Materials Requirements Planning (Session 11) · Material Requirements Planning • Materials requirements planning (MRP) is a means for determining the number of parts, components,

Materials Requirements Planning

(Session 11)

1

Outline

• Material Requirements Planning (MRP)• MRP Logic and Product Structure Trees• Time Fences• MRP Example• MRP II and Lot Sizing

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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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Example of MRP Logic and Product Structure Tree

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

B(4)

E(1)D(2)

C(2)

F(2)D(3)

AProduct Structure Tree for Assembly A Lead Times

A 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)

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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.

LT = 1 day

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

Order Placement 50

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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.

D ay : 1 2 3 4 5 6 7 8 9 10A R equ ired 50

O rder P lac em ent 50B R equ ired 20 200

O rder P lac em ent 20 200

B(4)

E(1)D(2)

C(2)

F(2)D(3)

A

SparesLT = 2

4x50=200

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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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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

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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)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

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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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©The McGraw-Hill Companies, Inc., 2004

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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Bill of Materials (BOM) File

• Materials• Parts• Components• Production sequence • Modular BOM

– Subassemblies• Super BOM

– Fractional options13

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 data15

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 release17

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)

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

X Gross requirements 95LT=2 Scheduled receipts

Proj. avail. balance 50 50 50 50 50 50 50 50 50 50On- 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

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It takes 2 A’s for each X

It takes 2 A’s for each 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









B(1)A(2)

X

It takes 1 B for each X

It takes 1 B for each X

20












21

A(2) B(1)

X

C(3)

It takes 3 C’s for each A

It takes 3 C’s for each A

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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Closed Loop MRP

Production PlanningMaster Production SchedulingMaterial Requirements PlanningCapacity Requirements Planning

Realistic?No

Feedback

Execute:Capacity PlansMaterial 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!

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Numerical # 1:

Given the following product structure tree diagram, complete the MRP records for A, B, and C.

A

C B (2)

C

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28

Gross 5 15 18 8 12 22Scheduled Receipt

PAB (21) 21 16 1 3 15 3

P.O.Receipt 20 20 20

P.O. Release 20 20 20

Week 4 5 6 7 8 9

PART AQ=20; LT=1; SS=0

Gross 40 40 40Scheduled Receipt

32 32

PAB (20) 20 20 12 12 12

P.O.Receipt 40 40

P.O. Release 40 40

PART BQ=40; LT=2; SS=0

Gross 40 20 60 20

Scheduled Receipt

PAB (50) 50 10 10 10 10 10

P.O.Receipt 20 60 20

P.O. Release 20 60 20

PART CQ=L-4-L; LT=1; SS=10

Numerical # 2:Draw the time-phased product structure tree.

Parts L.T.A 1

B 2C 1D 1E 2F 3G 2

A

B(2) C (3)

F(2)D(2) E(2) E(2)

D(2)G(1)29

1 2 3 4 5 6 7 830

G

D

A

B

E

F

D

E

C

Time-phased product structure of A

Time in week

Questions:

To ensure good master scheduling, a master scheduler must do which of the following?

• Never lose sight of the aggregate plan• Identify and communicate all problems• Be involved with customer order

promising• Be visible to all levels of management

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The purpose of a “time fence” is which of the following?

• Make sure the cows don’t get out of the barn

• Control flow through the production system

• Maximize sales to retailers• All of the above• None of the above

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Which of the following is an objective under an MRP system?

• To improve customer service• Minimize inventory investment• Maximize production operating

efficiency• All of the above• None of the above

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Which of the following is one of the three main inputs into an MRP system?

• BOM file• Exception report• Planning report• All of the above, None of the above

An MRP program accesses the status of a job according to specific time periods called which of the following?

a. Peg recordb. Time fencec. Time bucketd. Time clock, e. None of the above 34

In MRP, workload per work center can be determined. When the work capacity is exceeded, which of the following options can be implemented to correct the imbalance of workload?

• Work overtime• Renegotiate the due date and reschedule• Subcontract to an outside shop• All of the above• None of the above

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Which of the following are reasons why a Lot-For-Lot (L4L) method of lot sizing can be used in an MRP application?

• Minimizes carrying costs• Sets planned orders to exactly match the

net requirements• Produces exactly what is needed• Does not carry any units over into future

periods• All of the above

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End of Session

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Documents

Materials Requirements Planning (Session 11) · Material Requirements Planning • Materials requirements planning (MRP) is a means for determining the number of parts, components,