1. 1 Slides used in class may be different from slides in student pack Chapter 16 Materials Requirements Planning  Material Requirements Planning (MRP)  Bill of Material  MRP Logic and Calculations  Lot Sizes, Safety Stock and Time Fences  MRP II  MRP Management Issues

2. 2 Slides used in class may be different from slides in student pack Material Requirements Planning Defined  Materials requirements planning (MRP) is 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 Slides used in class may be different from slides in student pack 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.

4. Firm orders from known customers Forecasts of demand from random customers Aggregate product plan Master production schedule (MPS) Material planning (MRP) Engineering design changes Bill of material file Inventory transactions Inventory record file Reports 4

5. 5 Slides used in class may be different from slides in student pack MRP Input: Bill-of-Material  List of components & quantities needed to make product  Provides product structure (tree) –Parents –Children  Shows low-level coding –Lowest level in structure item occurs –Top level is 0; next level is 1 etc.

6. 6 Slides used in class may be different from slides in student pack Bill-of-Material Product Structure Tree Bicycle(1) P/N 1000 Handle Bars (1) P/N 1001 Frame Assy (1) P/N 1002 Wheels (2) P/N 1003 Frame (1) P/N 1004 Bicycle(1) P/N 1000 Handle Bars (1) P/N 1001 Frame Assy (1) P/N 1002 Wheels (2) P/N 1003 Frame (1) P/N 1004

7. 7 Slides used in class may be different from slides in student pack Product Structure Thinking Challenge The demand for product A is 50. How many of each component is needed to satisfy demand? A B(2)C(3) D(2) E(1)E(3)F(2) D(2)G(1) A B(2)C(3) D(2) E(1)E(3)F(2) D(2)G(1)

8. 8 Slides used in class may be different from slides in student pack Product Structure Solution A B(2)C(3) D(2) E(1)E(3)F(2) D(2)G(1) A B(2)C(3) D(2) E(1)E(3)F(2) D(2)G(1) 50

9. 9 Slides used in class may be different from slides in student pack Lead Times & Product Structure 2 wk. 1 wk. 3 wk. Frame Wheels Handle Bars Bicycle Frame Assy Time (weeks) Lead time

10. 10 Slides used in class may be different from slides in student pack MRP Scheduling Terminology  Gross Requirements: demand for an item from: –independent demand –dependent demand

11. 11 Slides used in class may be different from slides in student pack MRP Scheduling Terminology  Scheduled receipts – orders that have already been released (i.e., an open order) and that are scheduled to arrive at the beginning of the period.  Projected available balance (On-hand) – amount of inventory at the beginning of a period

12. 12 Slides used in class may be different from slides in student pack MRP Scheduling Terminology  Net requirements -  Planned order receipt -  Planned order release -

13. 13 Slides used in class may be different from slides in student pack MRP Formulas  NR t = GR t - OH t – SR t (0 if negative)  OH t = OH t-1 + SR t-1 + POReceipt t-1 – GR t-1 – SS

14. 14 Slides used in class may be different from slides in student pack MRP Example - One item’s complete record Starting information Lead time = 3; lot policy = lot-for-lot (LFL); on-hand = 20 units; safety stock = 0 units.

15. 15 Slides used in class may be different from slides in student pack Low Level Coding  What about this? A B C DCE E Level 0 Level 1 Level 3 Level 2 Won’t having the same part at different levels make it harder to do level by level calculations?

16. 16 Slides used in class may be different from slides in student pack Low Level Coding - “How to”  Place each item at same level - it simplifies the calculations A B C DCE E Level 0 Level 1 Level 3 Level 2 A B DC E Before: After:

17. 17 Slides used in class may be different from slides in student pack An 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 Slides used in class may be different from slides in student pack

19. 19 Slides used in class may be different from slides in student pack Lot Sizing in MRP Programs  We need to reflect restrictions which may exist in actual practice  Lot-for-lot (L4L)  Economic order quantity (EOQ)  Least total cost (LTC)  Least unit cost (LUC)  Fixed quantity –Minimums –Multiples

20. 20 Slides used in class may be different from slides in student pack Lot Size Effects Lead Time = 3; Lot Size= 5 units (or Multiples); On-Hand = 20 Units; Safety Stock = 0 Units. 20 Lot size is 5 or multiples (5, 10, 15 etc.).

21. 21 Slides used in class may be different from slides in student pack Using Safety Stock Lead time = 3; lot policy = lot-for-lot (LFL); on-hand = 20 units; safety stock = 2 units. 18 20 - 2 = Safety stock decreases ‘Available’ inventory. The amount physically on-hand is still the same (20).

22. 22 Slides used in class may be different from slides in student pack MRP Thinking Challenge A master schedule calls for 50 units of F in week 6, & 60 in week 8. On-hand levels are F = 0, G = 20, & H = 60. Another 20 units of G are scheduled to be received in week 4. Order quantities are lot-for-lot except for H, which has a lot size of 50 or multiples of 50. F(1) LT = 2 G(1) LT = 1 H(1) LT = 2 H(4) LT = 2

23. 23 Slides used in class may be different from slides in student pack Product F Solution

24. 24 Slides used in class may be different from slides in student pack Component G Solution

25. 25 Slides used in class may be different from slides in student pack Component H Solution

26. 26 Slides used in class may be different from slides in student pack Another MRP Example An end item (A) is assembled from 1 sub-component C, 2 part D’s, and 1 sub-component B Each sub-component C is assembled from 1 part D and 1 part E Each sub-component B is assembled from 1 part C and 2 part E’s The master production schedule calls for 250 units of A in week 6, 140 in week 8, and 200 in week 9. The following information is available from the inventory status file:

27. 27 Slides used in class may be different from slides in student pack MRP Input: 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)

28. 28 Slides used in class may be different from slides in student pack 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.

29. 29 Slides used in class may be different from slides in student pack Example of Time Fences 8 1526 Weeks Frozen Moderately Firm Flexible Firm Customer Orders Forecast and available capacity Capacity

30. 30 Slides used in class may be different from slides in student pack MRP Input: Inventory Records File  Each inventory item carried as a separate file – Status according to “time buckets”.  Pegging – Identify each parent item that created demand.

31. 31 Slides used in class may be different from slides in student pack MRP Outputs: 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.

32. 32 Slides used in class may be different from slides in student pack Closed Loop MRP Production Planning Master Production Scheduling Material Requirements Planning Capacity Requirements Planning Realistic? No Feedback Execute: Capacity Plans Material Plans Yes Feedback

33. 33 Slides used in class may be different from slides in student pack Manufacturing Resource Planning (MRP II)  Goal: Plan and monitor all resources of a manufacturing firm (closed loop): – manufacturing – marketing – finance – engineering  Simulate the manufacturing system

34. 34 Slides used in class may be different from slides in student pack MRP Management Issues  System Accuracy –  System nervousness –  Integration with Just-in-Time (JIT) –