Integrating production planning and control: towards a simple model for Capacitated ERP

Abstract

Despite great advances in enterprise management software during the past several decades, there remains a significant opportunity in the design of production and material planning systems. After a discussion of a major technical flaw in enterprise resource planning/material requirement planning (ERP/MRP) systems, we outline advanced planning in literature and selected software products, with focus on the notion of planned lead times and limited capacity. We then describe ‘Capacitated ERP’–a simple variation of production and material requirements planning of components that takes into account resource capacity before exploding requirements to lower level components (upstream supply tiers). The model is presented with an example at the component planning level in a declarative (as opposed to a procedural) format, consequently facilitating implementation in a spreadsheet environment, which is often used by small and midsized companies. An outline showing how to integrate this component into a typical Supply Chain Management-software environment for such firms is included. Finally, we generate initial insights gained from our proposed method applied to an aircraft engine supplier.

Keywords:

• production planning
• capacitated enterprise resource planning

Notes

Notes

1. This corresponds to the average US manufacturing utilization rate for December 2006 (US Government Printing Office 2008).

2. For M|M|1, the x-th percentile of system flow time is t such that x = 1 − e^{−μ(1 − ρ)t} , where 1/μ is mean order processing time.

3. Here 1/μ = 2 days; PLT = 2(11.7) = 23.4 days (approximately 4.7 five-day work weeks).

4. More recently, Hopp and Spearman (2004) have provided a more precise definition of push versus pull systems: pull systems explicitly limit WIP; push systems do not.

5. Originally ‘Leitstand’ software. See for example Kanet and Sridharan (1998).

6. Here we would have PLT = 11.8p.

7. A similar M|M| analysis by Kanet and Sridharan (1998) estimates the potential improvement in flow time to be 25–44%, depending on fraction tardy and machine utilization.

8. The size of a company does not necessarily lead to best products. There are a large number of niche producers of SCM software in the US, in India etc. A detailed evaluation fits more into a technical journal.

9. However, we often perceive a demand for deeper description of APO–recently noticed during the discussion following the presentation of Jacobs (2007) at POMS 2007.

10. For the sake of simplicity here, we do not show that a planner might also wish to deny requirements.

11. From German, loosely translated as a control centre. A leitstand is a graphics-based decision support system for production scheduling and control (system deals with physical logistics) (Kanet and Sridharan 1990).

12. An information leitstand is a top management tool dealing with information logistics. It gathers and filters information for top decision makers and forwards and adjusts selected quantitative data and messages to stakeholders, such as key customers and financial analysts (Mertens et al. 2005, Stößlein 2006).