1. Chapter 16 Materials Requirements Planning
Material Requirements Planning (MRP)
MRP Logic and Product Structure Trees
Time Fences
MRP Example
MRP II
Lot Sizing in MRP Programs 2 2

2. Material Requirements Planning Defined
Materials requirements planning (MRP)
the logic 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. 3 3

3. Bill-of-Material
List of components & quantities needed to make product
Provides product structure (tree)
Parents:
Children:
Shows low-level coding

4. Bill-of-Material Product Structure Tree

5. Product Structure Thinking Challenge
The demand for product A is 50. How many of each component is needed to satisfy demand?

6. Lead Times & Product Structure
Handle Bars
2 wk.
Lead time
1 wk.
Frame
2 wk.
Bicycle
1 wk.
3 wk.
Frame Assy
Wheels
Time (weeks)

7. Additional MRP Scheduling Terminology
Gross Requirements
On-hand
Net requirements
Planned order receipt
Planned order release 19 19

8. MRP Formulas
Beginning On-hand = Physical On-hand - Safety stock - Allocated
On-hand is
Allocated is
Next Period On-hand = Prior period's on-hand + Scheduled receipts
Net requirement =

9. Simple 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.
Lead Times
A 1 day
B 2 days
C 1 day
D 3 days
E 4 days
F 1 day
Product Structure Tree for Assembly A
B(4)
E(1)
D(2)
C(2)
F(2)
D(3) A
Demand
Day A
Day B (Spares)
Day D (Spares) 4 4

10. 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” in the 9th week to receive them in the 10th week.
LT = 1 day 5 5

11. Spares LT = 2 B(4) E(1) D(2) C(2) F(2) D(3) A 4x50=200
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.
Spares
LT = 2
B(4)
E(1)
D(2)
C(2)
F(2)
D(3) A
4x50=200 6 6

12. Finally, repeating the process for all components, we have the final materials requirements plan:13
B(4)
E(1)
D(2)
C(2)
F(2)
D(3) A
spares
Part D: Day 6
The McGraw-Hill Companies, Inc., 2000 7 7

13. Master Production Schedule (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

14. Types of Time Fences
Frozen
Moderately Firm
Flexible 9 9

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

16. Firm orders from known customers Forecasts of demand from random17
Firm orders
from known
customers
Forecasts
of demand
from random
Aggregate
product
plan
Engineering
design
changes
Bill of
material
file
Inventory
transactions
record
file
Master
production
schedule
(MPS)
Material
planning
(MRP)
Reports
The McGraw-Hill Companies, Inc., 2000 12 12

17. 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

18. 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

19. 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 plus the following spares: 18 18

20. 21 21

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

22. Manufacturing Resource Planning (MRP II)
Goal: Plan and monitor all resources of a manufacturing firm (closed loop):
Simulate the manufacturing system 23 23

23. Lot Sizing in MRP Programs
Lot-for-lot (L4L)
Economic order quantity (EOQ)
Least total cost (LTC)
Least unit cost (LUC)
Fixed quantity - Minimums, multiples 23 23

24. MRP Management Issues System nervousness
Integration with Just-in-Time (JIT)