# 1 Unit 4B - Logics and Calculation of Material Requirement Planning.

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1 Unit 4B - Logics and Calculation of Material Requirement Planning

2 Period12345 Customer Orders8010 30 MPS100 ATP208070 The MPS and Delivery promises Using the MPS, sales and distribution can determine the available to promise (ATP). What is ATP? The Available-To-Promise (ATP) is the portion of a firm’s inventory and planned production that is not already committed [1] and is available to the customer. It allows delivery promises to be made and allows customer order and deliveries to be scheduled accurately [1] Steps: 1) Add MPS quantity (if any) to on-hand inventory 2) Subtract all customer orders (actual orders) before the next MPS Working example on calculation of an ATP Inventory on hand: 100 units Assumption: ATP is sold before the next MPS ATP for period 1 = On hand – customer orders due before next MPS = 100 – 80 = 20 units ATP for period 2 = MPS – customer orders due before next MPS = 100 – (10 + 10) = 80 units ATP for period 4 = 100 -30 = 70 units [1] [1] Commit-Promised dates to customer that must be fulfilled

3 Week12345 Customer Orders50204050 MPS100 ATP Exercise: Do the ATP calculation for customer orders on Amalgamated Nut Crackers Inc. a) Can the master planner accept an order for another 20 for delivery in week 3? Note: Customer orders can be greater than the MPS

4 Basics and logics in the calculation of MRP The people who manage the MRP system are planners. They are responsible for making detailed decisions that keep the flow of material moving into, through, and out of the factory. Their basic responsibilities are: Launch (release) orders to purchasing or manufacturing Reschedule due dates of open orders Reconcile errors and find out the root cause Solve critical material shortages by expediting or re-planning Work with other planners, master production schedulers, production activity control, and purchasing to resolve problems Gross and Net Requirements Gross requirements: Have not taken into account the available inventory Net requirements cannot be negative. (Often inventory is available and must be included when calculating quantities to be produced) Net requirements = Gross requirements – Projected available

5 Projected available Calculated based on: a) Projected available sufficient to meet gross requirements Previous Projected Available – Gross requirements b) Projected available insufficient to meet gross requirements First lot size qty + Previous Projected Available – Gross requirements

6 Example: Gross requirements = 50 Projected available inventory = 20 Net requirements = 50 -20 = 30 Hence the planned order release of the parent becomes the gross requirement of the component. Working example: Consider the following table for a particular product. Lead time for the part is two weeks. Order quantity (Lot size) is 100 units. Week1234 Gross Requirements Projected Available 75 Net Requirements Planned Order Receipt Planned Order Release 504520

8 Scheduled receipts Orders placed on manufacturing or on a vendor Represent a commitment to make or buy Shows the quantities ordered and when they are expected to be completed and available Scheduled receipts on the MRP record are open orders on the factory They will only be closed when the goods are received into inventory and available for use Then the scheduled receipts disappears to become part of on-hand inventory Net requirements = Gross requirements – Scheduled receipts - Projected available The net requirements can now be modified to include scheduled receipts

9 Example to show scheduled receipts: Part Number Week 12345 A Gross Requirements Scheduled Receipts Projected Available Net Requirements Planned Order Receipt Planned Order Release 0 20 0 B Gross Requirements Scheduled Receipts Projected Available Net Requirements Planned Order Receipt Planned Order Release 0 20 0

10 Working example: Complete the following table. LT for the item is two weeks, and the lot size is 200. What action should be taken? Week1234 Gross Requirements Scheduled Receipts Projected Available 150 Net Requirements Planned Order Receipt Planned Order Release 50250 200 10050 The order for 200 units should be released.

11 Other Terms in MRP Time Bucket This is another term for 'period' and this is decided by the company. Very often this is set to a week or even a day. For timing convention - the 'current time' is deemed to be the beginning of the current time bucket (or period) Action Bucket This is the current time bucket or period and if there is a quantity in the action bucket (e.g. a planned order release) the planner must act upon it. Planning Horizon This is the number of periods for which the MRP plans and it is also known as the number of periods you see in a MRP record. It must be at least as long as product cumulative lead time

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