Krajewski Chapter 1

Resource Planning
Chapter 15
© 2007 Pearson Education

How Resource Planning
fits the Operations Management
Philosophy
Operations As a Competitive
Weapon
Operations Strategy
Project Management Process Strategy
Process Analysis
Process Performance and Quality
Constraint Management
Process Layout Supply Chain Strategy
Lean Systems Location
Inventory Management
Forecasting
Sales and Operations Planning
Resource Planning
Scheduling

Resource Planning
at Starwood
 Starwood manages employees, equipment, and supplies at
750 hotels around the world to ensure that the needs and
expectations of each and every customer are met.
 To help forecast these needs, Starwood now uses an
enterprise resource planning (ERP) system.
 Included in the ERP system by Oracle is an electronic
reservation system that profiles the preferences of guests,
allowing the staff to provide a “customized” experience for
each guest.
 The ERP system schedules the hotel’s staff members,
projects the amount of food, beverages, and other
resources needed for the hotel’s food-service department.
 Starwood’s ERP system also features a centralized
database with accounting data, payroll, accounts payable
information, general ledger and balance sheet, as well as
income statements for its various properties.
Resource Planning and
ERP
 Resource planning: A process that takes sales
and operations plans; processes information in the
way of time standards, routings, and other
information on how the firm produces its services or
products; and then plans the input requirements.
 Enterprise process: A companywide process that
cuts across functional areas, business units,
geographical regions, and product lines.
 Enterprise resource planning (ERP) systems:
Large, integrated information systems that support
many enterprise processes and data storage needs.
ERP Application Modules

ERP Design
 ERP revolves around a single comprehensive

database that can be made available across the
entire organization (or enterprise).
 The database collects data and feeds them into the
various modular applications (or suites).
 As new information is entered as a transaction in one
application, related information is automatically updated in
the other applications.
 The ERP system streamlines the data flows throughout the
organization and provides employees with direct access to
a wealth of real-time operating information.
 ERP eliminates many of the cross-functional coordination
problems older nonintegrated systems suffered from.
Dependent Demand
 Dependent demand: The demand for an item that

occurs because the quantity required varies with the
production plans for other items held in the firm’s
inventory.
 Parent: Any product that is manufactured from one
or more components.
 Component: An item that goes through one or
more operations to be transformed into or become
part of one or more parents.

Lumpy Dependent Demand Resulting
from Continuous Independent Demand
Parent Inventory Component Demand

(Independent) (Dependent)
Possible Planning
and Control Systems
The most prominent systems now in use are the
material requirements planning (MRP) system, the
Drum-Buffer-Rope (DBR) system, and lean systems.
• Products with many levels • Capacity is leveraged to • Using system as catalyst

of components, and more control bottlenecks and for continuous
customization entire system flow improvement
• Lumpy demand, often with • Simpler product structures • Small lot sizes, consistent
larger batch sizes and more standardized quality, reliable suppliers,
• Make-to-order, assemble- products and flexible workforce
to-order, and make-to- • Assemble-to-order or make- • Assemble-to-order or make-
stock strategies to-stock strategy to-stock strategy
• Lower and intermediate • Relatively higher volumes, • High volumes and well-
volumes, with flexible flows with flexible flows balanced line flows
transitioning to line flows
Material
Requirements Planning
 Material requirements planning (MRP): A
computerized information system developed specifically to
help manufacturers manage dependent demand inventory
and schedule replenishment orders.
 MRP explosion: A process that converts the requirements

of various final products into a material requirements plan that
specifies the replenishment schedules of all the
subassemblies, components, and raw materials needed to
produce final products.
 Bill of materials (BOM): A record of all the components

of an item, the parent–component relationships, and the
usage quantities derived from engineering and process
designs.
MRP Inputs
Authorized Other
master production sources
schedule of demand
Engineering
Inventory Inventory MRP Bills of
and process
transactions records explosion materials
designs
Material
requirements
plan

Bill of Materials Terms
 Usage quantity: The number of units of a
component that are needed to make one unit of its
immediate parent.
 Inventory items:
 End item: The final product sold to a customer.
 Intermediate item: An item that has at least one parent
and at least one component.
 Subassembly: An intermediate item that is assembled (as
opposed to being transformed by other means) from more
than one component.
 Purchased item: An item that has one or more parents
but no components because it comes from a supplier.
 Part commonality: The degree to which a
component has more than one immediate parent.

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Resource Planning

© 2007 Pearson Education

© 2007 Pearson Education

© 2007 Pearson Education

 ERP revolves around a single comprehensive

 Dependent demand: The demand for an item that

© 2007 Pearson Education

Parent Inventory Component Demand

• Products with many levels • Capacity is leveraged to • Using system as catalyst

 MRP explosion: A process that converts the requirements

 Bill of materials (BOM): A record of all the components

© 2007 Pearson Education

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