Assembly FG: An Educational Case on MRP II and ERP

Abstract

This educational case teaches students how discrete manufacturing companies use Manufacturing Resource Planning II (MRP II) within an Enterprise Resource Planning (ERP) system to plan purchase and production orders. In addition, students learn how ERP uses cost rollup controlled by a multi-level bill-of-materials (BOM) to cost work-in-process and finished goods parts. Using Microsoft Excel, students implement the “BOM explosion” logic used in MRP II to plan order quantities and start dates for purchase orders and production orders. By learning MRP II and cost rollup logic, students better understand why inaccuracies in computerized BOM or inventory records can lead to poor materials planning, material shortages, increased production costs, delayed shipments, excess and obsolete inventory, and inaccurately costed work-in-process and finished goods parts. The learning process and benefits of using the case in an Accounting Information Systems (AIS) or Cost Accounting course are discussed. Teaching Notes on how to administer the case and suggested answers for the exercises that follow the case are presented. Evidence of teaching effectiveness of the case is also included.