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MRP: Material Requirement Planning

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Title: MRP: Material Requirement Planning


1
Chapter 13
  • MRP Material Requirement Planning
  • ERP Enterprise Resource Planning

2
MRP
  • Material requirements planning Computer-based
    Information System for Ordering and Scheduling of
    Dependent Demand Inventories

3
Independent and Dependent Demand
Dependent demand Demand for items that are
subassemblies or component parts to be used in
production of finished goods.
Independent Demand
A
C(2)
B(4)
Dependent Demand
D(2)
E(1)
D(3)
F(2)
4
Information Flow, Processes, Data Bases
MRP Inputs
MRP Processing
MRP Outputs
Changes
Order releases
Master schedule
Planned-order schedules
Primary reports
Exception reports
Bill of materials
Planning reports
MRP computer programs
Secondary reports
Performance- control reports
Inventory records
Inventory transaction
5
Inputs to MRP
  • (1) Master schedule Identifying (a) which end
    items are to be produced, (b) in what quantities,
    and (c) when these are needed.
  • (2) Bill of Material a listing of all of the
    raw materials, parts, subassemblies, and
    assemblies needed to produce one unit of a
    product.
  • (3) Inventories

6
Bill-of-Materials
  • Product structure tree Visual depiction of the
    requirements in a bill of materials, where all
    components are listed by levels.

7
Product Structure Tree
8
Product Structure Tree
9
Product Structure Tree
10
Example
Determine the quantities of B, C, D, E, and F to
produce one unit of A
Level 0
A
B (2)
C
1
E (2)
F (2)
D (3)
2
E
3
E (4)
11
Extend Level 1
Level 0
A
B(2)
C
1
E (2)
F (2)
D (32)
2
E(2)
3
E (4)
12
Extend Level 2
Level 0
A
B(2)
C
1
E (2)
F (2)
D (32)
2
E(2)
3
E (432)
13
Compute the Quantities
Level 0
A
B(2)
C
1
E (2)
F (2)
D (6)
2
E(2)
We need B2 C1 D6 E28 F2
3
E (24)
14
Example
Inventory B4 C10 D8 E60 F0
Determine the quantities of these components that
we need to order or assemble to satisfy demand of
10A
15
Extend Level 0
Inventory B4 C10
16
Level 1 Computations
17
Extend Level 1
18
Extend Level 1
19
Extend Level 1
Inventory D8 E60 F0
20
Level 2 Computations
Level 0
A(10)
B (16)
C (0)
1
E (0)
F (0)
D (48-840)
E(16)
2
3
E (4)
21
Level 2 Computations
Level 0
A(10)
B (16)
C (0)
1
E (0)
F (0)
D (40)
E(16)
2
3
E (4)
22
Extend Level 2
Level 0
A(10)
B (16)
C (0)
1
E (0)
F (0)
D (40)
E(16)
2
3
E (440)
23
Extend Level 2
Level 0
A(10)
B (16)
C (0)
1
E (0)
F (0)
D (40)
E(16)
2
3
E (160)
24
Extend Level 2
Level 0
A(10)
B (16)
C (0)
1
E (0)
F (0)
D (40)
E(16)
2
E60 F0
3
E (160)
Inventory E60 Requirement E 16016-60116
25
Extend Level 2
Level 0
A(10)
B (16)
C (0)
1
E (0)
F (0)
D (40)
E(16)
2
3
E (100)
26
Assembly Time Chart
27
Shutter, 1 Frame (LT2W), and 4 Wood Section
(LT1W)
Frame (2, 2)
Shutter Assembly (1)
Wood Sections (4,1)
2
1
3
28
Master Schedule Lot for Lot Ordering
Week Beg Inv 1 2 3 4 5 6 7 8
Quantity 100 150
Shutter LT 1W Gross Requirement
Shutter LT 1W Scheduled Receipts
Shutter LT 1W Projected on Hand
Shutter LT 1W Net Requirement
Shutter LT 1W Planned Order Receipts
Shutter LT 1W Planned Order Releases
100
150
100
150
100
150
100
150
Shutter has two frames and four wood sections
29
Frame 2 per unit, LT2 W
Shutter LT 1W Gross Requirement 100 150
Shutter LT 1W Scheduled Receipts
Shutter LT 1W Projected on Hand
Shutter LT 1W Net Requirement 100 150
Shutter LT 1W Planned Order Receipts 100 150
Shutter LT 1W Planned Order Releases 100 150
Frame LT 2W Gross Requirement
Frame LT 2W Scheduled Receipts
Frame LT 2W Projected on Hand
Frame LT 2W Net Requirement
Frame LT 2W Planned Order Receipts
Frame LT 2W Planned Order Releases
200
300
200
300
200
300
200
300
30
Wood Section 4 per unit, LT1 W
Shutter LT 1W Gross Requirement 100 150
Shutter LT 1W Scheduled Receipts
Shutter LT 1W Projected on Hand
Shutter LT 1W Net Requirement 100 150
Shutter LT 1W Planned Order Receipts 100 150
Shutter LT 1W Planned Order Releases 100 150
Wood Section LT 1W Gross Requirement
Wood Section LT 1W Scheduled Receipts
Wood Section LT 1W Projected on Hand
Wood Section LT 1W Net Requirement
Wood Section LT 1W Planned Order Receipts
Wood Section LT 1W Planned Order Releases
400
600
70
70
70
70
600
330
330
600
330
600
31
Master Schedule Lot Size Ordering EOQ 320, 70
Shutter LT 1W Gross Requirement 100 150
Shutter LT 1W Scheduled Receipts
Shutter LT 1W Projected on Hand
Shutter LT 1W Net Requirement 100 150
Shutter LT 1W Planned Order Receipts 100 150
Shutter LT 1W Planned Order Releases 100 150
Frame LT 2W EOQ 320 Gross Requirement 200 300
Frame LT 2W EOQ 320 Scheduled Receipts
Frame LT 2W EOQ 320 Projected on Hand
Frame LT 2W EOQ 320 Net Requirement 200
Frame LT 2W EOQ 320 Planned Order Receipts
Frame LT 2W EOQ 320 Planned Order Releases
140
120
120
120
120
180
320
320
320
320
32
Lot Size Ordering EOQ 70
Shutter LT 1W Gross Requirement 100 150
Shutter LT 1W Scheduled Receipts
Shutter LT 1W Projected on Hand
Shutter LT 1W Net Requirement 100 150
Shutter LT 1W Planned Order Receipts 100 150
Shutter LT 1W Planned Order Releases 100 150
Wood Section LT 1W EOQ 70 Gross Requirement 400 600
Wood Section LT 1W EOQ 70 Scheduled Receipts 70
Wood Section LT 1W EOQ 70 Projected on Hand 70 70 70
Wood Section LT 1W EOQ 70 Net Requirement 330
Wood Section LT 1W EOQ 70 Planned Order Receipts
Wood Section LT 1W EOQ 70 Planned Order Releases
20
20
50
20
20
580
350
630
350
630
33
Practice Example (pp 606, P2), Units Required,
Lead Times
Item End B C D E F G H LT (WK) 1 2 3 3 1 2 1 2 In
vOnHand 0 10 10 25 12 30 5 0 For 20 units of the
end item, how many additional units of each item
is required
34
Units Required
Level 0
A(20)
D(3)
C(1)
B (2)
1
E (2)
2
F(3)
G (2)
E (2)
E (2)
H (4)
Item End B C D E F G H InvOnHand 0 10 10 25 12 30
5 0
35
Units Required
Level 0
A(20)
D(60)
C(20)
B (40)
1
E (2)
2
F(3)
G (2)
E (2)
E (2)
H (4)
Item End B C D E F G H InvOnHand 0 10 10 25 12 30
5 0
36
Units Required
Level 0
A(20)
D(60-25)
C(20-10)
B (40-10)
1
E (2)
2
F(3)
G (2)
E (2)
E (2)
H (4)
37
Units Required
Level 0
A(20)
D(35)
C(10)
B (30)
1
E (2)
2
F(3)
G (2)
E (2)
E (2)
H (4)
38
Units Required
Level 0
A(10)
D(35)
C(10)
B (30)
1
E (230)
2
F(330)
G (210)
E (235)
E (210)
H (435)
39
Units Required
Level 0
A(10)
D(35)
C(10)
B (30)
1
E (60)
2
F(90)
G (20)
E (70)
E (20)
H (140)
Item E F G H InvOnHand 12 30 5 0
40
Units Required
Level 0
A(10)
D(35)
C(10)
B (30)
1
E (60-12)
2
F(90-30)
G (20-5)
E (70)
E (20)
H (140)
41
Units Required
Level 0
A(10)
D(35)
C(10)
B (30)
1
E (48)
2
F(60)
G (15)
E (70)
E (20)
H (140)
Item End B C D E F G H Required 20 30 10 35 138
60 15 140
42
Example (pp 673, P2) Lead Times
A(1)
Item End B C D E F G H LT (WK) 1 2 3 3 1 2 1 2 R
equired 20 30 10 35 138 60 15 140
43
Lead Times
A(1)
D
C
B
Item B C D E F G H LT (WK) 2 3 3 1 2 1 2 Require
d 30 10 35 138 60 15 140
44
Lead Times
A(1)
D(3)
C(3)
B (2)
45
Lead Times
A(1)
D(3)
C(3)
B (2)
E
F
G
E
E
H
Item E F G H LT (WK) 1 2 1 2 Required 138 60 15
140
46
Lead Times
A(1)
D(3)
C(3)
B (2)
E (1)
F(2)
G (1)
E (1)
E (1)
H (2)
47
Lead Times
A(1)
D(3)
C(3)
B (2)
E (1)
F(2)
G (1)
E (1)
E (1)
H (2)
48
Master Schedule Lot for Lot Ordering
Week Beg Inv 1 2 3 4 5
Quantity 120
Product X LT 1W Gross Requirement
Product X LT 1W Scheduled Receipts
Product X LT 1W Projected on Hand
Product X LT 1W Net Requirement
Product X LT 1W Planned Order Receipts
Product X LT 1W Planned Order Releases
120
120
120
120
Part X (LT1) is formed by three Part A (LT1)
Part A is formed by two Part B (LT2)
49
Part A 3 per unit, LT1 W
Product X LT 1W Gross Requirement 120
Product X LT 1W Scheduled Receipts
Product X LT 1W Projected on Hand
Product X LT 1W Net Requirement 120
Product X LT 1W Planned Order Receipts 120
Product X LT 1W Planned Order Releases 120
Part A (3) LT 1W Gross Requirement
Part A (3) LT 1W Scheduled Receipts
Part A (3) LT 1W Projected on Hand
Part A (3) LT 1W Net Requirement
Part A (3) LT 1W Planned Order Receipts
Part A (3) LT 1W Planned Order Releases
360
60
60
60
60
300
300
300
50
Part B 5 per unit, LT2 W
Part A (3) LT 1W Gross Requirement
Part A (3) LT 1W Scheduled Receipts
Part A (3) LT 1W Projected on Hand
Part A (3) LT 1W Net Requirement
Part A (3) LT 1W Planned Order Receipts
Part A (3) LT 1W Planned Order Releases
360
60
60
60
60
300
300
300
Part B(2) LT 2W Gross Requirement
Part B(2) LT 2W Scheduled Receipts
Part B(2) LT 2W Projected on Hand
Part B(2) LT 2W Net Requirement
Part B(2) LT 2W Planned Order Receipts
Part B(2) LT 2W Planned Order Releases
600
100
100
100
100
500
500
500
51
Need More Practice ?
  • Solved Problems 1 and 2 on pages 602-604.
  • First solve the problem yourself.
  • Then look at the solution.

52
MRP Secondary Reports
  • Performance-control reports
  • Planning reports
  • Exception reports

53
Other Considerations
  • Safety Stock
  • Lot sizing
  • Lot-for-lot ordering
  • Economic order quantity
  • Fixed-period ordering
  • Part-period model

54
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.
  • Time fences Series of time intervals during
    which order changes are allowed or restricted.

55
MRP Planning
56
MRP in Services
  • Food catering service
  • End item gt catered food
  • Dependent demand gt ingredients for each recipe,
    i.e. bill of materials
  • Hotel renovation
  • Activities and materials exploded into
    component parts

57
Benefits of MRP
  • Low levels of in-process inventories
  • Ability to track material requirements
  • Ability to evaluate capacity requirements
  • Means of allocating production time

58
Requirements of MRP
  • Computer and necessary software
  • Accurate and up-to-date
  • Master schedules
  • Bills of materials
  • Inventory records
  • Integrity of data

59
MRP II
  • Expanded MRP with and emphasis placed on
    integration
  • Financial planning
  • Marketing
  • Engineering
  • Purchasing
  • Manufacturing

60
MRP II
61
ERP
  • Enterprise resource planning (ERP) An expanded
    effort to integrate standardized record-keeping
    that will permit information sharing throughout
    the organization
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