1. Materials Requirements Planning (MRP) Chapter 16 in Schroeder

2. Material Requirements Planning (MRP) Is the logic for determining the number of parts, components, and materials needed to produce a product Is driven by dependent demand

3. MRP Objectives Improve customer service Minimize inventory investment Maximize production operating efficiency … these are the same as any inventory management system

4. Based on a master production schedule, an MRP 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.

5. MRP Elements Bill of Materials (BOM) Master Scheduling Inventory Records Capacity Planning Purchasing Shop Floor Control

6. Example of MRP Logic and Product Structure Tree B(4) E(1)D(2) C(2) F(2)D(3) A Product Structure Tree for Assembly A Lead Times A1 day B 2 days C1 day D 3 days E4 days F1 day Demand Day 10 50 A Day 8 20 B (Spares) Day 6 15 D (Spares) 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. Adapted from Chase, et al., 2001.

7. B(4) E(1)D(2) C(2) F(2)D(3) A 40 + 15 spares Part D: Day 6 This is what we want to develop, the final materials requirements plan. Let’s see how we got to this … © The McGraw-Hill Companies, Inc., 2001 7

8. LT = 1 day 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 9 th day to receive them in the 10 th day.

9. Next, we need to start scheduling the components that make up “A”. LT = 2 B(4) E(1)D(2) C(2) F(2)D(3) A 4x50=200 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.

10. Next, we need to start scheduling the components that make up “A”. Spares LT = 2 B(4) E(1)D(2) C(2) F(2)D(3) A 4x50=200 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.

11. B(4) E(1)D(2) C(2) F(2)D(3) A 40 + 15 spares Part D: Day 6 Finally, repeating the process for all components, we have the final materials requirements plan: © The McGraw-Hill Companies, Inc., 2001 11 2x50=100 LT = 1

12. Additional MRP Scheduling Terminology Gross Requirements On-hand/Scheduled Receipts Net requirements Planned order receipt Planned order release

13. D and E with the More Complete Format Day12345678910 D LT=3 Gross Requirements 55400300 On Hand/Scheduled Receipts Net Requirements55400300 Planned Order Receipt55400300 Planned Order Release55400300 E LT=4 Gross Requirements20200 On Hand/Scheduled Receipts Net Requirements20200 Planned Order Receipt20200 Planned Order Release20200

14. 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. MRP versus Order-Point Systems

16. Alternative Types of MRS Systems Type I – Order Launching System - An inventory control system that releases manufacturing and purchase orders for the right quantity at the right time to support the master schedule. Type II – Order Launching and Shop Loading - A production and inventory control system used to plan and control inventories and capacities. An Enterprise Resource Planning System - A company-wide system used to plan and control all resources including inventory, capacity, cash, personnel, facilities and capital.