MRP IN SERVICES & ERP

MRP IN SERVICES
María Ayuso
Carmen Delgado
Ana Parias
OPERATIONS MANAGEMENT II

-relates all the activities in a company to customer demands.
-manage all the resources in a company by using MRP logic & data processing
• MRP:
• Nature of Demand:
o Independent demand: of an item that is unrelated to the demand for
other items. (e.g. finished goods, parts required for destructive testing,
and service part requirements)
o Dependent demand: is directly related to or derived from the bill of
material structure for other items or end products. Such demands are
calculated and need not be forecasted.
A given inventory item may have both dependent and independent demand at any
given time.
For example: a part may simultaneously be used as a component of an assembly and
also sold as a service part.
PREVIOUS KNOWLEDGE:

- Usually, those services require trees of the product structure.
- MRP can contribute significantly to the operating management of these services.
1. RESTAURANTS
· Meal common components are complementary ingredients.
Like bread, vegetables and condiments.
· These components depend on the demand of food.
· In the plan food is seen as a finished product.
EXAMPLE:
Preparation of Veal Picante, a very important meal for the restaurant
DEMAND IN SERVICES?

Tree of the product structure
1. RESTAURANTS

Bill of labor
Bill of materials
1. RESTAURANTS

2. HOSPITALS
• Especially when we talk about surgery that require teams, materials and known
provisions.
• Many hospital suppliers use this tool to improve inventory programming and
administration of costly surgery materials.
3. HOTELS
• When renewing each of its rooms, Marriot Hotels develops a Bill of materials
(BOM) to calculate materials, furniture and decoration requirements and a
structured list of labor
• After that, MRP provides net requirements and a program can be used by the
sales and HHRR departments.

Times for the aircraft arrival
(X) and departure (Y) 
SCHEDULED 
Marshaling services (A):
Performed at
PREDETERMINED
TIMES. The other services
(B, C, D, E) can be scheduled
between the earliest start
time (EST) and the latest
start time (LST)
Services Flow Chart
INTERNATIONAL AIRPORT SERVICES
EXAMPLE OF MRP IN SERVICES:

* We now create a “service master file”:
** Structure of the services:
 Service-time of a service = Its
duration
 The Offset Time (OT) and
Quantity-Per (QP) determine that 2
lavatory trucks are required during a
period of 2 consecutive time buckets.

*** The data structure of the Bill Of Service file:
 Focusing on Toilet Cleanning Service, the Offset Time
(OT) and Quantity-Per (QP) determine that 2 lavatory
trucks are required during a period of 2 consecutive time
buckets.

MRP procedure:
• Services have neither inventories nor scheduled receipts as in the cases of
manufacturing. Services must be provided at the moment when customers use
them : In the MRP calculation procedure Gross Requirements = Services that
customers need.
• Since there is no on-hand or on-order inventory  Net Requirement = Gross
Requirement.
• Only two rows remain in the MRP reports. MRP is now renamed as Service
Requirement Planning and the rows are named “required” and “scheduled”.

DISTRIBUTION RESOURCE PLANNING
(DRP)
When techniques to face dependent demand are used for the supply chain, we call it
Distribution Resource Planning (DRP). DRP is used to develop a stepped plan of
inventory replenishment for all the levels of the supply chain.
 Procedures and logic DRP are analogic to MRP. With DRP, the expected demand
turns into gross requirements. This net requirements are determined when assigning
the available inventory to the gross requirements.
 DRP process starts with the forecast at the retail sales level. As in MRP, after this,
inventory is reviewed to satisfy the demand. This way the inventory will be able
when needed and the net requirements will be compensated with the delivery time
needed. The planned exemption quantity of orders turns into the total requirement
of the inferior next level of the supply chain.
 DRP controls inventory through the system. This process starts at the level of the
retailer that orders more products. Assignations are done in the highest level from
inventory and production available.
 Effective use of DRP requires an integrated information system to quickly
communicate orders among levels.
 The objective of the DRP system is to replenish inventory in small quantities
and do it frequently.

MRP
System
· Is an information system
· Used to plan and identify the wide business resources needed to take,
process and account client orders.
· It is a software which eases companies automatize and integrate many of
their business processes, share a common database and the commercial
practices of the company and produce information on real time.
ENTERPRISE RESSOURCES PLANNING (ERP):
Technological enhancements
Open systems platforms
Client/Server architecture
ERP
Plans the allocation
of manufacturing
resources
Other resources
and has applications in
service as well as
manufacturing industries.

· Is an extension of the MRP system to tie in customers and suppliers
1. Allows automation and integration of many business processes
2. Shares common data bases and business practices
3. Produces information in real time
· Coordinates business from supplier evaluation to customer invoicing
· ERP modules include
- Basic MRP
- Finance
- Human resources
- Supply chain management (SCM)
- Customer relationship management (CRM)

Table 13.6
Bills of
Material
Work
Orders
Purchasing
and
Lead Times
Routings
and
Lead Times
Master
Production
Schedule
Inventory
Management
MRP

Customer Relationship Management
Invoicing
Shipping
Distributors,
retailers,
and end users
Sales Order
(order entry,
product
configuration,
sales management)
Supply Chain Management
Vendor Communication
(schedules, EDI, advanced shipping
notice,
e-commerce, etc.)Table 13.6
Finance/
Accounting
General
Ledger
Accounts
Receivable
Payroll
Accounts
Payable

· ERP can be highly customized to meet specific business requirements
· ERP systems can be integrated with
- Warehouse management
- Logistics
- Electronic catalogs
- Quality management
Flows of information of MRP and ERP that
show the administration of the relations with
the client (CRM) the administration of the
supply chain (SCM), and finance and
accounting.

· Together with date integration, ERP software assure transaction cost
reduction and more precise and quicker information.
The strategic importance of just in time systems and the
narrower relationship among suppliers and distributors makes
ideal the integration of the whole company.
EXAMPLE: NIKE
In an ERP system data is introduced only once to a shared database, complete
and consistent:
Production personnel starts working the order if there’s no
inventory, accounting area prints the bill, and loading area notifies
to Foot Locker the delivery date.
These data is immediately available in
the thousands pairs of shoes for Foot
Locker plant.
When a vendor of Nike introduces into his
ERP system an order of 20 thousands
pairs of shoes for Foot Locker

EXAMPLE: NIKE
The vendor, and also the client can verify the order progress in any
moment.
However, to reach this level of sense, date fields must be defined in the same
way for the whole company.
In Nike’s case, this means to integrate operations in the production places in
Vietnam, China and Mexico, in the business units of the world:
- In different currency
- And with reports in many languages.

· Each ERP vendor offers unique products.
· The main vendors, SAP AG (German Company), BEA (from Canada), SSAGlobal,
American Software, People Soft/Oracle, CMS Software (from the US), sell software of
modules designed for specified industries. Here we see a group of modules of SAP:

ADVANTAGES & DISADVANTAGES OF ERP
Advantages
1. Provides integration among the supply chain, production and the
administrative process
2. Creates shared databases
3. Can add improved processes, redesigned or “the best processes”
4. Increases communication and collaboration between sites and business units
5. It has a software database with commercial code
6. Can provide a strategic advantage above competitors

ADVANTAGES & DISADVANTAGES OF ERP
Disdvantages
1. It is very costly to buy but even more to customize
2. Its implementation can require important changes in the company and its
processes
3. It is so complex that many companies are not able to adapt to it
4. Its implementation entails a continuous process that maybe never ends
5. ERP experience is limited and assign personnel to it is a constant problem

ERP IN SERVICES
• Wealth care, government, retail shops and financial services.
• Hotel market - software that manage all customer service and
administrative functions
• client history, take reservations of the rooms and restaurants, programming
the times of a golf match and also administrate all the properties of a chain.
• PeopleSoft/Oracle - ERP with the administration of the supply chain to
coordinate the preparation of food for airlines
• Efficient Consumer Response (ECR) - administration system of the
supply chain that link purchases with sales, inventory, logistic and
production.

MRP IN SERVICES & ERP

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