1. Topics to be Covered 1. Material Requirement Planning
2. How Does MRP Fit in the Production Cycle
3. Inputs into MRP
4. MRP Processing
5. MRP Issues
6. Lot Sizing
7. Benefits and Limitations of MRP
8. MRP II and Closed Loop MRP
9. Keys to a Successful Implementation

2. What we have learned ! What is the question we need to answer now?
Supply Chain:
setup of our facility, suppliers, transportation and distribution
Process Planning:
defined and arranged our process in terms of layout and order
penetration (product vs process layout, MTO,MTS,ATO)
Forecasting:
defined anticipated end item demand over a specified time period.
(Technique)
Capacity Planning:
our tactical approach to how we anticipate meeting our anticipated demand ( Type and amount of Sources, chase vs level strategy)
What is the question we need to answer now?
What, How much and when to order the stuff to make our product

3. What have we learned to date about building this machine.
Make or buy
Location of facility
Products to offer
Process we will use (batch) per video
Forecast of end item
Establish labor need for end item
Establish source of products
Establish when we will obtain / produce each end item.
What is the next step
Define the qty of dependent parts
Define when we will begin to build or buy.
What is the purpose of MRP?

4. Material Requirement Planning
1. MRP is a computer-based information system designed to handle ordering and
scheduling of dependent -demand inventories.
2. MRP is used to breakdown the demand requirements for each finished good into
its lower level components requirements.
3. MRP identifies a higher level demand into all its lower level demand components ,
their quantities and timing requirements.
4. MRP continues this breakdown of component quantities and time needs until the
source of each lower level component is supplied by an external source.
5. MRP attempts to solve two problems:
a. Setting up scheduling for all components.
b. Provide an effective means for controlling the scheduled requirements for
each dependent items.

5. How Does MRP Fit In The Production Cycle.
Make or Buy
Forecasting
Facility Definition
Resource Planning
Aggregate Plan
Master Production Schedule
Rough Cut Capacity
Planning
MRP
Detailed Capacity
Planning
Purchasing
Shop Floor Control

6. Inputs Into MRP 1. Master Production Schedule 2. Bill Of Materials
3. Inventory Records File

7. MPS: Example Aggregate Production Plan Master Production Schedule
Scheduled
Man hours
Aggregate Production Plan
Manhrs Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
The manhours represent the total scheduled manhours identified in the aggregate plan.
The MPS is the products and quantity that can be built within these scheduled hours.
Model Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Products in
that month
Master Production Schedule

8. Master Production Schedule
1. MPS states which end items are to be produced, when these end items are
needed and in what quantities.
2. The MPS is a result of disaggregating the Aggregate Production Plan.
3. Sources for a MPS.
A. Customer Orders
B. Forecasts
C. Internal Orders
4. Planning Horizon for MPS is separated into Time Periods (Time Buckets).
- typically has a 1 year planning horizon.
5. The Time Horizon should cover the cumulative lead time necessary to produce
the end product.
6. Initial requirements for items needed may or may not be possible.
a. May exceed capacity
b. modify aggregate planning
c. recent demand changes
d. assumes sufficient time to complete tasks
7. MRP can not distinguish between a feasible and a non-feasible MPS.
Some products take longer than one year from order time to completion.
MRP horizon should cover this entire time
The time buckets dependent upon the product.
Some time in hours, days, weeks or months

9. Bill Of Material
1. Contains a listing of all of the assemblies, subassemblies, parts and raw materials
necessary to produce one unit of a finished product.
2. Frequently referred to as a Product Structure Diagram.
3. Parent component is a next higher level component which consists of one or more
Child components.
4. A BOM will identify all components from end item through raw material or
components procured from an outside source.
- includes nuts, bolts, screws, glue, etc.
5. It is important that the BOM is kept up to date.
- requires some sort of change coordination be put into place between
engineering and production.
- Engineering Change Notice

10. Bill Of Material (BOM) Example
Office Chair
Back Cushion
Seat Cushion
Chair Frame
Fasteners (8)
Adjuster
Mechanism
Base Unit
Wheels (6)
Fasteners (3)
Indented Bill Of Material
Item Part Number Qty
Office Chair
Back Cushion
Seat Cushion
Chair Frame
Adjuster Mechanism
Base Unit
Wheels
Fasteners
Fasteners

11. Inventory Records File
Used to store supplier information and the status of each item by time
period.
2. Gross requirements, schedule receipts, amount on-hand
3. Supplier name. location, lead time, pricing & lot size.
4. This step is the feedback for the system to highlight changes to
scheduling.

12. Example from BK
There is an item master for each part and subassembly produced either internally or externally.
Introduce model
This is the document that was used to make a change to the MRP.
An addition record included all the supplier information.

13. MRP Processing
Identify the quantity of each finished good and the time for their completion.
2. Use BOM to identify the subassemblies, components, and raw materials to create one unit.
3. Identify the Gross Requirements for each component.
- These are the quantities of each part to construct the required quantity for each end item.
4. Define the Net Requirements.
- This represents the quantity of each component or raw material that must be produced
internally or purchased from an external source.
- Net Rqmts = Gross Rqmts - (Scheduled Receipts + units on Hand + Safety Stock)
- Scheduled Receipts: Orders which have been previously placed and are anticipated to
arrive or be produced internally before the newly established need date.
- Net Rqmts for a higher level part is the Gross Rqmts for a lower level part.
5. The Net Rqmts are then placed into the Planned Order Release category until the order for a
given component/raw material is placed
- If the component is produced internally then the Release identifies when the same level
component work order is released to the shop floor to begin production.
- So all lower level components or raw materials must be available by this date.
- Should consider lead times.
6. The Planned Order Receipt identifies when the component or raw material anticipated to be
received.
- If the part is produced internally the Receipt identifies when this level part will be complete.
7. This process is continued until all part requirements have been scheduled.
Description of how to process MRP.

14. MRP Issues Safety Stock
1. Theoretically if demand is known then there is no need for safety stock.
2. Unanticipated variance in Demand causes inventory and safety stock to exist.
3. MRP does not consider machine breakdown, scrap rates, late deliveries.
4. MRP can reduce the amount of safety stock by removing variability.
5. Safety Stock determined by: History, lead time, experience
Updating The MRP System
1. Regenerative: Review the entire MRP system; usually a periodic batch process
(less frequent change; once a week or month)
2. Net Change: Continuous updating every time a change is made; Modifies only
areas of change. ( more frequent; once or more a day)
MRP Software Types: BPICS, KBM, SAP
What is safety stock: Used in cases where demand or production is variable beyond our control.

15. MRP Outputs Time Fences
Series of time intervals during which order changes are allowed or restricted.
- Work Order release Purchase order release Rescheduling
MRP Outputs
Provides management with a range of possible reports.
Reports can be classified as primary and secondary.
Primary Reports concern production & inventory planning and control:
- schedule of planned orders - amount & timing of future orders
- order releases - executes the planned orders (POs & WOs)
- Changes to planned orders - revisions of due dates & quantities
Secondary Reports concern performance
- evaluate system operation (missed deliveries & stock outs)
- planning reports - forecasting future inventory requirements
- exception reports - attributes to major discrepancies
Load Reports
Compares known and future capacity requirements
Typically requires a separate module
- Mini MRP: a review of current inventory and planned receipts to determine what is
needed for a real or hypothetical demand.

16. Supplier Report

17. Lot Sizing
1. Goal is to minimize the setup/ordering cost & holding costs.
2. There can be advantages in grouping part orders
3. Problem is that by grouping middle and upper level parts you have a
cascading effect on the lower level parts.
- so it is important to consider all inventory requirements below the
part/subassembly being considered for lot sizing.
4. Types of Lot Sizing Techniques.
- Lot by Lot
- EOQ
- Wagner-Whitlin
- Silver-Meal
- Least Cost
- Part-Period
All methods, except for Lot by Lot, consider the relationship between
holding costs and ordering costs.

18. Limitations of MRP Best used for Batch and job shop applications
Holding costs dependent on variations in system.
Inability to track material requirements
Inability to determine capacity requirements given a master schedule.
Lead Time is fixed
Necessary to Have:
- computer and software
- accurate way to maintain changes to parts BOM
- integrity of inventory records
7. Inability to react to short term or system changes.

19. MRP II and Closed Loop MRP
Manufacturing Resources Planning
1. Expands on the scope of production resource planning
- involves marketing, finance, engineering, etc.
2. A major purpose of MRP II is to integrate these primary functions of
production along with the other impacted areas in a common set of
goals.
3. Can be used to simulate effects of different manufacturing plans.
4. Provides each function with insight into the other functions
performance and plans.
Closed Loop MRP
1. Uses capacity planning and feedback to improve the ability of the
production system to complete work as planned.
2. Timely feedback allows planners time to generate alternative plans.

20. Keys to a Successful Implementation
1. Top Management Support.
2. Good Information Technology Design.
3. Appropriate user-designer interaction and understanding.
4. Committing to change and to the implementation effort.
5. Defining and planning the project extensively.
6. Using organizational change theories to manage process.

21. Enterprise Resource Planning (ERP)
ERP integrates a basic MRP systems with information from marketing, sales, finance, accounting, and human resources through a common database.
Planning is cross functional
Planning begins from Sales planning, thru MRP to the accounts receivable.
See Table 16.5 pg 421
ERP Video