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Materials Requirements

Planning

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Material Requirements Planning (MRP)

MRP Logic and Product Structure Trees

Time Fences

MRP Example

MRP II and Lot Sizing

OBJECTIVES

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Material Requirements Planning

Defined

Materials requirements planning (MRP) is ameans 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 orproduced

Dependent demand drives MRP

MRP is a software system

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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 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)

Given the product structure tree for A and the lead time anddemand 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 10

A Required

Order Placement 50

First, the number of units of A are scheduled

backwards to allow for their lead time. So, in thematerials 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 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.

D a y : 1 2 3 4 5 6 7 8 9 1 0

A R e q u i re d 5 0

O rd e r P la c e m e n t 5 0

B R e q u i re d 2 0 2 0 0

O rd e r P la c e m e n t 2 0 2 0 0

B(4)

E(1)D(2)

C(2)

F(2)D(3)

A

SparesLT = 2

4x50=200

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

A Required LT=1 Order Placement 50

B Required 20 200

LT=2 Order Placement 20 200

C Required 100

LT=1 Order Placement 100

D Required 55 400 300

LT=3 Order Placement 55 400 300

E Required 20 200

LT=4 Order Placement 20 200

F 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:

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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)

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Types of Time Fences

Frozen

No schedule changes allowed within this window

Moderately Firm

Specific changes allowed within product groups aslong 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 15.5

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From Exhibit 15.6

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Firm orders

from known

customers

Forecasts

of demand

from random

customers

Aggregate

product

plan

Bill of

material

file

Engineering

design

changes

Inventory

record file

Inventory

transactions

Master production

Schedule (MPS)

Primary reportsSecondary reports

Planned order schedule for

inventory and production

control

Exception reports

Planning reports

Reports for performance

control

Material

planning

(MRP

computer

program)

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Bill of Materials (BOM) File

A Complete Product Description

Materials

Parts

Components Production sequence

Modular BOM

Subassemblies Super BOM

Fractional options

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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

Plannedorders to be released at a future time Orderrelease notices to execute the planned

orders

Changes in due dates of open orders due to

rescheduling

Cancellations orsuspensions 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

Planningreports, 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 2

A 75 3

B 25 1

C 10 2

D 20 2

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

in week 10

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Closed Loop MRP

Production Planning

Master Production Scheduling

Material Requirements Planning

Capacity Requirements Planning

Realistic?No

Feedback

Execute:

Capacity Plans

Material Plans

Yes

Feedback

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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!