Chapter 18

1-1McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved

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Chapter 18

Materials Requirements Planning

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Material Requirements Planning

• 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

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Bill of Materials (BOM) FileA Complete Product Description

• Materials

• Parts

• Components

• Production sequence

• Modular BOM – Subassemblies

• Super BOM– Fractional options

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Example of MRP Logic and Product Structure Tree

B(4)

E(1)D(2)

C(2)

F(2)D(3)

A

Product Structure Tree for Assembly A Lead TimesA 1 dayB 2 daysC 1 dayD 3 daysE 4 daysF 1 day

Total Unit DemandDay 10 50 ADay 8 20 B (Spares)Day 6 15 D (Spares)

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

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

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LT = 1 day

Day: 1 2 3 4 5 6 7 8 9 10A Required 50

Order Placement 50

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.

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.

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Next, we need to start scheduling the components that make up “A”. In the case of component “B” we need 4 B’s for each A. Since we need 50 A’s, that means 200 B’s. And again, we back the schedule up for the necessary 2 days of lead time.

Next, we need to start scheduling the components that make up “A”. In the case of component “B” we need 4 B’s for each A. Since we need 50 A’s, that means 200 B’s. And again, we back the schedule up for the necessary 2 days of lead time.

Day: 1 2 3 4 5 6 7 8 9 10A Required 50

Order Placement 50B Required 20 200

Order Placement 20 200

B(4)

E(1)D(2)

C(2)

F(2)D(3)

A

SparesLT = 2

4x50=200

Day: 1 2 3 4 5 6 7 8 9 10A Required 50

LT=1 Order Placement 50B Required 20 200

LT=2 Order Placement 20 200C Required 100

LT=1 Order Placement 100D Required 55 400 300

LT=3 Order Placement 55 400 300E Required 20 200

LT=4 Order Placement 20 200F Required 200

LT=1 Order Placement 200

B(4)

E(1)D(2)

C(2)

F(2)D(3)

A

40 + 15 spares

Part D: Day 6

Finally, repeating the process for all components, we have the final materials requirements plan:

Finally, repeating the process for all components, we have the final materials requirements plan:

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Master Production Scheduling (MPS)

• Time-phased plan specifying how many and when the firm plans to build each end item

Aggregate Plan(Product Groups)

Aggregate Plan(Product Groups)

MPS(Specific End Items)

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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

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Example of Time Fences

8 15 26

Weeks

FrozenModerately

Firm Flexible

Firm Customer Orders

Forecast and availablecapacity

Capacity

Exhibit 15.5Exhibit 15.5

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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

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Firm orders from knowncustomers

Forecastsof demand

from randomcustomers

Aggregateproduct

plan

Bill ofmaterial

file

Engineeringdesign

changes

Inventoryrecord file

Inventorytransactions

Master productionSchedule (MPS)

Primary reportsSecondary reports

Planned order schedule for inventory and production control

Exception reportsPlanning reportsReports for performance control

Materialplanning(MRP

computer program)

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Inventory Records File

• Each inventory item carried as a separate file– Status according to “time buckets”

• Pegging– Identify each parent item that created

demand

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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

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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

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Additional MRP Scheduling Terminology

• Gross Requirements

• Scheduled receipts

• Projected available balance

• Net requirements

• Planned order receipt

• Planned order release

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MRP Example

A(2) B(1)

D(5)C(2)

X

C(3)

Item On-Hand Lead Time (Weeks)X 50 2A 75 3B 25 1C 10 2D 20 2

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

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

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A(2)

X

Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95

LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50

On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90

LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75

On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45


On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40

LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10

On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100

LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20

On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80

It takes 2 A’s for each X

It takes 2 A’s for each X

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B(1)A(2)

X

It takes 1 B for each X

It takes 1 B for each X

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A(2) B(1)

X

C(3)












It takes 3 C’s for each A

It takes 3 C’s for each A

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A(2) B(1)

C(2)

X

C(3)












It takes 2 C’s for each B

It takes 2 C’s for each B

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A(2) B(1)

D(5)C(2)

X

C(3)












It takes 5 D’s for each B

It takes 5 D’s for each B

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Chapter 18