Material Requirements Planning (MRP)

Summary of Scheduling Process

FORECAST

ROUGH-CUT CAPACITY PLANNING

PRODUCTION PLAN

MASTER PRODUCTION SCHEDULE (MPS)

MATERIAL REQUIREMENTS PLANNING (MRP)

CAPACITY REQUIREMENTS PLANNING

SHOP FLOOR CONTROLS VENDOR CONTROLS

MRP

Material Requirements Planning (MRP) – Translates MPS into Schedule of Component Requirements, Order Quantities, and Times

Manufacturing Resource Planning (MRP II) – Computes Resource Requirements, i. e. Labor

Enterprise Resource Planning (ERP) – Has Financial, Marketing, Etc. Components

Nature of Demand

Independent Demand – Demand Outside of Firm, on MPS (Vanilla Ice Cream)

Dependent Demand – Derived Demand within Firm (Cream, Vanilla Flavoring, Etc.)

MRP Inputs

Master Production Schedule (MPS)

Bill of Materials (Parts List)

Inventory Status – On Hand

Lead Times

MRP Outputs (Objectives)

Determine Requirements– What to Order

– How Much to Order

– When to Order

– When to Schedule Delivery

Keep Priorities Current

MRP Example 1

The Protecto Corporation sells special survival kits to the visitors of Congress and the state legislatures. In April there are requirements for 1000 kits. Each kit contains:

two ear plugs

one bottle of extra strength aspirin

five paper gas masks

one box

one label

The firm only manufactures the ear plugs and the gas masks. The other parts are purchased. Each ear plug uses two ounces of wax and .08 hours of labor time. Each gas mask uses a sheet of cardboard, one-half ounce of wax, and .10 hours of labor.

Bill of Materials: Example 1

Product Structure Tree

W a x (2 )

E a r P lug s (2 ) A sp irin (1 )

C a rd b oa rd (1 ) W a x (0 .5 )

G a s M a sks (5 ) B o x (1 ) L a b e l (1 )

K it (1 )

Component Parts & Labor Requirements

Ear Plugs (2 x 1000) = 2000

Aspirin (1 x 1000) = 1000

Gas Masks (5 x 1000) = 5000

Boxes (1 x 1000) = 1000

Labels (1 x 1000) = 1000

Cardboard (1 x 5000) = 5000

Wax (2 x 2000) + (.5 x 5000) = 6500

Labor Hours (.08 x 2000) + (.1 x 5000) = 660

Cardboard Sheets if 3% Scrapped

Adjustment for Scrap:

Scheduled Units = MRP / (1 – Scrap %)

Scheduled Units = 5000 / .97 = 5155

Standard Time = MRP / (1 - % Delay)

ST = 0.66 / 0.8= 0.825 Hours

Actual Time = ST / Labor Efficiency

AT = 0.825 /.9 = 0.920 Hours

Standard and Actual Labor Time – 20 Worker Idle Time

MRP Example 2 In order to make one starship, you need 3 warp engines and 4

impulse engines. Each warp engine requires 10 dilithium crystals, 7 units of platinum, and 3 antimatter pods. Each impulse engine requires 2 antimatter pods and 4 units of platinum. The lead times are:

Item Lead Time

Starship (SS) 2 years

Warp Engine (WE) 3 years

Impulse Engine (IE) 1 year

Dilithium Crystal (DC) 2 years

Antimatter Pods (AM) 1 year

Platinum (PL) 2 years

The Federation has ordered 3 starships to be delivered in AD 2379.


Product S tructure Tree

D ilith iu m C rys ta l (1 0 ) P la tin um (7 ) A n tim a tte r P od (3 )

W a rp E n g in e (3 )

A n itm a tte r P od (2 ) P la tin um (4 )

Im p u lse E n g ine (4 )

S ta rsh ip (1 )

MRP CalculationsStarship: Lead Time 2 Years

Warp Engine: Lead Time 3 YearsGross Requirements

Scheduled Receipts

Available

Net Requirements

Planned Order Receipts

Planned Order Releases

Year 2372 2373 2374 2375 2376 2377 2378 2379

Gross Requirements

Scheduled Receipts

Available

Net Requirements



3

33

3

00

9

99

9

00

MRP CalculationsStarship: Lead Time 2 Years

Impulse Engine: Lead Time 1 YearGross Requirements

Scheduled Receipts

Available

Net Requirements



Year 2372 2373 2374 2375 2376 2377 2378 2379

Gross Requirements

Scheduled Receipts

Available

Net Requirements



3

33

3

00

12

1212

12

00

MRP CalculationsWarp Engine: Lead Time 3 Years

Dilithium Crystal: Lead Time 2 YearsGross Requirements

Scheduled Receipts

Available

Net Requirements



Year 2372 2373 2374 2375 2376 2377 2378 2379

Gross Requirements

Scheduled Receipts

Available

Net Requirements



9

99

9

00

90

9090

90

00

MRP Calculations:

Work from Top to Bottom of Product Structure Tree (Low-Level Code Order)

Subtract Out Any Items On Hand

Combine Common Components – Put on the Same Table. If on the Same Square, Add.

MRP Extensions:

Multiple Bills of Material

On Hand Quantities

On Order Quantities

Spare Parts

MRP Example 3

A firm makes two products, A and R. A computer file reveals the following information about A and R, and their component parts:

Item On Hand Lead Time MPS Lot Size On Order

A 10 3 Weeks 160 (week 8) 1

B 0 2 Weeks 400

C 0 1 Week 400 (week 5) 1

D 200 3 Weeks 500

E 0 1 Week 1 200 (week 2)

R 20 3 Weeks 145 (week 7) 1


Product Structure Tree for Item A

D (3 )

C (2 ) E (3 )

B (2 ) E (4 )

A (1 )


Product Structure Tree for Item R

C (2 ) E (3 )

B (4 )

R (1 )

MRP CalculationsA: Lead Time 3 Weeks, Low-Level Code 0

D: Lead Time 3 Weeks, Low-Level Code 1Gross Requirements

Scheduled Receipts

Available

Net Requirements



Week 1 2 3 4 5 6 7 8

Gross Requirements

Scheduled Receipts

Available

Net Requirements



160

150150

100

450

250500

500

0200

150

250 250 250

MRP CalculationsR: Lead Time 3 Weeks, Low-Level Code 0

B: Lead Time 2 Weeks, Low-Level Code 1Gross Requirements

Scheduled Receipts

Available

Net Requirements



Week 1 2 3 4 5 6 7 8

Gross Requirements

Scheduled Receipts

Available

Net Requirements



145

125125

200

500

0500

800

0300

125

800

0

300

Low Level Codes

Item E is What Low-Level Code?

Item C is What Low-Level Code?

Can You Do the MRP Tables for Items C and E?

Material Planners

People Who Manage MRP System Release Manufacturing Orders (MO) or

Purchasing Orders (PO) Reschedule Due Dates of Open Orders

as Needed Reconcile Orders and Find Cause Solve Shortages by Expediting Coordinate with Others

Material PlannerWorks with:

Planned Orders Released Orders Firm Planned Orders Exception Messages Transaction Messages

Material Planner UsesFeedback for Priorities

Suppliers Actions Through Purchasing

Early or Late Completions or Differing Quantities

Management Actions (Changing MPS)

Material Requirements Planning (MRP)

Documents

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