4/4: Material Requirements Planning Dependent inventory model For in-house inventory planning

Requirements of MRP Master production schedule –when to make what Bill of Materials: how to make the product Lead times –how long it takes to get various components Inventory availability Scheduled receipts & on-hand inventory

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

Bill of Materials 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).

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 2D2E

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 2D2E 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 2D2E 2F 2E G 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 one circuit board (G) and one speaker (D). A 2B 3C 2D2E 2F 2E G D Note that the numbers here are only relevant to the level above them!

A 2B 3C 2D2E 2F 2E G D “Exploded” Product Structure Items above a level are PARENTS; Items below a level are COMPONENTS or CHILDREN.

A 2B 3C 2D2E 2F 2E G D Level 0 level 1 level 2 level 3 Exploded Product Structure: 4 levels.

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.

A 2B 3C 2D 2E 2F 2E G D Lead times A1 wk. B2 C1 D1 E2 F3 G2 Time-Phased Product Structure Rotate BOM below and reflect lead times with time as the X axis.

A 2B 3C 2D 2E 2F 2E G D Lead times A1 wk. B2 C1 D1 E2 F3 G Time-Phased Product Structure Rotate BOM and reflect lead times on X axis.

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 spreadsheet

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

Scheduled Receipts & On-Hand Inventory 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 & Releases Planned Order Receipts: –When you PLAN to RECEIVE what you ORDERED. Planned Order Releases: –When you PLAN to RELEASE what in an ORDER.

MRP: What you need to know Master Schedule Bill of Materials Lead times Lot sizes Scheduled receipts & on-hand inventory

Group Exercise:Create an MRP You make the PalmPointer, a handy PDA. You have received an order for 200 units to be shipped in 12 hours. A PalmPointer is made of a LCD screen, 4 buttons, 1 toggle button, and a motherboard. The motherboard is made of 3 processors, 2 clock batteries, and a circuit board. Assembly time for the assemblies are as follows: All parts are L4L except the batteries, which must be ordered in packs of 40. You already have 50 motherboards and 100 processors. –PalmPointer2 hoursLCD screen1 –buttons2toggle button3 –motherboard6processors2 –batteries1circuit board3 Create an MRP schedule to determine when to begin assembling each component. Go back to spreadsheet

Homework due 4/11 Download handout at There are two problems to be answered. Print out problems and turn in ON PAPER – no submissions.