© The McGraw-Hill Companies, Inc., 2004 1. 2 Chapter 15 Materials Requirements Planning.

©The McGraw-Hill Companies, Inc., 2004

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Chapter 15

Materials Requirements Planning


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• Material Requirements Planning (MRP)

• MRP Logic and Product Structure Trees

• Time Fences

• MRP Example

• MRP II and Lot Sizing

OBJECTIVES


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Material Requirements PlanningDefined• Materials requirements planning (MRP) is a

means for determining the number of parts, components, and materials needed to produce a product

• MRP provides time scheduling information specifying when each of the materials, parts, and components should be ordered or produced

• Dependent demand drives MRP• MRP is a software system


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Example of MRP Logic and Product Structure Tree

B(4)

E(1)D(2)

C(2)

F(2)D(3)

A

Product Structure Tree for Assembly A Lead TimesA 1 dayB 2 daysC 1 dayD 3 daysE 4 daysF 1 day

Total Unit DemandDay 10 50 ADay 8 20 B (Spares)Day 6 15 D (Spares)

Given the product structure tree for “A” and the lead time and demand information below, provide a materials requirements plan that defines the number of units of each component and when they will be needed

Given the product structure tree for “A” and the lead time and demand information below, provide a materials requirements plan that defines the number of units of each component and when they will be needed


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LT = 1 day

Day: 1 2 3 4 5 6 7 8 9 10A Required 50

Order Placement 50

First, the number of units of “A” are scheduled backwards to allow for their lead time. So, in the materials requirement plan below, we have to place an order for 50 units of “A” on the 9th day to receive them on day 10.

First, the number of units of “A” are scheduled backwards to allow for their lead time. So, in the materials requirement plan below, we have to place an order for 50 units of “A” on the 9th day to receive them on day 10.


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Next, we need to start scheduling the components that make up “A”. In the case of component “B” we need 4 B’s for each A. Since we need 50 A’s, that means 200 B’s. And again, we back the schedule up for the necessary 2 days of lead time.

Next, we need to start scheduling the components that make up “A”. In the case of component “B” we need 4 B’s for each A. Since we need 50 A’s, that means 200 B’s. And again, we back the schedule up for the necessary 2 days of lead time.

Day: 1 2 3 4 5 6 7 8 9 10A Required 50

Order Placement 50B Required 20 200

Order Placement 20 200

B(4)

E(1)D(2)

C(2)

F(2)D(3)

A

SparesLT = 2

4x50=200

Day: 1 2 3 4 5 6 7 8 9 10A Required 50

LT=1 Order Placement 50B Required 20 200

LT=2 Order Placement 20 200C Required 100

LT=1 Order Placement 100D Required 55 400 300

LT=3 Order Placement 55 400 300E Required 20 200

LT=4 Order Placement 20 200F Required 200

LT=1 Order Placement 200

B(4)

E(1)D(2)

C(2)

F(2)D(3)

A

40 + 15 spares

Part D: Day 6

Finally, repeating the process for all components, we have the final materials requirements plan:

Finally, repeating the process for all components, we have the final materials requirements plan:


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Master Production Schedule (MPS)

• Time-phased plan specifying how many and when the firm plans to build each end item

Aggregate Plan(Product Groups)

Aggregate Plan(Product Groups)

MPS(Specific End Items)


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Types of Time Fences

• Frozen– No schedule changes allowed within this window

• Moderately Firm– Specific changes allowed within product groups as

long as parts are available• Flexible

– Significant variation allowed as long as overall capacity requirements remain at the same levels


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Example of Time Fences

8 15 26

Weeks

FrozenModerately

Firm Flexible

Firm Customer Orders

Forecast and availablecapacity

Capacity

Exhibit 15.5Exhibit 15.5


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Material Requirements Planning System

• Based on a master production schedule, a material requirements planning system:– Creates schedules identifying the specific parts

and materials required to produce end items

– Determines exact unit numbers needed

– Determines the dates when orders for those materials should be released, based on lead times

From Exhibit 15.6From Exhibit 15.6

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Firm orders from knowncustomers

Forecastsof demand

from randomcustomers

Aggregateproduct

plan

Bill ofmaterial

file

Engineeringdesign

changes

Inventoryrecord file

Inventorytransactions

Master productionSchedule (MPS)

Primary reportsSecondary reports

Planned order schedule for inventory and production control

Exception reportsPlanning reportsReports for performance control

Materialplanning(MRP

computer program)


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Bill of Materials (BOM) FileA Complete Product Description

• Materials

• Parts

• Components

• Production sequence

• Modular BOM – Subassemblies

• Super BOM– Fractional options


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Inventory Records File

• Each inventory item carried as a separate file– Status according to “time buckets”

• Pegging– Identify each parent item that created demand


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Primary MRP Reports• Planned orders to be released at a future time• Order release notices to execute the planned

orders• Changes in due dates of open orders due to

rescheduling • Cancellations or suspensions of open orders due

to cancellation or suspension of orders on the master production schedule

• Inventory status data


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Secondary MRP Reports

• Planning reports, for example, forecasting inventory requirements over a period of time

• Performance reports used to determine agreement between actual and programmed usage and costs

• Exception reports used to point out serious discrepancies, such as late or overdue orders


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Additional MRP Scheduling Terminology

• Gross Requirements

• Scheduled receipts

• Projected available balance

• Net requirements

• Planned order receipt

• Planned order release


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MRP Example

A(2) B(1)

D(5)C(2)

X

C(3)

Item On-Hand Lead Time (Weeks)X 50 2A 75 3B 25 1C 10 2D 20 2

Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10

Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10


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A(2)

X

Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95

LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50

On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90

LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75

On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45


On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40

LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10

On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100

LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20

On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80

It takes 2 A’s for each X

It takes 2 A’s for each X


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B(1)A(2)

X

It takes 1 B for each X

It takes 1 B for each X


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A(2) B(1)

X

C(3)












It takes 3 C’s for each A

It takes 3 C’s for each A


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A(2) B(1)

C(2)

X

C(3)












It takes 2 C’s for each B

It takes 2 C’s for each B


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A(2) B(1)

D(5)C(2)

X

C(3)












It takes 5 D’s for each B

It takes 5 D’s for each B


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Closed Loop MRP

Production PlanningMaster Production SchedulingMaterial Requirements PlanningCapacity Requirements Planning

Realistic?No

Feedback

Execute:Capacity PlansMaterial Plans

Yes

Feedback


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Manufacturing Resource Planning (MRP II)

• Goal: Plan and monitor all resources of a manufacturing firm (closed loop):– manufacturing– marketing– finance– engineering

• Simulate the manufacturing system


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Lot Sizing in MRP Programs

• Lot-for-lot (L4L)

• Economic order quantity (EOQ)

• Least total cost (LTC)

• Least unit cost (LUC)

• Which one to use? – The one that is least costly!


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Question BowlWhich type of industry has only “medium”

expected benefits from the use of MRP?a. Assemble-to-stockb. Fabricate-to-stockc. Assemble-to-orderd. Fabricate-to-ordere. Process

Answer: e. Process


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Question BowlTo ensure good master scheduling, a master

scheduler must do which of the following?a. Never lose sight of the aggregate planb. Identify and communicate all problemsc. Be involved with customer order promisingd. Be visible to all levels of managemente. All of the above

Answer: e. All of the above (Correct answer can also include objectively trade off manufacturing, marketing, and engineering conflicts and include all demands from product sales, warehouse replenishment, spares, and interplant requirements.)


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Question BowlThe purpose of a “time fence” is which of the

following?a. Make sure the cows don’t get out of the

barnb. Control flow through the production systemc. Maximize sales to retailersd. All of the abovee. None of the above

Answer: b. Control flow through the production system


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Question BowlWhich of the following is an objective under an

MRP system?a. To improve customer serviceb. Minimize inventory investmentc. Maximize production operating efficiencyd. All of the abovee. None of the above

Answer: d. All of the above


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Question BowlWhich of the following is one of the three main

inputs into an MRP system?a. BOM fileb. Exception reportc. Planning reportd. All of the abovee. None of the above

Answer: a. BOM file (Correct answer can also include Master Schedule and Inventory Records File.)


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Question BowlAn MRP program accesses the status of a job

according to specific time periods called which of the following?

a. Peg recordb. Time fencec. Time bucketd. Time clocke. None of the above

Answer: c. Time bucket


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Question BowlIn MRP, workload per work center can be

determined. When the work capacity is exceeded, which of the following options can be implemented to correct the imbalance of workload?

a. Work overtimeb. Renegotiate the due date and reschedulec. Subcontract to an outside shopd. All of the abovee. None of the above

Answer: d. All of the above (Correct answer can also include selecting an alternative work center and rescheduling the work at a different time.)


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Question BowlWhich of the following are reasons why a Lot-

For-Lot (L4L) method of lot sizing can be used in an MRP application?

a. Minimizes carrying costsb. Sets planned orders to exactly match the

net requirementsc. Produces exactly what is neededd. Does not carry any units over into future

periodse. All of the above

Answer: e. All of the above


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End of Chapter 15

© The McGraw-Hill Companies, Inc., 2004 1. 2 Chapter 15 Materials Requirements Planning.

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Transcript of © The McGraw-Hill Companies, Inc., 2004 1. 2 Chapter 15 Materials Requirements Planning.