1. LESSON 5 Introduction to Materials Requirements Planning (MRP)
29 August 2014

2. Lesson Objectives
Upon completion of this lesson, you should be able to:
Explain the MRP process as part of Production Planning and Control (PPC)
Distinguish the three main sources of input to MRP
Contrast key benefits and drawbacks to MRP
Demonstrate the use of a time phased MRP record table
Given a scenario, evaluate the MRP Records for all the components of a product

3. Lesson Topics This lesson will cover the following topics:
Materials Requirements Planning (MRP)
MRP Inputs/Outputs
Benefits of MRP
Time-Phased MRP Record Table
MRP Records for All Components of a Product

4. What’s In It For Me?
Your ability to evaluate a contractor’s MRP allows you to identify possible resource risks and help mitigate their impact on contract deliverables

5. Lesson Introduction
How is Material Requirements Planning (MRP) used to plan parts ordering and finished product manufacture?

6. Materials Requirements Planning (MRP)
Lesson Topics:
Materials Requirements Planning (MRP)
MRP Inputs/Outputs
Benefits of MRP
Time-Phased MRP Record Table
MRP Records for All Components of a Product

7. Materials Requirements Planning (MRP)
An inventory management system
Designed to assist production managers in scheduling and placing orders for dependent demand items
Provides formal plans for each part number
Objective is to provide the right part at the right time to meet schedules for completed products

8. PPC System Framework Front End (Strategic) Engine (Tactical)
Resource Planning
Material and Capacity Plans
Detailed Capacity Planning
Sales and Operations Planning
Demand Management
Master Production Scheduling
Detailed Material Planning
Shop-floor Systems
Supplier Systems
Enterprise Resource Planning (ERP) Systems
Front End (Strategic)
Engine (Tactical)
Back End (Operational)
Material Requirements Planning

9. Detailed Material Planning and MRP
The Engine provides processes and systems for detailed material and capacity planning
Detailed Capacity Planning
Detailed Material Planning
Material Requirements Planning
Material and Capacity Plans
(Tactical)

10. Detailed Material Planning and MRP (cont.)
Detailed Material Planning process uses Material Requirements Planning (MRP) to determine the period-by-period (time-phased) plans for component parts and raw materials
MPS from the Front End feeds directly into the Detailed Material Planning process
Detailed Capacity Planning
Detailed Material Planning
Material Requirements Planning
Material and Capacity Plans
(Tactical)

11. MRP Inputs Lesson Topics: Materials Requirements Planning (MRP)
MRP Inputs/Outputs
Benefits of MRP
Time-Phased MRP Record Table
MRP Records for All Components of a Product

12. Inventory Records File
MRP Inputs
MPS
BOM
MRP
Inventory Records File

13. MRP Outputs MRP Planned Order Schedules Performance Control Report
3 Primary Reports
3 Secondary Reports
Planned Order Schedules
Performance Control Report
Order Releases
Planning Reports
Changes to Planned Orders
Exception Reports

14. Exercise 1: MRP Integration
Small Group Exercise:
Find a partner or work in a trio
Refer to Module 2, Lesson 5, Exercise 1 CME130_M2_L5_E1_Exercise_FINAL.docx
Read the directions in the exercise
Complete the activity; be prepared to share your responses
Time allowed: 30 minutes

15. Exercise 1: MRP Integration
SCENARIO
Using the cable manufacturer scenario, explain MRP processes.
OBJECTIVES
Explain the MRP process as part of the PPC.
Identify the three main sources of input to the MRP.
INSTRUCTIONS
Sketch how MRP fits into the PPC engine and relates to the PPC front end.
Annotate your illustration to identify MRP inputs and outputs.

16. Benefits of MRP Lesson Topics: Materials Requirements Planning (MRP)
MRP Inputs/Outputs
Benefits of MRP
Time-Phased MRP Record Table
MRP Records for All Components of a Product

17. Benefits of MRP Increased customer service and satisfaction
Improved utilization of facilities and personnel
Better inventory planning and scheduling
Faster response to market changes and shifts
Reduced inventory levels without reduced customer service

18. MRP Drawbacks
Changes must be completed within the system using transactions
Transaction errors must be identified and corrected to ensure accurate material plans

19. Which of the following is an MRP input?
Question and Answer
Which of the following is an MRP input?
MPS
Order Releases
Planning Reports
Planned Order Schedules

20. Which of the following is a benefit of using MRP?
Question and Answer
Which of the following is a benefit of using MRP?
Better inventory planning and scheduling
Changes may be completed using a variety of methods
High tolerance for errors within the transaction information
Higher inventory levels without increased holding costs

21. Materials Requirements Planning (MRP) MRP Inputs
Lesson Topics:
Materials Requirements Planning (MRP)
MRP Inputs/Outputs
Benefits of MRP
Time-Phased MRP Record Table
MRP Records for All Components of a Product

22. Time-Phased MRP Record Table
Term
Description
Gross Requirements
Anticipated usage or demand for each period
Scheduled Receipts
Existing replenishment orders at beginning of period
Projected Available Balance
Current and projected inventory status at the end of period
Net Requirements
Projected demand less inventory less the period’s planned order receipts less the period’s scheduled receipts
Planned Order Receipts
Planned replenishment orders for the beginning of each period
Planned Order Release
Replenishment orders to be issued each period

23. Time-Phased MRP Record Table (cont.)
End-Item - Chair
Wk 0
Wk 1
Wk 2
Wk 3
Wk 4
Wk 5
Wk 6
Wk 7
Wk 8
Gross Requirements
Scheduled Receipts
Projected Available Balance
Net Requirements
Planned Order Receipts
Planned Order Release

24. Example: MPS for an End-Item
End-Item - Chair
Wk 0
Wk 1
Wk 2
Wk 3
Wk 4
Wk 5
Wk 6
Wk 7
Wk 8
Gross Requirements
150 70
175 90 60
Scheduled Receipts
Projected Available Balance
260
110 40
-135
Net Requirements
Planned Order Receipts
Planned Order Release
The production manager at Aldershot Manufacturing wishes to develop a materials requirements plan for producing chairs over an 8 week period. She estimates that the lead time between releasing an order to the shop floor and producing a finished chair is 2 weeks. The company currently has 260 chairs in stock and no safety stock. The forecast customer demand is for 150 chairs in week 1, 70 in week 3, 175 in week 5, 90 in week 7 and 60 in week 8.
Lead Time = 2 Weeks

25. Example: MPS for an End-Item (cont.)
End-Item - Chair
Wk 0
Wk 1
Wk 2
Wk 3
Wk 4
Wk 5
Wk 6
Wk 7
Wk 8
Gross Requirements
150 70
175 90 60
Scheduled Receipts
Projected Available Balance
260
110 40
-90
Net Requirements
Planned Order Receipts
135
Planned Order Release
Receive Here
Order Here
Lead Time = 2 Weeks

26. Example: MPS for an End-Item (cont.)
Ordering decisions:
Timing – When to order
Quantity – How much to order
This is a driving principle in MRP; never order before you need to and never plan to stock out
With respect to quantity, we always order as little as possible

27. Gross-to-Net Explosion
Explosion is the process of translating product requirements into component part requirements, taking existing inventories and scheduled receipts into account.
As the explosion takes place, only the components, net of any inventory, are considered. This way, only the necessary requirements are linked through the system.

28. Gross-to-Net Explosion (cont.)
Translates product requirements into component part requirements
Takes existing inventories and scheduled receipts into account
Determines the quantities of all components needed to satisfy requirements for every part number so that all purchased and/or raw material requirements are exactly calculated

29. Lead Time Offset
Gross-to-Net Offset tells us how many of each component are needed for a finished product.
The “WHEN they are needed” is the Lead Time Offset.

30. Front and Back Schedule
Front Schedule, or Earliest Start, assumes that we will start everything as soon as possible.
Back Schedule will start everything as late as possible.
MRP uses the benefits of Back Scheduling and the Gross-to-Net Explosion; this is the heart of the system.

31. Explosion Example
Assuming demand for toy wagons is 10 units how many bolts are required?
10 wagons
Toy Wagon
Handle Assembly (1)
Bolts (2)
Handle Bar (1)
Frame Assembly (1)
Axles (2)
Wheel Assembly (4)
Wagon Body
Bolts (4)
Wheel (1)
10 frames
10 handles
10 handles × 2 bolts = 20 bolts
10 frames × 4 wheel ass. = 40 wheel ass.
40 wheel ass. × 4 bolts = 160 bolts
20 bolts bolts = 180 bolts

32. Which concept is used for MRP?
Question and Answer
Which concept is used for MRP?
Back scheduling
Front scheduling
Postponed scheduling

33. Materials Requirements Planning (MRP) MRP Inputs
Lesson Topics:
Materials Requirements Planning (MRP)
MRP Inputs/Outputs
Benefits of MRP
Time-Phased MRP Record Table
MRP Records for All Components of a Product

34. MRP Records for All Components of a Product
The MPS must align with the operations plan
Shows scheduling decisions for mixes of end items to produce
Hitting the schedule means the agreed-on operations plan will be met

35. Example: Material Needed for a Chair
Chair assembly (Level 0)
Must plan for production/ordering of components (Levels 1 and 2)
Back supports (3)
Side rails (2)
Front legs (2)
Cross bars (2)
Seat (1)

36. Example: BOM vs. Tree Chart
Chair
Level L0 L1 L2 1
Leg Assembly 2
Front Legs (2)
Cross Bar (1)
Seat
Back Assembly
Side Rails (2)
Back Supports (3)
Tree Chart*
Chair
Leg
Assembly
Back
Seat
Front Legs (2)
Cross
Bar (1)
Side
Rails (2)
Back Supports (3)
Level 0
Level 1
* Hardware is understood
Level 2

37. Example: End-Item vs. Components
Lead times:
LT Seat = 2 weeks
LT Back Assembly = 2 weeks
LT Leg Assembly = 1 week
On-hand inventory:
60 seats
40 back assemblies
80 leg assemblies
Scheduled receipts are:
50 seats in week 1
Back supports (3)
Side rails (2)
Front legs (2)
Cross bars (2)
Seat (1)
LT = Lead Time

38. Example: Chair vs. Seat End Item - Chair 1 2 3 4 5 6 7 81 2 3 4 5 6 7 8
Gross Requirements
150 70
175 90 60
Scheduled Receipts
Projected Available Balance
260
110 40
Net Requirements
135
Planned Order Receipts
Planned Order Release
LT Seat = 2 weeks
Component - Seat 1 2 3 4 5 6 7 8
Gross Requirements
135 90 60
Scheduled Receipts 50
Projected Available Balance
110
Net Requirements 25
Planned Order Receipts
Planned Order Release

39. Example: Chair vs. Back Assembly
End Item - Chair 1 2 3 4 5 6 7 8
Gross Requirements
150 70
175 90 60
Scheduled Receipts
Projected Available Balance
260
110 40
Net Requirements
135
Planned Order Receipts
Planned Order Release
LT Back Assembly = 2 weeks
Component - Back Assembly 1 2 3 4 5 6 7 8
Gross Requirements
135 90 60
Scheduled Receipts
Projected Available Balance 40
Net Requirements 95
Planned Order Receipts
Planned Order Release

40. Example: Back Assembly vs. Back Components1 2 3
Gross Requirements
135
Scheduled Receipts
Projected Available Balance 40
Net Requirements 95
Planned Order Receipts
Planned Order Release 90
Back Supports 1 2 3
Gross Requirements
285
270
Scheduled Receipts
165
Projected Available Balance
120
Net Requirements
Planned Order Receipts
Planned Order Release
180
LT Back Assembly = 2 weeks

41. Summary Having completed this lesson, you should now be able to:
Explain the MRP process as part of PPC
Distinguish the three main sources of input to the MRP
Contrast key benefits and drawbacks to MRP
Demonstrate the use of a time phased MRP record table
Given a scenario, evaluate the MRP Records for all the components of a product

42. Summary (cont.)
Your ability to interpret contractors’ MRP processes allows you to:
Verify that components were placed on order in time and in sufficient quantities to meet contract production requirements.

43. Module 2 Wrap Up Activity
Refer to the Module 2 Wrap up Activity
As a team, answer the questions in the Module 2 Wrap Up Activity File
Each team must answer all the questions.
Each Team must be prepared to present their answers.
You have the remaining time as directed by the instructor to complete this activity.