1. Material Requirements Planning

2. Materials requirements planning (MRP) is a means 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 Dependent demand drives MRP Material Requirements Planning Defined

3. Dependent Demand  The demand for one item is related to the demand for another item  Given a quantity for the end item, the demand for all parts and components can be calculated  In general, used whenever a schedule can be established for an item  MRP is the common technique

4. Benefits of MRP 1.Better response to customer orders 2.Faster response to market changes 3.Improved utilization of facilities and labor 4.Reduced inventory levels

5. 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 Material Requirements Planning System

6. 6 © The McGraw-Hill Companies, Inc., 2004 Firm orders from known customers Forecasts of demand from random customers Aggregate product plan Bill of material file Engineering design changes Inventory record file Inventory transactions Master production Schedule (MPS) Primary reports Secondary reports Planned order schedule for inventory and production control Exception reports Planning reports Reports for performance control Material planning (MRP computer program)

7. Elemen MRP 1.Master production schedule 2.Specifications or bill of material 3.Inventory availability 4.Purchase orders outstanding 5.Lead times Effective use of dependent demand inventory models requires the following

8. Master Production Schedule (MPS)  Specifies what is to be made and when  Must be in accordance with the aggregate production plan  Aggregate production plan sets the overall level of output in broad terms  As the process moves from planning to execution, each step must be tested for feasibility  The MPS is the result of the production planning process  MPS is established in terms of specific products

9. Master Production Schedule (MPS)  A customer order in a job shop (make- to-order) company  Modules in a repetitive (assemble-to- stock) company  An end item in a continuous (make-to- stock) company Can be expressed in any of the following terms:

10. Materials Parts Components Production sequence Modular BOM – Subassemblies Bill of Materials (BOM) File A Complete Product Description

11. BOM (Table Example) Top Leg Long Rail Short Rail

12. BOM (Product Structure) Short Rails (2) Table (End Item) Long Rails (2) Legs (4) Top (1) Leg Assembly (1)

13. Code Level CodeComponent 0 Table (end-item) 1Leg assembly (1) 2Short rails (2) 2Long rails (2) 2Legs (4) 1Top(1)

14. MRP versus Order-Point Systems

15. Elements of Success in MRP Implementation planning Adequate computer support Accurate data Management support User knowledge

17. 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 Total Unit Demand Day 10 50 A 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

18. 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 on day 10.

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

20. B(4) E(1)D(2) C(2) F(2)D(3) A Finally, repeating the process for all components, we have the final materials requirements plan: 20

21. 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

22. A(2) X It takes 2 A’s for each X

23. B(1)A(2) X It takes 1 B for each X

24. A(2)B(1) X C(3) It takes 3 C’s for each A

25. A(2)B(1) C(2) X C(3) It takes 2 C’s for each B

26. A(2)B(1) D(5)C(2) X C(3) It takes 5 D’s for each B

27. Closed Loop MRP Production Planning Master Production Scheduling Material Requirements Planning Capacity Requirements Planning Realistic? No Feedback Execute: Capacity Plans Material Plans Yes Feedback