1. 1 1 Slide © 2000 South-Western College Publishing/ITP Slides Prepared by JOHN LOUCKS

2. 2 2 Slide Chapter 11, Part B Material Requirements Planning n Material Requirements Planning Concept n MRP Inputs n Gross and Net Requirements n Time Phasing

3. 3 3 Slide Material Requirements Planning n Material requirements planning (MRP) is used to control a manufacturing inventory system. n The major function of an MRP system is to translate the demand for finished goods into detailed inventory requirements for all their components. n MRP serves as part of a data processing system whose function is to monitor and control the status of production and perform inventory control. n One goal of MRP is to minimize the investment in manufacturing inventories. n Another goal is to ensure all new materials, parts and subassemblies are available when needed, thus preventing production delays from occurring.

4. 4 4 Slide MRP Inputs n Inputs to an MRP system include: Master production schedule (MPS) which summarizes requirements and deadlines for finished goods over the planning horizon.Master production schedule (MPS) which summarizes requirements and deadlines for finished goods over the planning horizon. Bill of materials (BOM) which is a structured parts list detailing the sequencing of the assembly of the product.Bill of materials (BOM) which is a structured parts list detailing the sequencing of the assembly of the product. Inventory record for each raw material, part or subassembly showing everything affecting the inventory level over the planning horizon.Inventory record for each raw material, part or subassembly showing everything affecting the inventory level over the planning horizon.

5. 5 5 Slide An MRP System MRPcomputerprogramMRPcomputerprogram Bill of Materialsfile MaterialsfileInventoryfileInventoryfile InventoryfileInventoryfile ReportsReports To Production To Purchasing Forecasts Orders

6. 6 6 Slide Bill of Materials n One graphical representation of a bill of materials is known as a product structure tree. n In this representation, the finished product (end item) is shown at the top of the hierarchy (level 0). n At the level below this (level 1) are the subassemblies or parts making up the finished product. n In the next level (level 2) are the subassemblies or parts making up the subassemblies of level 1. n The parts or subassemblies shown at each level of the hierarchy are said to be the parent of the parts or subassemblies directly below them in the hierarchy. n Each item in the bill of materials, except for the end product, has a parent.

7. 7 7 Slide Gross and Net Requirements n In manufacturing there is often a dependent demand between different components. In this case, (Gross Component Requirements) (Gross Component Requirements) - (Number of Components in Inventory) - (Number of Components in Inventory) = (Net Component Requirements). = (Net Component Requirements). n The process of generating net requirements for components from the master production schedule for an end item is called a BOM explosion. n The gross component requirement is the quantity of the component necessary to support production at the next higher level of assembly. n The net requirements calculation enables one to determine the required additions to inventory.

8. 8 8 Slide Time Phasing n MRP determines the date the net requirements are needed by a procedure called time phasing. n In time phasing, a production plan for components is developed by working backwards from the desired completion date of the finished product through the various manufacturing stages. n Time phasing is used to determine the appropriate planning horizon for each subassembly or parent corresponding to the planning horizon for the end product. n An MRP worksheet can then be prepared for the part or subassembly over this planning horizon.

9. 9 9 Slide Example: Columbia Mopeds Columbia Mopeds is a manufacturer of off-road mopeds. The following product structure tree represents the bill of materials for its dual carburetor model 621 moped. MOPEDMOPED ENGINEASSEMBLYENGINEASSEMBLY MOTORMOTORCARBURETOR(2)CARBURETOR(2) GASTANKGASTANKWHEELASSEMBLY(2)WHEELASSEMBLY(2) HUBASSEMBLYHUBASSEMBLYTIRETIRE FRAMEFRAME

10. 10 Slide Example: Columbia Mopeds Lead times for the other components are as follows: Component Lead Time (Weeks) Component Lead Time (Weeks) Engine Assembly 1 Engine Assembly 1 Motor 1 Motor 1 Carburetor 2 Carburetor 2 Gas Tank 2 Gas Tank 2 Wheel Assembly 1 Wheel Assembly 1 Tire 3 Tire 3 Hub Assembly 1 Hub Assembly 1 Frame 3 Frame 3

11. 11 Slide Example: Columbia Mopeds The company is currently planning production for weeks 10 through 16. Based on existing orders and demand forecasts, the master production schedule is as follows: Determine how many units of each component will be needed to support the production of 1000 mopeds in week 10. Also, determine the planned order release dates to support the production in week 10. Assume there is no on-hand inventory of any parts. 1111 8008000014001400900900 1010 1615141312 1000100000 1300 WEEK PRODUCTIONQUANTITY

12. 12 Slide Example: Columbia Mopeds n Gross Requirements Level 1 ComponentsLevel 1 Components Note from the product structure tree that each moped requires one engine assembly, one gas tank, two wheel assemblies and one frame. Thus, 1000 engine assemblies, 1000 gas tanks, 2000 ( = 2 x 1000) wheel assemblies, and 1000 frames will be needed to support production. Level 2 ComponentsLevel 2 Components Each engine assembly requires one motor and two carburetors. Hence the 1000 engine assemblies require 1000 motors and 2000 carburetors.

13. 13 Slide Example: Columbia Mopeds n Gross Requirements (continued) Level 2 ComponentsLevel 2 Components Since each wheel assembly requires one tire and one hub assembly, 2000 tires and 2000 hub assemblies will be required to produce 2000 wheel assemblies.

14. 14 Slide Example: Columbia Mopeds The resulting unit requirements are summarized below: Component Unit Requirements Engine Assembly 1000 Engine Assembly 1000 Motor 1000 Motor 1000 Carburetor 2000 Carburetor 2000 Gas Tank 1000 Gas Tank 1000 Wheel Assembly 2000 Wheel Assembly 2000 Tire 2000 Tire 2000 Hub Assembly 2000 Hub Assembly 2000 Frame 1000 Frame 1000

15. 15 Slide Example: Columbia Mopeds n Planned Order Release Dates Level 1 ComponentsLevel 1 Components Note that each of the four level 1 components (engine assembly, gas tank, wheel assembly, and frame) must be available in week 10. Given that the lead time for the engine assembly is one week, its planned order release date should be week 9 (= 10 -1). As the lead time for gas tanks is two weeks, its planned release date should be week 8 (= 10- 2). Similarly, the planned order release date for the wheel assembly should be week 9 (= 10 - 1) and for the frame, week 7 (= 10 - 3).

16. 16 Slide Example: Columbia Mopeds n Planned Order Release Dates Level 2 ComponentsLevel 2 Components In order to have engine assemblies ready for assembly in week 9 (their planned release date), the motor and carburetor must be available by week 9. Given that the motors have a one-week lead time, this means they should have a planned release date of week 8 (= 9 -1). Similarly, the planned release date for the carburetors should be week 7 (= 9 - 2). The planned release date for the tires should be week 6 (= 9 - 3), and the planned release date for the hubs should be week 8 (= 9 - 1).

17. 17 Slide Example: Columbia Mopeds n Planned Order Release Dates Item Planned Release Date (Week) Item Planned Release Date (Week) Moped10 Engine Assembly 9 Engine Assembly 9 Motor 8 Motor 8 Carburetor 7 Carburetor 7 Gas Tank 8 Gas Tank 8 Wheel Assembly 9 Wheel Assembly 9 Tire 6 Tire 6 Hub Assembly 8 Hub Assembly 8 Frame 7 Frame 7

18. 18 Slide Example: Columbia Mopeds Now consider the following on-hand inventory balances for the moped components. Item Units in Inventory Engine Assembly 100 Engine Assembly 100 Motor 50 Motor 50 Carburetor 0 Carburetor 0 Gas Tank 200 Gas Tank 200 Wheel Assembly 300 Wheel Assembly 300 Tire 100 Tire 100 Hub Assembly 200 Hub Assembly 200 Frame 50 Frame 50 Determine the net requirement of each component necessary to support the production of 1000 mopeds in week 10.

19. 19 Slide Example: Columbia Mopeds n Net Requirements Level 1 ComponentsLevel 1 Components  Engine Assembly Gross Requirement: 1000 (1 x MPS Moped ) On-Hand Inventory: 100 Net Requirement: 900  Gas Tank Gross Requirement: 1000 (1 x MPS Moped ) On-Hand Inventory: 200 Net Requirement: 800  Wheel Assembly Gross Requirement: 2000 (2 x MPS Moped ) On-Hand Inventory: 300 Net Requirement: 1700

20. 20 Slide Example: Columbia Mopeds n Net Requirements Level 1 Components (continued)Level 1 Components (continued)  Frame Gross Requirement: 1000 (1 x MPS Moped ) On-Hand Inventory: 50 Net Requirement: 950 Level 2 ComponentsLevel 2 Components  Motor Gross Requirement: 900 (1 x NR EngineAss. ) On-Hand Inventory: 50 Net Requirement: 850

21. 21 Slide Example: Columbia Mopeds n Net Requirements Level 2 Components (continued)Level 2 Components (continued)  Carburetor Gross Requirement: 1800 (2 x NR EngineAss. ) On-Hand Inventory: 0 Net Requirement: 1800  Tire Gross Requirement: 1700 (1 x NR WheelAss. ) On-Hand Inventory: 100 Net Requirement: 1600  Hub Assembly Gross Requirement: 1700 (1 x NR WheelAss. ) On-Hand Inventory: 200 Net Requirement: 1500

22. 22 Slide The End of Chapter 11, Part B