1. Material Requirements Planning (MRP)
CHAPTER 13
Material Requirements Planning (MRP)

2. Material Requirements Planning
Master Production Schedule
Time-phased plan specifying timing and quantity of production for each end item.
Material Requirement Planning Process
Product Structure Tree
Moderately
Firm
Frozen
Flexible
Capacity
Forecast and
available capacity
Lead Times
Time fences --available capacity become dedicated over time.

3. Dependent vs Independent Demand
“Lumpy” demand
Demand
Stable demand
Demand
Time
Time
Amount on hand
Amount on hand
Safety stock
Time
Time

4. Objectives of MRP
MRP answers the following production decision of a firm
What is needed?
How much is needed?
When is it needed?

5. Material decision Decision on
Quantity (how much)
Time (when)
Type (what)
The first two are same as in inventory management. The last one is needed because it involves more than one type of parts or components.

6. MRP Overview MRP Inputs MRP Processing MRP Outputs Changes
Order releases
Master
schedule
Planned-order
schedules
Primary
reports
Exception reports
Planning reports
Performance-
control
reports
Bill of
materials
file
MRP computer
programs
Secondary
reports
Inventory
records
file
Inventory
transaction

7. Output from an MRP system
Generate a feasible schedule of requirements for
subassemblies
component parts
raw materials required
to produce the quantity of items required in the given time frame

8. Planning Horizon 1 2 3 4 5 6 7 8 9 10 Assembly Subassembly Fabrication
Procurement

9. Master Schedule
Master schedule: One of three primary inputs in MRP; states which end items are to be produced, when these are needed, and in what quantities.
Cumulative lead time: The sum of the lead times that sequential phases of a process require, from ordering of parts or raw materials to completion of final assembly.
Time fences: Series of time intervals during which order changes are allowed or restricted.

10. Bill-of-Materials
Bill of materials: One of the three primary inputs of MRP; a listing of all of the raw materials, parts, subassemblies, and assemblies needed to produce one unit of a product.
Product structure tree: Visual depiction of the requirements in a bill of materials, where all components are listed by levels.

11. BOM
Accuracy is important since errors may multiply many times

12. Product Structure Tree
Level
Chair
Seat
Legs (2)
Cross
bar
Side
Rails (2)
Back
Supports (3)
Leg
Assembly 1 2 3

13. Low Level Coding
Level Y 1 A B C D E F E G H 2 E E E 3

14. MRP Processing Gross requirements
Scheduled receipts(orders scheduled to arrive from suppliers at the beginning of the period)
Projected on hand
Net requirements
Planned-order receipts
Planned-order releases

15. ) ( MRP Processing - = Net Requirement in period t
Gross Requirement in period t
Projected on hand inventory in period t ) (
Safety stock
Allowance for waste - = + +

16. Assembly Time Chart 1 2 3 4 5 6 7 8 9 10 11 Final assembly
Procurement of
raw material D
raw material F
part C
part H
raw material I
Fabrication
of part G
of part E
Subassembly A
Subassembly B
Final assembly
and inspection

17. MRP Outputs
Planned orders - schedule indicating the amount and timing of future orders.
Order releases - Authorization for the execution of planned orders.
Changes - revisions of due dates or order quantities, or cancellations of orders.

18. Example (p.632)
A firm that produces wood shutters and bookcases has received two orders for shutters: One for 100 to be due for delivery at the start of week 4 and the other 150 units to be due for delivery at the start of week 8 of the current schedule. Each shutter consists of four slatted wood sections and two frames. The wood sections are made by the firm, and fabrication takes one week. The frames are ordered, and lead time is two weeks. Assembly of the shutters requires one week. There is a scheduled receipt of 70 wood sections at the beginning of week 1. Determine the size and timing of planned-order releases necessary to meet delivery requirements under each of theses conditions:
(1). Lot-for-lot ordering (order size equal to net requirement)
(2). Lot-size ordering with a lot size of 320 units for frames and 70 units for wood sections.

19. Solution to example
Develop a master schedule and a product structure tree
Shutter
Frames (2)
Wood sections (4)

20. Solution to example(lot-for-lot)

21. Solution to example (lot-for-lot)

22. Solution to example (lot-for-lot)

23. Solution to example (fixed lot-size)

24. Solution to example (fixed lot-size)

25. MRP Secondary Reports Performance-control reports Planning reports
Exception reports

26. Other Considerations Safety Stock Lot sizing Yield rates
Lot-for-lot ordering
Economic order quantity
Fixed-period ordering
Part-period model
Yield rates

27. MRP Capacity requirement Planning
Capacity requirements planning: The process of determining short-range capacity requirements.
Load reports: Department or work center reports that compare known and expected future capacity requirements with projected capacity availability.

28. MRP Capacity Requirement Planning
Develop a tentative
master production
schedule
Use MRP to
simulate material
requirements
Convert material
requirements to
resource requirements
Revise tentative
master production
schedule No
Is shop
capacity
adequate?
Can
capacity be
changed to meet
requirements No
Yes
Yes
Firm up a portion
of the MPS
Change
capacity

29. Benefits of MRP Low levels of in-process inventories
Ability to track material requirements
Ability to evaluate capacity requirements
Means of allocating production time

30. Requirements of MRP Computer and necessary software
Accurate and up-to-date
Master schedules
Bills of materials
Inventory records
Integrity of data

31. MRP II Expanded MRP with and emphasis placed on integration
Financial planning
Marketing
Engineering
Purchasing
Manufacturing

32. Overview of MRP II Market Demand Master production schedule Finance
Manufacturing
Marketing
Production
plan
MRP
Adjust master schedule
Rough-cut
capacity planning
Capacity
planning
Adjust
production plan
Problems? No
Problems?
Yes No
Requirements
schedules
Yes