1. Resource Requirements Planning:
Chapter 15
Resource Requirements Planning:
MRP and CRP

2. Overview Resource Requirements Planning
Material Requirements Planning (MRP)
Capacity Requirements Planning (CRP)
Wrap-Up: What World-Class Companies Do

3. Resource Requirements Planning
Aggregate
Planning
Chapter 13
Master Production
Scheduling (MPS)
Resource
Requirements
Planning
Material Requirements
Planning (MRP)
Chapter 15
Capacity Requirements
Planning (CRP)

4. Material Requirements Planning (MRP)

5. Materials Requirements Planning (MRP)
Computer based system
Explodes Master Schedule (MPS) into required amounts of raw materials and subassemblies to support MPS
Nets against current orders and inventories to develop production and purchased material ordering schedules

6. Objectives of MRP Improve customer service Reduce inventory investment
Improve plant operating efficiency

7. Elements of MRP Inputs Outputs Service-Parts Orders and Forecasts
Inventory
Transaction Data
Order Changes
Order
Inventory
Status File
Planned Order
Schedule
MRP
System
Master
Production
Schedule
Planning
Report
Performance
Exception
Reports
Bill of
Materials File

8. MRP Computer Program Begins with number of end items needed
Add service parts not included in MPS
Explode MPS into gross requirements by consulting bill of materials file
Modify gross requirements to get net requirements:
Net Requirements = Gross Requirements
+ Allocated Inventory
+ Safety Stock
- Inventory On Hand
Offset orders to allow for lead time

9. Outputs of MRP
Planned order schedule - quantity of material to be ordered in each time period
Changes to planned orders - modifications to previous planned orders
Secondary outputs:
Exception reports
Performance reports
Planning reports

10. Example: MRP Schedule
LocoMopeds is a manufacturer of off-road mopeds. The following product structure diagram represents the bill of materials for its dual-carburetor Model 442 moped.
MOPED
Level 0
ENGINE
ASSEMBLY
GAS
TANK
WHEEL
ASSEMBLY
(2)
FRAME
Level 1
MOTOR
CARBURETOR
(2)
HUB
ASSEMBLY
TIRE
Level 2

11. Example: MRP Schedule Bill of Material Parent Component Level Compon.
Code Code Code Description Req’d
442 0 #442 Moped
442 EA 1 Engine Assem. 1
GT 1 Gas Tank 1
WA 1 Wheel Assem. 2
F 1 Frame 1
EA M 2 Motor 1
C 2 Carburetor 2
WA HA 2 Hub Assem. 1
T 2 Tire 1

12. Example: MRP Schedule Inventory Status Report Item Code On- Hand
Safety
Stock
Lot
Size
Lead
Time
Sched. Receipts
Qnty Week
442
500
200
LFL 1 -- EA
300
100
1000 10 GT
600 2
900 WA
400
2000 F 3 M
250 C
150
2500+ HA
2400 11 T
3000,2000
11,12

13. Example: MRP Schedule
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:
Master Production Schedule: #442 Moped
Determine the MRP schedule required to support the master production schedule for the Model 442 moped in weeks 11
1300
800
1200
1400 10 16 15 14 13 12
WEEK
QUANTITY

14. Example: MRP Schedule
MRP Schedule for #442 Mopeds for Weeks , considering that:
Gross Requirements come from the moped MPS
There is an On-Hand balance of 500 mopeds at the end of week 9
There are no Scheduled Receipts for mopeds
A lot-for-lot rule is used for ordering mopeds
Safety stock of 200 mopeds is desired
Lead time for mopeds is one week

15. Example: MRP Schedule MRP Schedule for #442 Mopeds . . . Initially
GROSS REQUIREMENTS
SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 500)
NET REQUIREMENTS
PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES
ITEM: 442 MOPED LT: 1
LOT SIZE: LFL SS: 200 10
1300 11 12 13
800 15 14
1400
1200 16
WEEK

16. Example: MRP Schedule MRP Schedule for #442 Mopeds . . . Completed
GROSS REQUIREMENTS
SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 500)
NET REQUIREMENTS
PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES
ITEM: 442 MOPED LT: 1
LOT SIZE: LFL SS: 200
300
1000 10
1300 11 12 13
1200
800
1400 15 14 16
WEEK

17. Example: MRP Schedule
MRP Schedule for Gas Tanks for Weeks , considering that:
Gross Requirements come from moped Planned-Order-Releases
There is an On-Hand balance of 600 gas tanks at the end of week 9
There is a Scheduled Receipt for 900 tanks in week 10
A lot-for-lot rule is used for ordering gas tanks
Safety stock of 200 gas tanks is desired
Lead time for gas tanks is two weeks

18. Example: MRP Schedule MRP Schedule for Gas Tanks . . . Initially
GROSS REQUIREMENTS
SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 600)
NET REQUIREMENTS
PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES
ITEM: GAS TANK LT: 2
LOT SIZE: LFL SS: 200
1000
900 10
1300 11 12 13
800
1200 15 14
1400 16
WEEK

19. Example: MRP Schedule MRP Schedule for Gas Tanks . . . Completed
GROSS REQUIREMENTS
SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 600)
NET REQUIREMENTS
PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES
ITEM: GAS TANK LT: 2
LOT SIZE: LFL SS: 200
1000
900
1300 10
800
1200
300 11 12 13
1400 15 14 16
WEEK

20. Example: MRP Schedule
MRP Schedule for Frames for Weeks , considering that:
Gross Requirements come from moped Planned-Order-Releases
There is an On-Hand balance of 600 frames at the end of week 9
There is a Scheduled Receipt for 2000 frames in week 10
The firm uses a Lot Size (multiple) of 2000 for ordering frames
No safety stock of frames is desired
Lead time for frames is 3 weeks

21. Example: MRP Schedule MRP Schedule for Frames . . . Initially
GROSS REQUIREMENTS
SCHEDULED RECEIPTS
AVAILABLE
NET REQUIREMENTS
PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES
ITEM: FRAME LT: 3
LOT SIZE: SS: 0
1000
2000 10
1300 11 12 13
800
1200 15 14
1400 16
WEEK
600

22. Example: MRP Schedule MRP Schedule for Frames . . . Completed
GROSS REQUIREMENTS
SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 600)
NET REQUIREMENTS
PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES
ITEM: FRAME LT: 3
LOT SIZE: SS: 0
1000
2000
2600 10
1600
1300 11 12 13
800
500
300
900
1200 15 14
1400 16
WEEK
1500
1100

23. Example: MRP Schedule
MRP Schedule for Engine Assemblies for Weeks , considering that:
Gross Requirements come from moped Planned-Order-Releases
There is an On-Hand balance of 300 engine assemblies at the end of week 9
There is a Scheduled Receipt for 1000 engine assemblies in week 10
The firm uses a Lot Size (multiple) of 500 for ordering engine assemblies
Safety Stock of 100 engine assemblies is desired
Lead time for engine assemblies is 1 week

24. Example: MRP Schedule
MRP Schedule for Engine Assemblies Initially
GROSS REQUIREMENTS
SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 300)
NET REQUIREMENTS
PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES
ITEM: ENGINE ASSEM LT: 1
LOT SIZE: SS: 100
1000 10
1300 11 12 13
800
1200 15 14
1400 16
WEEK

25. Example: MRP Schedule
MRP Schedule for Engine Assemblies Completed
GROSS REQUIREMENTS
SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 300)
NET REQUIREMENTS
PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES
ITEM: ENGINE ASSEM LT: 1
LOT SIZE: SS: 100
1000
1200 10
1500
200
500
1100
1300 11 12 13
800
400
100 15 14
1400 16
WEEK

26. Example: MRP Schedule
MRP Schedule for Motors for Weeks , considering that:
Gross Requirements come from engine assembly Planned-Order-Releases
There is an On-Hand balance of 250 motors at the end of week 9
There are no Scheduled Receipts for motors
A lot-for-lot rule is used for ordering motors
No Safety Stock of motors is desired
Lead time for motors is 1 week

27. Example: MRP Schedule MRP Schedule for Motors . . . Initially
GROSS REQUIREMENTS
SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 250)
NET REQUIREMENTS
PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES
ITEM: MOTOR LT: 1
LOT SIZE: LFL SS: 0 10
1500
500 11 12 13
1000 15 14 16
WEEK

28. Example: MRP Schedule MRP Schedule for Motors . . . Completed
GROSS REQUIREMENTS
SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 250)
NET REQUIREMENTS
PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES
ITEM: MOTOR LT: 1
LOT SIZE: LFL SS: 0
250
1250 10
500
1500 11 12 13
1000 15 14 16
WEEK

29. Example: MRP Schedule
MRP Schedule for Carburetors for Weeks , considering that:
Gross Requirements come from engine assembly Planned-Order-Releases (times 2)
There is an On-Hand balance of 150 carburetors at the end of week 9
There are no Scheduled Receipts for carburetors
A Lot Size of is used for ordering carburetors
Safety Stock of 100 carburetors is desired
Lead time for carburetors is 2 weeks

30. Example: MRP Schedule MRP Schedule for Carburetors . . . Initially
GROSS REQUIREMENTS
SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 150)
NET REQUIREMENTS
PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES
ITEM: CARBURETOR LT: 2
LOT SIZE: SS: 100 10
3000
1000 11 12 13
2000 15 14 16
WEEK

31. Example: MRP Schedule MRP Schedule for Carburetors . . . Completed
GROSS REQUIREMENTS
SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 150)
NET REQUIREMENTS
PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES
ITEM: CARBURETOR LT: 2
LOT SIZE: SS: 100 50
2500 10
3050
3000
950
1000 11 12 13
1450
1550
1050
2000 15 14 16
WEEK

32. Example: MRP Schedule
MRP Schedule for Wheel Assemblies for Weeks , considering that:
Gross Requirements come from moped Planned-Order-Releases (times 2)
There is an On-Hand balance of 500 wheel assemblies at the end of week 9
There is a Scheduled Receipt for 2000 wheel assemblies in week 10
A Lot Size (multiple) of 500 is used for ordering wheel assemblies
Safety Stock of 400 wheel assemblies is desired
Lead time for wheel assemblies is 1 week

33. Example: MRP Schedule
MRP Schedule for Wheel Assemblies Initially
GROSS REQUIREMENTS
SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 500)
NET REQUIREMENTS
PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES
ITEM: WHEEL ASSEM LT: 1
LOT SIZE: SS: 400
2000 10
2600 11 12 13
1600
2400 15 14
2800 16
WEEK

34. Example: MRP Schedule
MRP Schedule for Wheel Assemblies Completed
GROSS REQUIREMENTS
SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 500)
NET REQUIREMENTS
PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES
ITEM: WHEEL ASSEM LT: 1
LOT SIZE: SS: 400
2000
2100 10
2500
100
2600 11 12 13
1600
2800
3000
400
200
2400 15 14 16
WEEK

35. Example: MRP Schedule
MRP Schedule for Hub Assemblies for Weeks , considering that:
Gross Requirements come from wheel assembly Planned-Order-Releases
There is an On-Hand balance of 100 hub assemblies at the end of week 9
There is a Scheduled Receipt of 2400 hub assemblies in week 11
A lot-for-lot rule is used for ordering hub assemblies
No Safety Stock of hub assemblies is desired
Lead time for hub assemblies is 1 week

36. Example: MRP Schedule MRP Schedule for Hub Assemblies . . . Initially
GROSS REQUIREMENTS
SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 100)
NET REQUIREMENTS
PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES
ITEM: HUB ASSEM LT: 1
LOT SIZE: LFL SS: 0 10
2400
2500
2000 11 12 13
3000 15 14 16
WEEK

37. Example: MRP Schedule MRP Schedule for Hub Assemblies . . . Completed
GROSS REQUIREMENTS
SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 100)
NET REQUIREMENTS
PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES
ITEM: HUB ASSEM LT: 1
LOT SIZE: LFL SS: 0
100 10
2000
2500
2400 11 12 13
3000 15 14 16
WEEK

38. Example: MRP Schedule
MRP Schedule for Tires for Weeks , considering that:
Gross Requirements come from wheel assembly Planned-Order-Releases
There is an On-Hand balance of 500 tires at the end of week 9
There are Scheduled Receipts for 3000 and 2000 tires weeks 11 and 12, respectively
A Lot Size (multiple) of 1000 is used for ordering tires
Safety Stock of 500 tires is desired
Lead time for tires is 3 weeks

39. Example: MRP Schedule MRP Schedule for Tires . . . Initially
GROSS REQUIREMENTS
SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 500)
NET REQUIREMENTS
PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES
ITEM: TIRE LT: 3
LOT SIZE: SS: 500 10
3000
2500
2000 11 12 13 15 14 16
WEEK

40. Example: MRP Schedule MRP Schedule for Tires . . . Completed
GROSS REQUIREMENTS
SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 500)
NET REQUIREMENTS
PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES
ITEM: TIRE LT: 3
LOT SIZE: SS: 500
2000 10
3000
2500 11 12 13
1500
500 15 14 16
WEEK

41. Lot-Sizing in MRP
Lot-size is the quantity ordered/produced at one time
Large lots are preferred because:
Changeovers cost less and capacity greater
Annual cost of purchase orders less
Price breaks and transportation breaks can be utilized
Small lots are preferred because:
Lower inventory carrying cost
Reduced risk of obsolescence
Shorter cycle time to produce customer order

42. Lot-Sizing Methods Typical MRP methods accommodates lumpy demand
Lot-for-Lot (LFL)
Period Order Quantity (POQ)
Comments on Economic Order Quantity (EOQ)
does not consider quantity discounts
does not always provide the most economical approach with lumpy demand

43. Example: Lot-Sizing Decision
The net requirements for a material from an MRP schedule are:
It costs $400 to change over the machines for this material in the affected work center. It costs $0.40 per unit when one unit of this material must be carried in inventory from one week to the next.
Identify the lot-sizing method that results in the least carrying and changeover costs for the 8-week schedule.
NET REQUIREMENTS
1000 1
1300 2 3 4
800
1200 6 5 7
WEEK 8

44. Example: Lot-Sizing Decision
Lot-for-Lot Method
Carrying Cost = 0($.40) = $0
Changeover Cost = 6($400) = $2,400
Total = $2,400
NET REQUIREMENTS
BEGINNING INVENTORY
PRODUCTION LOTS
ENDING INVENTORY
1000 1
1300 2 3 4
800
1200 6 5 7
WEEK 8

45. Example: Lot-Sizing Decision
Economic Order Quantity (EOQ) Method
S = $400.00
D = [(Net Req. for 8 wks)/8 weeks)](50 weeks/year)
= (6400/8)(50) = 40,000
C = ($0.40 per week)(50 weeks/year)
= $20.00

46. Example: Lot-Sizing Decision
Economic Order Quantity (EOQ) Method
Carrying Cost = 4855($.40) = $1,942
Changeover Cost = 6($400) = $2,400
Total = $4,342
NET REQUIREMENTS
BEGINNING INVENTORY
PRODUCTION LOTS
ENDING INVENTORY
1000
1265
265 1
230
1300 2 3 4
800
725
760
695
1200 6 5 7
WEEK
1190 8

47. Example: Lot-Sizing Decision
Period Order Quantity (POQ) Method
POQ = (# Weeks/year)/(# Orders/year)
= 50/(D/EOQ)
= 50/(40,000/1,265)
= or 2 weeks

48. Example: Lot-Sizing Decision
Period Order Quantity (POQ) Method
Carrying Cost = 2900($.40) = $1,160
Changeover Cost = 4($400) = $1,600
Total = $2,760
NET REQUIREMENTS
BEGINNING INVENTORY
PRODUCTION LOTS
ENDING INVENTORY
1000 1
800
2100
1300 2 3 4
2500
1200 6 5 7
WEEK 8

49. Example: Lot-Sizing Decision
Summary
Carrying Chg.Ovr. Total
Method Cost Cost Cost
LFL 0 2,400 2,400
EOQ 1,942 2,400 4,342
POQ 1,160 1,600 2,760

50. Issues in MRP Lot-Sizing
Useful at lower levels but may drive excess inventory when applied at higher levels
Net Change versus Regenerative MRP
Net change may generate too many action notices
Regenerative more costly to run but appears to be easier to manage
. . . more

51. Issues in MRP Safety Stock
Use depends on uncertainty of demand..... more uncertain the greater the need for safety stock
Assemble-to-Order Firms
MPS and MRP treated separately from Final Assembly Schedule(FAS)
FAS is prepared 1-2 weeks ahead
Use Modular Bill of Material
For each option with a demand forecast

52. MRP I to MRP II
MRP I simply exploded demand (MPS) into required materials
MRP II became Manufacturing Resource Planning which provides a closed-loop business management system
Financial management
Shop floor control
Operations management
Simulation capability

53. Evaluation of MRP
Most beneficial to process-focused systems that have long processing times and complex multistage production steps
Lead times must be reliable
Must freeze MPS for some time before actual production... certain demand
Difficult to implement

54. Capacity Requirements Planning (CRP)

55. Capacity Requirements Planning (CRP)
Tests MPS for feasibility
Utilizes routings to determine labor/machine loads
If schedule feasible, recommends freezing
If schedule overloads resources, points out processes that are overscheduled

56. Load Schedules
Compares actual labor and machine hours against available hours
Offsets schedules between successive stages of production by lead times
Provides feasible MPS and economically loaded work centers
Promotes system operating efficiency ... lowers costs!

57. HW Chapter 15
HW #7 and 16 on page 612 and 617.

58. End of Chapter 15