Material Requirements Planning Dependent Inventory Model. For in-house inventory planning.

Requirements of MRP Master production schedule (what to made, when) Specifications, or Bill of Material (how to make the product) Inventory availability Purchase orders outstanding (what is on order) Lead times (how long it takes to get various components)

Master Production Schedule Tells us what is required to satisfy demand and meet the production plan. Statement of what is to be produced, NOT a forecast of demand.

Specifications, or Bill of Material A list of quantities of components, ingredients, or materials to make a final product. Provides the product structure. EX: A “Blast ‘em, dude” audio kit (A) is made of 2 small tweeter boxes (B) and 3 large woofer boxes (C). Each tweeter is made of two speakers (D) and two shipping boxes (E). Each woofer consists of two boosters (F) and two shipping boxes (E). Each booster is made of a circuit board (G) and a speaker (D).

EX: A “Blast ‘em, dude” audio kit (A) is made of 2 small tweeter boxes (B) and 3 large woofer boxes (C). Each tweeter is made of two speakers (D) and two shipping boxes (E). Each woofer consists of two boosters (F) and two shipping boxes (E). Each booster is made of a circuit board (G) and a speaker (D). A 2B 3C

EX: A “Blast ‘em, dude” audio kit (A) is made of 2 small tweeter boxes (B) and 3 large woofer boxes (C). Each tweeter is made of two speakers (D) and two shipping boxes (E). Each woofer consists of two boosters (F) and two shipping boxes (E). Each booster is made of a circuit board (G) and a speaker (D). A 2B 3C 2D 2E

EX: A “Blast ‘em, dude” audio kit (A) is made of 2 small tweeter boxes (B) and 3 large woofer boxes (C). Each tweeter is made of two speakers (D) and two shipping boxes (E). Each woofer consists of two boosters (F) and two shipping boxes (E). Each booster is made of a circuit board (G) and a speaker (D). A 2B 3C 2D 2E 2F 2E

EX: A “Blast ‘em, dude” audio kit (A) is made of 2 small tweeter boxes (B) and 3 large woofer boxes (C). Each tweeter is made of two speakers (D) and two shipping boxes (E). Each woofer consists of two boosters (F) and two shipping boxes (E). Each booster is made of one circuit board (G) and one speaker (D). A 2B 3C 2D 2E 2F 2E G D

Note that the numbers here are only relevant to the level above them! EX: A “Blast ‘em, dude” audio kit (A) is made of 2 small tweeter boxes (B) and 3 large woofer boxes (C). Each tweeter is made of two speakers (D) and two shipping boxes (E). Each woofer consists of two boosters (F) and two shipping boxes (E). Each booster is made of one circuit board (G) and one speaker (D). Note that the numbers here are only relevant to the level above them! A 2B 3C 2D 2E 2F 2E G D

Called an “exploded” product structure. Items above a level are PARENTS; items below a level are COMPONENTS or CHILDREN. A 2B 3C 2D 2E 2F 2E G D

4 levels here. Level 0 level 1 level 2 level 3 A 2B 3C 2D 2E 2F 2E G D

Low-level coding Necessary for identical items existing at diff. levels in the BOM. An item is coded at the lowest level at which it is used. Level 0 level 1 level 2 level 3 A 2B 3C 2D 2E 2F 2E G D

Low-level coding Useful in calculating quantities of components needed. Level 0 level 1 level 2 level 3 A 2B 3C 2E 2F 2E 2D G D

Lead times Time required to acquire (purchase, produce, or assemble) an item. Manufactured part: lead time made of move, setup, and assembly or run times for each component. Purchased part: lead time made of difference between when part is ordered and when it is received.

Time-phased product structure. Lead times A 1 wk. B 2 C 1 D 1 E 2 F 3 G 2 Rotate BOM below and reflect lead times with time as the X axis. A 2B 3C 2E 2F 2E 2D G D

Time-phased product structure. Rotate BOM below and reflect lead times with time as the X axis. 8 7 6 5 4 3 2 1 0 2D 2B Lead times A 1 wk. B 2 C 1 D 1 E 2 F 3 G 2 2E G A 2F D 3C 2E

Gross Material Requirements Assume we need 50 “Blast ‘em, dude” speaker kits in eight weeks. We need to calculate when and how many of each component we need to start making. (go to Excel).

Lot sizing lot-for-lot (L4L): order exactly the amount you want. Lot req. sized: order in certain amounts (ex. a dozen eggs).

Scheduled Receipts Units (of any component) that you have already scheduled to come in at a particular time.

On-Hand Inventory Units (of any component) that you already have in stock (at the beginning).

Gross Req. vs. Net Req. Gross required is the total amount of a component you need. Net required is (Gross) - (On-hand inventory) - (Scheduled receipts)

Planned Order Receipts What you PLAN to RECEIVE what you ORDERED. What you PLAN to RELEASE in an ORDER. Planned Order Releases