Chap 015

1
The McGraw-Hill Companies, Inc., 2004
Chapter 15
Materials Requirements Planning
OBJECTIVES
Material Requirements Planning (MRP) MRP Logic and Product Structure Trees Time Fences MRP Example MRP II and Lot Sizing
Material Requirements Planning Defined

Materials requirements planning (MRP) is a means for determining the number of parts, components, and materials needed to produce a product MRP provides time scheduling information specifying when each of the materials, parts, and components should be ordered or produced Dependent demand drives MRP MRP is a software system
Example of MRP Logic and Product Structure Tree

Given the product structure tree for A and the lead time and demand information below, provide a materials requirements plan that defines the number of units of each component and when they will be needed
Product Structure Tree for Assembly A Lead Times A 1 day B 2 days C 1 day D 3 days E 4 days F 1 day Total Unit Demand Day 10 50 A Day 8 20 B (Spares) Day 6 15 D (Spares)
A B(4) D(2) E(1) D(3) C(2) F(2)
First, the number of units of A are scheduled backwards to allow for their lead time. So, in the materials requirement plan below, we have to place an order for 50 units of A on the 9th day to receive them on day 10.
Day: A Required Order Placement 1 2 3 4 5 6 7 8 9 50 10 50
LT = 1 day
Next, we need to start scheduling the components that make up A. In the case of component B we need 4 Bs for each A. Since we need 50 As, that means 200 Bs. And again, we back the schedule up for the necessary 2 days of lead time.
Day: A B R e q u ire d O rd e r P la c e m e n t R e q u ire d O rd e r P la c e m e n t 20 200 20 50 200 1 2 3 4 5 6 7 8 9 10 50
LT = 2 A B(4) D(2) E(1) D(3) C(2) F(2)
Spares
4x50=200
Finally, repeating the process for all components, we have the final materials requirements plan:
Day: A LT=1 B LT=2 C LT=1 D LT=3 E LT=4 F LT=1 Required Order Placement Required Order Placement Required Order Placement Required Order Placement Required Order Placement Required Order Placement 1 2 3 4 5 6 7 8 9 50 200 100 55 55 20 200 200 200 400 300 20 200 400 100 300 10 50
20 20 200
A
Part D: Day 6
B(4) D(2) E(1) D(3)
C(2) F(2)
40 + 15 spares
Master Production Schedule (MPS)

Time-phased plan specifying how many and when the firm plans to build each end item
Aggregate Plan (Product Groups)
MPS (Specific End Items)
10
Types of Time Fences

Frozen No schedule changes allowed within this window Moderately Firm Specific changes allowed within product groups as long as parts are available Flexible Significant variation allowed as long as overall capacity requirements remain at the same levels
11
Example of Time Fences

Frozen Capacity Firm Customer Orders Moderately Firm Flexible
Exhibit 15.5
Forecast and available capacity
15 Weeks
26
12
Material Requirements Planning System

Based on a master production schedule, a material requirements planning system: Creates schedules identifying the specific parts and materials required to produce end items

Determines exact unit numbers needed Determines the dates when orders for those materials should be released, based on lead times
13
Firm orders from known customers
Aggregate product plan
Forecasts of demand from random customers
Engineering design changes
Master production Schedule (MPS)
Inventory transactions
From Exhibit 15.6
Bill of material file
Material planning (MRP computer program)
Inventory record file
Secondary reports
Primary reports Planned order schedule for inventory and production control Exception reports Planning reports Reports for performance control
14
Bill of Materials (BOM) File A Complete Product Description

Materials Parts Components Production sequence Modular BOM
Subassemblies Fractional options

Super BOM
15
Inventory Records File

Each inventory item carried as a separate file
Status according to time buckets
Pegging
Identify each parent item that created demand
16
Primary MRP Reports

Planned orders to be released at a future time Order release notices to execute the planned orders Changes in due dates of open orders due to rescheduling Cancellations or suspensions of open orders due to cancellation or suspension of orders on the master production schedule Inventory status data
17
Secondary MRP Reports

Planning reports, for example, forecasting inventory requirements over a period of time Performance reports used to determine agreement between actual and programmed usage and costs Exception reports used to point out serious discrepancies, such as late or overdue orders
18
Additional MRP Scheduling Terminology

Gross Requirements Scheduled receipts Projected available balance Net requirements Planned order receipt Planned order release
19
MRP Example
X A(2) C(3) C(2) B(1) D(5)
Item X A B C D On-Hand Lead Time (Weeks) 50 2 75 3 25 1 10 2 20 2
Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10
20
Da 1 2 3 4 5 6 7 8 9 10 95 50 45 45
X L 2
nhand 50
A(2)
nhand 75
It takes 2 As for each X
nhand 25 C L 2 nhand 10 D L 2 nhand 20
oss requ remen s hedu ed re e p s Proj a a ba an e Ne requ remen s Pl nned order re e p Pl nner order release ross requ remen s heduled re e p s Proj a a l. bal n e Ne requ remen s Pl nned order re e p Pl nner order release ross requ remen s heduled re e p s Proj. v il. bal n e Ne requiremen s Pl nned order re eip Pl nner order release ross requiremen s heduled re eip s Proj. v il. bal n e Ne requiremen s Pl nned order re eip Pl nner order release ross requiremen s heduled re eip s Proj. v il. bal n e Ne requiremen s Pl nned order re eip Pl nner order release
50 50
50
50
50
50
50
50
50
45 9 75 75 75 75 75 75 75 75 15 15 45 25 25 25 25 25 25 25 25 20 20
15
45 10 10 10 10 10 35 35 40
20 40
40 40 100
35
20 20
20
20
20
20
20 80 80
80
21
Da 1 2 3 4 5 6 7 8 9 10 95 50 45 45
X L 2
nhand 50
A(2)
B(1)
nhand 75
It takes 1 B for each X
nhand 25 C L 2 nhand 10 D L 2 nhand 20
ross requiremen s heduled re eip s Proj. v il. bal n e Ne requiremen s Pl nned order re eip Pl nner order release ross requiremen s heduled re eip s Proj. v il. bal n e Ne requiremen s Pl nned order re eip Pl nner order release ross requiremen s heduled re eip s Proj. v il. bal n e Ne requiremen s Pl nned order re eip Pl nner order release ross requiremen s heduled re eip s Proj. v il. bal n e Ne requiremen s Pl nned order re eip Pl nner order release ross requiremen s heduled re eip s Proj. v il. bal n e Ne requiremen s Pl nned order re eip Pl nner order release
50 50
50
50
50
50
50
50
50
45 9 75 75 75 75 75 75 75 75 15 15 45 25 25 25 25 25 25 25 25 20 20
15
45 10 10 10 10 10 35 35 40
20 40
40 40 100
35
20 20
20
20
20
20
20 80 80
80
22
Da 1 2 3 4 5 6 7 8 9 10 95 50 45 45
X L 2
nhand 50
A(2)
B(1)
nhand 75
C(3)
L 1 nhand 25 C L 2 nhand 10 D L 2 nhand 20
It takes 3 Cs for each A
50 50
50
50
50
50
50
50
50
45 9 75 75 75 75 75 75 75 75 15 15 45 25 25 25 25 25 25 25 25 20 20
15
45 10 10 10 10 10 35 35 40
20 40
40 40 100
35
20 20
20
20
20
20
20 80 80
80
23
Da 1 2 3 4 5 6 7 8 9 10 95 50 45 45
X L 2
nhand 50
A(2)
B(1)
nhand 75
C(3)
C(2)
It takes 2 Cs for each B
50 50
50
50
50
50
50
50
50
45 9 75 75 75 75 75 75 75 75 15 15 45 25 25 25 25 25 25 25 25 20 20
15
45 10 10 10 10 10 35 35 40
20 40
40 40 100
35
20 20
20
20
20
20
20 80 80
80
24
Da 1 2 3 4 5 6 7 8 9 10 95 50 45 45
X L 2
nhand 50
A(2)
B(1)
nhand 75
C(3)
C(2)
D(5)
It takes 5 Ds for each B
50 50
50
50
50
50
50
50
50
45 9 75 75 75 75 75 75 75 75 15 15 45 25 25 25 25 25 25 25 25 20 20
15
45 10 10 10 10 10 35 35 40
20 40
40 40 100
35
20 20
20
20
20
20
20 80 80
80
25
Closed Loop MRP

Production Planning Master Production Scheduling Material Requirements Planning Capacity Requirements Planning
No Feedback Realistic? Feedback
Yes
Execute: Capacity Plans Material Plans
26
Manufacturing Resource Planning (MRP II)

Goal: Plan and monitor all resources of a manufacturing firm (closed loop):

manufacturing marketing finance engineering
Simulate the manufacturing system
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Lot Sizing in MRP Programs

Lot-for-lot (L4L) Economic order quantity (EOQ) Least total cost (LTC) Least unit cost (LUC) Which one to use?
The one that is least costly!
28
End of Chapter 15

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The McGraw-Hill Companies, Inc., 2004

The McGraw-Hill Companies, Inc., 2004

The McGraw-Hill Companies, Inc., 2004

Material Requirements Planning Defined

Example of MRP Logic and Product Structure Tree

A B(4) D(2) E(1) D(3) C(2) F(2)

The McGraw-Hill Companies, Inc., 2004

LT = 2 A B(4) D(2) E(1) D(3) C(2) F(2)

The McGraw-Hill Companies, Inc., 2004

B(4) D(2) E(1) D(3)

The McGraw-Hill Companies, Inc., 2001

Master Production Schedule (MPS)

MPS (Specific End Items)

The McGraw-Hill Companies, Inc., 2004

Types of Time Fences

The McGraw-Hill Companies, Inc., 2004

Example of Time Fences

Forecast and available capacity

The McGraw-Hill Companies, Inc., 2004

Material Requirements Planning System

The McGraw-Hill Companies, Inc., 2004

Firm orders from known customers

Aggregate product plan

Forecasts of demand from random customers

Engineering design changes

Master production Schedule (MPS)

Bill of material file

Material planning (MRP computer program)

Inventory record file

Bill of Materials (BOM) File A Complete Product Description

Subassemblies Fractional options

Inventory Records File

Status according to time buckets

Identify each parent item that created demand

The McGraw-Hill Companies, Inc., 2004

Primary MRP Reports

The McGraw-Hill Companies, Inc., 2004

Secondary MRP Reports

The McGraw-Hill Companies, Inc., 2004

Additional MRP Scheduling Terminology

Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10

The McGraw-Hill Companies, Inc., 2004

It takes 2 As for each X

nhand 25 C L 2 nhand 10 D L 2 nhand 20

It takes 1 B for each X

nhand 25 C L 2 nhand 10 D L 2 nhand 20

It takes 3 Cs for each A

It takes 2 Cs for each B

It takes 5 Ds for each B

Closed Loop MRP

No Feedback Realistic? Feedback

The McGraw-Hill Companies, Inc., 2004

Manufacturing Resource Planning (MRP II)

manufacturing marketing finance engineering

Simulate the manufacturing system

The McGraw-Hill Companies, Inc., 2004

Lot Sizing in MRP Programs

The McGraw-Hill Companies, Inc., 2004

The McGraw-Hill Companies, Inc., 2004

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