1. McGraw-Hill/Irwin
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Materials Requirements Planning
Chapter 18
Materials Requirements Planning

3. Material Requirements Planning
18-3
Material Requirements Planning
Materials requirements planning (MRP) is a means for determining the number of parts, components, and materials needed to produce a product
MRP provides time scheduling information specifying when each of the materials, parts, and components should be ordered or produced
Dependent demand drives MRP
MRP is a software system 3 3

4. Example of MRP Logic and Product Structure Tree
18-4
Example of MRP Logic and Product Structure Tree
Given the product structure tree for “A” and the lead time and demand information below, provide a materials requirements plan that defines the number of units of each component and when they will be needed
Product Structure Tree for Assembly A
Lead Times
A 1 day
B 2 days
C 1 day
D 3 days
E 4 days
F 1 day
B(4)
E(1)
D(2)
C(2)
F(2)
D(3) A
Total Unit Demand
Day A
Day B (Spares)
Day D (Spares) 4 4

5. 18-5
First, the number of units of “A” are scheduled backwards to allow for their lead time. So, in the materials requirement plan below, we have to place an order for 50 units of “A” on the 9th day to receive them on day 10.
LT = 1 day 5 5

6. LT = 2 Spares B(4) E(1) D(2) C(2) F(2) D(3) A
18-6
Next, we need to start scheduling the components that make up “A”. In the case of component “B” we need 4 B’s for each A. Since we need 50 A’s, that means 200 B’s. And again, we back the schedule up for the necessary 2 days of lead time.
LT = 2
Spares
B(4)
E(1)
D(2)
C(2)
F(2)
D(3) A
4x50=200 6 6

7. 18-7
Finally, repeating the process for all components, we have the final materials requirements plan:
B(4)
E(1)
D(2)
C(2)
F(2)
D(3) A
spares
Part D: Day 6 6 6

8. Master Production Scheduling (MPS)
18-8
Master Production Scheduling (MPS)
Time-phased plan specifying how many and when the firm plans to build each end item
Aggregate Plan
(Product Groups)
MPS
(Specific End Items) 8 8

9. No schedule changes allowed within this window Moderately Firm
18-9
Types of Time Fences
Frozen
No schedule changes allowed within this window
Moderately Firm
Specific changes allowed within product groups as long as parts are available
Flexible
Significant variation allowed as long as overall capacity requirements remain at the same levels 9 9

10. Forecast and available
18-10
Example of Time Fences
Exhibit 15.5 8 15 26
Weeks
Frozen
Moderately
Firm
Flexible
Firm Customer Orders
Forecast and available
capacity
Capacity 10 10

11. Material Requirements Planning System
18-11
Material Requirements Planning System
Based on a master production schedule, a material requirements planning system:
Creates schedules identifying the specific parts and materials required to produce end items
Determines exact unit numbers needed
Determines the dates when orders for those materials should be released, based on lead times 11 11

12. Secondary reports Primary reports Exception reports Planning reports
18-12
Firm orders
from known
customers
Forecasts
of demand
from random
Aggregate
product
plan
Bill of
material
file
Engineering
design
changes
Inventory
record file
transactions
Master production
Schedule (MPS)
Material
planning
(MRP
computer
program)
Primary reports
Secondary reports
Planned order schedule for inventory and production control
Exception reports
Planning reports
Reports for performance control 11 11

13. Bill of Materials (BOM) File A Complete Product Description
18-13
Bill of Materials (BOM) File A Complete Product Description
Materials
Parts
Components
Production sequence
Modular BOM
Subassemblies
Super BOM
Fractional options 13 13

14. Inventory Records File
18-14
Inventory Records File
Each inventory item carried as a separate file
Status according to “time buckets”
Pegging
Identify each parent item that created demand 14 14

15. Planned orders to be released at a future time
18-15
Primary MRP Reports
Planned orders to be released at a future time
Order release notices to execute the planned orders
Changes in due dates of open orders due to rescheduling
Cancellations or suspensions of open orders due to cancellation or suspension of orders on the master production schedule
Inventory status data 15 15

16. 18-16
Secondary MRP Reports
Planning reports, for example, forecasting inventory requirements over a period of time
Performance reports used to determine agreement between actual and programmed usage and costs
Exception reports used to point out serious discrepancies, such as late or overdue orders 15 15

17. Additional MRP Scheduling Terminology
18-17
Additional MRP Scheduling Terminology
Gross Requirements
Scheduled receipts
Projected available balance
Net requirements
Planned order receipt
Planned order release 19 19

18. A(2) B(1) D(5) C(2) X C(3) MRP Example
18-18
MRP Example
A(2)
B(1)
D(5)
C(2) X
C(3)
Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10 18 18

19. 18-19 X
A(2)
It takes 2 A’s for each X 21 21

20. 18-20 X
A(2)
B(1)
It takes 1 B for each X 21 21

21. 18-21 X
A(2)
B(1)
C(3)
It takes 3 C’s for each A 21 21

22. 18-22 X
A(2)
B(1)
C(3)
C(2)
It takes 2 C’s for each B 21 21

23. 18-23 X
A(2)
B(1)
C(3)
C(2)
D(5)
It takes 5 D’s for each B 21 21

24. Closed Loop MRP Yes Production Planning Master Production Scheduling
18-24
Closed Loop MRP
Production Planning
Master Production Scheduling
Material Requirements Planning
Capacity Requirements Planning No
Feedback
Realistic?
Feedback
Execute:
Capacity Plans
Material Plans
Yes 22 22

25. Lot Sizing in MRP Programs
18-25
Lot Sizing in MRP Programs
Lot-for-lot (L4L)
Economic order quantity (EOQ)
Least total cost (LTC)
Least unit cost (LUC)
Which one to use?
The one that is least costly! 23 23

26. 18-26
Question Bowl
Which type of industry has only “medium” expected benefits from the use of MRP?
Assemble-to-stock
Fabricate-to-stock
Assemble-to-order
Fabricate-to-order
Process
Answer: e. Process 7

27. Never lose sight of the aggregate plan
18-27
Question Bowl
To ensure good master scheduling, a master scheduler must do which of the following?
Never lose sight of the aggregate plan
Identify and communicate all problems
Be involved with customer order promising
Be visible to all levels of management
All of the above
Answer: e. All of the above (Correct answer can also include objectively trade off manufacturing, marketing, and engineering conflicts and include all demands from product sales, warehouse replenishment, spares, and interplant requirements.) 7

28. Answer: b. Control flow through the production system
18-28
Question Bowl
The purpose of a “time fence” is which of the following?
Make sure the cows don’t get out of the barn
Control flow through the production system
Maximize sales to retailers
All of the above
None of the above
Answer: b. Control flow through the production system 7

29. Which of the following is an objective under an MRP system?
18-29
Question Bowl
Which of the following is an objective under an MRP system?
To improve customer service
Minimize inventory investment
Maximize production operating efficiency
All of the above
None of the above
Answer: d. All of the above 7

30. 18-30
Question Bowl
Which of the following is one of the three main inputs into an MRP system?
BOM file
Exception report
Planning report
All of the above
None of the above
Answer: a. BOM file (Correct answer can also include Master Schedule and Inventory Records File.) 7

31. None of the above Answer: c. Time bucket
18-31
Question Bowl
An MRP program accesses the status of a job according to specific time periods called which of the following?
Peg record
Time fence
Time bucket
Time clock
None of the above
Answer: c. Time bucket 7

32. Renegotiate the due date and reschedule Subcontract to an outside shop
18-32
Question Bowl
In MRP, workload per work center can be determined. When the work capacity is exceeded, which of the following options can be implemented to correct the imbalance of workload?
Work overtime
Renegotiate the due date and reschedule
Subcontract to an outside shop
All of the above
None of the above
Answer: d. All of the above (Correct answer can also include selecting an alternative work center and rescheduling the work at a different time.) 7

33. Answer: e. All of the above
18-33
Question Bowl
Which of the following are reasons why a Lot-For-Lot (L4L) method of lot sizing can be used in an MRP application?
Minimizes carrying costs
Sets planned orders to exactly match the net requirements
Produces exactly what is needed
Does not carry any units over into future periods
All of the above
Answer: e. All of the above 7

34. 18-34
End of Chapter 18