1. MRP Introduction EXAMPLES
Joanna Oleśków Szłapka
Production Management

2. Dealing with the Problem Complexity through Decomposition
Corporate Strategy
Aggregate Unit
Demand
Aggregate Planning
(Plan. Hor.: 1 year, Time Unit: 1 month)
Capacity and Aggregate Production Plans
End Item (SKU)
Demand
Master Production Scheduling
(Plan. Hor.: a few months, Time Unit: 1 week)
SKU-level Production Plans
Manufacturing
and Procurement
lead times
Materials Requirement Planning
(Plan. Hor.: a few months, Time Unit: 1 week)
Component Production lots and due dates
Part process
plans
Shop floor-level Production Control
(Plan. Hor.: a day or a shift, Time Unit: real-time)

3. The “MRP Explosion” Calculus
Lead
Times
Lot Sizing
Policies
BOM
MRP
MPS
Current
Availabilities
Planned
Order Releases
Priority
Planning

4. Independent vs. Dependent Demand
Independent Demand (finished goods and spare parts)
B(4)
C(2)
D(2)
E(1)
D(3)
F(2)
Dependent Demand (components) 3

5. The “MRP Explosion” Calculus
External Demand
Level 0
Capacity
Planning
Initial
Inventories
Level 1
Level 2
Scheduled
Receipts
Level N
Planned
Order Releases
Gross Requirements

6. Example: BOM for an end Item AC B D A
Level 0
Level 1 1 1 1 2 2 2
Level 2 2 2 6

7. C B D A 1 3 25 50 25 50 25 50 25 50 50 50 50 1 2 50 50 50
POHt = POHt-1 - GRt + Rt
50*1
50*1
50*1 50 50 50 50 50 50
100
100 7

8. 100*1
50*3
50*3
50*3 C B D A
150
100
150
150 20
120 20
120
120
220
220
220 1 3
250
250
250
250 1 2
(100*2)
+10 10 10
210 10 10 10 10 10 40 30 20 10
200
190
180
170
200
200 8

9. 1. Fixed Order Quantity (FOQ)
Specify a number of units arbitrarily to be ordered each time an order is placed for a particular item.
Quantity may be arbitrary or EOQ
240 80
460
200
570
450
265
150
500
500
500
500 9

10. 2. Economic Order Quantity (EOQ)
A type of fixed order quantity that determines the amount of an item to be purchased or produced at one time.
Wish to minimize the combined cost of order (acquiring) and carrying inventory.
EOQ =
D = Annual demand for the item
Q = Order quantity
CP = Cost of order preparation or Setup cost
CH = Inventory carrying cost per unit per year 10

11. Example: EOQ Setup cost = $10/order Cost of item = $1.50/unit
Inventory carrying cost = 25% /year =
240 80
610
350
220
100
565
450
650
650
650
650
Avg. Demand = 152.5/wk
D =  52 wks/yr
= 7,930
EOQ = =
= 650 11

12. 3. Lot-for-Lot (L4L) aka. discrete order quantity
It generates planned orders in quantities equal to the net requirements in each period.
No extra on-hand inventory.
Used for perishable food items or items for which the market fluctuates widely. 12

13. Example: Lot-for-Lot 80
130
160 80 80 80 80 80 80 80 80
120
260
130
120
185
115
120
260
130
120
185
115 13

14. MRP Example 1 A LT=3 C(3) LT=4 D(2) LT=2
Given the following information, determine when orders should be released for A, C, and D and the size of those orders A
LT=3
C(3)
LT=4
D(2)
LT=2
Parts
On hand
Scheduled Receipts
Lot Size
Demand A C D 10
140
200
250, period 2
L4L
Mult 50
Mult 250
100, period 8

15. MRP Example 2 B LT=2 D(3) A LT=3 C(3) LT=4 D(2) LT=2
Given the following information, determine when orders should be released for A, B, C, and D and the size of those orders.
Parts
On hand
Scheduled Receipts
Lot Size
Demand A B C D 10 5
140
200
250, period 2
L4L
Mult 50
Mult 250
100, period 8
200, period 6 -

16. Product structure tree & MRP schedule - EXAMPLE
Assume that Product Z is made up of two units of A and four units of B.   The lead time for Z is two weeks. The lead time for all other units is one week.  The demand for Z is 100 units in Week 10 and 200 units in Week 14.  The lot size for Z and A are Lot-for-Lot (LFL).  The lot size for B is 500+ units (FOQ).  For Z, and A there are no units on hand, no safety stock, and no units allocated.  Item B has 500 units on hand, 100 units of safety stock and 100 units already allocated.   a)  Develop an MRP schedule showing the gross and net requirements and the planned order receipts and releases for Product Z and each of its components.