1. Chapter 16 Inventory Systems for Dependent Demand
Master production schedule
Material Requirements Planning (MRP)
System structure
Example
MRP II
MRP/JIT 2 2 2

2. Material Requirements Planning
How much of an item is needed?
When is an item needed to complete
a specified number of units...
in a specified period of time?
Dependent demand drives MRP 3 3 3

3. Introductory Example - Dependent Demand
Lead Times
A 1 day
B 2 days
C 1 day
D 3 days
E 4 days
F 1 day
Product Structure Tree for Assembly A
B(4)
E(1)
D(2)
C(2)
F(2)
D(3) A
Demand
Day A
Day B (Spares)
Day D (Spares)
Create a schedule to satisfy demand. 4 4 4

4. LT = 1 day Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 1998 5 5

5. LT = 2 Spares B(4) E(1) D(2) C(2) F(2) D(3) A Irwin/McGraw-Hill6
Irwin/McGraw-Hill
The McGraw-Hill Companies, Inc., 1998 6 6

6. B(4) E(1) D(2) C(2) F(2) D(3) A Part D: Day 6 40 + 15 spares7
Irwin/McGraw-Hill
The McGraw-Hill Companies, Inc., 1998 7 7

7. Master Production Schedule (MPS)
Time-phased plan specifying how many and when the firm plans to build each end item
Aggregate Plan
(Product Groups)
MPS
(Specific End Items) 8 8 8

8. Time Fences Frozen Moderately Firm Flexible
No schedule changes allowed within this window
Moderately Firm
Specific changes allowed within product groups as long as parts are available
Flexible
Significant variation allowed as long as overall capacity requirements remain at the same levels 9 9 9

9. Forecast and available
Time Fences 8 15 26
Weeks
Frozen
Moderately
Firm
Flexible
Firm Customer Orders
Forecast and available
capacity
Capacity 10 10 10

10. Material Requirements Planning
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 numbers needed
Determines the dates when orders for those materials should be released, based on lead times 11 11 11

11. Firm orders from known customers Forecasts of demand from random
Aggregate
product
plan
Engineering
design
changes
Bill of
material
file
Inventory
transactions
record
file
Master
production
schedule
(MPS)
Material
planning
(MRP)
Reports
Irwin/McGraw-Hill 12
The McGraw-Hill Companies, Inc., 1998 12 12

12. Bill of Materials (BOM) File A Complete Product Description
Parts
Components
Production sequence
Modular BOM
Subassemblies
Planning BOM
Fractional options 13 13 13

13. Inventory Records File
Each inventory item carried as a separate file
See, for example, Exhibit 16.15
Status according to “time buckets”
Pegging
Identify each parent item that created demand 14 14 14

14. Primary MRP Reports Planned orders Order release notices
to be released at a future time
Order release notices
to execute the planned orders
Changes in due dates of open orders due to rescheduling 15 15 15

15. Primary MRP Reports Cancellations or suspensions of open orders
due to cancellation or suspension of orders on the master production schedule.
Inventory status data 16 16 16

16. Net Change System Activity driven Net change schedules
Potential for system nervousness 17 17 17

17. Another 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
plus the following spares: 18 18 18

18. Adding some more terminology
Gross Requirements
On-hand
Net requirements
Planned order receipt
Planned order release 19 19 19

19. A(2)
B(1)
D(5)
C(2) X
C(3) 20
Irwin/McGraw-Hill 20 20

20. 21
Irwin/McGraw-Hill 21 21

21. Manufacturing Resource Planning (MRP II)
Goal: Plan and monitor all resources of a manufacturing firm (closed loop):
manufacturing
marketing
finance
engineering
Simulate the manufacturing system 23 23 23