1. Management Science 2 Material Requirements Planning (MRP)
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
© 2001 by Prentice Hall, Inc. Upper Saddle River, N.J

2. Inventory Classifications
Process stage
Number & Value
Demand Type
Other
Raw Material WIP Finished Goods
A Items B Items C Items
Maintenance Dependent Operating
Independent Dependent
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
© 2001 by Prentice Hall, Inc. Upper Saddle River, N.J

3. Dependent versus Independent Demand
Item
Materials With
Independent Demand
Dependent Demand
Demand
Source
Company Customers
Parent Items
Material
Type
Finished Goods
WIP & Raw Materials
Method of
Estimating
Forecast & Booked
Customer Orders
Calculated
Planning
Method
EOQ & ROP
MRP
We start this chapter by linking Dependent Demand Inventory back to Independent Demand Inventory. You might note to students that independent demand is created external to the company, dependent demand, internally.
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
© 2001 by Prentice Hall, Inc. Upper Saddle River, N.J

4. Inputs to the Production Plan
Marketing
Customer
Demand
Production
Capacity
Inventory
Finance
Cash Flow
Aggregate Production Plan
Human
Resources
Manpower
Planning
Procurement
Supplier
Performance
Management
Return on
Investment
Capital
Engineering
Design
Completion
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
© 2001 by Prentice Hall, Inc. Upper Saddle River, N.J

5. Requirements for Effective Use of Dependent Demand Inventory Models
Effective use of dependent demand inventory models requires that the operations manager know the:
master production schedule
specifications or bills-of-material
inventory availability
purchase orders outstanding
lead times
You might add to this list that the operations manager must know that inventory records, bill-of-materials, etc., are accurate.
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
© 2001 by Prentice Hall, Inc. Upper Saddle River, N.J

6. MRP Benefits
Increased customer satisfaction due to meeting delivery schedules
Faster response to market changes
Improved labor & equipment utilization
Better inventory planning & scheduling
Reduced inventory levels without reduced customer service
While MRP certainly can produce these benefits, it is useful to discuss the problems faced in establishing an MRP system. A number of companies have given up on the task - the necessary transformation of old processes has simply proven too difficult.
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
© 2001 by Prentice Hall, Inc. Upper Saddle River, N.J