X from the second forecast (next 6 months). However, item X has a minimum order quantity of 10. Take note that the due dates picked by the system is calculated from the dates defined for the forecast. The pegging Information The pegging information in SAP Business One can be analyzed by checking the quantity displayed in either the receipt row or the gross requirement row of the MRP result window. When the quantity for the receipt row is clicked, the source of the receipt is displayed. 13
The source can be a purchase order or/and production order. The pegging information for gross requirement displays the source of the requirement, which can be open purchase orders, sales orders or forecasts. Colour Attributes The MRP result has some “graphics sense”. Pale gray cells depicts periods where due date can not be met as a result of long lead-time. The values in these cells are displayed in red. Yellow cells depict periods in which receipt or gross requirement takes place. Conclusion Conclusively, there’s more to just running an MRP system. Been able to critically and objectively analyze the MRP is key to the success of an MRP system, especially when it is dependent on the ERP system – SAP Business One. This is because; the flaws in some definitions like lead-time, due date and even forecast, can impair on other modules like inventory, which can rubbish, not only the MRP system but also the ERP system. .
14
COORDIAL- MRP System in Steel Industry
Introduction: COORDIAL is a real time application for the management of molten steel within the steel works of the Sollac Group (USINOR). Driven by the company MRP system, it pilotes the workshop Supervisor system. In use around the clock since 2 years at Dunkerque (F) and since 18 months at Fos (F), these applications optimise the major metallurgic operations in the entire steel works.
Management of molten Steel at Sollac...in CHIP
The Interactive Gantt Chart The production of finished and semi-finished steel products is a very capital-intensive industry, at work around the clock, where a difference of a few degrees Centigrade or a
15
few minutes delay can have important consequences in the overall cost. This is where the COORDIAL solution, built by ATOS, plays a very important role in keeping productivity high and costs low.
Gap between MRP and Shop Floor
There is a big gap between the daily orders (X tons of a given steel grade) and the various shop-level instructions that the supervisor can manage. Based on additional procedures, behavior models, machine characteristics, etc. the coordination process must generate precise instructions (down to the minute, and removing all generalities) to the shop floor. This process must of course, follow the events and allow for possible delays. On top of this, the temperature of the steel stock and time play a very important role in the process. Too cold, the batch has to be reheated, incurring energy costs and time. Too hot, the machines may be damaged. Too early, the machines are not available, or too late, the product continuity is disrupted...which is catastrophic in the process industry. What differs steel production from ordinary shops is the scheduling behaviour. Tasks duration depend on proceeding and succeeding tasks. COORDIAL is the solution developed by the Engineering Integration Division of ATOS for scheduling is 24 hours, with a precision of 1 minute. It can also make simulations over 3 days horizon. Benefits of COORDIAL: coordial offers directly perceived benefits such as
•
Able to co-ordinate the multitude of activities occurring in the various workshops within the steel works (blast furnaces, converters, electric ovens, steel refinery stations, continuous flow shops, steel rolls, up to the final cutting stages)
•
Able to maximize throughput and productivity, by synchronizing activities and minimizing delays and increasing overall production Able to implement very dynamic scheduling rules
•
16
• •
Able to track events and synchronize the plan with real events from the shop floor Able to keep track of activities as and when they occur: the planning is continuously updapted by events from shop floor. This allows the operator to make up-to-date and timely decisions.
COORDIAL environment
COORDIAL takes orders (steel grade and quantity) from the MRP and provides optimal plans to be implemented at the shop floor level. The plans maintained by COORDIAL are automatically updated regularly by events received from the shop floor supervisory system (VIGILE from ATOS). The operator may directly make changes via the interactive Gantt component.
COORDIAL at work
COORDIAL has been installed and is in regular use around the clock at two steel works of the Sollac Group in France: Dunkerque, since 24 months, and Fos since 18 months Some 70 to 90 batches are handled daily at each site, where each batch involves 250-300 tons of steel. COORDIAL enables important energy savings, by ensuring that the batches
17
arrive on time at the work stations. Even if productivity is increased by a few percent, COORDIAL gives substantial overall annual savings. Created by the merging of Sligos and Axime, Atos Group has a revenue of 7 billion francs and a total of 10000 employees (in 1999). Some 4500 employees work in Engineering Integration
18
IBM’s Rochester PLANT Uses MRP to Execute its Fast Turn-Around Strategy
IBM’s Rochester, Minnesota, plant(www.research.ibm.com) is responsible for the final assembly of IBM.’s AS/400 midrange computers. The complex includes a printed circuit board assembly and testing facility that provides subassemblies to final assemble lines. Each AS/400 computer is assembled to customer order, which the plant does more than 50,000 times per year. There are more than 10,000 different configurations. The plant must manage over 57,000 parts and assemblies no matter where they might be in the 3.6 million square feet of space the facility occupies, a daunting task without the help of modern systems. To remain competitive in the industry, IBM must promise delivery of complete computers within 96 hours of receiving the order. In addition, because of the short lead times, the plant must procure materials before firm customer orders are received, which requires careful management of inventory levels and shortages.
A core element of the plant’s fast turn-around strategy is a MAPICS MRP II system (www.mapics.com) which took 18 months to install. In addition, IBM developed an application called Production Resource Manager (PRM), which interfaces with a firms MRP II or ERP systems. In addition to typical inputs to an MRP II system, PRM requires bills of capacity, production, suppliers and inventory constraints and optimization
19
objectives such as maximizing profits, minimizing costs or minimizing inventories. The bills of capacity are analogous to bills of material except they contain the amounts of specific capacities that are needed by a particular configuration of the final product and when they are needed. PRM takes the MRP II plan for component and purchased material replenishment orders and modifies it as needed to account for supply and component availability, capacity constraints and objectives. The many outputs include a master production schedule, an optimal component production schedule, a revised shipment schedule and a critical parts list.
Customer Orders Forecasts
Master Production Schedule
Bills of Materials Time Standards
MRP Explosion
Inventory Records & Transactions
Material Requirement Planning
Manufacturing resource Planning
Cost and Financial Data
Purchasing Reports
Financial accounting Reports
Sales and Marketing Reports
Manufacturing Reports
The system has enabled the Rochester plant to improve its inventory accuracy to 99% and reduce safety stocks by 15 to 25%. The system also includes a cost accounting module which makes costing information that used to take more than a week to obtain immediately available. In addition, planners can simulate “what-if” scenarios quickly to see the impacts of carious events on the production schedule. MRP II and the PRM application have enabled IBM’s Rochester plant to execute its fast turn-around strategy.
20
doc_778349880.doc
The documentation about Operations management covers topics like Manufacturing Resource Planning and material requirement planning, (MRP), MRP2, MRP in SAP business one, coordial MRP system in steel industry and IBM plant.
OPERATIONS MANAGEMENT
Manufacturing Resource Planning & Material Requirement Planning
1
Contents
1. What is MRP and MRPII?---------------------------------------------------Pg 3 2. MRP in SAP Business One--------------------------------------------------Pg 4 3. COORDIAL- MRP System in Steel Industry ----------------------------Pg13 4. IBM’s Rochester Plant-------------------------------------------------------Pg17
2
What is MRP?
• • • Materials requirements planning (MRP) is a means for determining the number of parts, components, and materials needed to produce a product (end item) Dependent vs. independent demand MRP provides time scheduling information specifying when each of the subassemblies, parts, and components should be ordered or produced o What, when, how many? • • • Dependent demand drives MRP MRP is an information system Critical input and data requirements: o Master Production Schedule (MPS) o Bill of Materials (BOM) o Inventory database • Many outputs – primary ones are: o Planned orders to be released at a future time. o Order release notices to execute the planned orders. o Changes in due dates of open orders due to rescheduling. o Cancellations or suspensions of open orders due to cancellation or suspension of orders on the master production schedule. o Inventory status data. Planned order releases
MRP II
In the 1980s, MRP technology was expanded to create a new approach called manufacturing resources planning, or MRP II. The techniques developed in MRP to provide valid production schedules proved so successful that organizations became aware that with valid schedules other resources could be better planned and controlled. MRP II has not replaced MRP, nor is it an improved version of it. Rather, it represents an effort to expand the scope of production resource planning and to involve other functional areas of the firm in the planning process such as marketing, finance, engineering, purchasing, and human resources. MRP II differs from MRP in that all of these functional areas have input into the master production schedule. From that point, MRP is used to generate
3
material requirements and help production managers plan capacity. MRP II systems often include simulation capabilities so managers can evaluate various options.
MRP in SAP Business One: A Business Scenario
Introduction MRP – Material Requirement Planning in SAP Business One creates recommendation for purchase orders and production orders based on some inputs such as Purchase Orders, Sales Orders, Inventory Status, Forecast, Bill of Material, Lead time, Minimum Order quantity, Parent dependent requirement, Parent Production Order, etc. Essentially, MRP works like an expert system, which determines how much would be purchased for a purchase item and produced for a manufactured item at a particular point in time. It can be said that it is an intelligent system! SAP Business One has about ten thousand installations worldwide and is a popular MRP solution for SMEs and SMBs. The customers in India include: ? Adi Media Private Ltd ? Agrasen Engineering Industries Limited ? Ankit Forgings A general illustration of MRP implementation using SAP Business One is as follows: Company ABC produces and sells item X. Item X is a produced (make) not a purchased (buy) item and it is managed by MRP. It is assumed that the components needed to produce Item X are in stock. It has a lead time of 6 days and a minimum order quantity of 10. As at today, the inventory status of item X is shown below. 1. 40 quantities of item X are in stock. 2. 60 quantities of item X are ordered as a result of a production order raised with due date in one month from today.
4
3. 30 quantities of item X are committed as a result of a sales order received with delivery date in two months from today. 4. 70 quantities of item X are available. This can be calculated from this formulae: Available = in stock – committed + ordered = 40 – 30 + 60 = 70
5
The planner knows from his prior knowledge of how the demand for item X flows, hence, he forecasts that, there will be a demand for 100 and 8 quantities of item X in the next 4 months and 6 months respectively. He also wants to plan for the next 8 months starting from today at an interval of 2 days. Furthermore, the MRP run for item X is
6
designed to consume the forecast, existing stock, production orders and sales orders.
Today’s Date: 19.07.2006 Forecast for 4 months: 100 units
7
Forecast for 6 months: 8 units
Scenario Generation or selecting an existing scenario
8
Entering the scenario details. In this case the planning horizon is of 8 months from 19.07.06 to 19.03.07 with a data interval of 2 days.
The data sources are selected as per the inputs available. The forecast input can be additionally mentioned as well along with the respective warehouses.
9
MRP Result
Typically, MRP result is made up of four major parameters: Initial stock (for the period), Receipt (for the period), Gross requirement (for the period) and Final stock (net requirement for the period). Using our business scenario, two due dates are worthy of note as it relates to the MRP result. 1. 18.8.06 (After one month)
10
2. 19.9.06 (After two months).
As at (1) above, there’s an initial stock of 40 (from today’s stock), a receipt of 60 and the final stock is 100. As at (2) above, initial stock is 100 (a summation of today’s stock of 40 and receipt of 60 from the purchase order). Gross requirement is 30, from the sales order. The final stock therefore is 70, which is initial stock – gross requirement. The MRP Recommendation report As earlier stated, MRP creates recommendation for purchase order and production order depending on whether the item in question is a purchase item or production item. Item X in our business scenario is a produced item, hence the order recommendation report for the business scenario will contain two lines of production orders as shown below.
11
Order Recommendation Report
12
The first line will be a recommendation for 30 quantities of item X while the second line will be for 10 quantities of item. Reason Line 1. Remember that we have 70 in stock for the gross requirement from the first forecast quantity (next 4 months) of 100. Line 2. Remember that we designed a gross requirement of 8 quantities of item X from the second forecast (next 6 months). However, item X has a minimum order quantity of 10. Take note that the due dates picked by the system is calculated from the dates defined for the forecast. The pegging Information The pegging information in SAP Business One can be analyzed by checking the quantity displayed in either the receipt row or the gross requirement row of the MRP result window. When the quantity for the receipt row is clicked, the source of the receipt is displayed. 13
The source can be a purchase order or/and production order. The pegging information for gross requirement displays the source of the requirement, which can be open purchase orders, sales orders or forecasts. Colour Attributes The MRP result has some “graphics sense”. Pale gray cells depicts periods where due date can not be met as a result of long lead-time. The values in these cells are displayed in red. Yellow cells depict periods in which receipt or gross requirement takes place. Conclusion Conclusively, there’s more to just running an MRP system. Been able to critically and objectively analyze the MRP is key to the success of an MRP system, especially when it is dependent on the ERP system – SAP Business One. This is because; the flaws in some definitions like lead-time, due date and even forecast, can impair on other modules like inventory, which can rubbish, not only the MRP system but also the ERP system. .
14
COORDIAL- MRP System in Steel Industry
Introduction: COORDIAL is a real time application for the management of molten steel within the steel works of the Sollac Group (USINOR). Driven by the company MRP system, it pilotes the workshop Supervisor system. In use around the clock since 2 years at Dunkerque (F) and since 18 months at Fos (F), these applications optimise the major metallurgic operations in the entire steel works.
Management of molten Steel at Sollac...in CHIP
The Interactive Gantt Chart The production of finished and semi-finished steel products is a very capital-intensive industry, at work around the clock, where a difference of a few degrees Centigrade or a
15
few minutes delay can have important consequences in the overall cost. This is where the COORDIAL solution, built by ATOS, plays a very important role in keeping productivity high and costs low.
Gap between MRP and Shop Floor
There is a big gap between the daily orders (X tons of a given steel grade) and the various shop-level instructions that the supervisor can manage. Based on additional procedures, behavior models, machine characteristics, etc. the coordination process must generate precise instructions (down to the minute, and removing all generalities) to the shop floor. This process must of course, follow the events and allow for possible delays. On top of this, the temperature of the steel stock and time play a very important role in the process. Too cold, the batch has to be reheated, incurring energy costs and time. Too hot, the machines may be damaged. Too early, the machines are not available, or too late, the product continuity is disrupted...which is catastrophic in the process industry. What differs steel production from ordinary shops is the scheduling behaviour. Tasks duration depend on proceeding and succeeding tasks. COORDIAL is the solution developed by the Engineering Integration Division of ATOS for scheduling is 24 hours, with a precision of 1 minute. It can also make simulations over 3 days horizon. Benefits of COORDIAL: coordial offers directly perceived benefits such as
•
Able to co-ordinate the multitude of activities occurring in the various workshops within the steel works (blast furnaces, converters, electric ovens, steel refinery stations, continuous flow shops, steel rolls, up to the final cutting stages)
•
Able to maximize throughput and productivity, by synchronizing activities and minimizing delays and increasing overall production Able to implement very dynamic scheduling rules
•
16
• •
Able to track events and synchronize the plan with real events from the shop floor Able to keep track of activities as and when they occur: the planning is continuously updapted by events from shop floor. This allows the operator to make up-to-date and timely decisions.
COORDIAL environment
COORDIAL takes orders (steel grade and quantity) from the MRP and provides optimal plans to be implemented at the shop floor level. The plans maintained by COORDIAL are automatically updated regularly by events received from the shop floor supervisory system (VIGILE from ATOS). The operator may directly make changes via the interactive Gantt component.
COORDIAL at work
COORDIAL has been installed and is in regular use around the clock at two steel works of the Sollac Group in France: Dunkerque, since 24 months, and Fos since 18 months Some 70 to 90 batches are handled daily at each site, where each batch involves 250-300 tons of steel. COORDIAL enables important energy savings, by ensuring that the batches
17
arrive on time at the work stations. Even if productivity is increased by a few percent, COORDIAL gives substantial overall annual savings. Created by the merging of Sligos and Axime, Atos Group has a revenue of 7 billion francs and a total of 10000 employees (in 1999). Some 4500 employees work in Engineering Integration
18
IBM’s Rochester PLANT Uses MRP to Execute its Fast Turn-Around Strategy
IBM’s Rochester, Minnesota, plant(www.research.ibm.com) is responsible for the final assembly of IBM.’s AS/400 midrange computers. The complex includes a printed circuit board assembly and testing facility that provides subassemblies to final assemble lines. Each AS/400 computer is assembled to customer order, which the plant does more than 50,000 times per year. There are more than 10,000 different configurations. The plant must manage over 57,000 parts and assemblies no matter where they might be in the 3.6 million square feet of space the facility occupies, a daunting task without the help of modern systems. To remain competitive in the industry, IBM must promise delivery of complete computers within 96 hours of receiving the order. In addition, because of the short lead times, the plant must procure materials before firm customer orders are received, which requires careful management of inventory levels and shortages.
A core element of the plant’s fast turn-around strategy is a MAPICS MRP II system (www.mapics.com) which took 18 months to install. In addition, IBM developed an application called Production Resource Manager (PRM), which interfaces with a firms MRP II or ERP systems. In addition to typical inputs to an MRP II system, PRM requires bills of capacity, production, suppliers and inventory constraints and optimization
19
objectives such as maximizing profits, minimizing costs or minimizing inventories. The bills of capacity are analogous to bills of material except they contain the amounts of specific capacities that are needed by a particular configuration of the final product and when they are needed. PRM takes the MRP II plan for component and purchased material replenishment orders and modifies it as needed to account for supply and component availability, capacity constraints and objectives. The many outputs include a master production schedule, an optimal component production schedule, a revised shipment schedule and a critical parts list.
Customer Orders Forecasts
Master Production Schedule
Bills of Materials Time Standards
MRP Explosion
Inventory Records & Transactions
Material Requirement Planning
Manufacturing resource Planning
Cost and Financial Data
Purchasing Reports
Financial accounting Reports
Sales and Marketing Reports
Manufacturing Reports
The system has enabled the Rochester plant to improve its inventory accuracy to 99% and reduce safety stocks by 15 to 25%. The system also includes a cost accounting module which makes costing information that used to take more than a week to obtain immediately available. In addition, planners can simulate “what-if” scenarios quickly to see the impacts of carious events on the production schedule. MRP II and the PRM application have enabled IBM’s Rochester plant to execute its fast turn-around strategy.
20
doc_778349880.doc