Material Requirements Material Requirements PlanningPlanning

Materials Requirements Materials Requirements PlanningPlanning

Material Requirements Planning (MRP)MRP Logic and Product Structure

TreesMRP ExampleLot Sizing in MRP Programs

Material Requirements Material Requirements PlanningPlanning

Materials requirements planning (MRP) is the logic 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.

Independent Demand Independent Demand Inventory SystemsInventory Systems

Demand for an item carried in inventory is independent of the demand for any other item in inventory

Finished goods inventory is an example

Demands are estimated from forecasts and/or customer orders

Dependent Demand Dependent Demand Inventory SystemsInventory Systems

Items whose demand depends on the demands for other items

For example, the demand for raw materials and components can be calculated from the demand for finished goods

The systems used to manage these inventories are different from those used to manage independent demand items

Independent vs. Dependent Independent vs. Dependent DemandDemand

A

Independent Demand(finished goods and spare parts)

B(4) C(2)

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

Dependent Demand(components)

Objectives of MRPObjectives of MRP

Improve customer serviceReduce inventory costEnhancing operating efficiency

Example of MRP Logic and Example of MRP Logic and Product Structure TreeProduct Structure Tree

B(4)

E(1)D(2)

C(2)

F(2)D(3)

A

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

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.

Material Requirements Material Requirements Planning SystemPlanning 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.

Firm orders from knowncustomers

Forecastsof demand

from estimates

Aggregateproduct

plan

Masterproductionschedule

(MPS)

Materialplanning(MRP)

Engineeringdesign

changes

Bill ofmaterial

file

Inventorytransactions

Inventorystatus

file

10

Bill of Materials (BOM) FileBill of Materials (BOM) FileA Complete Product DescriptionA Complete Product Description Materials Parts Components Production sequence Modular BOM

Component or Subassemblies BOM Planning BOM or kits

create an artificial parent to the BOM used for inexpensive items like washers or pins to group.

CodingCoding

If identical items exist at various levels in the BOM: Item is coded at

lowest level at which it occurs

D (Level 2 or Level 3)

This number identifies the part at the lowest level of usage.

A

B C

D E E F

G D

Inventory Records FileInventory Records File

Buckets= time units in MRP system Week bucket vs. day bucket

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

Pegging Identify each parent item that created demand.

Parent vs. child Parent= Items above the current level Child = Items below the current level

Primary MRP ReportsPrimary 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.

Secondary MRP ReportsSecondary 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.

Additional MRP Additional MRP Scheduling TerminologyScheduling Terminology

Gross Requirements: needed during each period.

Scheduled Receipts: Existing orders that arrive at beginning of period.

On-hand or available balance:

(depending on software convention, could be at the beginning of each period or end):

Book: Inventory balance at end of each period.

Net requirements: What is need to meet requirements and safety stock.

Planned order receipt: arrives at beginning of period.

Planned order release: Addresses lead time.

MRP ExamplesMRP Examples

Closed Loop MRPClosed Loop MRP

Production PlanningMaster Production SchedulingMaterial Requirements PlanningCapacity Requirements Planning

Realistic?No

Feedback

Execute:Capacity PlansMaterial Plans

Yes

Feedback