1. Material Requirements Planning Planned Orders Demand BOM Material Data Inputs Output

2. Material Requirements Planning Planned Orders Demand BOM Material Data Inputs Output  With MRP, production is planned to meet: Future demand forecasts (make-to-stock) Orders to be completed in the future (make- to-order or assemble-to-order)  A key input is, therefore, actual demand or a demand forecast MRP is a Push production system

3. Material Requirements Planning Planned Orders Demand BOM Material Data Inputs Output  Planning Sales and Operations Planning (SOP) Forecasting, marketing plans, capacity Profitability Analysis Controlling (CO) Module (CO-PA) Direct Input (Demand Management) Demand Sources

4. Demand Management Simplest way to create demand it to input it directly:

5. Demand

6. Demand—S/R List

7. Material Requirements Planning Planned Orders Demand BOM Material Data Inputs Output  MRP uses the assembly structure, or Bill of Material (BOM) to determine how many components or subassemblies are needed to make the required number of finished products Considers available inventory of components and subassemblies in calculations—net requirements MRP is designed for assembled products

8. Material Requirements Planning Planned Orders Demand BOM Material Data Inputs Output  For end-items, demand is “independent”—from customers  For other components, demand can be determined using the BOM Dependent demand MRP is designed for assembled products

9. Material Requirements Planning Planned Orders Demand BOM Material Data Inputs Output ## NRG–A (7 cases) ## Dough NRG–A (500 lb) ## Oats (300 lb) ## Wheat Germ (50 lb) ## Carob Chips (50 lb) ## Raisins (50 lb)

10. Material Requirements Planning Planned Orders Demand BOM Material Data Inputs Output ## NRG–A (7 cases) ## Dough NRG–A (500 lb) ## Oats (300 lb) ## Wheat Germ (50 lb) ## Carob Chips (50 lb) ## Raisins (50 lb) Time Key MRP concept: Time-phased BOM

11. Bill of Material (BOM)

12. ## NRG–A (7 cases) ## Dough NRG–A (500 lb)

13. Bill of Material (BOM) ## NRG–A (7 cases) ## Dough NRG–A (500 lb)

14. Bill of Material (BOM) ## Dough NRG–A (500 lb) ## Oats (300 lb) ## Wheat Germ (50 lb) ## Nutmeg (2 lb) ## Cinnamon (5 lb)

15. Bill of Material (BOM) ## Dough NRG–A (500 lb) ## Oats (300 lb) ## Wheat Germ (50 lb) ## Nutmeg (2 lb) ## Cinnamon (5 lb)

16. Material Requirements Planning Planned Orders Demand BOM Material Data Inputs Output  Primary material data includes: Current Inventory Lot sizing procedure Production lead times  All of this data is available in SAP via the Stock/Requirements List Material Data determines production lot size and timing

17. Material Data—S/R List Inventory Level 0 Inventory Detail

18. Inventory—Detail

19. Material Data—S/R List Lot Size FX, 7

20. Material Data—S/R List LeadTime 1

21. Material Requirements Planning

28. MRP—Net Requirements

29. Textbook MRP uses a bucketed system Textbook MRP

30. LS - lot size - size of production batch or lot sizing method Gross Requirements - quantity needed in each period - from MPS or from other components and assemblies Scheduled Receipts - Planned receipt dates for orders that have already been placed Planned Order Receipts - expected receipt date for planned orders (orders that haven't been placed yet) Available Balance - Projected inventory balance at the end of each period Planned Order Releases - Orders that need to be placed (as determined by MRP process) to meet gross requirements (source of planned order receipts)

31. Inventory Data Component LS LT Initial Inventory Scheduled Receipts A LFL 1 - 10 in pd. 1 B 50 2 30 50 in pd. 2 C 50 3 40 50 in pd. 3 D 30 4 30 in pd. 3 Textbook MRP—Example Problem