CHAPTER 3:
MATERIAL
REQUIREMENTS
PLANNING
Lecturer: MSc. La Thu Thuy
[email protected]
01. 02. 03.
Overview of MRP Inputs MRP
MRP Processing
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1. Overview of MRP
§ A methodology that translates master schedule requirements for end items
into time-phased requirements for subassemblies, components, and raw
materials.
§ calculates and schedules all raw materials, components, and
subassemblies needed to create your final product and meet your customer
orders.
§ A major distinction in the way inventories are managed results from the
nature of demand
o Dependent demand: Demand for items that are subassemblies or
component parts to be used in the production of finished goods.
o Independent demand: demand for finished product
§ MRP is designed to answer 3 questions: (1) What is needed? (2) How much
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is needed? and (3) When is it needed?
1. Overview of MRP
Figure 1: MRP inputs, processing, and
outputs
Inputs:
• bill of materials: the composition of a
finished product;
• master schedule: how much finished
product is desired and when;
• inventory records file: how much inventory
is on hand or on order.
Process: determine the net requirements for
each period of the planning horizon
Outputs: planned-order schedules, order
releases,
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2. MRP Inputs
Master schedule
Bill of Materials (BOM)
Inventory Records
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2.1 Master schedule
• Master schedule (master production schedule): states which end items are to be
produced, when they are needed, and in what quantities.
• The quantities in a master schedule come from different sources: customer orders,
forecasts, and orders from warehouses to build up seasonal inventories.
• The masterschedule separates the planning horizon into a series of time periods or
time buckets.
o the time buckets need not be of equal length.
o the near-term portion of a master schedule may be in weeks, but later portions
may be in months or quarters.
• the master schedule needs to cover the stacked or cumulative lead time necessary
to produce the end items.
o sum of the lead times that sequential phases of a process require, from ordering
of parts or raw materials to completion of final assembly.
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2.1 Master schedule
A master schedule for end item X
The planning horizon must cover the cumulative lead time
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2.2 Bill of Materials (BOM)
Figure 2: A product structure tree
Bill of materials (BOM): a listing of
for end item X
all the raw materials, parts,
subassemblies, and assemblies
needed to produce one unit of a
product.
à each finished product has its
own BOM.
Product structure tree: A visual
depiction of the requirements in a
bill of materials, where all
components are listed by levels.
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Assembly diagram and product structure tree for chair assembly
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VX Corporation’s CAD/CAM software
Assembly diagram and product structure
tree for chair assembly
Example 1
Use the information presented in Figure 2 to do the following:
a. Determine the quantities of B, C, D, E, and F needed to assemble one X.
b. Determine the quantities of these components that will be required to
assemble 10 Xs, taking into account the quantities on hand (i.e., in inventory)
of various components:
Components On hand
B 4
C 10
D 8
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E 60
Example 1: Solution
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2.3. Inventory record
Inventory records refer to stored information on the status of
each item by time period, called time buckets. This includes:
§ quantities on hand
§ quantities ordered
§ other details for each item, such as supplier, lead time,
and lot size policy
§ Changes due to stock receipts and withdrawals, canceled
orders, and similar events
à Like BOM, inventory records must be accurate.
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Assembly time chart showing material order points needed to meet
scheduled availability of the end item
3. MRP Processing
• MRP processing takes the end item
requirements specified by the master
schedule and “explodes” them into
time-phased requirements for
assemblies, parts, and raw materials
using the bill of materials offset by lead
times.
• MRP processing combines the time
phasing and “explosion” into a
sequence of spread- sheet sections
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3. MRP Processing
• gross requirements: Total expected demand for an item or raw
material in a time period.
• scheduled receipts: Open orders scheduled to arrive from vendors
or elsewhere in the pipeline.
• projected on hand: Expected amount of inventory that will be on
hand at the beginning of each time period.
• net requirements: The actual amount needed in each time period.
• planned-order receipts: Quantity expected to be received by the
beginning of the period in which it is shown.
• planned-order releases: Planned amount to order in each time
period; planned- order receipts offset by lead time.
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Example 2
A firm that produces wood shutters and bookcases has received two orders for
shutters: one for 100 shutters and one for 150 shutters. The 100-unit order is
due for delivery at the start of week 4 of the current schedule, and the 150-unit
order is due for delivery at the start of week 8. Each shutter consists of two
frames and four slatted wood sections. 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 in (i.e., at the beginning of) week 1. Determine the
size and timing of planned-order releases necessary to meet delivery
requirements under each of these conditions:
1. Lot-for-lot ordering (i.e., planned-order release equal to net requirements).
2. Lot-size ordering with a lot size of 320 units for frames and 70 units for wood
sections.
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Example 2: Solution
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Benefits of MRP
• Enables managers to easily
• determine the quantities of each component for a given order size
• To know when to release orders for each component
• To be alerted when items need attention
• Additional benefits
• Low levels of in-process inventories
• The ability to track material requirements
• The ability to evaluate capacity requirements
• Ameans of allocating production time
• The ability to easily determine inventory usage via backflushing
(Exploding an end item’s BOM to determine the quantities of the
components that were used to make the item, eliminating the need to
collect detailed usage information on the production floor)
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Requirements of MRP
To implement an effective MRP system requires:
§ A computer and the necessary software to handle
computations and maintain records
§ Accurate and up-to-date
• Master schedules
• Bills of materials
• Inventory records
§ Integrity of data files
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MRP in Services
§Food catering service
§ End item = catered food
§ Dependent demand = ingredients for each recipe, i.e. bill of
materials
§Hotel renovation
§ Activities and materials “exploded” into component parts for
cost estimation and scheduling
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MRP & EPR
Manufacturing resources planning
(MRP II): Expanded approach to
production resource planning,
involving other areas of a firm in
the planning process and enabling
capacity requirements planning.
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MRP & EPR
Distribution resource
planning (DRP): A
method used for planning
orders in a supply chain.
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MRP & EPR
Enterprise resource planning
(ERP): Integration of financial,
manufacturing, and human
resources in a single database.
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MRP in SAP
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MRP in SAP
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Example 3
The following product structure tree indicates the
components needed to assemble one unit of product W.
Determine the quantities of each component needed to
assemble 100 units of W.
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Example 4
The product structure tree for end item E follows. The manager wants to know
the material requirements for ordered part R that will be needed to complete
120 units of E by the start of week 5. Lead times for items are one week for level
0 items, one week for level 1 items, and two weeks for level 2 items. There is a
scheduled receipt of 60 units of M at the start of week 2 and 100 units of R at
the start of week 1. Lot-for-lot ordering is used.
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Example 5
The following table lists the components needed to assemble an end item, lead times, and
quantities on hand.
Item End B C D E F G H
LT (wk) 1 2 3 3 1 2 1 2
Amount on hand 0 10 10 25 12 30 5 0
End item
B(2) C D(3)
(E(3) F(3) G(2) E(2) H(4) E(2)
a. If 20 units of the end item are to be assembled, how many additional units of E are needed?
(Hint: You don’t need to develop an MRP plan to determine this.)
b. An order for the end item is scheduled to be shipped at the start of week 11. What is the latest
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week that the order can be started and still be ready to ship on time? (Hint: You don’t need to
develop an MRP plan for this part either.)
