MRP EXERCISE

2nd Part.

BRIEFLY REMAINDER OF WHAT MRP IS AND ITS CHARACTERISTICS

MRP is a dependent demand technique that uses a bill of-material, inventory, expected receipts, and a master production Schedule to determine material requirement.

• In order to apply this method it will be needed to know:

1. What is to be made and when.

2. Materials and parts required to make the product.

3.What is in stock.

4. What is on order, also called expected receipts.

5. How long it takes to get various components.

MRP

Order Propos

al

Stock

Sales

Customerorder

Production order

Forecast

Historical of sales

NET MATERIAL REQUIREMENT PLAN (ELEMENTS)

• Gross requirement: is the independent demand quantity for each ítem (given).

• Schedule requirement: orders that have been placed but not yet completed (given).

• Availabilities: estimate amount of inventory available each week after gross requirement have been satisfied.

• Planned Order Receipts: quantity determined to be required for receipt at the beginning of a time period.

• Planned Order Releases: amount of order planned in each time period.

NET MATERIAL REQUIREMENT PLAN (FORMULAS)

Net Requirement = Gross Requirement – (availability + Schedule orders).

Optimal Quantity Order =

Q* = 2DS

H

where D= Annual usage.

S= Set-up cost.

H= Holding cost.

LOT SIZING TECHNIQUES

• Lot for lot.- Produced exactly what is required.

No: if set-up cost is significant high

or

unable to implement JIT (Just In Time).

• Constant or Fixed Order Quantity. Specify a number of units arbitrarily to be ordered each time, an order is placed for a particular ítem.

• Economic Order Quantity. A specific number of units, that will minimise the combined cost of order (acquiring and carrying inventory.

PROBLEM Nº 5 (problem definition)

• A company manufactures products A and H and the following information is available: Products A and

HPeriod

8 9 10 11 12

Gross requirement of

A

100   50   150

Gross requirements of

H

  100   50  

Item On hand inventory Lead time Components

A 0 1 B (1); C (1)B 100 2 D(1); E(1)C 25 1 F(1); G(1)D 50 1  E 75 2  F 75 2  G 75 1  H 0 1 J (1), K (1), C(1)J 100 2 E(1), F(1)C 25 1 F(1), G(1)K 100 2 E(1); G(1)

1. Elaborate the product tree structure and represent the level code.2. Besides the units required of A and H, there exists a demand of 30 units for item E (sold as repair element) in week 10. Modify the Gross materials requirement plan to reflect this change and elaborate the Net Material Requirement Plan. 

PROBLEM Nº5 (SOLUTION)

Product tree and representation of the level code.

1st level

2nd

level

Product A

Product H

B C CKJ

D E F G E F E G F G

PROBLEM Nº5 (SOLUTION)

There exists a demand of 30 units for item E in week 10, construct the MRP Table.

NOTE: It has to been started from the top to the bottom.-The Gross requirement (GRP) for these to table will be directly subtracted from the exercise.

Always the GRP of the ítem from the top will be directly given.

-The lead time in both ítem: 1 week.

PROBLEM Nº5 (SOLUTION)

• For Product A is required ítem B and C:

-The Gross requirement in ítem B will be subtracted from the orders planned of product A. In the case of ítem C, the GRP will included the order planned for product H.

-Availability is given by the exercise (there no safety stock in this exercise).

-Lead time is two week for ítem B, and one week for ítem C.

PROBLEM Nº5 (SOLUTION)

• For product H is required ítem J, K and C.

-The Gross requirement of both ítems will be taken from the planned order of product H.

-Availability: given.

-Net req : gross req. Availabilies.

-Lead time: ítem J (2 weeks); ítem K (2 weeks).

PROBLEM Nº5 (SOLUTION)

• 2nd level : Item B is composed by ítem D and E.

NOTE: Item E is also required for ítem J and K. Additionally in week 10, extra demand of 30.

Item E 1 2 3 4 5 6 7 8 9 10 11 12Gross req. 50 100 150 30Planned receiptAvailability 75 75 75 75 75 75 75 25Net req. 75 150 30Planned order order 75 150 30Planned order release 75 150 30

PERIOD

-Gross req. : For ítem D was subtracted from orders planned in ítem B, and for ítem E was subtracted form orders planned in ítem B, J, and K, and the extra demand in week 10 of 30 units.

-Availabilities : given.

-Net req: Gross req. Availabilities.

-Lead time: 2 weeks for both ítems.

Item D 1 2 3 4 5 6 7 8 9 10 11 12Gross req. 50 150Planned receiptAvailability 50 50 50 50 50 50 50Net req. 0 150Planned order order 0 150Planned order release 150

PERIOD

PROBLEM Nº5 (SOLUTION)

• The remainder ítems are F and G:

Item F 1 2 3 4 5 6 7 8 9 10 11 12Gross req. 50 100 100 50 150Planned receiptAvailability 75 75 75 75 75 75 25Net req. 75 100 50 150Planned order order 75 100 50 150Planned order release 75 100 50 150

PERIOD

Item G 1 2 3 4 5 6 7 8 9 10 11 12Gross req. 50 100 100 50 150Planned receiptAvailability 75 75 75 75 75 75 25Net req. 75 100 50 150Planned order order 75 100 50 150Planned order release 75 100 50 150

PERIOD

-Gross req: ítem F will be subtracted from planned order of ítem C (x2), J and K. And for ítem G from planned orders of ítem C (x2), and J.

-Availabilities: given.

-Net req: Gross req. Availabilities.

-Lead time: ítem F (2 weeks); ítem G (1 week).

PROBLEM Nº 7 (SOLUTION)

• A company that manufactures product X and Y has the following information:Products X and Y Period

4 5 6 7Gross

requirement of X  50   150

Gross requirement of Y

100   50  

Item On hand inventory

Lead Time Components

X 0 1 A (1), B (1)Y 0 1 B(1), F (1)A 100 2 C(1), D(1)B 25 1 E(1), F (1)C 50 1  D 75 2  E 75 1  F 115 1  

You are asked to:

1. Elaborate the product tree structure and represent the level code.2. Besides the requirements for X and Y, there exits also a demand of 30 units for item D (sold externally) in week 5. Modify the Gross Requirement to reflect this change and elaborate the Net Requirement Plan

PROBLEM Nº 7 (SOLUTION)

• 1. Elaborate the product tree structure and represent the level code.

X Y

A B B F

DC E F E F

PROBLEM Nº 7 (SOLUTION)

There exists an extra demand of 30 units (ítem D). Additionally all ítem follows the lot-for-lot technique, excepts ítem F, which follows optimal order quantity technique. Order cost =140 m.u , holding cost: 1 m.u

ITEM X 1 2 3 4 5 6 7GROSS REQ. 50 150

PLANNED RECEIPTAVAILABILITY

NET REQ. 50 150PLANNED ORD R. 50 150

PLANNED ORD. RE 50 150

WEEKS

ITEM Y 1 2 3 4 5 6 7GROSS REQ. 100 50

PLANNED RECEIPTAVAILABILITY

NET REQ. 100 50PLANNED ORD R. 100 50

PLANNED ORD. RE 100 50

WEEKS

-The Gross requirement (GRP) for these to table will be directly subtracted from the exercise.

Always the GRP of the ítem from the top will be directly given.

-The lead time in both ítem: 1 week.

PROBLEM Nº 7 (SOLUTION)

• For product X is required ítem A and B.

ITEM A 1 2 3 4 5 6 7GROSS REQ. 50 150

PLANNED RECEIPTAVAILABILITY 100 100 100 100 50 50

NET REQ. 100PLANNED ORD R. 100

PLANNED ORD. RE 100

WEEKS

ITEM B 1 2 3 4 5 6 7GROSS REQ. 100 50 50 150

PLANNED RECEIPTAVAILABILITY 25 25 25

NET REQ. 75 50 50 150PLANNED ORD R. 75 50 50 150

PLANNED ORD. RE 75 50 50 150

WEEKS

-The Gross requirement in ítem A will be subtracted from the orders planned of product X. In the case of ítem B, the GRP will include the order planned for product X and Y.

-Availability is given by the exercise (there no safety stock in this exercise).

-Lead time is two week for ítem A, and one week for ítem B.

PROBLEM Nº 7 (SOLUTION)

• Item F Special characteristic (follows a fixed order quantity technique). ITEM F 1 2 3 4 5 6 7

GROSS REQ. 75 150 50 200PLANNED RECEIPT

AVAILABILITY 115 115 40 10 80NET REQ. 110 40 120

PLANNED ORD R. 120 120 120PLANNED ORD. RE 120 120 120

WEEKS -The Gross requirement in ítem F will be subtracted from the orders planned of product H, from ítem B (x2).

-Availability is given by the exercise (there no safety stock in this exercise).

-Lead time is two week for ítem B, and one week for ítem C.

The planned order will be the one that minimize the cost of holding inventories. Optimal quantity =

Q = ROOT ((2 X Ce x D) / Cp x Ɵ )

Q=ROOT (( 2 x 140 x 120) / 1 x 7) = 120

PROBLEM Nº 7 (SOLUTION)

• 2nd level : For making ítem A is required ítem C and D.

ITEM C 1 2 3 4 5 6 7GROSS REQ. 100

PLANNED RECEIPTAVAILABILITY 50 50 50 50

NET REQ. 50PLANNED ORD R. 50

PLANNED ORD. RE 50

WEEKS

ITEM D 1 2 3 4 5 6 7GROSS REQ. 100 30

PLANNED RECEIPTAVAILABILITY 75 75 75 75

NET REQ. 25 30PLANNED ORD R. 25 30

PLANNED ORD. RE 25 30

WEEKS

-Gross req: ítem C will be subtracted from planned order of ítem A. And for ítem D from planned orders of ítem A.

-Availabilities: given.

-Net req: Gross req. Availabilities.

-Lead time: ítem C (1 weeks); ítem D (2 week).

PROBLEM Nº 7 (SOLUTION)

• For making ítem B is required ítem E.

ITEM E 1 2 3 4 5 6 7GROSS REQ. 75 50 50 150

PLANNED RECEIPTAVAILABILITY 75 75

NET REQ. 50 50 150PLANNED ORD R. 50 50 150

PLANNED ORD. RE 50 50 150

WEEKS-Gross req: ítem E will be subtracted from planned order of ítem B (x2).

-Availabilities: given.

-Net req: Gross req. Availabilities.

-Lead time: ítem E (1 week).

SOLVED PROBLEM (problem definition)

• The demand for item A in weeks 8, 10, and 11 are 50, 75, and 100 units, respectively. Consider the following data.

Answer: (a) and (b)

(a) Draw the product tree for item A

(b) Indicate the low-level code for each item

Answer (c):MRP records for each item are

as follows:

Answer (c):MRP records for each item are as follows:

Answer (c):MRP records for each item are as follows:

1

3

2

Answer (c):MRP records for each item are as follows:

11

Answer (c):MRP records for each item are as follows:

2

Answer (c):MRP records for each item are as follows:

3

THANKS FOR YOUR ATTENTION