Materials Requirement Planning (MRP I) MRP IIerpstudymaterial.weebly.com/uploads/9/6/3/0/963038/mrp1andmrp2.pdfMaterials Requirement Planning (MRP I) & MRP II BALAJI.M FACULTY, TSM

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Handouts for MRP I & MRP II

TSM/ERP COURSE/II MBA

Materials Requirement Planning (MRP I)&

MRP II

BALAJI.M

FACULTY, TSM

Materials Requirements Planning

? Material Requirements Planning (MRP)? MRP Logic and Product Structure Trees? MRP Example? MRP II? Lot Sizing in MRP Programs

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MRP System Input & Output

MasterProductionScheduleBill of

MaterialsMaterial

RequirementsPlanning Sys.

InventoryStatus

Planned Order& OtherReports

Item Master PurchasingData

MasterProductionScheduleBill of

MaterialsMaterial

RequirementsPlanning Sys.

InventoryStatus

Planned Order& OtherReports

Item Master PurchasingData

Master Production Schedule

¨Shows items to be produced

¨End item, customer order, module

¨Derived from aggregate plan

Item/Week Oct 3 Oct 10 Oct 17 Oct 24

Drills 300 200 310 300

Saws 300 450 310 330

¨Example

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Bill-of-Material

? List of components & quantities needed to make product ? Provides product structure (tree)

? Parents:

? Children:

Bill-of-Material Product Structure Tree

Bicycle(1)P/N 1000

Handle Bars (1)P/N 1001

Frame Assy (1)P/N 1002

Wheels (2)P/N 1003

Frame (1)P/N 1004

Bicycle(1)P/N 1000

Handle Bars (1)P/N 1001

Frame Assy (1)P/N 1002

Wheels (2)P/N 1003

Frame (1)P/N 1004

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Product Structure Thinking Challenge

The demand for product A is 50. How many of each component is needed to satisfy demand?

A

B(2) C(3)

D(2)

E(1)E(3) F(2)

D(2)G(1)

A

B(2) C(3)

D(2)

E(1)E(3) F(2)

D(2)G(1)

Additional MRP Scheduling Terminology? Gross Requirements

? On-hand

? Net requirements

? Planned order receipt

? Planned order release

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Objectives of MRP

? Improve customer service? Reduce inventory investment? Improve plant operating efficiency

Firm orders from knowncustomers

Forecastsof demand

from randomcustomers

Aggregateproduct

plan

Masterproductionschedule(MPS)

Materialplanning(MRP)

Engineeringdesign

changes

Bill ofmaterial

file

Inventorytransactions

Inventoryrecord

file

Reports

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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.

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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Order ChangesOrder

Elements of MRP

MRPSystem

Planned OrderSchedule

InventoryTransaction Data

Bill ofMaterials File

MasterProductionSchedule

InventoryStatus File

Service-PartsOrders andForecasts

Inputs Outputs

PerformancePlanningReport

ExceptionReports

MRP Computer Program

? Begins with number of end items needed? Add service parts not included in MPS? Explode MPS into gross requirements by consulting

bill of materials file? Modify gross requirements to get net requirements:? Net Requirements = Gross Requirements

+ Allocated Inventory+ Safety Stock- Inventory On Hand

? Offset orders to allow for lead time

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Outputs of MRP

? Planned order schedule - quantity of material to be ordered in each time period

? Changes to planned orders - modifications to previous planned orders

? Secondary outputs:? Exception reports ? Performance reports? Planning reports

MRP Drawbacks:

? Loss of visibility for low level components? MRP nervousness? Minimum length of the planning horizon? Freezing the MPS? Lumpiness of demand

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MRP in Services

? Can be used when demand for service or service items is directly related to or derived from demand for other services?restaurant - rolls required for each meal?hospitals - implements for surgery?etc.

Simple 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 ALead TimesA 1 dayB 2 daysC 1 dayD 3 daysE 4 daysF 1 day

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.

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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” in the 9th

day to receive them in the 10th day.

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.

D a y : 1 2 3 4 5 6 7 8 9 10A Required 50

Order P lacement 5 0B Required 20 200

Order P lacement 2 0 200

SparesLT = 2

B(4)

E(1)D(2)

C(2)

F(2)D(3)

A 4x50=200

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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:

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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 plus the following spares:

Spares 1 2 3 4 5 6 7 8 9 10A 12B 7C 10D 15

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

LT=2 On-Hand=50 50Net Requirements 45Planned Order Receipt 45Planner Order Release 45

A Gross Requirements 90 12LT=3 On-Hand=75 75

Net Requirements 15 12Planned Order Receipt 15 12Planner Order Release 15 12

B Gross Requirements 7 45LT=1 On-Hand=25 25 18

Net Requirements 27Planned Order Receipt 27Planner Order Release 27

C Gross Requirements 45 36 54 10LT=2 On-Hand=10 10

Net Requirements 35 36 54 10Planned Order Receipt 35 36 54 10Planner Order Release 35 36 54 10

D Gross Requirements 15 135LT=2 On-Hand=20 20 5

Net Requirements 130Planned Order Receipt 130Planner Order Release 130

Closed Loop MRP

Production PlanningMaster Production SchedulingMaterial Requirements PlanningCapacity Requirements Planning

Realistic?No

Feedback

Execute:Capacity PlansMaterial Plans

Yes

Feedback

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Lot-Sizing in MRP

? Lot-size is the quantity ordered/produced at one time? Large lots are preferred because:

? Changeovers cost less and capacity greater? Annual cost of purchase orders less? Price breaks and transportation breaks can be

utilized? Small lots are preferred because:

? Lower inventory carrying cost? Reduced risk of obsolescence? Shorter cycle time to produce customer order

The best method, resulting in least cost,depends on cost and demand patterns.

Lot-Sizing Methods

? Economic Order Quantity (EOQ)? does not consider quantity discounts? does not always provide the most economical

approach with lumpy demand? Lot-for-Lot (LFL)

? accommodates lumpy demand? Period Order Quantity (POQ)

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MRP I to MRP II

? MRP I simply exploded demand (MPS) into required materials

? MRP II became Manufacturing Resource Planningwhich provides a closed-loop business management system? Financial management? Shop floor control? Operations management? Simulation capability

Manufacturing Resource Planning (MRP II)

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

? Simulate the manufacturing system

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Capacity Requirements Planning (CRP)

? Tests MPS for feasibility? Utilizes routings to determine labor/machine loads? If schedule feasible, recommends freezing? If schedule overloads resources, points out processes

that are overscheduled

Load Schedules

? Compares actual labor and machine hours against available hours

? Offsets schedules between successive stages of production by lead times

? Provides feasible MPS and economically loaded work centers

? Promotes system operating efficiency ... lowers costs!

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Wrap-Up: World-Class Practice

? Lead times respond to conditions? Product development as levels of product structure

tree? Lead times that adjust to load? MRP reports shared with customers and suppliers? All of the above results in bias towards smaller

batches and shorter lead times

Documents

Materials Requirement Planning (MRP I) MRP IIerpstudymaterial.weebly.com/uploads/9/6/3/0/963038/mrp1andmrp2.pdfMaterials Requirement Planning (MRP I) & MRP II BALAJI.M FACULTY, TSM