chap016.ppt materials requirements planning

7/30/2019 Chap016.ppt Materials Requirements Planning

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McGraw-Hill/Irwin The McGraw-Hill Companies, Inc. 2007, All Rights Reserved

Materials Requirements

Planning

Chapter 16


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Chapter 16 Outline

Definition of MRP Systems

MRP versus Order-Point Systems

MRP ExampleMRP Elements

Operating an MRP System

The Successful MRP System


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Introduction to MRP

Used to manage dependent demand itemsRaw materials and purchased parts

Work in process (WIP)

Driven by the master schedule (which is drivenby S&OP).

End items exploded into all componentsusing bill of materials (BOM)

Schedule offset based on lead times

Is the heart of a larger ERP system


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Definitions of MRP Systems

Developed by Joe Orlicky at IBM, 1975.

IBM 370 was the first computer with the

capacity to handle MRP calculations

Types of MRP: Type I. An inventory control system (MRP)

Type II. Manufacturing Resource Planning system

(MRPII)

Type III. Enterprise Resource Planning (ERP) system


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Definitions of MRP Systems

Three principal functions of MRP (Orlicky):Inventory Order the right part

Order in the right quantity

Order at the right time

Priorities Order with the right due date

Keep the due date valid

Capacity

A complete load An accurate (valid) load

An adequate time span for visibility of future load


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TR 4-6

Firm orders from

Customers

Sister plants

Stock replenishment

Engineering Design changes

BOM

Forecast of Demand

Purchase Orders

Vendors

MRP PartsExplosion

Rough-cutcapacity planning

Capacity planning

Shop Orders

Shop-floor control

Masterschedule

S & OP

Closed Loop MRP System

Operations ProductRaw Materials

Inventory Records

Inv. Transactions

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Attribute MRP Order Point

Demand Dependent Independent

Order philosophy Requirements Replenishment

Forecast Based on master schedule Based on past demand

Control concept Control all items ABC

Objectives Meet manufacturing needs Meet customer needs

Lot sizing Discrete EOQ

Demand pattern Lumpy but predictable Random

Types of inventory Work in process and raw

materials

Finished goods and spare

parts

Comparison of MRP & Order-Point Systems


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MRP Elements

Inputs

1. Master Schedule

2. Bill of Materials (BOM)

3. Inventory Records

Capacity Planning (feasibility)

Planned Order Releases (outputs)

Purchasing (buy)

Shop Floor Control (make)


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MRP Inputs

1. Master schedule

2. Product structure file (bill of materials or

BOM)

1. Parts & subassemblies contained in product

2. Sequence of operations

3. Inventory master file

1. Item master information

2. Balances & ordering information

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1. Master Schedule

Quantities derived from S&OP production plan(product groups) [input]

Drives MRP process with a schedule of finished

products (actual items by week) [output]Quantities may consist of a combination of

customer orders & demand forecasts

Quantities represent what needs to be produced,not what can be produced (infinite capacity

planning)

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2. MRP Example of BOM

Top

Leg

Long Rail

Short Rail


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BOM (Product Structure)

Short Rails (2)

1 week

Table (End Item)

1 week

Long Rails (2)

1 week

Legs (4)

1 week

Top (1)

2 weeks

Leg Assembly (1)

1 week


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Indented BOM

Level Code Component

0 Table (end-item)

1 Leg assembly (1)

2 Short rails (2)

2 Long rails (2)

2 Legs (4)

1 Top(1)


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3. Inventory (item master) File

Description

Part number

Part name

Safety stockItem classification

Cost

Yield

Lead time

Group to which itembelongs

Assemblies in whichitem is used

Shelf life

Batch controlrequirements

Substitutes

Suppliers and their

ratingsUnit of measure (SKU)

Permanent information may include:


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Inventory Status File

Quantities

Ordered

Received

Issued

Allocated

Previously allocated that have been issued

Dates ordered, received, issued, and allocated

Shipping, production, and purchase numbersOn-hand balance & Available balance

Batch identification (e.g. lot number)

Changing information includes:


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MRP Example

The Alpha Beta Company

Inventory Position

Item On Hand Scheduled Receipts Lot Size MPS

A 10 0 1 100, period 8

B 5 0 1 200, period 6

C 140 0 150 - - -

D 200 250, period 2 250 - - -

A

LT=3

C(3)

LT=4

D(2)

LT=2

D(3)

LT=2

B

LT=2Level (LLC)=0

Level (LLC)=1

BOM

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MRP Matrices For A & B

Item: A LLC: 0 Period

Lot size: 1 LT: 3 PD 1 2 3 4 5 6 7 8

Gross requirements 100

Scheduled receipts

Projected on hand 10 10 10 10 10 10 10 10 0

Net requirements 90

Planned order receipts 90Planned order releases 90

Item: B LLC: 0 Period

Lot size: 1 LT: 2 PD 1 2 3 4 5 6 7 8


Scheduled receipts

Projected on hand 5 5 5 5 5 5 0 0 0Net requirements 195

Planned order receipts 195

Planned order releases 195

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Origin of Requirements

At Level Zero: gross requirements come

from the master production schedule (MPS)

Below level zero: gross requirements comefrom planned order releases for the next

level above.

Net requirements are gross requirements

plus scheduled receipts minus inventory on-

hand


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MRP Matrices For C & D

Item: C LLC: 1 Period

Lot size: 150 LT: 4 PD 1 2 3 4 5 6 7 8


Scheduled receipts

Projected on hand 140 140 140 140 140 20 20 20 20

Net requirements 130

Planned order receipts 150Planned order releases 150

Item: D LLC: 1 Period

Lot size: 250 LT: 2 PD 1 2 3 4 5 6 7 8

Gross requirements 585 180

Scheduled receipts 250

Projected on hand 200 200 450 450 115 185 185 185 185Net requirements 135 65

Planned order receipts 250 250

Planned order releases 250 250

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Alpha Beta Planned Order

Release Report

Period Item Quantity

1 C 150

2 D 250

3 D 250

4 B 195

5 A 90

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Should MRP carry safety stock?

How much safety stock should be carried?

Issue of safety lead time

Danger of informal system driving out the formal

system

Expansion of MRP to other functions (finance, HRM,

etc.) of business


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Operating a Successful MRP

SystemAccurate Inventory Records

Stable master production schedule

Realistic master production scheduleGood control of engineering change orders

(impacts BOM)

Good interface with capacity planning (CRP)Reports that are useful


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Elements of Successful MRP

ImplementationAllow enough time (18 months minimum)

Put materials people in charge of cross-functional team (not IS or accountants)

Train everyone and train them again!

Top Management supportAccurate records


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Summary

Definition of MRP Systems

MRP versus Order-Point Systems

MRP ExampleMRP Elements


The Successful MRP System


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End of Chapter Sixteen

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