materials requirements planning -...

Materials Requirements Planning

Independent and Dependent Demand

Independent Demand

A

B(4) C(2)

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

Dependent Demand

Independent demand is uncertain.

Dependent demand is certain.

Dependent demand: Demand for items that are

subassemblies or component parts to be used in

production of finished goods.

Once the independent demand is known, the dependent

demand can be determined.

Dependent Demand

Material Requirements Planning

DefinedMaterials requirements planning (MRP) is a

computerized inventory planning and control system for determining when (no earlier and no later) and how many of each of the parts, components, and materials should be ordered or produced.

It translates master schedule requirements from end items into time-phased requirements for subassemblies, components and raw materials.

Dependent demand drives MRP

MRP is a software system

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

6

©The McGraw-Hill Companies, Inc., 2004

Firm orders

from known

customers

Forecasts

of demand

from random

customers

Aggregate

production

plan

Bill of

material

file

Engineering

design

changes

Inventory

record file

Inventory

transactions

Master production

Schedule (MPS)

Primary reportsSecondary reports

Planned order schedule for

inventory and production

control (work orders,

purchase orders),

rescheduling notices

Exception reports

Planning reports

Reports for performance

control

Material

planning

(MRP

computer

program)

MRP Inputs MRP Processing MRP Outputs

Master

schedule

Bill of

materials

Inventory

records

MRP computer

programs

Changes

Order releases

Planned-order

schedules

Exception reports

Planning reports

Performance-

control

reports

Inventory

transaction

Primary

reports

Secondary

reports

MRP System

MRP Inputs 1: Master Production Schedule

Drives MRP process with a schedule of finished products;

states which end items are to be produced, when these

are needed, and in what quantities

Quantities may consist of a combination of customer

orders & demand forecasts

Quantities represent what needs to be produced, not what

can be produced

Master Production Schedule (MPS)

Time-phased plan specifying how many and when the

firm plans to build each end item

Aggregate Plan

(Product Groups)

MPS

(Specific End Items)

Master Production Schedule

Item / Week Oct 3 Oct. 10 Oct. 17 Oct.24 Oct. 31

Clipboard 85 95 120 100 100

Lapdesk 0 50 0 50 0

Lapboard 75 120 47 20 17

Pencil Case 125 125 125 125 125

Shows items to be produced

Derived from aggregate planExample:

MRP Inputs 2: Bill-of-Materials

Bill of materials (BOM): One of the three primary inputs of MRP; a listing of all of the raw materials, parts, subassemblies, and assemblies needed to produce one unit of a product.

Product structure tree: Visual depiction of the requirements in a bill of materials, where all components are listed by levels.

Product Structure Tree: Example 1Chair

Seat

Legs (2)Cross

bar

Side

Rails (2)

Cross

bar

Back

Supports (3)

Leg

Assembly

Back

Assembly

Level

0

1

2

3

Bicycle(1)P/N 1000

Handle Bars (1)

P/N 1001

Frame Assembly (1)

P/N 1002

Wheels (2)

P/N 1003Frame (1)P/N 1004

Product Structure Tree: Example 2

Product Drawing: Example 3

Top clip (1) Bottom clip (1)

Pivot (1) Spring (1)

Rivets (2)

Finished clipboard Pressboard (1)

Clipboard

Product Structure Tree ( Example 3)

Clipboard Level 0

Level 1

Level 2Spring

(1)Bottom Clip

(1)Top Clip

(1)Pivot

(1)

Rivets (2)

Clip Ass’y (1)

Pressboard (1)

13-16 MRP and ERP

Gross Requirements: needed during each period.

Scheduled Receipts: Existing orders that arrive at beginning of period.

On-hand or available balance:

(depending on software convention, could be at the beginning of each period or end):

Book: Inventory balance at end of each period.

Net requirements: What is need to meet requirements and safety stock.

Planned order receipt: arrives at beginning of period.

Planned order release: Addresses lead time.

MRP Inputs 3: Inventory Records File

One of the three primary inputs of MRP

Includes information on the inventory status of each item by time period

Gross requirements

Scheduled receipts

Amount on hand

Lead times

Lot sizes

And more....

MRP Terminology (1 of 3)

Gross requirements

Scheduled receipts

Projected on hand

Net requirements

Planned-order receipts

Planned-order releases

MPR Terminology (2 of 3)

Gross requirements

Total expected demand

Scheduled receipts

Open orders scheduled to arrive

Projected on hand

Expected inventory on hand at the beginning

of each time period

MRP Processing Terminology (3 of 3)Net requirements

Actual amount needed in each time period

Gross requirements – available inventory

Planned-order receipts

Quantity expected to be received at the beginning of the

period

Offset by lead time

Planned-order releases

Planned amount to be ordered in each time period

MRP Processing:

Example 1-School Mate ProductsMaster Production Schedule

1 2 3 4 5

Clipboard 85 95 120 100 100

Lapdesk 0 60 0 60 0

Item Master File (ınventory record file

CLIPBOARD LAPDESK PRESSBOARD

On hand 25 20 150

On order 175 (Period 1) 0 0

(sch receipt)

LLC 0 0 1

Lot size L4L Mult 50 Min 100

Lead time 1 1 1

School Mate ProductsProduct Structure Record

Clipboard

Lapdesk

Pressboard(2)

Trim(3’)

Beanbag(1)

Glue(4 oz)

Level 0

Level 0

Pressboard(1)

Clip Ass’y(1)

Rivets(2) Level 1

Level 1

School Mate Products

ITEM: CLIPBOARD LLC: 0 PERIOD

LOT SIZE: L4L LT: 1 1 2 3 4 5

Gross Requirements 85 95 120 100 100

Scheduled Receipts 175

Projected on Hand 25

Net Requirements

Planned Order Receipts

Planned Order Releases



LOT SIZE: L4L LT: 1 1 2 3 4 5



Projected on Hand 25 115

Net Requirements 0



(25 + 175) = 200 units available

(200 - 85) = 115 on hand at the end of Period 1



LOT SIZE: L4L LT: 1 1 2 3 4 5



Projected on Hand 25 115 20

Net Requirements 0 0



115 units available

(115 - 85) = 20 on hand at the end of Period 2



LOT SIZE: L4L LT: 1 1 2 3 4 5



Projected on Hand 25 115 20 0

Net Requirements 0 0 100

Planned Order Receipts 100

Planned Order Releases 100

20 units available

(20 - 120) = -100 — 100 additional Clipboards are required

Order must be placed in Period 2 to be received in Period 3



LOT SIZE: L4L LT: 1 1 2 3 4 5



Projected on Hand 25 115 20 0 0 0

Net Requirements 0 0 100 100 100

Planned Order Receipts 100 100 100

Planned Order Releases 100 100 100

Following the same logic Gross Requirements in Periods 4

and 5 develop Net Requirements, Planned Order Receipts, and



ITEM: LAPDESK LLC: 0 PERIOD

LOT SIZE: MULT 50 LT: 1 1 2 3 4 5


Scheduled Receipts


Net Requirements





LOT SIZE: MULT 50 LT: 1 1 2 3 4 5


Scheduled Receipts



Planned Order Receipts 50 50

Planned Order Releases 50 50

Following the same logic, the Lapdesk MRP matrix is

completed as shown


ITEM: PRESSBOARD LLC: 0 PERIOD

LOT SIZE: MIN 100 LT: 1 1 2 3 4 5

Gross Requirements

Scheduled Receipts


Net Requirements




LOT SIZE: L4L LT: 1 1 2 3 4 5



LOT SIZE: MULT 50 LT: 1 1 2 3 4 5




LOT SIZE: MIN 100 LT: 1 1 2 3 4 5


Scheduled Receipts


Net Requirements




LOT SIZE: L4L LT: 1 1 2 3 4 5



LOT SIZE: MULT 50 LT: 1 1 2 3 4 5


x2 x2

x1 x1x1



LOT SIZE: MIN 100 LT: 1 1 2 3 4 5


Scheduled Receipts



Planned Order Receipts 100 150 100



LOT SIZE: L4L LT: 1 1 2 3 4 5



LOT SIZE: MULT 50 LT: 1 1 2 3 4 5



Planned Order Report

PERIOD

ITEM 1 2 3 4 5

Clipboard 100 100 100

Lapdesk 50 50

Pressboard 100 150 100

Capacity

Usually expressed as standard machine

hours or labor hours

Capacity = (no. machines or workers)

x (no. shifts) x (utilization)

x (efficiency)

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