Material Requirements Planning Distribution Requirements ...eclt5940/protected/MRP-DRP-S.pdf ·...

Material Requirements Planning

&

Distribution Requirements Planning

Material Requirements Planning

&

Distribution Requirements Planning

( MRP & DRP )

No formal readings

SEEM 4610

Supply Chain Revisited

what happens in a supply chain?what happens in a supply chain?

Manufacturer

(Campbell’s )

Customer

(Park’n Shop

DC, Stores)Consumers

Customer places an

order

Chain Reaction

Customer order

Issuing orders + producing (1 wk)

Campbell’s Soup

Orders to Metal Processor

. . .

Can

Order to farms (1 wk )

Chicken

Chicken raising (30 wks). . .. . .

Hatching eggs(4 wks)

Waiting hens to lay eggs ( 3 mos)

Order to Steel Maker

Lessons

Someone along the

Soup chain must

carry stock/inventory

in some form before

seeing actual

order/”demand”

Make to stock

(produce/stock-up

according to plan)

How do you get the

plan?

MRP RequirementsMRP Requirements

• Computer system

• Mainly discrete products

• Accurate bill-of-material

• Accurate inventory status

– 99% inventory accuracy

• Stable lead times

MRP & Production Planning

Process

Forecast &

Firm Orders

MaterialRequirements

Planning

Resource

Availability

MasterProductionScheduling

How many and When for

Finished Goods?

APP

Aggregate Production

Planning: to balance overall

capacity and demand (hiring,

contracting, …)

– Ch. 8 (skip)

MRP System

Input & Output

MRP System

Input & Output

What to make

& whenWhat items

make up

the product Material

Requirements

Planning Sys.

What is in

stock

What items to

make & when

How long to

make items

What is on

order

MRP System

Input & Output

MRP System

Input & Output

Master

Production

ScheduleBill of

MaterialsMaterial

Requirements

Planning Sys.

Inventory

Status

Planned Order

& Other

Reports

Item MasterPurchasing

Data

Master

Production Schedule

Master

Production Schedule

Item/Week Oct 3 Oct 10 Oct 17 Oct 24

Product A1 300 200 310 300

Product X3 300 450 310 330

• Shows items to be produced

– End item, customer order, module

• Derived from aggregate plan

• Example

Bill-of-MaterialBill-of-Material

• List of components & quantities needed to

make product

• Provides product structure (tree)

– Parents: Items above given level

– Children: Items below given level

• Shows low-level coding

– Top level is 0; next level is 1 etc.

Bill-of-Material

Product Structure Tree

Bill-of-Material

Product Structure Tree

Bicycle(1)

P/N 1000

Handle Bars (1)

P/N 1001

Frame Assy (1)

P/N 1002

Wheels (2)

P/N 1003

Frame (1)

P/N 1004

Nature of MRP

• Use forecast to predict required amount of level 0 (end product)

• Use this number to determine number of lower level components needed (dependent demand)

Frame Seat Brake Kit

Hoop

Rim

Wire

Spokes

Front Wheel Rear Wheel

Bike Level 0

Level 1

Level 2

Level 3

Bill of Material

Example

Bill of Material

Example

Bill of Material

P/N: 1000 Name: Bicycle

P/N Desc Qty Units Level

1001 Handle Bars 1 Each 11002 Frame Assy 1 Each 1 1003 Wheels 2 Each 2 1004 Frame 1 Each 2

Product Structure Solution*Product Structure Solution*

A

B(2) C(3)

D(2)

E(1)E(3) F(2)

D(2)G(1)

5050

50 50 x 3 = 150x 3 = 15050 50 x 2 = 100x 2 = 100

150 150 x 2 = x 2 =

300300

150 150 x 1 = x 1 =

150150

300 300 x 1 = x 1 =

300300

300 300 x 2 = x 2 =

600600

100 100 x 3 = x 3 =

300300

100 100 x 2 = x 2 =

200200

Note: Note:

D: 200 + 600 = 800 D: 200 + 600 = 800

E: 300 + 150 = 450E: 300 + 150 = 450

Lead TimeLead Time

InputInput

MoveMove

TimeTime

QueueQueue

TimeTime

SetupSetup

TimeTime

RunRun

TimeTimeOutputOutput

WaitWait

TimeTime

Lead Times &

Product Structure

Lead Times &

Product Structure

1 2 3 4 5 6 7 8

2 2 wk.wk.

2 2 wk.wk.

1 1 wk.wk.

1 1 wk.wk.3 3 wk.wk.

FrameFrame

WheelsWheels

Handle BarsHandle Bars

BicycleBicycle

Frame Frame AssyAssy

Time (weeks)Time (weeks)

Lead timeLead time

MRP ReportMRP Report

1 2 3 4 5

Gross Requirements 2 20 25 15

Scheduled Receipts 5 30

Available Inventory 23 3 33 8 0

Net Requirements 7

Planned Order Receipts 7

Planned Order Releases 7

Lead time = 3; lot policy = lotLead time = 3; lot policy = lot--forfor--lot (LFL); lot (LFL);

onon--hand = 20 units; safety stock = 0 units.hand = 20 units; safety stock = 0 units.

20202020

(Week #, beg. of Nov.)

MRP Example Component BMRP Example Component B

A master schedule calls for

starting (planned order release)

2 units of product X in week 1,

20 in week 2, & 10 in week 4.

The planned order releases for

product Y are 15 in week 4, and

15 in week 5. Determine the

gross requirements for

component B.

X

A(1) B(1)

Y

A(1) C(3)

Component B SolutionComponent B Solution

X Y

A(1) B(1) A(1) C(3)

WeekQty

12

220

3 4 5 1 2 3 4 5151510

Week 1 2 3 4 5Qty 2 20 10

WeekQty

Gross Requirements BGross Requirements B

Planned Order Releases XPlanned Order Releases X Planned Order Releases YPlanned Order Releases Y

X

Thinking Challenge Component

C


CA master schedule calls for








component C.

X

A(1) B(1)

Y

A(1) C(3)

Component C Solution*Component C Solution*

X Y

A(1) B(1) A(1) C(3)

WeekQty

12

220

3 4 5 1 2 3 4 5151510

Week 1 2 3 4 5Qty 4545

WeekQty

Gross Requirements CGross Requirements C



A


AA master schedule calls for








component A.

X

A(1) B(1)

Y

A(1) C(3)

Component A Solution*Component A Solution*

X Y

A(1) B(1) A(1) C(3)

WeekQty

12

220

3 4 5 1 2 3 4 5151510

Week 1 2 3 4 5Qty 2 20 1525

WeekQty

Gross Requirements AGross Requirements A


MRP ExampleMRP Example

Prepare a net requirements plan:

1 2 3 4 5



Available Inventory

Net Requirements

Planned Order Receipts

Planned Order Releases


onon--hand = 20 units; safety stock = 0 units.hand = 20 units; safety stock = 0 units.

20202020

MRP Formulas (Formal & Complete)

• Available Inv. = “Total” On-hand

- Safety stock -Allocated

– T. on-hand is inventory physically present

– Allocated is inventory reserved for special

orders (say, for a R&D project)

• T. On-hand = Prior period's avail. inv.

+ Scheduled receipts

• Net requirement = Gross requirement

- Available Inv

Projected available inv. or Proj. on-hand

“Total” is often missing!

MRP

Problem 2

A master schedule calls for 50

units of F in week 6, & 60 in

week 8. On-hand levels are F

= 0, G = 20, & H = 60.

Another 20 units of G are

scheduled to be received in

week 4. Order quantities are

lot-for-lot except for H, which

has a lot size of 50 or

multiples of 50.

F(1)

LT = 2

G(1)

LT = 1

H(1)

LT = 2

H(4)

LT = 2

1 2 3 4 5 6 7 8

Gross Req. 50 60

Scheduled Rec.

Available Inv. 0 0 0 0 0 0 0 0

Net Requirements 50 60

Planned Ord. Rec. 50 60

Planned Ord. Rel. 50 60

Product F

Solution*

0000

1 2 3 4 5 6 7 8

Gross Req. 50 60

Scheduled Rec. 20

Available Inv. 20 20 20 0 0 0 0 0


Planned Ord. Rec. 10 60

Planned Ord. Rel. 10 60

Component G Solution*

20202020

1 2 3 4 5 6 7 8

Gross Req. 40(G)

50(F)

240

(G)60(F)

Scheduled Rec.

Available Inv. 60 60 20 20 30 20 20 20

Net Requirements 30 220 30

Planned Ord. Rec. 50 250 50

Planned Ord. Rel. 50 250 50

Component H Solution*

60606060

Using Safety Stock

1 2 3 4 5




Net Requirements 9




onon--hand = 20 units; hand = 20 units; safety stock = 2 unitssafety stock = 2 units..

18181818

Lot Size

• Lot: Batch of material that moves & gets

processed together

• Reduces setup & handling time & cost

• Techniques

– Lot-for-lot (LFL)

– Economic order quantity (EOQ)

– Part period balancing

Lot Size Effects

1 2 3 4 5




Net Requirements 7



Lead Time = 3; Lead Time = 3; Lot Size= 5 units (or Multiples)Lot Size= 5 units (or Multiples); ;

OnOn--Hand = 20 Units; Safety Stock = 0 Units.Hand = 20 Units; Safety Stock = 0 Units.

20202020

Summary of MRP Summary of MRP

• Some important terms

– Bill of materials – many applications

– Leadtimes

– Master production schedule (MPS: over a

planning horizon)

– Inventory status

– Scheduled receipts/deliveries

MRP logic has profound impact on SC planning

It is based on “push” philosophy, but the above concepts are useful in

a broad context

Summary of MRP Summary of MRP

Product XX

Component A Component B

Part A1 Part A6 Part B1 Part B2 …….

An “Explosion”

MRP IIMRP II

• MRP II is the extension of MRP to include other

resources such as labour hrs, costs, m/c

capacities, and other information, not just

material quantity

• MRP is the core part of MRP II

• Additional inputs to MRPII: standard hrs,

process “routes”, cost inform. , etc.

• MRP II can be used to perform short term cap.

Planning and cost evaluation

A Distribution Network A Distribution Network

Central DC

Region A DC Region B DC

DC A1 DC A10 DC B1 DC Bx …….

LTa1LTa10

LTb1

LTbx

LTbLTa

Local DC Demand Forecasts

WK 5 6 7 8 9 10

DC a1 10 12 0 20 30 15

DC a2 5 15 5 10 20 10

.

.

.

DC bx 20 12 15 20 25 30

Translating into Regional DC

• Lead-time information

WK 5 6 7 8 9 10

DC a1 10 12 0 20 30 15

DC a2 5 15 5 10 20 10

Should be available no later than 5 - LTa1

In DRP, diff. terms used!

Los Angeles Vitamin C Tablets 100/bottles

T. On-hand Balance 500 take S. stock out

Safety stock 200

Lead time (wk) 2

Lot-size 300

Past due 1 2 3 4 5 6 7 8

Forecast 100 120 90 110 120 100 80 120

In transit

Projected on-hand 300 200 80 290 180 60 260 180 60


Plnd Shpmts-Rcpt.Date 300 300

Plnd Shpmts-Ship.Date 300 300

Montreal T. On-hand Balance 160

Safety stock 75

Lead time (wk) 2

Lot-size 150

0 1 2 3 4 5 6 7 8

Forecast 40 50 45 50 40 45 40 50

In transit 150


Plnd Shpmts-Rcpt.Date 0 0 0 0 0 150 0 0

Plnd Shpmts-Ship.Date 150

Hide net req’t!

DC 1 DC 2 DC n

2 wks4 wks

CDC

New York StoreT. On-hand Balance 300

Safety stock 100

Lead time (wk) 2

Lot-size 300

Past due 1 2 3 4 5 6 7 8

Forecast 120 130 115 125 140 110 125 105

In transit


Plnd Shpmts-Rcpt.Date 300 300 300

Plnd Shpmts-Ship.Date 300 300 300

2 3 4 5 6 7 8

LA 300 300

Montreal 150

NY 300 300 300

Vancouver 150

Toronto 150

Chicago 300 300

TOTALS 300 300 150 750 450 300 300 0 0

Summary at Central Distribution Center (Factory)

Past due 1

Week

DRP Before and After Changes in Demand

Los Angeles Vitamin C Tablets 100/bottles

On-hand Balance 500

Safety stock 200

Lead time (wk) 2

Lot-size 300

Before

Past due 1 2 3 4 5 6 7 8

Forecast 100 120 90 110 120 100 80 120

In transit




After

Past due 2 3 4 5 6 7 8

Forecast 120 90 110 120 100 80 120

In transit 300

Projected on-hand 130 10 220 110 290 190 110 290



MRP & DRP MRP & DRP

CDC DRP: what, when

& how much

needed at CDC

Prod Plan

MRP: what, when,

how much to

make or order

Model1

P#1 P#2

LT1 LT2

Only a few firms can do so!

Material Requirements Planning Distribution Requirements ...eclt5940/protected/MRP-DRP-S.pdf ·...

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