1. Material Requirements Planning
Chapter 14
Material Requirements Planning

2. Independent demand is uncertain. Dependent demand is certain.
(Chapter 13) A
Dependent Demand
(Chapter 14)
B(4)
C(2)
D(2)
E(1)
D(3)
F(2)
Independent demand is uncertain. Dependent demand is certain.
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3. Dependent Demand vs Independent Demand
Figure 14-1
Dependent Demand vs Independent Demand
Time
Demand
Stable demand
“Lumpy” demand
Amount on hand
Safety stock
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4. Figure 14-2 MRP Inputs MRP Processing MRP Outputs Master schedule
Bill of
materials
file
Inventory
records
MRP computer
programs
Changes
Order releases
Planned-order
schedules
Exception reports
Planning reports
Performance-
control
reports
transaction
Primary
Secondary
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5. Inventory Records File
A computerized file with a complete record of each material (part number) held in inventory
Provides current status and planning factors used by MRP
quantity currently on hand (perpetual inventory)
quantities on order and delivery dates
customer orders (service parts)
lot size
lead time
safety stock level
scrap rate
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6. Master Schedule
States which end items (finished goods) are to be produced, when these are needed, and in what quantities
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7. Bill-of-Materials
A listing of all of the raw materials, parts, subassemblies, and assemblies needed to produce one unit of a finished product
Typically shown a product tree structure where all components and their relationships are listed by levels
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8. Product Structure Tree
Figure 14-5
Product Structure Tree
Level
Chair
Seat
Legs (2)
Cross
bar
Side
Rails (2)
Back
Supports (3)
Leg
Assembly 1 2 3
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9. Netting Process Assume the following on-hand amounts for each item
Chair
Leg Assembly
Seat
Back Assembly
Leg
Cross Bar
Side Rail
Back Support
Amount on hand 10 5 7 2 8 14 12 20
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10. Planning Horizon
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 (see Figure 12-12, page 548).
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11. Netting Process Assume the following lead times for each item Item
Chair
Leg Assembly
Seat
Back Assembly
Leg
Cross Bar
Side Rail
Back Support
Lead time 1 2
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12. Assembly Time Chart 1 2 3 4 5 Place order with supplier Release order
Procurement of
back supports
Procurement
of cross bar
Back assembly
Procurement
of side rails
Final assembly
and inspection
of chair
Procurement
of seat
Procurement
of cross bar
Leg
assembly
Procurement
of front legs 1 2 3 4 5
Place order
with supplier
Release order
to department
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13. 1 2 3 4 5
Gross requirements
Scheduled receipts
Projected on hand
Net requirements
Planned-order receipts
Planned-order releases
Item
MRP Logic 10 15 20 12 5
The MPS is converted into the gross requirements for each component for each time period (time bucket) in the planning horizon using the bill of materials.
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14. 1 2 3 4 5
Gross requirements
Scheduled receipts
Projected on hand
Net requirements
Planned-order receipts
Planned-order releases
Item 10 15 20 12 5 7 9
The scheduled receipts are orders that have been placed and are on the way. It is assumed that receipts arrive and are available at the beginning of a time period.
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15. 1 2 3 4 5
Gross requirements
Scheduled receipts
Projected on hand
Net requirements
Planned-order receipts
Planned-order releases
Item 10 15 20 12 5 7 9 23
The initial inventory is added to period 1’s scheduled receipts and placed in period 1 of the projected on hand line. In this case, assume that the initial inventory is 16. Add period 1’s scheduled receipt (7) and initial inventory (16) to obtain the projected on hand amount for period 1 (23).
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16. 1 2 3 4 5
Gross requirements
Scheduled receipts
Projected on hand
Net requirements
Planned-order receipts
Planned-order releases
Item 10 15 20 12 5 7 9 23
-13
Subtract the projected on hand amount for period 1 (23) from period 1’s gross requirement (10) to find the net requirement (-13).
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17. 1 2 3 4 5
Gross requirements
Scheduled receipts
Projected on hand
Net requirements
Planned-order receipts
Planned-order releases
Item 10 15 20 12 5 7 9 23 22
-13
If the net requirement is negative or zero, that amount (13) is added to the period 2’s scheduled receipt (9) to find the period 2’s projected on hand amount (22).
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18. 1 2 3 4 5
Gross requirements
Scheduled receipts
Projected on hand
Net requirements
Planned-order receipts
Planned-order releases
Item 10 15 20 12 5 7 9 23 22
-13 -7
Subtract the projected on hand amount for period 2 (22) from period 2’s gross requirement (15) to find the net requirement (-7).
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19. 1 2 3 4 5
Gross requirements
Scheduled receipts
Projected on hand
Net requirements
Planned-order receipts
Planned-order releases
Item 10 15 20 12 5 7 9 23 22 7
-13 -7
If the net requirement is negative or zero, that amount (7) is added to the period 3’s scheduled receipt (0) to find the period 3’s projected on hand amount (7).
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20. 1 2 3 4 5
Gross requirements
Scheduled receipts
Projected on hand
Net requirements
Planned-order receipts
Planned-order releases
Item 10 15 20 12 5 7 9 23 22 7
-13 -7 13
Subtract the projected on hand amount for period 3 (7) from period 3’s gross requirement (20) to find the net requirement (13). If the net requirement is positive, an order receipt must be planned to cover that amount.
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21. 1 2 3 4 5
Gross requirements
Scheduled receipts
Projected on hand
Net requirements
Planned-order receipts
Planned-order releases
Item 10 15 20 12 5 7 9 23 22 7
-13 -7 13 13
If lot-for-lot lot sizing is being used, the planned order receipt is equal to period 3’s net requirement.
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22. 1 2 3 4 5
Gross requirements
Scheduled receipts
Projected on hand
Net requirements
Planned-order receipts
Planned-order releases
Item 10 15 20 12 5 7 9 23 22 7
-13 -7 13 13 13
The planned order receipt is then offset (moved forward in time) to allow for the lead time. This is the planned order release.
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23. Repeat the steps for period 4.1 2 3 4 5
Gross requirements
Scheduled receipts
Projected on hand
Net requirements
Planned-order receipts
Planned-order releases
Item 10 15 20 12 5 7 9 23 22 7
-13 -7 13 12 13 12 13 12
Repeat the steps for period 4.
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24. Repeat the steps for period 51 2 3 4 5
Gross requirements
Scheduled receipts
Projected on hand
Net requirements
Planned-order receipts
Planned-order releases
Item 10 15 20 12 5 7 9 23 22 7
-13 -7 13 12 5 13 12 5 13 12 5
Repeat the steps for period 5
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25. Bill of Materials A
B(2)
C(3)
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26. Master production schedule: 100 in week 5
Assumptions
Master production schedule: 100 in week 5
Item On hand Lead Time Scheduled Receipts A B
C in wk 2
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27. MRP Dynamics Modes of operation
regenerative - batch mode
net change - on-line, real time mode
System nervousness - frequent changes of inputs to a net change MRP system
Pegging - tracing upward in the BOM from the component to all of the parent items
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28. Order releases - authorization for the execution of planned orders.
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.
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29. Performance-control reports Planning reports Exception reports
MRP Secondary Reports
Performance-control reports
Planning reports
Exception reports
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30. Other Considerations Safety Stock Lot sizing Lot-for-lot ordering
Economic order quantity
Fixed-period ordering
Part-period model
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31. Capacity 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.
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32. resource requirements
Figure 14-17
MRP Planning
Develop a tentative
master production
schedule
Use MRP to
simulate material
requirements
Convert material
requirements to
resource requirements
Firm up a portion
of the MPS
Is shop
capacity
adequate?
Can
capacity be
changed to meet
Revise tentative
Change
Yes No
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33. Low levels of in-process inventories
Benefits of MRP
Low levels of in-process inventories
Ability to track material requirements
Ability to evaluate capacity requirements
Means of allocating production time
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34. Desirable Characteristics for MRP Implementation (1 of 2)
An effective computer system
Accurate computerized bills of material and inventory status files
Manufactures discrete products that are processed through many production steps
Processes requiring long processing times
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35. Desirable Characteristics for MRP Implementation (2 of 2)
Relatively reliable and stable lead times
Master schedule frozen for a period of time sufficient to procure materials without expediting and confusion
Top management support and commitment
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36. Expanded MRP with and emphasis placed on integration
MRP II
Expanded MRP with and emphasis placed on integration
Financial planning
Marketing
Engineering
Purchasing
Manufacturing
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37. Figure 14-19 Market Demand Finance Manufacturing Marketing Production
Master
production schedule
Finance
Manufacturing
Marketing
Production
plan
MRP
Adjust master schedule
Rough-cut
capacity planning
Capacity
planning
Adjust
production plan
Problems? No
Yes No
Requirements
schedules
Yes
Problems?
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38. M R P
WOW!!!
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