1. Resource Planning
Chapter 15

2. Dependent Demand
Dependent demand: The demand for an item that occurs because the quantity required varies with the production plans for other items held in the firm’s inventory.
Parent: Any product that is manufactured from one or more components.
Component: An item that goes through one or more operations to be transformed into or become part of one or more parents.

3. Lumpy Dependent Demand Resulting from Continuous Independent Demand
| | | | | | | | | |
Day
2000 —
1500 —
1000 —
500 —
Bicycles
Rims
2000 —
1500 —
1000 —
500 —
| | | | | | | | | |
Day
Order
1000 on
day 3
Order
1000 on
day 8
Reorder point
Figure 15.2
(a)
(b)

4. Material Requirements Planning
Material requirements planning (MRP): A computerized information system developed specifically to help manufacturers manage dependent demand inventory and schedule replenishment orders.
MRP explosion: A process that converts the requirements of various final products into a material requirements plan that specifies the replenishment schedules of all the subassemblies, components, and raw materials needed to produce final products.
Bill of materials (BOM): A record of all the components of an item, the parent–component relationships, and the usage quantities derived from engineering and process designs.

5. MRP Inputs MRP explosion Authorized master production schedule Other
sources
of demand
Inventory
transactions
records
Bills of
materials
Engineering
and process
designs
Material
requirements
plan
MRP
explosion

6. Bill of Materials Terms
Usage quantity: The number of units of a component that are needed to make one unit of its immediate parent.
Inventory items:
End item: The final product sold to a customer.
Intermediate item: An item that has at least one parent and at least one component.
Subassembly: An intermediate item that is assembled (as opposed to being transformed by other means) from more than one component.
Purchased item: An item that has one or more parents but no components because it comes from a supplier.
Part commonality: The degree to which a component has more than one immediate parent.

7. Bill of Materials A Ladder-back chair Seat cushion Seat-frame boards
Front legs A
Ladder-back chair
Back legs
Leg supports
Back slats

8. Bill of Materials A Ladder-back chair C (1) Seat subassembly D (2)
Front
legs
B (1)
Ladder-back
E (4)
Leg
supports
I (1)
Seat cushion
H (1)
Seat frame
G (4)
Back slats
F (2)
Back legs
J (4)
Seat-frame boards

9. Master Production Schedule
Master production schedule (MPS): A part of the material requirements plan that details how many end items will be produced within specified periods of time.
MPS for a Family of chairs
Ladder-back chair
Kitchen chair
Desk chair 1 2
April
May 3 4 5 6 7 8
Aggregate
production plan
for chair family
200
670
150
120

10. Master Production Scheduling Process
Operations must first create a prospective MPS to test whether it meets the schedule with the resources.

11. Developing a Master Production Schedule
Forecast is less than booked orders in week 1; projected on-hand inventory balance = – 38 = 17.
Forecast exceeds booked orders in week 2; projected on-hand inventory balance
= – 30 = –13. The shortage signals a need to schedule an MPS quantity for completion in week 2.
MPS for Weeks 1 & 2

12. Available-To-Promise Inventory
Available-to-promise (ATP) inventory: The quantity of end items that marketing can promise to deliver on specified dates.
It is the difference between the customer orders already booked and the quantity that operations is planning to produce.
As new customer orders are accepted, the ATP inventory is reduced to reflect the commitment of the firm to ship those quantities
Actual inventory stays unchanged until the order is removed from inventory and shipped to the customer.

13. MPS Record MPS Quantity =
IF (BI - MAX(Forecast, Orders) < 0, Lot size,0)
Projected on-hand =
BI + MPS quantity - MAX(Forecast,Orders)
ATP =
On-hand or MPS Quantity - Sum of actual orders until next MPS quantity

14. MPS Worksheet

15. MPS Schedule with ATP 55 Item: Ladder-back chair
Order Policy: 150 units
Lead Time: 1 week
MPS Schedule with ATP
April
May
Quantity on Hand: 55 1 2 3 4 5 6 7 8
Forecast 30 30 30 30 35 35 35 35
Customer orders booked 38 27 24 8
Projected on-hand inventory
MPS quantity
MPS start
Available-to-promise (ATP) inventory
© 2007 Pearson Education

16. © 2007 Pearson Education
Item: Ladder-back chair
Order Policy: 150 units
Lead Time: 1 week
MPS Schedule with ATP
April
May
Quantity on Hand: 55 1 2 3 4 5 6 7 8
Forecast 30 30 30 30 35 35 35 35
Customer orders booked 38 27 24 8
Projected on-hand inventory 17
137
107 77 42 7
122 87
MPS quantity
150
150
MPS start
150
150
Available-to-promise (ATP) inventory 17 91
150
The total of customer orders booked until the next MPS receipt is = 59 units. The ATP = 150 (MPS quantity) – 59 = 91 units.
The total of customer orders booked until the next MPS receipt is 38 units. The ATP = 55 (on-hand) – 38 = 17.

17. MPS for Product A Application 15.1

18. MPS for Product A Application 15.1

19. Inventory Record
Inventory record: A record that shows an item’s lot-size policy, lead time, and various time-phased data.
Gross requirements: The total demand derived from all parent production plans.
Scheduled Receipts (open orders) are orders that have been placed but not yet completed.
Projected on-hand inventory: An estimate of the amount of inventory available each week after gross requirements have been satisfied.
Planned receipts: Orders that are not yet released to the shop or supplier.
Planned order release: An indication of when an order for a specified quantity of an item is to be issued.

20. Lot Sizing Three methods for determining lot size
Fixed Order Quantity (FOQ)
Periodic Order Quantity (POQ)
Lot-for-Lot (L-4-L)

21. Inventory Record 8-Period Worksheet

22. Inventory Record - FOQ Figure 15.11 Item: C
Description: Seat subassembly
Lot Size: 230 units
Lead Time: 2 weeks
Gross requirements 1 2 3 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases
Week
150
230
120 37

23. Inventory Record - FOQ Explanation:
Item: C
Description: Seat subassembly
Lot Size: 230 units
Lead Time: 2 weeks
Gross requirements
150 1
230 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
The inventory for each week is calculated from the gross requires, scheduled receipts, and on-hand inventory.
Explanation:
Gross requirements are the total demand for the two chairs. Projected on-hand inventory in week 1 is – 150

24. Inventory Record - FOQ Explanation:
Item: C
Description: Seat subassembly
Lot Size: 230 units
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
Explanation:
Gross requirements are the total demand for the two chairs. Projected on-hand inventory in week 1 is – 150 = 117 units.

25. Inventory Record - FOQ Item: C Description: Seat subassembly
Lot Size: 230 units
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
This series of slides will complete the MRP record by adding in the basic equation for the calculation of projected on-hand inventory. This builds to Figure 16.6.
This slide advances automatically.

26. Inventory Record - FOQ = + – Item: C Description: Seat subassembly
Lot Size: 230 units
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
Projected on-hand inventory balance at end of week t
Inventory on hand at end of week t - 1
Gross requirements in week t
Scheduled or planned receipts in week t = + –

27. Inventory Record - FOQ = + – Item: C Description: Seat subassembly
Lot Size: 230 units
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
– 3
–153
–273
This slide adds in the remaining on-hand inventory figures prior to the determination of order quantities and timing.
This slide advances automatically.
Projected on-hand inventory balance at end of week t
Inventory on hand at end of week t - 1
Gross requirements in week t
Scheduled or planned receipts in week t = + –

28. Planned Orders - FOQ Explanation:
Figure 15.11
Explanation:
Without a new order in week 4, there will be a shortage of three units: – 120 = – 3 units.
Item: C
Description: Seat subassembly
Lot Size: 230 units
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week –3
– 3
–153
– 273
When the on-hand inventory falls below zero it is necessary to plan an order.

29. Planned Orders - FOQ Item: C Description: Seat subassembly
Lot Size: 230 units
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
This slide advances automatically.

30. Planned Orders - FOQ Explanation:
Adding the planned receipt brings the balance to
– 120 = 227 units.
Item: C
Description: Seat subassembly
Lot Size: 230 units
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
227
This slide advances automatically.

31. Planned Orders - FOQ Explanation:
Adding the planned receipt brings the balance to
– 120 = 227 units.
Item: C
Description: Seat subassembly
Lot Size: 230 units
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
227

32. Planned Orders - FOQ Explanation:
Offsetting for a two-week lead time puts the corresponding planned order release back to week 2.
Item: C
Description: Seat subassembly
Lot Size: 230 units
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
227
The actual order replacement must be offset by the lead time.
This slide advances automatically.

33. Planned Orders - FOQ Explanation:
Offsetting for a two-week lead time puts the corresponding planned order release back to week 2.
Item: C
Description: Seat subassembly
Lot Size: 230 units
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
227

34. Planned Orders - FOQ Explanation:
The first planned order lasts until week 7, when projected inventory would drop to – 43.
Item: C
Description: Seat subassembly
Lot Size: 230 units
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
227 77
–43

35. Planned Orders - FOQ Explanation:
Adding the second planned receipt brings the balance to – 120 = 187.
Item: C
Description: Seat subassembly
Lot Size: 230 units
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
227 77
This slide advances automatically.

36. Planned Orders - FOQ Explanation:
Adding the second planned receipt brings the balance to – 120 = 187.
Item: C
Description: Seat subassembly
Lot Size: 230 units
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
227 77
187

37. Planned Orders - FOQ Explanation:
The corresponding planned order release is for week 5.
Item: C
Description: Seat subassembly
Lot Size: 230 units
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
227 77
187

38. Planned Orders - FOQ Item: C Description: Seat subassembly
Lot Size: 230 units
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
227 77
187

39. © 2007 Pearson Education
Item: C
Description: Ladder-back Chair Seat subassembly
Lot Size: 230 units
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
227 77
187
The first planned receipt lasts until week 7, when projected inventory would drop to – 120 = –43 units. Adding the second planned receipt brings the balance to – 120 = 187 units. The corresponding planned order release is for week 5 (or week 7 minus 2 weeks).
Without a planned receipt in week 4, a shortage of 3 units will occur: – 120 = –3 units. Adding the planned receipt brings the balance to – 120 = 227 units. Offsetting for a 2-week lead time puts the corresponding planned order release back to week 2.

40. Lot Sizing Rules Periodic Order Quantity (POQ)
Periodic order quantity (POQ): A rule that allows a different order quantity for each order issued but tends to issue the order at predetermined time intervals.
The order quantity equals the amount of the item needed to covers P weeks’ worth of gross requirements.
POQ lot size to arrive in week t
Total Gross requirements for P weeks, including week t
Projected on-hand inventory balance at end of week t-1
= –

41. Lot-Sizing Rules – POQ Item: C Description: Seat subassembly
Lot Size: P = 3
Lead Time: 2 weeks
Gross requirements 1 2 3 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases
Week
150
230
117
120 37

42. Gross requirements for weeks 4, 5, and 6 Inventory at end of week 3
Lot-Sizing Rules – POQ
POQ lot size
Gross requirements for weeks 4, 5, and 6
Inventory at end of week 3
= –
Item: C
Description: Seat subassembly
Lot Size: P = 3
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
This is the basic equation for the POQ.
117
117

43. Lot-Sizing Rules – POQ Item: C Description: Seat subassembly
Lot Size: P = 3
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
This slide advances automatically.
117
117

44. Lot-Sizing Rules – POQ (120 + 0 + 150) Item: C
Description: Seat subassembly
Lot Size: P = 3
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
( )
117
117

45. Lot-Sizing Rules – POQ (120 + 0 + 150) – 117 Item: C
Description: Seat subassembly
Lot Size: P = 3
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
( ) – 117
117
117

46. Lot-Sizing Rules – POQ (120 + 0 + 150) – 117 = 153 units Item: C
Description: Seat subassembly
Lot Size: P = 3
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
( ) – 117 = 153 units
This slide advances automatically.
117
117
153

47. Lot-Sizing Rules – POQ (120 + 0 + 150) – 117 = 153 units Item: C
Description: Seat subassembly
Lot Size: P = 3
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
( ) – 117 = 153 units
The first POQ is 153 units.
117
117
153

48. Lot-Sizing Rules – POQ (120 + 0 + 150) – 117 = 153 units Item: C
Description: Seat subassembly
Lot Size: P = 3
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
( ) – 117 = 153 units
117
117
150
153

49. Lot-Sizing Rules – POQ (120 + 0 + 150) – 117 = 153 units Item: C
Description: Seat subassembly
Lot Size: P = 3
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
( ) – 117 = 153 units
117
117
150
153
153

50. Lot-Sizing Rules – POQ (120 + 0) – 0 = 120 units Item: C
Description: Seat subassembly
Lot Size: P = 3
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
( ) – 0 = 120 units
With only two weeks remaining in the planning period we use those for the POQ.
This slide advances automatically.
117
117
150
150
153
120
153
120

51. Lot-Sizing Rules – POQ Item: C Description: Seat subassembly
Lot Size: P = 3
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
117
117
150
150
153
120
153
120

52. Lot-Sizing Rules – POQ Figure 15.13
This slide shows the actual screen shot of the Solver output for the POQ example.

53. Lot-for-Lot
Lot-for-lot (L4L) rule: A rule under which the lot size ordered covers the gross requirements of a single week.
Thus P = 1, and the goal is to minimize inventory levels.
The projected on-hand inventory combined with the new order will equal zero at the end of week t.
L4L lot size to arrive in week t
Gross requirements for week t
Projected on-hand inventory balance at end of week t-1
= –

54. Lot-Sizing Rules – L4L Item: C Description: Seat subassembly
Lot Size: L4L
Lead Time: 2 weeks
Gross requirements 1 2 3 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases
Week
150
230
117
120 37
The next series of slides develops Figure 16.8 manually if the Instructor wishes to show the details of the process.

55. Gross requirements in week 4 Inventory balance at end of week 3
Lot-Sizing Rules – L4L
L4L lot size
Gross requirements in week 4
Inventory balance at end of week 3
= –
Item: C
Description: Seat subassembly
Lot Size: L4L
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week

56. Lot-Sizing Rules – L4L = 120 – 117 = 3 L4L lot size Item: C
= – = 3
L4L lot size
Item: C
Description: Seat subassembly
Lot Size: L4L
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week

57. Lot-Sizing Rules – L4L = 120 – 117 = 3 L4L lot size Item: C
= – = 3
L4L lot size
Item: C
Description: Seat subassembly
Lot Size: L4L
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week 3

58. Lot-Sizing Rules – L4L = 120 – 117 = 3 L4L lot size Item: C
= – = 3
L4L lot size
Item: C
Description: Seat subassembly
Lot Size: L4L
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
Order quantities will exactly match requirements. 3 3

59. Lot-Sizing Rules – L4L Item: C Description: Seat subassembly
Lot Size: L4L
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week 3 3

60. Lot-Sizing Rules – L4L Item: C Description: Seat subassembly
Lot Size: L4L
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week 3
150 3
150

61. Lot-Sizing Rules – L4L Item: C Description: Seat subassembly
Lot Size: L4L
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
This slide advances automatically. 3
150
120 3
150
120

62. Lot-Sizing Rules – L4L Item: C Description: Seat subassembly
Lot Size: L4L
Lead Time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week 3
150
120 3
150
120

63. Lot-Sizing Rules – L4L Figure 15.14
This is the Solver output for Example 16.8.

64. Comparing Lot-Sizing Rules
FOQ, POQ, and L4L rules affect inventory costs and setup and ordering costs. In the example, each rule took effect in week 4, when the first order was placed.
A comparison of projected on-hand inventory averaged over weeks 4 through 8 of the planning horizon for the ladder-back chair seat subassembly:
FOQ: ( )/5 = 181 units
POQ: ( )/5 = 60 units
L4L: ( )/5 = 0 units
FOQ generates high inventory because it creates remnants.
POQ reduces on-hand inventory because it does a better job of matching order quantity to requirements.
L4L minimizes inventory investment but maximizes the number of orders placed.

65. Safety Stock
The usual policy is to use safety stock for end items and purchased items to protect against fluctuating customer orders and unreliable suppliers of components but to avoid using it as much as possible for intermediate items.
Schedule a planned receipt whenever the projected on-hand inventory balance drops below the desired safety stock level.
Ladder-back Chair Seat subassembly

66. H10-A Using FOQ Application 15.2

67. H10-A Using FOQ Application 15.2

68. H10-A Using POQ Application 15.3

69. H10-A Using POQ Application 15.3

70. H10-A Using L4L Application 15.4

71. H10-A Using L4L Application 15.4

72. Routings and time standards
© 2007 Pearson Education
MRP translates, or explodes, the MPS and other sources of demand into the requirements needed for all of the subassemblies, components, and raw materials the firm needs to produce parent items. This process generates the material requirements plan for each component item.
MRP explosion
Material requirements plan
Action notices
Releasing new orders
Adjusting due dates
Priority reports
Dispatch lists
Supplier schedules
Capacity reports
Capacity requirements planning
Finite capacity scheduling
Input-output control
Routings and time standards
Manufacturing resources plan
Performance reports
Cost and price data

73. Bill of Materials C (1) Seat subassembly H (1) Seat frame I (1)
Seat cushion
J (4)
Seat-frame boards
Figure 15.17

74. MRP Explosion Figure 15.18 Item: Seat subassembly Lot size: 230 units
Lead
time: 2 weeks
Gross requirements
150 1
230
117 2 3
120 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 37
Week
227 77
187
The series starts with the MRP record for the end item.
Figure 15.18

75. MRP Explosion
Item: Seat subassembly
Lot size: 230 units
Lead
time: 2 weeks
Gross requirements
150 1 2 3
120 4 5 6 7 8
Planned receipts
Planned order releases
Week
230
This is reduced to allow room for subsequent records. The middle of the record has been cut to allow space.
This slide advances automatically.

76. MRP Explosion These are the two records for level one items.
Item: Seat subassembly
Lot size: 230 units
Lead
time: 2 weeks
Gross requirements
150 1 2 3
120 4 5 6 7 8
Planned receipts
Planned order releases
Week
230
These are the two records for level one items.
Item: Seat frames
Lot size: 300 units
Lead
time: 1 week
Gross requirements 1 2 3 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 40
Week
300
Item: Seat cushion
Lot size: L4L

77. MRP Explosion Usage quantity: 1
Item: Seat subassembly
Lot size: 230 units
Lead
time: 2 weeks
Gross requirements
150 1 2 3
120 4 5 6 7 8
Planned receipts
Planned order releases
Week
230
Item: Seat frames
Lot size: 300 units
Lead
time: 1 week
Gross requirements 1 2 3 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 40
Week
230
300
Item: Seat cushion
Lot size: L4L
Usage quantity: 1
The gross requirements of the level one items are derived from the planned order releases of the level zero item.

78. MRP Explosion Usage quantity: 1 Item: Seat subassembly
Lot size: 230 units
Lead
time: 2 weeks
Gross requirements
150 1 2 3
120 4 5 6 7 8
Planned receipts
Planned order releases
Week
230
Item: Seat frames
Lot size: 300 units
Lead
time: 1 week
Gross requirements 1 2 3 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases 40
Week
230
300
Item: Seat cushion
Lot size: L4L
Usage quantity: 1

79. MRP Explosion The records are completed in the normal fashion.
Item: Seat subassembly
Lot size: 230 units
Lead
time: 2 weeks
Gross requirements
150 1 2 3
120 4 5 6 7 8
Planned receipts
Planned order releases
Week
230
The records are completed in the normal fashion.
Item: Seat frames
Lot size: 300 units
Lead
time: 1 week
Gross requirements 1 40 2 3 4 5 6 7 8
Scheduled receipts
Projected on-hand inventory
Planned receipts
Planned order releases
Week
110
230
300
180
Item: Seat cushion
Lot size: L4L

80. MRP Explosion Once again, these are reduced and shortened for clarity.
Item: Seat frames
Lot size: 300 units
Lead
time: 1 week
Gross requirements 1 2 3 4 5 6 7 8
Planned receipts
Planned order releases
Week
300
Item: Seat cushion
Lot size: L4L
230
Once again, these are reduced and shortened for clarity.
This slide advances automatically.

81. MRP Explosion The processing of a level two item follows as before.
Item: Seat frames
Lot size: 300 units
Lead
time: 1 week
Gross requirements 1 2 3 4 5 6 7 8
Planned receipts
Planned order releases
Week
300
Item: Seat cushion
Lot size: L4L
230
The processing of a level two item follows as before.
Gross requirements 1 2 3 4 5 6 7 8
Scheduled receipts
Planned receipts
Planned order releases
200
Week
Projected on-hand inventory
Item: Seat-frame boards
Lot size: 1500 units
Lead
time: 1 week

82. MRP Explosion Usage quantity: 4 Item: Seat frames Lot size: 300 units
Lead
time: 1 week
Gross requirements 1 2 3 4 5 6 7 8
Planned receipts
Planned order releases
Week
300
Item: Seat cushion
Lot size: L4L
230
Usage quantity: 4
Gross requirements 1 2 3
1200 4 5 6 7 8
Scheduled receipts
Planned receipts
Planned order releases
200
Week
Projected on-hand inventory
Item: Seat-frame boards
Lot size: 1500 units
Lead
time: 1 week

83. MRP Explosion Item: Seat frames Lot size: 300 units Lead time: 1 week
Gross requirements 1 2 3 4 5 6 7 8
Planned receipts
Planned order releases
Week
300
Item: Seat cushion
Lot size: L4L
230
Gross requirements 1
200 2 3
1200 4 5 6 7 8
Scheduled receipts
Planned receipts
Planned order releases
Week
500
1500
Projected on-hand inventory
Item: Seat-frame boards
Lot size: 1500 units
Lead
time: 1 week

84. Other Important Reports
Action notice: A computer-generated memo alerting planners about releasing new orders and adjusting the due dates of scheduled receipts.
Capacity requirements planning (CRP): A technique used for projecting time-phased capacity requirements for workstations; its purpose is to match the material requirements plan with the capacity of key processes.
Manufacturing resource planning (MRP II): A system that ties the basic MRP system to the company’s financial system and to other core and supporting processes.

85. Item A’s MPS and BOM Application 15.5

86. Inventory Data Application 15.5

87. Item D Application 15.5

88. Item B Application 15.5

89. Item C Application 15.5

90. Solved Problem 1 LT = 2 LT = 3 A B (3) C (1) LT = 1 G (1) LT = 6 D (1)
F (1)
If there is no existing inventory, how many units of items G, E, and D must be purchased to produce five units of end item A?
5 units of item G
30 units of item E
20 units of item D
LT = Lead time

91. Solved Problem 3 A B (1) C (2) D (1) LT = 2 LT = 1 LT = 3
The MPS for product A calls for the assembly department to begin final assembly according to the following schedule: 100 units in week 2; 200 units in week 4; 120 units in week 6; 180 units in week 7; and 60 units in week 8. Develop a material requirements plan for the next eight weeks for items B, C, and D.
ITEM
DATA CATEGORY B C D
Lot-sizing rule POQ (P=3) L4L FOQ = 500 units
Lead time 1 week 2 weeks 3 weeks
Scheduled receipts None 200 (week 1) None
Beginning (on-hand)
inventory

92. Solved Problem 3 Item: B Lot size: POQ (P = 3)
© 2007 Pearson Education
Solved Problem 3
Item: B Lot size: POQ (P = 3)
Description: Lead time: 1 week
Week 1 2 3 4 5 6 7 8 9 10
Gross requirements
100
200
120
180 60
Scheduled receipts
Projected on-hand inventory 20 20
200
200
240 60
Planned receipts
280
360
Planned order releases
280
360

93. Solved Problem 3 Item: C Lot size: L4L Description: Lead time: 2 weeks
© 2007 Pearson Education
Solved Problem 3
Item: C Lot size: L4L
Description: Lead time: 2 weeks
Week 1 2 3 4 5 6 7 8 9 10
Gross requirements
200
400
240
360
120
Scheduled receipts
200
Projected on-hand inventory
200
Planned receipts
400
240
360
120
Planned order releases
400
240
360
120

94. Solved Problem 3 Item: D Lot size: FOQ = 500 units
© 2007 Pearson Education
Solved Problem 3
Item: D Lot size: FOQ = 500 units
Description: Lead time: 3 weeks
Week 1 2 3 4 5 6 7 8 9 10
Gross requirements
400
240
360
120
Scheduled receipts
Projected on-hand inventory
425
425 25 25
285
425
305
305
305
360
305
Planned receipts
500
500
Planned order releases
500
500