1 Introduction to Operations Management Material Requirements Planning (MRP) CHAPTER 13.

1Introduction to Operations Management

Material Requirements Planning (MRP)

CHAPTER

13


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

TreeLead

Times


Dependent vs Independent Demand

Time

Time Time

Time

Dem

and

Am

ount

on

hand

Am

ount

on

hand

Dem

and

Stable demand“Lumpy” demand

Safety stock


Objectives of MRP

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


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.


MRP OverviewMRP Inputs MRP Processing MRP Outputs

Masterschedule

Bill ofmaterials

file

Inventoryrecords

file

MRP computerprograms

Changes

Order releases

Planned-orderschedules

Exception reports

Planning reports

Performance-controlreports

Inventorytransaction

Primaryreports

Secondaryreports


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


Planning Horizon

1 2 3 4 5 6 7 8 9 10

Procurement

Fabrication

Subassembly

Assembly


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.


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.


BOM

Accuracy is important since errors may multiply many times


Product Structure Tree

Chair

Seat

Legs (2)Cross

barSide

Rails (2)Cross

barBack

Supports (3)

LegAssembly

BackAssembly

Level 0

1

2

3


Low Level Coding

Y

C

F E G H

A D

Level 0

1

2

3

E

EEE

B


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


MRP Processing

Net Requirement in period t

=Gross Requirement in period t

Projected on hand inventory in period t

- +

( Safety stock

Allowance for waste+ )


Assembly Time Chart

1 2 3 4 5 6 7 8 9 10 11

Procurement ofraw material D

Procurement ofraw material F

Procurement ofpart C

Procurement ofpart H

Procurement ofraw material I

Fabricationof part G

Fabricationof part E

Subassembly A

Subassembly B

Final assemblyand inspection


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.


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.


Solution to exampleDevelop a master schedule and a product structure tree

Wk number 1 2 3 4 5 6 7 8

Quantity 100 150

Shutter

Frames (2) Wood sections (4)


Solution to example(lot-for-lot)

1 2 3 4 5 6 7

Grossrequirements

100

Scheduledreceipts

Projected onhandNet

requirements100

Planned-orderreceipts

100

Shutters:

LT isoneweek

Planned-orderreleases

100 150


Solution to example (lot-for-lot)times 2

1 2 3 4 5 6 7

Grossrequirements

200 300

Scheduledreceipts

Projected onhandNet

requirements200 300


200 300

Frames:

LT istwoweeks


200 300


Solution to example (lot-for-lot)times 4

1 2 3 4 5 6 7

Grossrequirements

400 600

Scheduledreceipts

70

Projected onhand

70 70 70

Netrequirements

330 600


330 600

Woodsections:

LT isoneweek


330 600


Solution to example (fixed lot-size)

times 2

1 2 3 4 5 6 7

Grossrequirements

200 300

Scheduledreceipts

Projected onhand

120 120 120 120

Netrequirements

200 180


320 320

Frames:

LT istwoweeks


320 320


Solution to example (fixed lot-size)

times 4

1 2 3 4 5 6 7

Grossrequirements

400 600

Scheduledreceipts

70

Projected onhand

70 70 70 20 20 20 20

Netrequirements

330 580


350 630

Woodsections:

LT isoneweek


350 630


MRP Secondary Reports

Performance-control reports Planning reports Exception reports


Other Considerations

Safety Stock Lot sizing

– Lot-for-lot ordering

– Economic order quantity

– Fixed-period ordering

– Part-period model Yield rates


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.


MRP Capacity Requirement PlanningDevelop a tentativemaster production

schedule

Develop a tentativemaster production

schedule

Use MRP tosimulate material

requirements

Use MRP tosimulate material

requirements

Convert materialrequirements to

resource requirements

Firm up a portionof the MPS

Is shopcapacity

adequate?

Cancapacity be

changed to meetrequirements

Revise tentativemaster production

schedule

Changecapacity

Yes

No

Yes

No


Benefits of MRP

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


Requirements of MRP

Computer and necessary software Accurate and up-to-date

– Master schedules– Bills of materials– Inventory records

Integrity of data


MRP II

Expanded MRP with and emphasis placed on integration– Financial planning– Marketing– Engineering– Purchasing– Manufacturing


Overview of MRP II

MarketDemand

Productionplan

Problems?

Rough-cutcapacity planning

Yes No YesNo

Finance

Marketing

Manufacturing

Adjustproduction plan

Masterproduction schedule

MRP

Capacityplanning

Problems?Requirements

schedules

Adj

ust

mas

ter

sche

dule

1 Introduction to Operations Management Material Requirements Planning (MRP) CHAPTER 13.

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