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Resource Management

deals with the planning, execution, and control of all the resources that are used to produce goods or provide services in a value chain.


Resources Include

materials, equipment, facilities, information, technical knowledge and skills, and of course, people.


Resources Objectives

1. Maximize profits and customer satisfaction,

2. Minimize costs, or

3. Maximize benefits to stakeholders.


Aggregate Planning

is the development of a long-term output and resource plan in aggregate units of measure.



is the process of translating aggregate plans into short-term operational plans that provide the basis for weekly and daily schedules and detailed resource requirements.



refers to moving work from one workstation to another, assigning people to tasks, setting priorities for jobs, scheduling equipment, and controlling processes.


Resource Planning Framework for Goods and Services

Most service organizations do not require as many levels of intermediate planning (Level 2) as goods-producing firms.

Level 1 and 2 planning are often combined in service businesses.


Aggregate Planning Options

- Demand management

- Production-rate changes

- Workforce changes

- Inventory smoothing

- Facilities, equipment, and transportation


Level Production Strategy

plans for the same production rate in each time period.


Chase Demand Strategy

sets the production rate equal to the demand in each time period.


Disaggregation in Manufacturing

- Master production scheduling (MPS)

- Materials requirements planning (MRP)

- Capacity requirements planning (CRP)


Master Production Schedule (MPS)

is a statement of how many finished items are to be produced and when they are to be produced.

Typically developed for weekly time periods over a 6- to 12-month horizon.


Materials Requirements Planning (MRP)

is a forward-looking, demand-based approach for planning the production of manufactured goods and ordering materials and components to minimize unnecessary inventories and reduce costs.

The output of an MRP system is a schedule for obtaining raw materials and purchased parts, a detailed schedule for manufacturing and controlling inventories, and financial information that drives cash flow, budget, and financial needs.


MRP depends on understanding three basic concepts:

1. dependent demand
2. time-phasing
3. lot sizing


Dependent Demand

is demand that is directly related to the demand of other SKUs and can be calculated without needing to be forecasted.


Bill of Labor (BOL)

is a hierarchical record analogous to a BOM that defines labor inputs necessary to create a good or service.


End Items

are finished goods scheduled in the MPS or FAS that must be forecasted.


Parent Item

is manufactured from one or more components.



are any item (raw materials, manufactured parts, purchased parts) other than an end item that goes into a higher-level parent item(s).



always has at least one immediate parent and also has at least one immediate component


Time Phasing and Lot Sizing in MRP

Dependent demand requirements do not need to be ordered at the same time, but are time-phased as needed.

Orders may be consolidated to take advantage of ordering economies of scale; this is called lot sizing.


MRP Explosion

is the process of using the logic of dependent demand to calculate the quantity and timing of orders for all subassemblies and components that go into and support the production of finished goods.


Time buckets

are the time period size used in the MRP explosion process and usually are one week in length.


Gross Requirements (GR)

are the total demand for an item derived from all of its parents. Scheduled or planned receipts (S/PR) are orders that are due or planned to be delivered.


Planned Order Receipt (PORec)

specifies the quantity and time an order is to be received.


Planned order release (PORel)

specifies the planned quantity and time an order is to be released to the factory or a supplier


Projected on-hand inventory (POH)

is the expected amount of inventory on-hand at the beginning of the time period considering on-hand inventory from the previous period plus scheduled receipts or planned order receipts minus the gross requirements


Lot Sizing

is the process of determining the appropriate amount and timing of ordering to reduce costs.


Three common lot-sizing methods for MRP

1. Lot-for-lot (LFL)
2. Fixed order quantity (FOQ)
3. Periodic order quantity (POQ)


Lot-for-lot (LFL)

An ordering schedule that covers the gross requirements for each week