11-1  Material requirements planning (MRP): Computer-based information system that translates master schedule requirements for end items into time-phased requirements for subassemblies, components, and raw materials. MRP

11-2 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.

11-3  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. Dependant Demand

11-4 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.

11-5 Product Structure Tree Chair Seat Legs (2) Cross bar Side Rails (2) Cross bar Back Supports (3) Leg Assembly Back Assembly Level Figure 11.5

11-6 MRP InputsMRP ProcessingMRP 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 Figure 11.2 Overview of MRP

11-7 Inventory Records  One of the three primary inputs in MRP  Includes information on the status of each item by time period  Gross requirements  Scheduled receipts  Amount on hand  Lead times  Lot sizes  And more …

11-8 MPR Processing  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

11-9 MPR Processing  Net requirements  Actual amount needed in each time period  Planned-order receipts  Quantity expected to received at the beginning of the per iod （ lot-for-lot ordering & lot-size ordering ）  Planned-order releases  Planned amount to order in each time period

11-10 Inventory Requirements  Net requirements:  Available Inventory: Net Requirements = Gross Requirements – Available Inventory Available Inventory = Projected on hand – Safety stock – Inventory allocated to other items

 Example ：  A firm produces shutters ， and each shutter consists of two frames and four slatted wood sections. The wood sections are made by the firm, and fabrication takes one week. The frames are ordered, and the lead time is two weeks. Assembly of the shutters requires one week. There is a scheduled receipt of 70 wood sections in week1. Determine the size and timing of planned-order releases necessary to meet delivery requirements under each of these conditions:  Lot-for-lot ordering  Lot-size ordering with a lot size of 320 units for frames and 70 units for wood sections

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11-14 Other Considerations  Safety Stock  Lot sizing  Lot-for-lot ordering  Economic order quantity  Fixed-period ordering

11-15  Expanded MRP with emphasis placed on integration  Financial planning  Marketing  Engineering  Purchasing  Manufacturing MRP II

11-16  Enterprise resource planning (ERP):  Next step in an evolution that began with MPR and evolved into MRPII  Integration of financial, manufacturing, and human resources on a single computer system. ERP

11-17 ERP Software  ERP software provides a system to capture and make data available in real time to decision makers and other users in the organization  Provides tools for planning and monitoring various business processes  Includes  Production planning and scheduling  Inventory management  Product costing  Distribution

Exercise in class  The product structure tree for end item E follows. The manager wants to know the material requirements for order part R and N will be needed to complete 110 units of E by the start of week 5. Lead time or items are one week for level 0 items, one week for level 1 items, and two weeks for level 2 items. There is a scheduled receipt of 30 units of R at the start of the week 2 and 50 units of N at the start of week 1. Lot-size ordering with a lot size of 30 for R and 50 for N E M (3)N (4) R (2)P