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Chapter 15Chapter 15Chapter 15Chapter 15
Resource Requirements Planning:Resource Requirements Planning:
MRP and CRPMRP and CRP
2
OverviewOverviewOverviewOverview
Resource Requirements PlanningResource Requirements Planning Material Requirements Planning (MRP)Material Requirements Planning (MRP) Capacity Requirements Planning (CRP)Capacity Requirements Planning (CRP) Wrap-Up: What World-Class Companies DoWrap-Up: What World-Class Companies Do
3
Resource Requirements PlanningResource Requirements PlanningResource Requirements PlanningResource Requirements Planning
Master ProductionMaster ProductionScheduling (MPS)Scheduling (MPS)Master ProductionMaster ProductionScheduling (MPS)Scheduling (MPS)
Material RequirementsMaterial RequirementsPlanning (MRP)Planning (MRP)
Material RequirementsMaterial RequirementsPlanning (MRP)Planning (MRP)
Capacity RequirementsCapacity RequirementsPlanning (CRP)Planning (CRP)
Capacity RequirementsCapacity RequirementsPlanning (CRP)Planning (CRP)
AggregateAggregatePlanningPlanning
AggregateAggregatePlanningPlanning
ResourceResourceRequirementsRequirements
PlanningPlanning
Chapter 13Chapter 13
Chapter 15Chapter 15
4
Material Requirements Planning (MRP)Material Requirements Planning (MRP)
5
Materials Requirements Planning (MRP)Materials Requirements Planning (MRP)Materials Requirements Planning (MRP)Materials Requirements Planning (MRP)
Computer based systemComputer based system Explodes Master Schedule (MPS) into required Explodes Master Schedule (MPS) into required
amounts of raw materials and subassemblies to amounts of raw materials and subassemblies to support MPSsupport MPS
Nets against current orders and inventories to develop Nets against current orders and inventories to develop production and purchased material ordering schedulesproduction and purchased material ordering schedules
6
Objectives of MRPObjectives of MRPObjectives of MRPObjectives of MRP
Improve customer serviceImprove customer service Reduce inventory investmentReduce inventory investment Improve plant operating efficiencyImprove plant operating efficiency
7
Order ChangesOrder ChangesOrderOrder
Order ChangesOrder ChangesOrderOrder
PlanningPlanningReport Report PlanningPlanningReport Report
Elements of MRPElements of MRPElements of MRPElements of MRP
MRPMRPSystemSystem
Planned OrderPlanned OrderScheduleSchedule
Planned OrderPlanned OrderScheduleSchedule
InventoryInventoryTransaction DataTransaction Data
InventoryInventoryTransaction DataTransaction Data
Bill ofBill of Materials FileMaterials File
Bill ofBill of Materials FileMaterials File
MasterMasterProductionProductionScheduleSchedule
MasterMasterProductionProductionScheduleSchedule
InventoryInventoryStatus FileStatus FileInventoryInventoryStatus FileStatus File
Service-PartsService-PartsOrders andOrders andForecastsForecasts
Service-PartsService-PartsOrders andOrders andForecastsForecasts
PerformancePerformance PerformancePerformance
ExceptionExceptionReportsReports
ExceptionExceptionReportsReports
Inputs Outputs
8
MRP Computer ProgramMRP Computer ProgramMRP Computer ProgramMRP Computer Program
Begins with number of end items neededBegins with number of end items needed Add service parts not included in MPSAdd service parts not included in MPS Explode MPS into gross requirements by consulting Explode MPS into gross requirements by consulting
bill of materials filebill of materials file Modify gross requirements to get net requirements:Modify gross requirements to get net requirements: Net Requirements = Gross RequirementsNet Requirements = Gross Requirements
+ Allocated Inventory+ Allocated Inventory+ Safety Stock+ Safety Stock
-- Inventory On Inventory On HandHand
Offset orders to allow for lead timeOffset orders to allow for lead time
9
Outputs of MRPOutputs of MRPOutputs of MRPOutputs of MRP
Planned order schedulePlanned order schedule - quantity of material to be - quantity of material to be ordered in each time periodordered in each time period
Changes to planned ordersChanges to planned orders - modifications to - modifications to previous planned ordersprevious planned orders
Secondary outputs:Secondary outputs: Exception reports Exception reports Performance reportsPerformance reports Planning reportsPlanning reports
10
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
LocoMopeds is a manufacturer of off-road LocoMopeds is a manufacturer of off-road mopeds. The following product structure diagram mopeds. The following product structure diagram represents the bill of materials for its dual-carburetor represents the bill of materials for its dual-carburetor Model 442 moped.Model 442 moped.
MOPEDMOPEDMOPEDMOPED
ENGINEENGINEASSEMBLYASSEMBLY
ENGINEENGINEASSEMBLYASSEMBLY
MOTORMOTORMOTORMOTOR CARBURETORCARBURETOR(2)(2)
CARBURETORCARBURETOR(2)(2)
GASGASTANKTANKGASGASTANKTANK
WHEELWHEELASSEMBLYASSEMBLY
(2)(2)
WHEELWHEELASSEMBLYASSEMBLY
(2)(2)
HUB HUB ASSEMBLYASSEMBLY
HUB HUB ASSEMBLYASSEMBLY TIRETIRETIRETIRE
FRAMEFRAMEFRAMEFRAME
Level 0Level 0
Level 1Level 1
Level 2Level 2
11
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
Bill of MaterialBill of MaterialParentParent ComponentComponent LevelLevel
Compon.Compon.CodeCode CodeCode CodeCode DescriptionDescription Req’dReq’d
442442 00 #442 Moped#442 Moped
442442 EAEA 11 Engine Assem.Engine Assem. 11GTGT 11 Gas TankGas Tank 11WAWA 11 Wheel Assem.Wheel Assem. 22
FF 11 FrameFrame 11
EAEA MM 22 MotorMotor 11CC 22 CarburetorCarburetor 22
WAWA HAHA 22 Hub Assem.Hub Assem. 11TT 22 TireTire 11
12
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
Inventory Status ReportInventory Status Report
ItemItemCodeCode
On-On-HandHand
SafetySafetyStockStock
LotLotSizeSize
LeadLeadTimeTime
Sched. ReceiptsSched. ReceiptsQnty. WeekQnty. Week
442442 500500 200200 LFLLFL 11 ---- ----
EAEA 300300 100100 500500 11 10001000 1010
GTGT 600600 200200 LFLLFL 22 900900 1010
WAWA 500500 400400 500500 11 20002000 1010
FF 600600 00 20002000 33 20002000 1010
MM 250250 00 LFLLFL 11 ---- ----
CC 150150 100100 2500+2500+ 22 ---- ----
HAHA 100100 00 LFLLFL 11 24002400 1111
TT 500500 500500 10001000 33 3000,20003000,2000 11,1211,12
13
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
The company is currently planning production The company is currently planning production for weeks 10 through 16. Based on existing orders for weeks 10 through 16. Based on existing orders and demand forecasts, the master production schedule and demand forecasts, the master production schedule is as follows:is as follows:
Master Production Schedule: #442 MopedMaster Production Schedule: #442 Moped
Determine the MRP schedule required to Determine the MRP schedule required to support the master production schedule for the Model support the master production schedule for the Model 442 moped in weeks 10-16.442 moped in weeks 10-16.
1111
13001300 800800 12001200 14001400
1010 16161515141413131212
00 13001300 00
WEEKWEEK
QUANTITYQUANTITY
14
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for #442 Mopeds for Weeks 10 - 16, MRP Schedule for #442 Mopeds for Weeks 10 - 16, considering that:considering that: Gross Requirements come from the moped MPSGross Requirements come from the moped MPS There is an On-Hand balance of 500 mopeds at the There is an On-Hand balance of 500 mopeds at the
end of week 9end of week 9 There are no Scheduled Receipts for mopeds There are no Scheduled Receipts for mopeds A lot-for-lot rule is used for ordering mopedsA lot-for-lot rule is used for ordering mopeds Safety stock of 200 mopeds is desiredSafety stock of 200 mopeds is desired Lead time for mopeds is one weekLead time for mopeds is one week
15
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for #442 Mopeds . . . InitiallyMRP Schedule for #442 Mopeds . . . Initially
GROSS REQUIREMENTSGROSS REQUIREMENTS
SCHEDULED RECEIPTSSCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 500) AVAILABLE (ON-HAND = 500)
NET REQUIREMENTSNET REQUIREMENTS
PLANNED ORDER RECEIPTSPLANNED ORDER RECEIPTS
PLANNED ORDER RELEASESPLANNED ORDER RELEASES
ITEM: 442 MOPED LT: 1 ITEM: 442 MOPED LT: 1 LOT SIZE: LFL SS: 200 LOT SIZE: LFL SS: 200
00
1010
13001300 00
1111 1212 1313
13001300 800800
15151414
1400140012001200
1616
WEEKWEEK
16
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for #442 Mopeds . . . CompletedMRP Schedule for #442 Mopeds . . . Completed
GROSS REQUIREMENTSGROSS REQUIREMENTS
SCHEDULED RECEIPTSSCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 500)AVAILABLE (ON-HAND = 500)
NET REQUIREMENTSNET REQUIREMENTS
PLANNED ORDER RECEIPTSPLANNED ORDER RECEIPTS
PLANNED ORDER RELEASESPLANNED ORDER RELEASES
ITEM: 442 MOPED LT: 1 ITEM: 442 MOPED LT: 1 LOT SIZE: LFL SS: 200 LOT SIZE: LFL SS: 200
00
300300
10001000
1010
10001000
10001000
300300
13001300
13001300
00
00
1111 1212 1313
13001300
12001200800800
12001200800800
1400140012001200
13001300
13001300
800800
000000 00
14001400
800800
1515
14001400
1414
1400140012001200
1616
WEEKWEEK
17
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Gas Tanks for Weeks 10 - 16, MRP Schedule for Gas Tanks for Weeks 10 - 16, considering that:considering that: Gross Requirements come from moped Planned-Gross Requirements come from moped Planned-
Order-ReleasesOrder-Releases There is an On-Hand balance of 600 gas tanks at There is an On-Hand balance of 600 gas tanks at
the end of week 9the end of week 9 There is a Scheduled Receipt for 900 tanks in There is a Scheduled Receipt for 900 tanks in
week 10 week 10 A lot-for-lot rule is used for ordering gas tanksA lot-for-lot rule is used for ordering gas tanks Safety stock of 200 gas tanks is desiredSafety stock of 200 gas tanks is desired Lead time for gas tanks is two weeksLead time for gas tanks is two weeks
18
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Gas Tanks . . . InitiallyMRP Schedule for Gas Tanks . . . Initially
GROSS REQUIREMENTSGROSS REQUIREMENTS
SCHEDULED RECEIPTSSCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 600)AVAILABLE (ON-HAND = 600)
NET REQUIREMENTSNET REQUIREMENTS
PLANNED ORDER RECEIPTSPLANNED ORDER RECEIPTS
PLANNED ORDER RELEASESPLANNED ORDER RELEASES
ITEM: GAS TANK LT: 2 ITEM: GAS TANK LT: 2 LOT SIZE: LFL SS: 200LOT SIZE: LFL SS: 200
10001000
900900
1010
00 13001300
1111 1212 1313
800800 12001200
15151414
0014001400
1616
WEEKWEEK
19
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Gas Tanks . . . CompletedMRP Schedule for Gas Tanks . . . Completed
GROSS REQUIREMENTSGROSS REQUIREMENTS
SCHEDULED RECEIPTSSCHEDULED RECEIPTS
AVAILABLE AVAILABLE (ON-HAND = 600) (ON-HAND = 600)
NET REQUIREMENTS NET REQUIREMENTS
PLANNED ORDER RECEIPTSPLANNED ORDER RECEIPTS
PLANNED ORDER RELEASESPLANNED ORDER RELEASES
ITEM: GAS TANK LT: 2 ITEM: GAS TANK LT: 2 LOT SIZE: LFL SS: 200 LOT SIZE: LFL SS: 200
10001000
900900
13001300
10001000
1010
800800
00
12001200
300300
13001300
1111 1212 1313
800800
12001200
14001400
12001200
15151414
0014001400
1616
WEEKWEEK
300300 000000
10001000
10001000 800800
800800
14001400
1400140012001200
00
20
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Frames for Weeks 10 - 16, MRP Schedule for Frames for Weeks 10 - 16, considering that:considering that: Gross Requirements come from moped Planned-Gross Requirements come from moped Planned-
Order-ReleasesOrder-Releases There is an On-Hand balance of 600 frames at the There is an On-Hand balance of 600 frames at the
end of week 9end of week 9 There is a Scheduled Receipt for 2000 frames in There is a Scheduled Receipt for 2000 frames in
week 10week 10 The firm uses a Lot Size (multiple) of 2000 for The firm uses a Lot Size (multiple) of 2000 for
ordering framesordering frames No safety stock of frames is desiredNo safety stock of frames is desired Lead time for frames is 3 weeksLead time for frames is 3 weeks
21
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Frames . . . InitiallyMRP Schedule for Frames . . . Initially
GROSS REQUIREMENTSGROSS REQUIREMENTS
SCHEDULED RECEIPTSSCHEDULED RECEIPTS
AVAILABLE AVAILABLE
NET REQUIREMENTSNET REQUIREMENTS
PLANNED ORDER RECEIPTSPLANNED ORDER RECEIPTS
PLANNED ORDER RELEASESPLANNED ORDER RELEASES
ITEM: FRAME LT: 3 ITEM: FRAME LT: 3 LOT SIZE: 2000 SS: 0LOT SIZE: 2000 SS: 0
10001000
20002000
1010
00 13001300
1111 1212 1313
800800 12001200
15151414
0014001400
1616
WEEKWEEK
600600
22
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Frames . . . CompletedMRP Schedule for Frames . . . Completed
GROSS REQUIREMENTSGROSS REQUIREMENTS
SCHEDULED RECEIPTSSCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 600) AVAILABLE (ON-HAND = 600)
NET REQUIREMENTSNET REQUIREMENTS
PLANNED ORDER RECEIPTSPLANNED ORDER RECEIPTS
PLANNED ORDER RELEASESPLANNED ORDER RELEASES
ITEM: FRAME LT: 3 ITEM: FRAME LT: 3 LOT SIZE: 2000 SS: 0 LOT SIZE: 2000 SS: 0
10001000
20002000
26002600
00
20002000
1010
16001600
00
20002000
16001600
13001300
1111 1212 1313
800800
20002000
500500
20002000
300300300300 900900
00
12001200
15151414
0014001400
1616
WEEKWEEK
00 00
15001500
00 11001100
23
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Engine Assemblies for Weeks 10 - MRP Schedule for Engine Assemblies for Weeks 10 - 16, considering that:16, considering that: Gross Requirements come from moped Planned-Gross Requirements come from moped Planned-
Order-ReleasesOrder-Releases There is an On-Hand balance of 300 engine There is an On-Hand balance of 300 engine
assemblies at the end of week 9assemblies at the end of week 9 There is a Scheduled Receipt for 1000 engine There is a Scheduled Receipt for 1000 engine
assemblies in week 10assemblies in week 10 The firm uses a Lot Size (multiple) of 500 for The firm uses a Lot Size (multiple) of 500 for
ordering engine assembliesordering engine assemblies Safety Stock of 100 engine assemblies is desiredSafety Stock of 100 engine assemblies is desired Lead time for engine assemblies is 1 weekLead time for engine assemblies is 1 week
24
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Engine Assemblies . . . InitiallyMRP Schedule for Engine Assemblies . . . Initially
GROSS REQUIREMENTSGROSS REQUIREMENTS
SCHEDULED RECEIPTSSCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 300) AVAILABLE (ON-HAND = 300)
NET REQUIREMENTS NET REQUIREMENTS
PLANNED ORDER RECEIPTSPLANNED ORDER RECEIPTS
PLANNED ORDER RELEASESPLANNED ORDER RELEASES
ITEM: ENGINE ASSEM. LT: 1 ITEM: ENGINE ASSEM. LT: 1 LOT SIZE: 500 SS: 100 LOT SIZE: 500 SS: 100
10001000
10001000
1010
00
13001300
1111 1212 1313
800800 12001200
15151414
0014001400
1616
WEEKWEEK
25
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Engine Assemblies . . . CompletedMRP Schedule for Engine Assemblies . . . Completed
GROSS REQUIREMENTSGROSS REQUIREMENTS
SCHEDULED RECEIPTSSCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 300) AVAILABLE (ON-HAND = 300)
NET REQUIREMENTS NET REQUIREMENTS
PLANNED ORDER RECEIPTSPLANNED ORDER RECEIPTS
PLANNED ORDER RELEASESPLANNED ORDER RELEASES
ITEM: ENGINE ASSEM. LT: 1 ITEM: ENGINE ASSEM. LT: 1 LOT SIZE: 500 SS: 100 LOT SIZE: 500 SS: 100
10001000
10001000
12001200
1010
15001500
200 200
00
500500
15001500
11001100
200200
13001300
1111 1212 1313
800800
1000100011001100
1000100015001500
10001000
400400
500500
15001500
400400100100400400 00
12001200
15151414
0014001400
1616
WEEKWEEK
26
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Motors for Weeks 10 - 16, MRP Schedule for Motors for Weeks 10 - 16, considering that:considering that: Gross Requirements come from engine assembly Gross Requirements come from engine assembly
Planned-Order-ReleasesPlanned-Order-Releases There is an On-Hand balance of 250 motors at the There is an On-Hand balance of 250 motors at the
end of week 9end of week 9 There are no Scheduled Receipts for motorsThere are no Scheduled Receipts for motors A lot-for-lot rule is used for ordering motorsA lot-for-lot rule is used for ordering motors No Safety Stock of motors is desiredNo Safety Stock of motors is desired Lead time for motors is 1 weekLead time for motors is 1 week
27
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Motors . . . InitiallyMRP Schedule for Motors . . . Initially
GROSS REQUIREMENTSGROSS REQUIREMENTS
SCHEDULED RECEIPTS SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 250) AVAILABLE (ON-HAND = 250)
NET REQUIREMENTSNET REQUIREMENTS
PLANNED ORDER RECEIPTSPLANNED ORDER RECEIPTS
PLANNED ORDER RELEASESPLANNED ORDER RELEASES
ITEM: MOTOR LT: 1 ITEM: MOTOR LT: 1 LOT SIZE: LFL SS: 0 LOT SIZE: LFL SS: 0 1010
15001500
500500
1111 1212 1313
15001500
10001000
15151414 1616
WEEKWEEK
28
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Motors . . . CompletedMRP Schedule for Motors . . . Completed
GROSS REQUIREMENTSGROSS REQUIREMENTS
SCHEDULED RECEIPTS SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 250) AVAILABLE (ON-HAND = 250)
NET REQUIREMENTSNET REQUIREMENTS
PLANNED ORDER RECEIPTSPLANNED ORDER RECEIPTS
PLANNED ORDER RELEASESPLANNED ORDER RELEASES
ITEM: MOTOR LT: 1 ITEM: MOTOR LT: 1 LOT SIZE: LFL SS: 0 LOT SIZE: LFL SS: 0
250250
12501250
1010
12501250
500500
12501250
250250
15001500
15001500
500500
500500
00
500500
1111 1212 1313
15001500
10001000
10001000
15001500
15001500
10001000
000000 00
10001000
15151414 1616
WEEKWEEK
29
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Carburetors for Weeks 10 - 16, MRP Schedule for Carburetors for Weeks 10 - 16, considering that:considering that: Gross Requirements come from engine assembly Gross Requirements come from engine assembly
Planned-Order-Releases (times 2)Planned-Order-Releases (times 2) There is an On-Hand balance of 150 carburetors at There is an On-Hand balance of 150 carburetors at
the end of week 9the end of week 9 There are no Scheduled Receipts for carburetorsThere are no Scheduled Receipts for carburetors A Lot Size of 2500+ is used for ordering A Lot Size of 2500+ is used for ordering
carburetorscarburetors Safety Stock of 100 carburetors is desiredSafety Stock of 100 carburetors is desired Lead time for carburetors is 2 weeksLead time for carburetors is 2 weeks
30
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Carburetors . . . InitiallyMRP Schedule for Carburetors . . . Initially
GROSS REQUIREMENTSGROSS REQUIREMENTS
SCHEDULED RECEIPTS SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 150) AVAILABLE (ON-HAND = 150)
NET REQUIREMENTSNET REQUIREMENTS
PLANNED ORDER RECEIPTSPLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES PLANNED ORDER RELEASES
ITEM: CARBURETOR LT: 2 ITEM: CARBURETOR LT: 2 LOT SIZE: 2500+ SS: 100LOT SIZE: 2500+ SS: 100 1010
30003000 10001000
1111 1212 1313
30003000 20002000
15151414 1616
WEEKWEEK
31
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Carburetors . . . CompletedMRP Schedule for Carburetors . . . Completed
GROSS REQUIREMENTSGROSS REQUIREMENTS
SCHEDULED RECEIPTS SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 150) AVAILABLE (ON-HAND = 150)
NET REQUIREMENTSNET REQUIREMENTS
PLANNED ORDER RECEIPTSPLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES PLANNED ORDER RELEASES
ITEM: CARBURETOR LT: 2 ITEM: CARBURETOR LT: 2 LOT SIZE: 2500+ SS: 100LOT SIZE: 2500+ SS: 100
5050
25002500
1010
25002500
30503050
30003000
30003000
25002500
25002500
950950
5050
10001000
1111 1212 1313
30003000
950950
25002500
14501450
25002500
155015501050105015501550 15501550
20002000
15151414 1616
WEEKWEEK
32
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Wheel Assemblies for Weeks 10 - MRP Schedule for Wheel Assemblies for Weeks 10 - 16, considering that:16, considering that: Gross Requirements come from moped Planned-Gross Requirements come from moped Planned-
Order-Releases (times 2)Order-Releases (times 2) There is an On-Hand balance of 500 wheel There is an On-Hand balance of 500 wheel
assemblies at the end of week 9assemblies at the end of week 9 There is a Scheduled Receipt for 2000 wheel There is a Scheduled Receipt for 2000 wheel
assemblies in week 10assemblies in week 10 A Lot Size (multiple) of 500 is used for ordering A Lot Size (multiple) of 500 is used for ordering
wheel assemblieswheel assemblies Safety Stock of 400 wheel assemblies is desiredSafety Stock of 400 wheel assemblies is desired Lead time for wheel assemblies is 1 weekLead time for wheel assemblies is 1 week
33
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Wheel Assemblies . . . InitiallyMRP Schedule for Wheel Assemblies . . . Initially
GROSS REQUIREMENTSGROSS REQUIREMENTS
SCHEDULED RECEIPTSSCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 500) AVAILABLE (ON-HAND = 500)
NET REQUIREMENTS NET REQUIREMENTS
PLANNED ORDER RECEIPTSPLANNED ORDER RECEIPTS
PLANNED ORDER RELEASESPLANNED ORDER RELEASES
ITEM: WHEEL ASSEM. LT: 1 ITEM: WHEEL ASSEM. LT: 1 LOT SIZE: 500 SS: 400 LOT SIZE: 500 SS: 400
20002000
20002000
1010
00
26002600
1111 1212 1313
16001600 24002400
15151414
0028002800
1616
WEEKWEEK
34
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Wheel Assemblies . . . CompletedMRP Schedule for Wheel Assemblies . . . Completed
GROSS REQUIREMENTSGROSS REQUIREMENTS
SCHEDULED RECEIPTSSCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 500) AVAILABLE (ON-HAND = 500)
NET REQUIREMENTS NET REQUIREMENTS
PLANNED ORDER RECEIPTSPLANNED ORDER RECEIPTS
PLANNED ORDER RELEASESPLANNED ORDER RELEASES
ITEM: WHEEL ASSEM. LT: 1 ITEM: WHEEL ASSEM. LT: 1 LOT SIZE: 500 SS: 400 LOT SIZE: 500 SS: 400
20002000
20002000
21002100
1010
25002500
100100
00
20002000
25002500
25002500
100100
26002600
1111 1212 1313
16001600
2800280020002000
3000300020002000
30003000
16001600
20002000
20002000
0040040000 200200
24002400
15151414
0028002800
1616
WEEKWEEK
35
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Hub Assemblies for Weeks 10 - 16, MRP Schedule for Hub Assemblies for Weeks 10 - 16, considering that:considering that: Gross Requirements come from wheel assembly Gross Requirements come from wheel assembly
Planned-Order-ReleasesPlanned-Order-Releases There is an On-Hand balance of 100 hub assemblies There is an On-Hand balance of 100 hub assemblies
at the end of week 9at the end of week 9 There is a Scheduled Receipt of 2400 hub There is a Scheduled Receipt of 2400 hub
assemblies in week 11assemblies in week 11 A lot-for-lot rule is used for ordering hub assembliesA lot-for-lot rule is used for ordering hub assemblies No Safety Stock of hub assemblies is desiredNo Safety Stock of hub assemblies is desired Lead time for hub assemblies is 1 weekLead time for hub assemblies is 1 week
36
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Hub Assemblies . . . InitiallyMRP Schedule for Hub Assemblies . . . Initially
GROSS REQUIREMENTSGROSS REQUIREMENTS
SCHEDULED RECEIPTSSCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 100) AVAILABLE (ON-HAND = 100)
NET REQUIREMENTS NET REQUIREMENTS
PLANNED ORDER RECEIPTSPLANNED ORDER RECEIPTS
PLANNED ORDER RELEASESPLANNED ORDER RELEASES
ITEM: HUB ASSEM. LT: 1 ITEM: HUB ASSEM. LT: 1 LOT SIZE: LFL SS: 0 LOT SIZE: LFL SS: 0
00
1010
24002400
25002500
20002000
1111 1212 1313
20002000
30003000
15151414
0000
1616
WEEKWEEK
37
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Hub Assemblies . . . CompletedMRP Schedule for Hub Assemblies . . . Completed
GROSS REQUIREMENTSGROSS REQUIREMENTS
SCHEDULED RECEIPTSSCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 100) AVAILABLE (ON-HAND = 100)
NET REQUIREMENTS NET REQUIREMENTS
PLANNED ORDER RECEIPTSPLANNED ORDER RECEIPTS
PLANNED ORDER RELEASESPLANNED ORDER RELEASES
ITEM: HUB ASSEM. LT: 1 ITEM: HUB ASSEM. LT: 1 LOT SIZE: LFL SS: 0 LOT SIZE: LFL SS: 0
00
100100
1010
20002000
25002500
24002400
25002500
20002000
20002000
20002000
00
20002000
1111 1212 1313
20002000
30003000
30003000
20002000
20002000
30003000
000000 00
30003000
15151414
0000
1616
WEEKWEEK
38
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Tires for Weeks 10 - 16, MRP Schedule for Tires for Weeks 10 - 16, considering that:considering that: Gross Requirements come from wheel assembly Gross Requirements come from wheel assembly
Planned-Order-ReleasesPlanned-Order-Releases There is an On-Hand balance of 500 tires at the There is an On-Hand balance of 500 tires at the
end of week 9end of week 9 There are Scheduled Receipts for 3000 and 2000 There are Scheduled Receipts for 3000 and 2000
tires weeks 11 and 12, respectivelytires weeks 11 and 12, respectively A Lot Size (multiple) of 1000 is used for ordering A Lot Size (multiple) of 1000 is used for ordering
tirestires Safety Stock of 500 tires is desiredSafety Stock of 500 tires is desired Lead time for tires is 3 weeksLead time for tires is 3 weeks
39
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Tires . . . InitiallyMRP Schedule for Tires . . . Initially
GROSS REQUIREMENTSGROSS REQUIREMENTS
SCHEDULED RECEIPTSSCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 500) AVAILABLE (ON-HAND = 500)
NET REQUIREMENTS NET REQUIREMENTS
PLANNED ORDER RECEIPTSPLANNED ORDER RECEIPTS
PLANNED ORDER RELEASESPLANNED ORDER RELEASES
ITEM: TIRE LT: 3 ITEM: TIRE LT: 3 LOT SIZE: 1000 SS: 500 LOT SIZE: 1000 SS: 500
00
1010
30003000
25002500 20002000
20002000
1111 1212 1313
20002000
30003000
15151414
0000
1616
WEEKWEEK
40
Example: MRP ScheduleExample: MRP ScheduleExample: MRP ScheduleExample: MRP Schedule
MRP Schedule for Tires . . . CompletedMRP Schedule for Tires . . . Completed
GROSS REQUIREMENTSGROSS REQUIREMENTS
SCHEDULED RECEIPTSSCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 500) AVAILABLE (ON-HAND = 500)
NET REQUIREMENTS NET REQUIREMENTS
PLANNED ORDER RECEIPTSPLANNED ORDER RECEIPTS
PLANNED ORDER RELEASESPLANNED ORDER RELEASES
ITEM: TIRE LT: 3 ITEM: TIRE LT: 3 LOT SIZE: 1000 SS: 500 LOT SIZE: 1000 SS: 500
00
0 0
20002000
1010
30003000
30003000
30003000
25002500
25002500
20002000
20002000
1111 1212 1313
20002000
25002500
30003000
15001500
20002000
500500 500500500 500 500 500
30003000
15151414
0000
1616
WEEKWEEK
41
Lot-Sizing in MRPLot-Sizing in MRPLot-Sizing in MRPLot-Sizing in MRP
Lot-sizeLot-size is the quantity ordered/produced at one time is the quantity ordered/produced at one time Large lots are preferred because:Large lots are preferred because:
Changeovers cost less and capacity greaterChangeovers cost less and capacity greater Annual cost of purchase orders lessAnnual cost of purchase orders less Price breaks and transportation breaks can be Price breaks and transportation breaks can be
utilizedutilized Small lots are preferred because:Small lots are preferred because:
Lower inventory carrying costLower inventory carrying cost Reduced risk of obsolescenceReduced risk of obsolescence Shorter cycle time to produce customer orderShorter cycle time to produce customer order
42
Lot-Sizing MethodsLot-Sizing MethodsLot-Sizing MethodsLot-Sizing Methods
Typical MRP methodsTypical MRP methods accommodates lumpy demandaccommodates lumpy demand
Lot-for-Lot (LFL)Lot-for-Lot (LFL) Period Order Quantity (POQ)Period Order Quantity (POQ)
Comments on Economic Order Quantity (EOQ)Comments on Economic Order Quantity (EOQ) does not consider quantity discountsdoes not consider quantity discounts does not always provide the most economical does not always provide the most economical
approach with lumpy demandapproach with lumpy demand
43
Example: Lot-Sizing DecisionExample: Lot-Sizing DecisionExample: Lot-Sizing DecisionExample: Lot-Sizing Decision
The net requirements for a material from an The net requirements for a material from an MRP schedule are:MRP schedule are:
It costs $400 to change over the machines for It costs $400 to change over the machines for this material in the affected work center. It costs this material in the affected work center. It costs $0.40 per unit when one unit of this material must be $0.40 per unit when one unit of this material must be carried in inventory from one week to the next.carried in inventory from one week to the next.
Identify the lot-sizing method that results in the Identify the lot-sizing method that results in the least carrying and changeover costs for the 8-week least carrying and changeover costs for the 8-week schedule.schedule.
NET REQUIREMENTS NET REQUIREMENTS 10001000
11
00 13001300
22 33 44
800800 12001200
6655
0013001300
77
WEEKWEEK
800800
88
44
Example: Lot-Sizing DecisionExample: Lot-Sizing DecisionExample: Lot-Sizing DecisionExample: Lot-Sizing Decision
Lot-for-Lot MethodLot-for-Lot Method
Carrying Cost Carrying Cost = 0($.40) = $0 = 0($.40) = $0
Changeover Cost = 6($400) = Changeover Cost = 6($400) = $2,400$2,400
Total = $2,400Total = $2,400
NET REQUIREMENTS NET REQUIREMENTS
BEGINNING INVENTORY BEGINNING INVENTORY
PRODUCTION LOTS PRODUCTION LOTS
ENDING INVENTORYENDING INVENTORY
10001000
00
10001000
00
11
00
00
00
00
00
13001300
13001300
00
22 33 44
800800
000000
0000
1300130012001200800800 00
00
12001200
6655
0013001300
0000
77
WEEKWEEK
800800
00
800800
00
88
45
Example: Lot-Sizing DecisionExample: Lot-Sizing DecisionExample: Lot-Sizing DecisionExample: Lot-Sizing Decision
Economic Order Quantity (EOQ) MethodEconomic Order Quantity (EOQ) Method
S = $400.00S = $400.00
D = [(Net Req. for 8 wks)/8 weeks)](50 weeks/year)D = [(Net Req. for 8 wks)/8 weeks)](50 weeks/year)
= (6400/8)(50) = 40,000= (6400/8)(50) = 40,000
C = ($0.40 per week)(50 weeks/year)C = ($0.40 per week)(50 weeks/year)
= $20.00= $20.00
2DS 2(40,000)(400)EOQ = = = 1265
C 20
2DS 2(40,000)(400)EOQ = = = 1265
C 20
46
Example: Lot-Sizing DecisionExample: Lot-Sizing DecisionExample: Lot-Sizing DecisionExample: Lot-Sizing Decision
Economic Order Quantity (EOQ) MethodEconomic Order Quantity (EOQ) Method
Carrying Cost = 4855($.40) = $1,942Carrying Cost = 4855($.40) = $1,942
Changeover Cost = 6($400) = Changeover Cost = 6($400) = $2,400$2,400
Total = $4,342Total = $4,342
NET REQUIREMENTS NET REQUIREMENTS
BEGINNING INVENTORY BEGINNING INVENTORY
PRODUCTION LOTS PRODUCTION LOTS
ENDING INVENTORYENDING INVENTORY
10001000
00
12651265
265265
11
265265
00
265265
00
230230
12651265
13001300
265265
22 33 44
800800
725725760760695695
695695230230
126512651265126512651265 00
725725
12001200
6655
0013001300
725725760760
77
WEEKWEEK
12651265
11901190
800800
725725
88
47
Example: Lot-Sizing DecisionExample: Lot-Sizing DecisionExample: Lot-Sizing DecisionExample: Lot-Sizing Decision
Period Order Quantity (POQ) MethodPeriod Order Quantity (POQ) Method
POQ = (# Weeks/year)/(# Orders/year)POQ = (# Weeks/year)/(# Orders/year)
= 50/(D/EOQ)= 50/(D/EOQ)
= 50/(40,000/1,265)= 50/(40,000/1,265)
= 1.58 or 2 weeks= 1.58 or 2 weeks
48
Example: Lot-Sizing DecisionExample: Lot-Sizing DecisionExample: Lot-Sizing DecisionExample: Lot-Sizing Decision
Period Order Quantity (POQ) MethodPeriod Order Quantity (POQ) Method
Carrying Cost = 2900($.40) = $1,160Carrying Cost = 2900($.40) = $1,160
Changeover Cost = 4($400) = Changeover Cost = 4($400) = $1,600$1,600
Total = $2,760Total = $2,760
NET REQUIREMENTS NET REQUIREMENTS
BEGINNING INVENTORY BEGINNING INVENTORY
PRODUCTION LOTS PRODUCTION LOTS
ENDING INVENTORYENDING INVENTORY
10001000
00
10001000
00
11
00
00
00
00
800800
21002100
13001300
00
22 33 44
800800
001300130000
00800800
002500250000 800800
800800
12001200
6655
0013001300
0013001300
77
WEEKWEEK
00
00
800800
800800
88
49
Example: Lot-Sizing DecisionExample: Lot-Sizing DecisionExample: Lot-Sizing DecisionExample: Lot-Sizing Decision
SummarySummary
CarryingCarrying Chg.Ovr.Chg.Ovr. TotalTotalMethodMethod CostCost CostCost CostCost
LFLLFL 00 2,4002,400 2,4002,400
EOQEOQ 1,9421,942 2,4002,400 4,3424,342
POQPOQ 1,1601,160 1,6001,600 2,7602,760
50
Issues in MRPIssues in MRPIssues in MRPIssues in MRP
Lot-SizingLot-Sizing Useful at lower levels but may drive excess Useful at lower levels but may drive excess
inventory when applied at higher levelsinventory when applied at higher levels Net Change versus Regenerative MRPNet Change versus Regenerative MRP
Net change may generate too many action noticesNet change may generate too many action notices Regenerative more costly to run but appears to be Regenerative more costly to run but appears to be
easier to manageeasier to manage . . . more. . . more
51
Issues in MRPIssues in MRPIssues in MRPIssues in MRP
Safety StockSafety Stock Use depends on uncertainty of demand..... more Use depends on uncertainty of demand..... more
uncertain the greater the need for safety stockuncertain the greater the need for safety stock Assemble-to-Order FirmsAssemble-to-Order Firms
MPS and MRP treated separately from Final MPS and MRP treated separately from Final Assembly Schedule(FAS)Assembly Schedule(FAS)
FAS is prepared 1-2 weeks aheadFAS is prepared 1-2 weeks ahead Use Modular Bill of MaterialUse Modular Bill of Material
For each option with a demand forecastFor each option with a demand forecast
52
MRP I to MRP IIMRP I to MRP IIMRP I to MRP IIMRP I to MRP II
MRP I simply exploded demand (MPS) into required MRP I simply exploded demand (MPS) into required materialsmaterials
MRP II became MRP II became Manufacturing Resource PlanningManufacturing Resource Planning which provides a closed-loop business management which provides a closed-loop business management systemsystem Financial managementFinancial management Shop floor controlShop floor control Operations managementOperations management Simulation capabilitySimulation capability
53
Evaluation of MRPEvaluation of MRPEvaluation of MRPEvaluation of MRP
Most beneficial to process-focused systems that have Most beneficial to process-focused systems that have long processing times and complex multistage long processing times and complex multistage production stepsproduction steps
Lead times must be reliableLead times must be reliable Must freeze MPS for some time before actual Must freeze MPS for some time before actual
production... certain demandproduction... certain demand Difficult to implementDifficult to implement
54
Capacity Requirements Planning (CRP)
55
Capacity Requirements Planning (CRP)Capacity Requirements Planning (CRP)Capacity Requirements Planning (CRP)Capacity Requirements Planning (CRP)
Tests MPS for feasibilityTests MPS for feasibility Utilizes routings to determine labor/machine loadsUtilizes routings to determine labor/machine loads If schedule feasible, recommends freezingIf schedule feasible, recommends freezing If schedule overloads resources, points out processes If schedule overloads resources, points out processes
that are overscheduledthat are overscheduled
56
Load SchedulesLoad SchedulesLoad SchedulesLoad Schedules
Compares actual labor and machine hours against Compares actual labor and machine hours against available hoursavailable hours
Offsets schedules between successive stages of Offsets schedules between successive stages of production by lead timesproduction by lead times
Provides feasible MPS and economically loaded work Provides feasible MPS and economically loaded work centerscenters
Promotes system operating efficiency ... lowers costs!Promotes system operating efficiency ... lowers costs!
57
HW Chapter 15HW Chapter 15HW Chapter 15HW Chapter 15
HW #7 and 16 on page 612 and 617.HW #7 and 16 on page 612 and 617.
58
End of Chapter 15End of Chapter 15