1. Introduction to Materials Management Chapter 4 – Material Requirements Planning

2. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Independent versus Dependent Demand Independent Demand Not related to demand for other assemblies or products, instead from outside sources Generally forecasted demand Dependent Demand Generally related to production of an end product (as defined on the MPS) Can be calculated instead of forecasted

3. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Dependent Demand Approach – Materials Requirement Planning (MRP) Major Objectives of MRP Determine Requirements – Calculated to meet product requirements defined in the MPS What to order How much to order When to order When to schedule delivery Keep Priorities Current

4. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Links To Other MPC Functions

5. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Major Inputs to MRP Master Production Schedule quantities and times Inventory records of all items to be planned Planning factors such as lead times, order quantities, and safety stock Current status of each item Bills of material for MPS items

6. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Sample Bill of Materials

7. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Bill of Material Points The BOM shows all parts to make one of the item Each part has one, and only one, part number A part is defined by form, fit, and function – any change requires a new part number

8. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Sample Product Tree for the BOM

9. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Breaking Down the BOM into More Detail – the Multilevel Bill

10. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Example in Page 68

11. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Indented BOM – Use Indentation to Show Parent-Component Relationships

12. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Planning Bills of Material Artificial grouping of components for Planning Purposes Used to simplify Forecasting Planning Master Scheduling Represent an average, not buildable product

13. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Sample Planning BOM

14. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Where-Used and Pegging Where-used reports - shows the parents for a component (contrast with a bill of materials that show the components for a parent) Pegging report – shows the parents for a component, but only those parents where there is an existing requirement

15. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Figure 4.10 in page 70

16. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Major Uses for Bills of Material Defines the product Provides method for design change control Planning – What is needed and when Order entry – order configuration and pricing Production – Parts needed to assemble a product Costing – material cost of goods sold

17. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Basic MRP Record

18. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Some Key Terms Lead time – span of time for a process Exploding – process of multiplying requirements by usage to get BOM requirements Offsetting – Placing requirements in the proper period based on lead time Planned orders – Orders planned during the explosion, but not yet released for processing Low-level code – lowest level on which a part resides on the Bill of Materials

19. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Some Key Terms, Continued Scheduled receipts – Open orders released for processing (production or purchase) scheduled to be received at a defined time. Gross Requirements – Total of a component needed to meet requirements not taking any existing inventory into account Net Requirements – Actual amount of a component needed to meet requirement after existing requirements taken into account

20. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Some Key Terms, Continued Projected available – The expected inventory position at the end of the period Planned order release – the amount that should be ordered (using the lot size) to prevent a negative projected available balance Planned order receipt – when the order should be available for use, offset by lead time from the planned order release

21. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Example Problem Lead time for this component is 2 weeks and order quantity is 200. Complete the table. What action should be taken?

22. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Example problem solution The order for 200 should be released

23. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Example for a multilevel BOM Lead time for each component is 1 week

24. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Netting and exploding zero-level parts

25. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Netting and exploding first-level parts

26. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Completed Material Requirements Plan

27. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Sample Multiproduct MRP Explosion

28. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Points About the MRP Record Current time – beginning of first period (often called time buckets) Items considered available at beginning of period Quantity in Projected Available row considered at end of period Current period often called action bucket – action should be taken to avoid a future problem

29. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Planner Responsibilities for MRP Launch Orders – Production or Purchasing Reschedule orders as required Reconcile errors and search for causes Solve critical material shortages Replan Expedite Coordinate with other functions to resolve problems

30. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Moving through time – an example This record shows the status of the part Monday morning. The computer is showing the need to release the order of 30

31. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. During the week, the following events happen: Only 25 units of the scheduled receipt move into inventory. The balanced is scrapped The gross requirement for week 3 is changed to 10. The gross requirement for week 4 is increased to 50. The gross requirement for week 7 is 15. An inventory count reveals there are 10 more in inventory than the record shows The gross requirement for week 1 is issued from inventory The planned order release of 30 in week 1 is released and becomes a scheduled receipt in week 3.

32. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. The new record reflects those events from week 1:

33. Introduction to Materials Management, 7 th Edition Arnold, Chapman, Clive © 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Homework Assignment Problems 4.5, 4.9, 4.11, 4.15