chapter fourteen material requirements planning chapter 14 material requirements planning

CHAPTER FOURTEENMATERIAL REQUIREMENTS PLANNING

Chapter 14

Material Requirements Planning


MTSU Management 362 14-2

Independent Demand(Chapter 13)

A

B(4) C(2)

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

Dependent Demand(Chapter 14)

Independent demand is uncertain. Dependent demand is certain.



Dependent Demand vs Independent Demand

Time

Time Time

Time

Dem

and

Dem

and

Stable demand“Lumpy” demand

Am

ou

nt

on

han

d

Am

ou

nt

on

han

d

Safety stock

Figure 14-1



MRP Inputs MRP Processing MRP Outputs

Masterschedule

Bill ofmaterials

file

Inventoryrecords

file

MRP computerprograms

Changes

Order releases

Planned-orderschedules

Exception reports

Planning reports

Performance-controlreports

Inventorytransaction

Primaryreports

Secondaryreports

Figure 14-2



Inventory Records File• A computerized file with a complete record of

each material (part number) held in inventory

• Provides current status and planning factors used by MRP– quantity currently on hand (perpetual inventory)– quantities on order and delivery dates– customer orders (service parts)– lot size– lead time– safety stock level– scrap rate



Master Schedule

• States which end items (finished goods) are to be produced, when these are needed, and in what quantities



Bill-of-Materials

• A listing of all of the raw materials, parts, subassemblies, and assemblies needed to produce one unit of a finished product

• Typically shown a product tree structure where all components and their relationships are listed by levels



Chair

Seat

Legs (2)Cross

barSide

Rails (2)Cross

barBack

Supports (3)

LegAssembly

BackAssembly

Level 0

1

2

3

Figure 14-5

Product Structure Tree



Netting Process

ItemChair

Leg Assembly

Seat

Back Assembly

Leg

Cross Bar

Side Rail

Back Support

Amount on hand10

5

7

2

8

14

12

20

Assume the following on-hand amountsfor each item



Planning Horizon

• Cumulative lead time: The sum of the lead times that sequential phases of a process require, from ordering of parts or raw materials to completion of final assembly.

• Time fences: Series of time intervals during which order changes are allowed or restricted (see Figure 12-12, page 548).



Netting Process

ItemChair

Leg Assembly

Seat

Back Assembly

Leg

Cross Bar

Side Rail

Back Support

Lead time1

1

1

2

1

1

1

2

Assume the following lead timesfor each item



1 2 3 4 5

Procurement ofback supports

Procurementof seat

Back assembly

Legassembly

Assembly Time Chart

Procurementof cross bar

Place orderwith supplier

0

Procurementof side rails

Procurementof cross bar

Procurementof front legs

Final assemblyand inspectionof chair

Release orderto department



The MPS is converted into the gross requirements for each component for each time period (time bucket) in the planning horizon using the bill of materials.

MRP Logic

1 2 3 4 5

Gross requirements

Scheduled receipts

Projected on hand

Net requirements

Planned-order receipts

Planned-order releases

Item

10 15 20 12 5



The scheduled receipts are orders that have been placed and are on the way. It is assumed that receipts arrive and are available at the beginning of a time period.

1 2 3 4 5

Gross requirements

Scheduled receipts

Projected on hand

Net requirements



Item

10 15 20 12 5

7 9



The initial inventory is added to period 1’s scheduled receipts and placed in period 1 of the projected on hand line. In this case, assume that the initial inventory is 16. Add period 1’s scheduled receipt (7) and initial inventory (16) to obtain the projected on hand amount for period 1 (23).

1 2 3 4 5

Gross requirements

Scheduled receipts

Projected on hand

Net requirements



Item

10 15 20 12 5

7 9

23



Subtract the projected on hand amount for period 1 (23) from period 1’s gross requirement (10) to find the net requirement (-13).

1 2 3 4 5

Gross requirements

Scheduled receipts

Projected on hand

Net requirements



Item

10 15 20 12 5

7 9

23

-13



If the net requirement is negative or zero, that amount (13) is added to the period 2’s scheduled receipt (9) to find the period 2’s projected on hand amount (22).

1 2 3 4 5

Gross requirements

Scheduled receipts

Projected on hand

Net requirements



Item

10 15 20 12 5

7 9

23

-13

22



Subtract the projected on hand amount for period 2 (22) from period 2’s gross requirement (15) to find the net requirement (-7).

1 2 3 4 5

Gross requirements

Scheduled receipts

Projected on hand

Net requirements



Item

10 15 20 12 5

7 9

23

-13

22

-7



If the net requirement is negative or zero, that amount (7) is added to the period 3’s scheduled receipt (0) to find the period 3’s projected on hand amount (7).

1 2 3 4 5

Gross requirements

Scheduled receipts

Projected on hand

Net requirements



Item

10 15 20 12 5

7 9

23

-13

22

-7

7



Subtract the projected on hand amount for period 3 (7) from period 3’s gross requirement (20) to find the net requirement (13). If the net requirement is positive, an order receipt must be planned to cover that amount.

1 2 3 4 5

Gross requirements

Scheduled receipts

Projected on hand

Net requirements



Item

10 15 20 12 5

7 9

23

-13

22

-7

7

13



If lot-for-lot lot sizing is being used, the planned order receipt is equal to period 3’s net requirement.

1 2 3 4 5

Gross requirements

Scheduled receipts

Projected on hand

Net requirements



Item

10 15 20 12 5

7 9

23

-13

22

-7

7

13

13



The planned order receipt is then offset (moved forward in time) to allow for the lead time. This is the planned order release.

1 2 3 4 5

Gross requirements

Scheduled receipts

Projected on hand

Net requirements



Item

10 15 20 12 5

7 9

23

-13

22

-7

7

13

13

13



Repeat the steps for period 4.

1 2 3 4 5

Gross requirements

Scheduled receipts

Projected on hand

Net requirements



Item

10 15 20 12 5

7 9

23

-13

22

-7

7

13

13

13

12

12

12



Repeat the steps for period 5

1 2 3 4 5

Gross requirements

Scheduled receipts

Projected on hand

Net requirements



Item

10 15 20 12 5

7 9

23

-13

22

-7

7

13

13

13

12

12

12

5

5

5



Bill of Materials

A

B(2) C(3)



Assumptions

Master production schedule: 100 in week 5

Item On hand Lead Time Scheduled Receipts

A 15 1 0

B 20 2 0

C 10 1 15 in wk 2



MRP Dynamics

• Modes of operation– regenerative - batch mode– net change - on-line, real time mode

• System nervousness - frequent changes of inputs to a net change MRP system

• Pegging - tracing upward in the BOM from the component to all of the parent items



MRP Outputs

• Planned orders - schedule indicating the amount and timing of future orders.

• Order releases - authorization for the execution of planned orders.

• Changes - revisions of due dates or order quantities, or cancellations of orders.



MRP Secondary Reports

• Performance-control reports

• Planning reports

• Exception reports



Other Considerations

• Safety Stock

• Lot sizing– Lot-for-lot ordering– Economic order quantity– Fixed-period ordering– Part-period model



Capacity Planning

• Capacity requirements planning: The process of determining short-range capacity requirements.

• Load reports: Department or work center reports that compare known and expected future capacity requirements with projected capacity availability.



MRP PlanningDevelop a tentativemaster production

schedule

Develop a tentativemaster production

schedule

Use MRP tosimulate material

requirements

Use MRP tosimulate material

requirements

Convert materialrequirements to

resource requirements

Firm up a portionof the MPS

Is shopcapacity

adequate?

Cancapacity be

changed to meetrequirements

Revise tentativemaster production

schedule

Changecapacity

Yes

No

Yes

No

Figure 14-17



Benefits of MRP

• Low levels of in-process inventories

• Ability to track material requirements

• Ability to evaluate capacity requirements

• Means of allocating production time



Desirable Characteristics for MRP Implementation (1 of 2)

• An effective computer system

• Accurate computerized bills of material and inventory status files

• Manufactures discrete products that are processed through many production steps

• Processes requiring long processing times



• Relatively reliable and stable lead times

• Master schedule frozen for a period of time sufficient to procure materials without expediting and confusion

• Top management support and commitment

Desirable Characteristics for MRP Implementation (2 of 2)



• Expanded MRP with and emphasis placed on integration– Financial planning– Marketing– Engineering– Purchasing– Manufacturing

MRP II



MarketDemand

Production

plan

Production

plan

Problems?Problems?

Rough-cutcapacity planning

Rough-cutcapacity planning

Yes No YesNo

Finance

Marketing

Manufacturing

Adjustproduction plan

Adjustproduction plan

Masterproduction schedule

Masterproduction schedule

MRP

Capacityplanning

Problems?Requirementsschedules

Requirementsschedules

Ad

just

mas

ter

sch

edu

le

Figure 14-19



M R PM R PWOW!!!

chapter fourteen material requirements planning chapter 14 material requirements planning

Documents

independent demand chapter

planning factors

item slide

assembly leg cross bar

assembly level

product structure tree

support lead time

completion of final