Material Requirements Planning (MRP)

Summary of Scheduling Process FORECAST  ROUGH-CUT CAPACITY PLANNING PRODUCTION PLAN MASTER PRODUCTION SCHEDULE (MPS) MATERIAL REQUIREMENTS PLANNING (MRP) CAPACITY REQUIREMENTS PLANNING   SHOP FLOOR CONTROLS VENDOR CONTROLS

MRP Material Requirements Planning (MRP) – Translates MPS into Schedule of Component Requirements, Order Quantities, and Times Manufacturing Resource Planning (MRP II) – Computes Resource Requirements, i. e. Labor Enterprise Resource Planning (ERP) – Has Financial, Marketing, Etc. Components

Nature of Demand Independent Demand – Demand Outside of Firm, on MPS (Vanilla Ice Cream) Dependent Demand – Derived Demand within Firm (Cream, Vanilla Flavoring, Etc.)

MRP Inputs Master Production Schedule (MPS) Bill of Materials (Parts List) Inventory Status – On Hand Lead Times

MRP Outputs (Objectives) Determine Requirements What to Order How Much to Order When to Order When to Schedule Delivery Keep Priorities Current

MRP Example 1 The Protecto Corporation sells special survival kits to the visitors of Congress and the state legislatures. In April there are requirements for 1000 kits. Each kit contains: two ear plugs one bottle of extra strength aspirin five paper gas masks one box one label The firm only manufactures the ear plugs and the gas masks. The other parts are purchased. Each ear plug uses two ounces of wax and .08 hours of labor time. Each gas mask uses a sheet of cardboard, one-half ounce of wax, and .10 hours of labor.

Bill of Materials: Example 1

Component Parts & Labor Requirements Ear Plugs (2 x 1000) = 2000 Aspirin (1 x 1000) = 1000 Gas Masks (5 x 1000) = 5000 Boxes (1 x 1000) = 1000 Labels (1 x 1000) = 1000 Cardboard (1 x 5000) = 5000 Wax (2 x 2000) + (.5 x 5000) = 6500 Labor Hours (.08 x 2000) + (.1 x 5000) = 660

Cardboard Sheets if 3% Scrapped Adjustment for Scrap: Scheduled Units = MRP / (1 – Scrap %) Scheduled Units = 5000 / .97 = 5155

Standard and Actual Labor Time – 20 Worker Idle Time Standard Time = MRP / (1 - % Delay) ST = 0.66 / 0.8 = 0.825 Hours Actual Time = ST / Labor Efficiency AT = 0.825 /.9 = 0.920 Hours

MRP Example 2 In order to make one starship, you need 3 warp engines and 4 impulse engines. Each warp engine requires 10 dilithium crystals, 7 units of platinum, and 3 antimatter pods. Each impulse engine requires 2 antimatter pods and 4 units of platinum. The lead times are: Item Lead Time Starship (SS) 2 years Warp Engine (WE) 3 years Impulse Engine (IE) 1 year Dilithium Crystal (DC) 2 years Antimatter Pods (AM) 1 year Platinum (PL) 2 years The Federation has ordered 3 starships to be delivered in AD 2379.

Bill of Materials: Example 2

MRP Calculations Starship: Lead Time 2 Years 3 Year 2372 2373 2374 2375 2376 2377 2378 2379 Gross Requirements   Scheduled Receipts Available Net Requirements Planned Order Receipts Planned Order Releases 3 3 3 Warp Engine: Lead Time 3 Years Gross Requirements   Scheduled Receipts Available Net Requirements Planned Order Receipts Planned Order Releases 9 9 9 9

MRP Calculations Starship: Lead Time 2 Years 3 Year 2372 2373 2374 2375 2376 2377 2378 2379 Gross Requirements   Scheduled Receipts Available Net Requirements Planned Order Receipts Planned Order Releases 3 3 3 Impulse Engine: Lead Time 1 Year Gross Requirements   Scheduled Receipts Available Net Requirements Planned Order Receipts Planned Order Releases 12 12 12 12

MRP Calculations Warp Engine: Lead Time 3 Years 9 Year 2372 2373 2374 2375 2376 2377 2378 2379 Gross Requirements   Scheduled Receipts Available Net Requirements Planned Order Receipts Planned Order Releases 9 9 9 Dilithium Crystal: Lead Time 2 Years Gross Requirements   Scheduled Receipts Available Net Requirements Planned Order Receipts Planned Order Releases 90 90 90 90

MRP Calculations: Work from Top to Bottom of Product Structure Tree (Low-Level Code Order) Subtract Out Any Items On Hand Combine Common Components – Put on the Same Table. If on the Same Square, Add.

MRP Extensions: Multiple Bills of Material On Hand Quantities On Order Quantities Spare Parts

MRP Example 3 A firm makes two products, A and R. A computer file reveals the following information about A and R, and their component parts: Item On Hand Lead Time MPS Lot Size On Order A 10 3 Weeks 160 (week 8) 1 B 0 2 Weeks 400 C 0 1 Week 400 (week 5) 1 D 200 3 Weeks 500 E 0 1 Week 1 200 (week 2) R 20 3 Weeks 145 (week 7) 1

Bill of Materials: Example 3

Bill of Materials: Example 3

MRP Calculations A: Lead Time 3 Weeks, Low-Level Code 0 160 Week 1 2 3 4 5 6 7 8 Gross Requirements   Scheduled Receipts Available Net Requirements Planned Order Receipts Planned Order Releases 10 150 150 150 D: Lead Time 3 Weeks, Low-Level Code 1 Gross Requirements   Scheduled Receipts Available Net Requirements Planned Order Receipts Planned Order Releases 450 200 250 250 250 250 500 500

MRP Calculations R: Lead Time 3 Weeks, Low-Level Code 0 145 Week 1 2 3 4 5 6 7 8 Gross Requirements   Scheduled Receipts Available Net Requirements Planned Order Receipts Planned Order Releases 20 125 125 125 B: Lead Time 2 Weeks, Low-Level Code 1 Gross Requirements   Scheduled Receipts Available Net Requirements Planned Order Receipts Planned Order Releases 500 300 300 500 800 800

Low Level Codes Item E is What Low-Level Code? Item C is What Low-Level Code? Can You Do the MRP Tables for Items C and E?

Material Planners People Who Manage MRP System Release Manufacturing Orders (MO) or Purchasing Orders (PO) Reschedule Due Dates of Open Orders as Needed Reconcile Orders and Find Cause Solve Shortages by Expediting Coordinate with Others

Material Planner Works with: Planned Orders Released Orders Firm Planned Orders Exception Messages Transaction Messages

Material Planner Uses Feedback for Priorities Suppliers Actions Through Purchasing Early or Late Completions or Differing Quantities Management Actions (Changing MPS)