1 Example: MRP Schedule LocoMopeds is a manufacturer of off-road mopeds. The following product structure diagram represents the bill of materials for its dual-carburetor Model 442 moped. MOPEDMOPED ENGINEASSEMBLYENGINEASSEMBLY MOTORMOTORCARBURETOR(2)CARBURETOR(2) GASTANKGASTANKWHEELASSEMBLY(2)WHEELASSEMBLY(2) HUBASSEMBLYHUBASSEMBLYTIRETIRE FRAMEFRAME Level 0 Level 1 Level 2

2 Example: MRP Schedule l Bill of Material ParentComponentLevelCompon. CodeCodeCodeDescriptionReq’d 4420#442 Moped 442EA1Engine Assem.1 GT1Gas Tank1 WA1Wheel Assem.2 F1Frame1 EAM2Motor1 C2Carburetor2 WAHA2Hub Assem.1 T2Tire1

3 Example: MRP Schedule l Inventory Status Report ItemCodeOn-HandSafetyStockLotSizeLeadTime Sched. Receipts Qnty. Week LFL1---- EA GT600200LFL WA F M2500LFL1---- C HA1000LFL T ,200011,12

4 Example: MRP Schedule The company is currently planning production for weeks 10 through 16. Based on existing orders and demand forecasts, the master production schedule is as follows: Master Production Schedule: #442 Moped Determine the MRP schedule required to support the master production schedule for the Model 442 moped in weeks WEEK QUANTITY

5 Example: MRP Schedule l MRP Schedule for #442 Mopeds for Weeks , considering that: l Gross Requirements come from the moped MPS l There is an On-Hand balance of 500 mopeds at the end of week 9 l There are no Scheduled Receipts for mopeds l A lot-for-lot rule is used for ordering mopeds l Safety stock of 200 mopeds is desired l Lead time for mopeds is one week

6 Example: MRP Schedule l MRP Schedule for #442 Mopeds... Initially GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 500) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: 442 MOPED LT: 1 ITEM: 442 MOPED LT: 1 LOT SIZE: LFL SS: 200 LOT SIZE: LFL SS: WEEK

7 Example: MRP Schedule l MRP Schedule for #442 Mopeds... Completed GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 500) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: 442 MOPED LT: 1 ITEM: 442 MOPED LT: 1 LOT SIZE: LFL SS: 200 LOT SIZE: LFL SS: WEEK

8 Example: MRP Schedule l MRP Schedule for Gas Tanks for Weeks , considering that: l Gross Requirements come from moped Planned- Order-Releases l There is an On-Hand balance of 600 gas tanks at the end of week 9 l There is a Scheduled Receipt for 900 tanks in week 10 l A lot-for-lot rule is used for ordering gas tanks l Safety stock of 200 gas tanks is desired l Lead time for gas tanks is two weeks

9 Example: MRP Schedule l MRP Schedule for Gas Tanks... Initially GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 600) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: GAS TANK LT: 2 ITEM: GAS TANK LT: 2 LOT SIZE: LFL SS: 200 LOT SIZE: LFL SS: WEEK

10 Example: MRP Schedule l MRP Schedule for Gas Tanks... Completed GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 600) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: GAS TANK LT: 2 ITEM: GAS TANK LT: 2 LOT SIZE: LFL SS: 200 LOT SIZE: LFL SS: WEEK

11 Example: MRP Schedule l MRP Schedule for Frames for Weeks , considering that: l Gross Requirements come from moped Planned- Order-Releases l There is an On-Hand balance of 600 frames at the end of week 9 l There is a Scheduled Receipt for 2000 frames in week 10 l The firm uses a Lot Size (multiple) of 2000 for ordering frames l No safety stock of frames is desired l Lead time for frames is 3 weeks

12 Example: MRP Schedule l MRP Schedule for Frames... Initially GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES PLANNED ORDER RELEASES ITEM: FRAME LT: 3 ITEM: FRAME LT: 3 LOT SIZE: 2000 SS: 0 LOT SIZE: 2000 SS: WEEK 600

13 Example: MRP Schedule l MRP Schedule for Frames... Completed GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 600) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: FRAME LT: 3 ITEM: FRAME LT: 3 LOT SIZE: 2000 SS: 0 LOT SIZE: 2000 SS: WEEK

14 Example: MRP Schedule l MRP Schedule for Engine Assemblies for Weeks , considering that: l Gross Requirements come from moped Planned- Order-Releases l There is an On-Hand balance of 300 engine assemblies at the end of week 9 l There is a Scheduled Receipt for 1000 engine assemblies in week 10 l The firm uses a Lot Size (multiple) of 500 for ordering engine assemblies l Safety Stock of 100 engine assemblies is desired l Lead time for engine assemblies is 1 week

15 Example: MRP Schedule l MRP Schedule for Engine Assemblies... Initially GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 300) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: ENGINE ASSEM. LT: 1 ITEM: ENGINE ASSEM. LT: 1 LOT SIZE: 500 SS: 100 LOT SIZE: 500 SS: WEEK

16 Example: MRP Schedule l MRP Schedule for Engine Assemblies... Completed GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 300) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: ENGINE ASSEM. LT: 1 ITEM: ENGINE ASSEM. LT: 1 LOT SIZE: 500 SS: 100 LOT SIZE: 500 SS: WEEK

17 Example: MRP Schedule l MRP Schedule for Motors for Weeks , considering that: l Gross Requirements come from engine assembly Planned-Order-Releases l There is an On-Hand balance of 250 motors at the end of week 9 l There are no Scheduled Receipts for motors l A lot-for-lot rule is used for ordering motors l No Safety Stock of motors is desired l Lead time for motors is 1 week

18 Example: MRP Schedule l MRP Schedule for Motors... Initially GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 250) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: MOTOR LT: 1 ITEM: MOTOR LT: 1 LOT SIZE: LFL SS: 0 LOT SIZE: LFL SS: WEEK

19 Example: MRP Schedule l MRP Schedule for Motors... Completed GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 250) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: MOTOR LT: 1 ITEM: MOTOR LT: 1 LOT SIZE: LFL SS: 0 LOT SIZE: LFL SS: WEEK

20 Example: MRP Schedule l MRP Schedule for Carburetors for Weeks , considering that: l Gross Requirements come from engine assembly Planned-Order-Releases (times 2) l There is an On-Hand balance of 150 carburetors at the end of week 9 l There are no Scheduled Receipts for carburetors l A Lot Size of 200+ is used for ordering carburetors l Safety Stock of 100 carburetors is desired l Lead time for carburetors is 2 weeks

21 Example: MRP Schedule l MRP Schedule for Carburetors... Initially GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 150) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: CARBURETOR LT: 2 ITEM: CARBURETOR LT: 2 LOT SIZE: SS: 100 LOT SIZE: SS: WEEK

22 Example: MRP Schedule l MRP Schedule for Carburetors... Completed GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 150) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: CARBURETOR LT: 2 ITEM: CARBURETOR LT: 2 LOT SIZE: SS: 100 LOT SIZE: SS: WEEK

23 Example: MRP Schedule l MRP Schedule for Wheel Assemblies for Weeks , considering that: l Gross Requirements come from moped Planned- Order-Releases (times 2) l There is an On-Hand balance of 500 wheel assemblies at the end of week 9 l There is a Scheduled Receipt for 2000 wheel assemblies in week 10 l A Lot Size (multiple) of 500 is used for ordering wheel assemblies l Safety Stock of 400 wheel assemblies is desired l Lead time for wheel assemblies is 1 week

24 Example: MRP Schedule l MRP Schedule for Wheel Assemblies... Initially GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 500) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: WHEEL ASSEM. LT: 1 ITEM: WHEEL ASSEM. LT: 1 LOT SIZE: 500 SS: 400 LOT SIZE: 500 SS: WEEK

25 Example: MRP Schedule l MRP Schedule for Wheel Assemblies... Completed GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 500) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: WHEEL ASSEM. LT: 1 ITEM: WHEEL ASSEM. LT: 1 LOT SIZE: 500 SS: 400 LOT SIZE: 500 SS: WEEK

26 Example: MRP Schedule l MRP Schedule for Hub Assemblies for Weeks , considering that: l Gross Requirements come from wheel assembly Planned-Order-Releases l There is an On-Hand balance of 100 hub assemblies at the end of week 9 l There is a Scheduled Receipt of 2400 hub assemblies in week 11 l A lot-for-lot rule is used for ordering hub assemblies l No Safety Stock of hub assemblies is desired l Lead time for hub assemblies is 1 week

27 Example: MRP Schedule l MRP Schedule for Hub Assemblies... Initially GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 100) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: HUB ASSEM. LT: 1 ITEM: HUB ASSEM. LT: 1 LOT SIZE: LFL SS: 0 LOT SIZE: LFL SS: WEEK

28 Example: MRP Schedule l MRP Schedule for Hub Assemblies... Completed GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 100) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: HUB ASSEM. LT: 1 ITEM: HUB ASSEM. LT: 1 LOT SIZE: LFL SS: 0 LOT SIZE: LFL SS: WEEK

29 Example: MRP Schedule l MRP Schedule for Tires for Weeks , considering that: l Gross Requirements come from wheel assembly Planned-Order-Releases l There is an On-Hand balance of 500 tires at the end of week 9 l There are Scheduled Receipts for 3000 and 2000 tires weeks 11 and 12, respectively l A Lot Size (multiple) of 1000 is used for ordering tires l Safety Stock of 500 tires is desired l Lead time for tires is 3 weeks

30 Example: MRP Schedule l MRP Schedule for Tires... Initially GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 500) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: TIRE LT: 3 ITEM: TIRE LT: 3 LOT SIZE: 1000 SS: 500 LOT SIZE: 1000 SS: WEEK

31 Example: MRP Schedule l MRP Schedule for Tires... Completed GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 500) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: TIRE LT: 3 ITEM: TIRE LT: 3 LOT SIZE: 1000 SS: 500 LOT SIZE: 1000 SS: WEEK

32 Issues in MRP l Management Commitment l User involvement l Education and training l Selection of S/W packages l Data accuracy l Realistic MPS l Realistic lead times l Maintaining accurate BOM files

33 Lot-Sizing in MRP l Lot-size is the quantity ordered/produced at one time l Large lots are preferred because: l Changeovers cost less and capacity greater l Annual cost of purchase orders less l Price breaks and transportation breaks can be utilized l Small lots are preferred because: l Lower inventory carrying cost l Reduced risk of obsolescence l Shorter cycle time to produce customer order

34 Lot-Sizing Methods in MRP l Economic Order Quantity (EOQ) l does not consider quantity discounts l does not always provide the most economical approach with lumpy demands l Lot-for-Lot (LFL) l accommodates lumpy demand l Period Order Quantity (POQ) l Many others

35 Lot-Sizing Methods in MRP The best lot-sizing method, resulting in least cost, depends on cost and demand patterns

36 Lot-Sizing in MRP l Lot-size is the quantity ordered/produced at one time l Large lots are preferred because: l Changeovers cost less and capacity greater l Annual cost of purchase orders less l Price breaks and transportation breaks can be utilized l Small lots are preferred because: l Lower inventory carrying cost l Reduced risk of obsolescence l Shorter cycle time to produce customer order

37 The best method, resulting in least cost, depends on cost and demand patterns. Lot-Sizing Methods l Economic Order Quantity (EOQ) l does not consider quantity discounts l does not always provide the most economical approach with lumpy demand l Lot-for-Lot (LFL) l accommodates lumpy demand l Period Order Quantity (POQ)

38 Evaluation of MRP l Most beneficial to process-focused systems that have long processing times and complex multistage production steps l Lead times must be reliable l Must freeze MPS for some time before actual production... certain demand l Difficult to implement

39 Closed Loop MRP Production Planning Master Production Scheduling Material Requirements Planning Capacity Requirements Planning Realistic? No Feedback Execute: Capacity Plans Material Plans Yes Feedback

40 Closed Loop MRP Materials Management at Washburn Guitar, Inc.

41 Manufacturing Resource Planning (MRP II) l Goal: Plan and monitor all resources of a manufacturing firm (closed loop): l Manufacturing l Marketing l Finance l Engineering l Shop-floor control l Simulation capability of the manufacturing system

42 Enterprise Resource Planning (ERP) l ERP systems available today integrate manufacturing with other functional areas in an organization l ERP systems make it easier for management to obtain local information about performance of specific processes, bottlenecks resources, and products (or product groups), etc. l Class I ERP software packages (for large companies) include BAAN, SAP, and Oracle

43 MRP II System

44 MRP I to MRP II l MRP I simply exploded demand (MPS) into required materials l MRP II became Manufacturing Resource Planning which provides a closed-loop business management system l Financial management l Shop floor control l Operations management l Simulation capability

45 Capacity Requirements Planning (CRP)

46 Capacity Requirements Planning (CRP) l Tests MPS for feasibility l Utilizes routings to determine labor/machine loads l If schedule feasible, recommends freezing l If schedule overloads resources, points out processes that are overscheduled

47 Load Schedules l Compares actual labor and machine hours against available hours l Offsets schedules between successive stages of production by lead times l Provides feasible MPS and economically loaded work centers l Promotes system operating efficiency... lowers costs!

48 World-Class Practice l Lead times respond to conditions l Product development as levels of product structure tree l Lead times that adjust to load l MRP reports shared with customers and suppliers