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5.1 MATERIAL REQUIREMENT PLANNING
Definition
The planning of components based on the demand for higher‐level assemblies.
A MRP system creates schedules identifying the specific parts and materials required to
produce end items, the exact numbers needed and the dates when orders for these
materials should be released and be received or completed within the production.
A material requirement planning is a technique that uses the bill of material, inventory data
and a master schedule to calculate requirements for material.
Objectives
‐ To control inventory level
‐ To assign operating priorities for items
‐ To plan capacity to load the production system
Fig: ‐ 5.1 Materials requirements planning (MRP I) schematic
5.2 MASTER PRODUCTION SCHEDULE
The Master Production Schedule (MPS) is the significant input that drives the MRP system.
Primarily, MPS identify the quantity of the particular products that manufacturer is going to
produce. To achieve this, MPS needs combining two independent demands namely customer
orders and forecasted demand as shown in figure 2 (Bedworth, 1991). Moreover, the MPS is
also considered from other issues such as key capacity constraints, inventory levels and
safety stock requirement as shown in figure 3 (Slack et al, 2001). Crucially, MPS have to
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ensure that raw materials are available to meet the demands (Lunn, 1992). Furthermore,
MPS must not exceed the production plan or capacity plan.
Turning to time frame for MPS, typically, a time bucket for MPS is one week. In addition, the
minimum length of planning horizon should be equal to the longest lead time of item in
process.
Fig: ‐ 5.2 Inputs into the master production schedule
Inventory
‐ Order the right part
‐ Order in right quantity
‐ Order at right time
Priorities
‐ Order with right due date
‐ Keep the due date valid
Capacity
‐ Plan for a complete load
‐ Plan an accurate load
‐ Plan for an adequate time to view future load
Theme
“Getting the right materials to the right place at the right time”
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ITEMS
The term ‘item’ refers to an entity that a manufacturing organization makes, buys or sells. An
item might refer to a saleable item; in the case of an automobile company this would be a
finished car. Raw materials or a bought‐in finished part are also items. Finally, components or
subassemblies are also components. Continuing the example of an automotive company, an
engine would also be termed an item. Items are generally given a unique identifier when a
computer‐based control system is being used.
5.3 BILL OF MATERIAL (BOM)
Bill of Material (BOM) is another input of MRP system, which clarifies the structure of an
independent demand item (Slack et al, 2001). As defined by the American Production and
Inventory Control Society (APICS), a bill of material is: “a listing of all of the subassemblies,
intermediates, parts, and raw materials that go into a parent assembly showing the quantity
of each required to make an assembly” (Starr, 1996). Generally, there are three significant
types of BOM namely single level, multi levels, and indented BOM (Starr, 1996). The details
of materials, in single‐level BOM, are presented as a single level while, in indented BOM, this
information is shown as several levels (Slack et al, 2001).
The BOM file contains the complete product description, listing not only the material, parts
and components but also the sequence in which the product is created. The BOM is often
called the product structure file or product tree because it shows how a product is put
together. It contains the information to identify each item and the quantity used per unit of
item of which it is a part.
Table – 5.1: Different shapes of product structure
Turning to the shape of the product structure, Slack point out that there are four shapes of product
structure as shown in table – 5.1 (Slack et al, 2001)
To sum up, bill of material facilitate MRP application checking the components for each item that is
going to be produced. In other words, it enables MRP to identify that which part and how many of
them is required for any particular item (Slack et al, 2001).
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Example:
A
B(2) C(3)
Figure – 5.4 Subassemblies and components of an electric motor
Note that to assemble a motor; a single winding is required, whereas two end covers are
needed. The rotor assembly is made from two items: a rotor core and a shaft. The shaft itself
is manufactured from 300mm of steel bar (see Figure 5.5).
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Figure – 5.5 Further breakdown of an electric motor
A complete representation of the motor would be termed a ‘full part explosion’. This is
illustrated in Figure 5.6.
Figure – 5.6 Full parts explosion for an electric motor
5.4 INVENTORY DATA
Inventory data facilitate MRP system identifying inventory status so as to calculate a ‘net’
requirement (Slack et al, 2001). Generally, inventory data consist of three files as follows
(Slack et al, 2001):
The item master file
In order to identify a particular part, the first element of the item master file is a part
number, which is assigned to all components (Slack et al, 2001). This number is unique for
each part. In practice, they may be only numbers or the combination of numbers and
alphabets. Moreover, this file may include the stable data such as part description and the
unit of measure (Slack et al, 2001). Finally, in many case, this file also contains a lead time for
each particular item.
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The transaction file
So as to calculate the net requirement of any particular part, the MRP system needs the
transaction file, which contains inventory levels of each part (Slack et al, 2001). This file,
logically, calculate inventory levels by referring to all transactions such as receipts into stock.
Consequently, this may cause an inaccuracy of the result compared to a reality. As a result, in
practice, the organization may have to update the transaction file periodically.
The location file
The location file facilitates the MRP system locating the location of any particular part (Slack
et al, 2001). In some case, inventories may be stored in a fixed location, so they are easy to
be found and managed. However, by using this approach, the organization may have a poor
utilization of a location (Lunn, 1992). Alternatively, the organization may store their
component randomly so as to utilize their space (Slack et al, 2001). In this case, the location
file may become significant issue because one particular component may be stored in many
places. Further, the organization may take an advantage from random location by
implementing a first‐in‐first‐out method, which ensures that the inventory is picked in order
of its time in warehouse (Slack et al, 2001).
Fig: ‐ 5.7 he MRP netting process
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MRP calculation
In calculation, the MRP system uses these three inputs (MPS, BOM, and Inventory Data) to
establish planned order releases and reschedule notices (Lunn, 1992). In practice, the MRP
perform the calculation by using the logic as shown in figure 5.7 (Slack et al, 2001).
5.5 AN EXAMPLE USING MRP
Table – 5.3: Future requirements for Meters A and B, Subassembly D and Part E stemming from
Specific Customer Orders and from Random Sources.
Meter ‐ A Meter ‐ B Subassembly D Part E
Month Known Random Known Random Known Random Known Random
3 1,000 250 400 60 200 70 300 80
4 600 250 300 60 180 70 350 80
5 300 250 500 60 250 70 300 80
6 700 250 400 60 200 70 250 80
7 600 250 300 60 150 70 200 80
8 700 250 700 60 160 70 200 80
Demand for the meters and components originated from two sources:
‐ Regular customer – That place firm orders
‐ Unidentified customers – That make the normal random demands for those items
With demands for months 3 and 4 listed in the first week for each month or as weeks 9 and
13.
Table –5.4: A Master Schedule to Satisfy Demand Requirements as Specified in Table – 1
Week
9 10 11 12 13 14 15 16 17 18
Meter – A 1250 850 550
Meter – B 460 360 560
Subassembly – D 270 250 320
Part – E 380 430 380
Meter A and B consist of two subassemblies, C and D and two parts, E and F.
Meter Type Meter Type
Level 0 A B
Level 3 E(1) F(1) E(2) E(1) F(1) F(2) E(1) F(2) E(1) F(1) F(2)
Fig: ‐ 5.7 Bill of Material for Meter A and B
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Table – 5.5: Number of Units on Hand and Lead Time Data that would appear on the Inventory
Record File
Item On‐Hand Inventory Lead time (weeks)
A 50 2
B 60 2
C 40 1
D 30 1
E 30 1
F 40 1
Table – 5.6: Material Requirement Planning Schedule for Meter A and B, Subassemblies C and D and
Parts E and F
WEEK
ITEM 4 5 6 7 8 9 10 11 12 13
A (LT = 2)
Gross requirements 1250 850
On hand 50 50
Net Requirements 1200
Planned‐Order receipt 1200
Planed‐Order release 1200
B (LT = 2)
Gross requirements 460 360
On hand 50 60
Net Requirements 400
Planned‐Order receipt 400
Planed‐Order release 400
C (LT = 1) 400 270
Gross requirements 1200 0
On hand 50 40 270
Net Requirements 1560 270
Planned‐Order receipt 1560
Planed‐Order release 1560
D (LT = 1) 380
Gross requirements 1560 1200 0 250
On hand 50 30 0 380
Net Requirements 1530 1200 380
Planned‐Order receipt 1530 1200
Planed‐Order release 1530 1200 270
E (LT = 1) 2400
Gross requirements 1530 1200 400 270 380 430
On hand 50 30 0 0 0 0
Net Requirements 1500 1200 2800 270 380
Planned‐Order receipt 1500 1200 2800 279 380
Planed‐Order release 1500 1200 2800 270 380
F (LT = 1) 3120
Gross requirements 1530 1200 800 270
On hand 50 40 0 0 0
Net Requirements 1490 4320 800 270
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Figure – 5.9 Example bill of material
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Note that the figures running along the top of the table, 1 to 8, represent week numbers. The
starting point for the calculation are the figures shown in bold. Because A0 is at the top of
the BOM, the projected available balance represents customer orders. Using equation (5.1),
the projected available balance for week 1 is determined by subtracting the projected gross
requirements for week 1 from the SOH. Thus:
Week 1: 5 = 25 – 20
The projected available balance for week 2 is calculated in the same way, except on this
occasion the arrival of material due to the scheduled receipt in week 2 must be taken into
account:
Week 2: 45 = 5 – 20 + 60
The calculation for weeks 3 and 4 is similar to that for week 1:
Week 3: 25 = 45 – 20
Week 4: 5 = 25 – 20
In week 5, if the calculation was simply repeated, the projected available balance would yield
a negative value (5 – 20 = –15), which has no physical meaning. The effect of this is to
prompt the creation of a planned order. The planned order would need to be received in
week 5. Note that because the lot size is set at 60, it is this quantity that is used in the
planned order receipt row:
Week 5: 45 = 5 – 20 + 60
MRP calculates the start date for the planned order by subtracting the lead time (3 weeks)
from the due date. Thus the planned order release in week 2 corresponds with the planned
order receipt in week 5. The calculation of projected available balance for weeks 6 and 7 is
straightforward:
Week 6: 25 = 45 – 20
Week 7: 5 = 25 – 20
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In week 8, however, the projected available balance would again become negative unless
another planned order is created. The same logic used for week 5 is repeated. Thus:
Week 8: 45 = 5 – 20 + 60
Note that because neither of the planned orders is due for release in the current period,
MRP would take no action for A0 during the current week.
The projected gross requirements for F1 are derived from the planned order releases for A0.
This can be best understood by considering the physical manufacture of A0. For the
manufacture of the 60 units of A0 to commence in week 2, 60 units of F1 will need to be
available at this time. The calculations applied for A0 can be repeated for F1. Thus:
Week 1: 15 = 15 – 0
In week 2, a planned order will need to be created:
Week 2: 75 = 15 – 60 + 120
The calculations for weeks 3–8 are straightforward. As with A0, MRP will take no action for
F1 as no planned orders are due for release. If the calculation is repeated in a week’s time,
however, and there are no other changes, the release date for the planned order will move
into the current week. This will cause an order to be generated.
Note that the relatively stable demand of A0 results in a single order for 120 units of F1. This
is not a function of the MRP planning system, but a consequence of the lot sizes applied.
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