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Enterprise Resource Planning
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This document describes how enterprises plan and allocate their resources to different products.
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Enterprise Resource PlanningResource Planning – This means organizing the use of our
resources (labour, materials and time) in the best possible way to
attain the objectives of our business. It can be viewed in a
hierarchical structure –
1. Long-range planning – construction of facilities, major
equipment purchase and other aggregated resource decisions.
Example: Long-range capacity planning.
2. Intermediate-range planning – shows quantity and timing of
end items i.e. Master Production Schedule. It describes the
number and the time each resource needs to perform some
action.
3. Short-range planning – the detailed planning for components,
parts and materials to support the Master Production
Schedule, MRP.
Aggregated Production Plan (APP) – this is the highest level
of resource planning wit the rough quantities of materials and
other resources in mind. A production plan is made for all the
products. Decisions are made based on demand forecasts,
marketing strategies, vertical integration, capacity planning etc.
The time horizon is generally greater than 1 year.
Master Production Schedule (MPS) – this is a detailed
breakup of the APP. This is generated for a period of 12 months. It
specifies the volume of production of different products to be
produced in different periods. They are made after demand
forecasting and form a backbone for more detailed planning.
Materials Requirements Planning (MRP) –
It evaluates the volume of raw material and components to meet
demand and discusses further in detail about the timing of
production. It provides us with a way to manage dependent
demand (demand for raw materials, production requirements). It
ensures that materials are present at the current time and place
for production to occur in the most economical means.
A very important use of MRP is enabling centralization of
purchasing. This is because it states the detailed component
required for each product that can be later grouped and
purchased.
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