1. Material Requirement Planning (MRP)

2. Material Requirement Planning (MRP)
______________________________________
Key Outputs of MRP
Calculate demand for component items
Determine requirements for subassemblies, components, and raw material
Determine when they are needed
Generate work orders and purchase order
Consider lead time

3. When to use MRP ___________________________________
Dependent / Independent Demand?

4. Demand Characteristics
Demand Characteristics for Finished Products and Their Components
Dependent demand
Independent demand
100 x 1 =
100 tabletops
100 tables
100 x 4 = 400 table legs
400 –
300 –
200 –
100 –
Discrete demand
Continuous demand
400 –
300 –
200 –
100 –
No. of tables
No. of tables
Week
M T W Th F M T W Th F

5. MRP Input & Output Material Requirements Planning (MRP) Work orders
Purchase orders
Rescheduling notices

6. Major Inputs to MRP Process: 1. Bill of Material
Product structure file
Determines which component items need to be scheduled
Product Structure Record
Clipboard
Level 0
Level 1
Level 2
Spring (1)
Bottom Clip (1)
Top Clip (1)
Pivot (1)
Rivets (2)
Clip Assembly (1)
Pressboard (1)

7. Major Inputs to MRP Process: 2. Master Production Schedule (MPS)
Drives MRP process with a schedule of finished products
Quantities represent production not demand
Quantities may consist of a combination of customer orders & demand forecasts
Quantities represent what needs to be produced, not what can be produced
Example
PERIOD
MPS ITEM
Clipboard
Lapdesk
Lapboard
Pencil Case

8. Major Inputs to MRP Process: 3. Inventory Record
_________________________________________________
Contains an extensive amount of information on every item that is produced, ordered, or inventoried in the system
DESCRIPTION INVENTORY POLICY
Item Pressboard Lead time 1
Item no. 734 Annual demand 5000
Item type Purch Holding cost 1
Product/sales class Comp Ordering/setup cost 50
Value class B Safety stock 0
Buyer/planner RSR Reorder point 39
Vendor/drawing EOQ 316
Phantom code N Minimum order qty 100
Unit price/cost 1.25 Maximum order qty 500
Pegging Y Multiple order qty
LLC 1 Policy code 3

9. MRP Processes – 4 Basic Steps
Exploding the bill of material
___________________________________
Netting out inventory
Lot sizing rule – How many units
Time-phasing requirements

10. Lot Sizing Rule Comparison
The FOQ rule ___________ _______________________
The POQ rule ___________ _______________________
_______________________
The L4L rule ___________ _______________________

11. MRP Matrix = + - Gross Requirement
Derived from planned order releases of the parent
Actual / estimated demand, in case of final product
Schedule Receipts
Items on order
Scheduled to arrive in the future time period
Projected on hand
Current inventory, or anticipated inventory at the end of period
Projected on-hand
Inventory at end
of period t
Inventory on-hand at end of period t - 1
Scheduled / planned receipts in period t
Gross requirements in period t = + -

12. MRP Matrix Net requirements
Actual quantity to produce based on projected on hand and on-order quantity
Planned Order Receipts
Quantity, when orders need to be received
Consider lot sizing rule:
Planned Order Release
When order need to be placed to receive on time
Consider lead time

13. MRP Matrix (You can download the template from our class webpage)
ITEM NAME OR NO. PERIOD
LOT SIZE LT
Gross Requirements
Derived from MPS or planned order releases of the parent
Scheduled Receipts
On order and scheduled to be received
Projected on Hand
Beg Inv
Anticipated quantity on hand at the end of the period
Net Requirements
Gross requirements net of inventory and scheduled receipts
Planned Order Receipts
When orders need to be received
Planned Order Releases
When orders need to be placed to be received on time

14. Example MRP Matrix ITEM: CLIPBOARD LLC: 0 PERIOD
LOT SIZE: L4L LT:
Gross Requirements
Scheduled Receipts 175
Projected on Hand 25
Net Requirements
Planned Order Receipts
Planned Order Releases

15. MRP Example 1 A LT=3 C(3) LT=4 D(2) LT=2
Given the following information, determine when orders should be released for A, C, and D and the size of those orders A
LT=3
C(3)
LT=4
D(2)
LT=2
Parts
On hand
Scheduled Receipts
Lot Size
Demand A C D 10
140
200
250, period 2
L4L
Mult 50
Mult 250
100, period 8

16. MRP Example 2
Given the following information, determine when orders should be released for A, B, C, and D and the size of those orders. A
LT=3
C(3)
LT=4
D(2)
LT=2 B
LT=2
D(3)
Parts
On hand
Scheduled Receipts
Lot Size
Demand A B C D 10 5
140
200
250, period 2
L4L
Mult 50
Mult 250
100, period 8
200, period 6 -

17. Evolution of MRP
MRP (material requirements planning) was the precursor to ERP
Primarily a production planning and control system
MRP evolved to MRP II (manufacturing resource planning)
ERP (Enterprise Resource Planning) and ERP II continue to extend the links through all business processes

18. Enterprise Resource Planning (ERP) An Overview
Organizes and manages a company’s business processes by sharing information across functional areas
Connects with supply-chain and customer management applications
ERP in the nutshell*
Client server software
Integrates majority of business processes
Processes majority of transactions
Enterprise wide database
Real time data access
* adapted from e-courseware, MIT Sloan

19. ERP Modules [Figure 12.1 Organizational Data Flow]

20. ERP Modules [Figure 12.2 ERP’s Central Database]
Finance & Accounting
Sales
& Marketing
Production & Materials Management
ERP Data Repository
Human Resources

21. ERP Implementation Process
First step is to analyze business processes
Which processes have the biggest impact on customer relations?
Which process would benefit the most from integration?
Which processes should be standardized?
Use of Internet portals can aid implementation