1. MATERIAL Requirements planning MRP

2. PLANNING AND CONTROL ACTIVITIES IN MANUFACTURING ENTERPRISE
Strategic plan
Sales&Operation Plan (Aggregated Production Plan)
Master Production Schedule (MPS)
Material Req. Planning (MRP)
Purchasing Control
Production Control
Input /Output Control
Detailed Capacity Req. Planning
Rough-cut Capacity Plannig
Resource Planning
Plan
Execution
Demand
Demand Forecasts
Customers Orders
Resources

3. Materials Requirements Planning MRP
MRP system
Production and inventory management system in dependent demand inventory environment .
System was developed by Orlicky in the early seventies of last century
MRP determines the items orders quantities and the time periods (time „buckets”) in which those orders must be placed to meet MPS needs.
Backgraund of MRP
Distinction of independent demand and dependent demand inventory
Availability of relatively powerful, reliable and cost-efective computers

4. Independent and Dependent Demand
INDEPENDENT DEMAND - the demand for item is independent on the demand for others item.. The typical dependency is only on external customer demand. Final products and spare parts inventory.
DEPENDENT DEMAND - demand for item is dependent upon the demand for some other item (parent item). Components and raw materials
Bill of Materials
CAR
WEEL
TIRE

5. Stock Consumption and Demand Inventory Reorder Point System used in dependent inventory case
Independent demand
Car
Dependent demand
Weel RP
Product
STOCK CONSUMPTION
Demand
STOCK DEMAND
Tire
Discontinuous
Steady and Continuous
Time
Time
Assembly
Time
Time
Component
Time
Time

6. Materials Requirements Planning Inputs/Outputs
MRP inputs
Master Production Schedule
Bill of Materials
Inventory Status
Lot size (lot sizing method)
Lead Times
MRP outputs
Planned manufacturing order releases
Planned purchasing order releases

7. Basic Structure of MRP system
MASTER PRODUCTION SCHEDULE (MPS)
MATERIAL REQUIREMENTS PLANNING (MRP)
Gross Requirements
Net Requirements
3. Lot sizing
4. Offsetting. Backward scheduling
Inventory status
On hand inventory
Scheduled receipts of openned orders
Bill of Materials
Master Items File
Lot size, Lead time
Planned Purchasing Order Releases
Planned Manufacturing Order Releases

8. MRP explosion BOM MRP explosion in time X B C D F E (2) (3) (4) (1) 1
Level 1 2 3 4 6 5
Week
p – production
z - purchasing Ez Dp Bp Ez Xp
X MPS Ez Cp Fz
Product structure X - Bill of Material (BOM)
Total (cumulated) lead time of Product X

9. Projected available t - 1 Safety stock paramiter
MRP Logic
Gross requirements calculation (MPS + Bill of Materials)
Net requirements calculation (NRt = GRt – SRt – PAIt-1 + SS)
Lot Sizing – order quantity calculation using proper lot sizing method
Backward scheduling (Timing) – placing a planned order in the appropriate time period
Net req-ments t
Gross req-ments t
Scheduled receipts t
Projected available t - 1
Safety stock paramiter = - - +
Item: B
Period t (week) 1 2 3 4 5 6 7
Lead time: 1
Gross requirements 30 60 50
Safety stock: 0
Scheduled receipts
Lot sizing method: LFL
Available inventory
Net reqirements
Planned receipts
Planned order releaces
Rekord MRP item B

10. Lot Sizing ? Part C Periods (weeks) 1 2 3 4 5 7 8 6 Net requirements
Planned order release 20 ?
LOT SIZING ALGORITHMS
1. Lot for Lot - LFL
2. Fixed Order Quantity - FOQ
3. Economic Order Quantity - EOQ
4. Fixed Period Requirements -- FPR
5. Period Order Quantity - POQ
6. Least Unit Cost - LUC
7. Least Total Cost - LTC
8. Part-Period Balancing - PPB
9. Wagner-Whitin Algoritm - WW

11. Algorithm 1 – Lot 4 Lot Lot size = net requirements
Example Planning horizon = 9 weeks
Period = 1 week
Holding cost H = 1 $/unit/week
Order cost (set up cost) S = 100 $/order
Week 1 2 3 4 5 6 7 8 9
Total
Net requirements 35 10 40 20 5 10 30
150
Lot size 35 10 40 20 5 10 30
150
Inventory
Holding costs TH = 0
Setup costs TS = 700
Total costs TC = 700

12. Algorithms 2 - 3
Assumption: Lot size is fixed, order period is variable
Algorithm 2 – lot size is set up.
Algorithm 3 – lot size is calculated using EOQ model
Example: Algorithm 2 (lot size is fixed FQ = 60 units)
Week 1 2 3 4 5 6 7 8 9
Total
Net requirements 35 10 40 20 5 10 30
150
Lot size 60 60 60
180
Inventory 25 15 15 35 35 15 10 30
180
Holding costs TH = 180
Setup costs TS = 300
Total costs TC = 480

13. Algorithms 4 - 5 Assumption: Order period is fixed
Algoritm 4 – order period is set up.
Algoritm 5 – lot size is calculated using EOQ model
Example: Algoritm 4 (order period is fixed FP = 3 weeks)
Week 1 2 3 4 5 6 7 8 9
Total
Net requirements 35 10 40 20 5 10 30
150
Lot size 45 60 45
150
Inventory 10 20 20 40 30
120
Holding costs TH = 120
Setup costs TS = 300
Total costs TC = 420

14. Algorithms 6 - 9
Assumption: Lot size is variable, order period is variable
Example: Algoritm 9 (Wagner’s Whitin’s algorithm)
Week 1 2 3 4 5 6 7 8 9
Total
Net requirements 35 10 40 20 5 10 30
150
Lot size 45 65 40
150
Inventory 10 25 25 5 30 95
Holding costs TH = 95
Setup costs TS = 300
Total costs TC = 395

15. Master Production Schedule
Week t 1 2 3 4 5 6 7
(MPS)
Product X 15 30 25
Master item: X
Week t 1 2 3 4 5 6 7
Lead time: 1
Gross requirements 30 25
Safety stock: 0
Scheduled receipts
Lot size: LFL
Projected available
Net requirements
Planned receipts 15
Planned orders release 15 15 15
Item: C (2)
Week t 1 2 3 4 5 6 7
Lead time: 2
Gross requirements 60 50
Safety stock: 0
Scheduled receipts
Lot size: FQ 50
Projected available 20 10
Net requirements 40
Planned receipts
Planned orders release x2 x2 x2 x2 30 30 50

16. One week later Item: C (2) Week t 2 3 4 5 6 7 8 Lead time: 2
Gross requirements 60 50 40
Safety stock: 0
Scheduled receipts
Lead time: FQ 50
Projected available 30 20 10
Net requirements
Planned receipts
Planned orders release 50
Order released in week 1

17. MRP versus Order-Point Systems

18. Benefits of MRPII/ERP system implementation in an organisation
Reduced Inventory with fewer (none) shortages
Improved Customer Service
Improved Direct Labour Productivity
Reduced Purchasing Cost
Reduced Obsolescence
Reduced Overtime
Plan for future capacity needs