Materials Requirements Planning

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Chapter 16
Materials Requirements Planning
Material Requirements Planning (MRP) MRP Logic
and Product Structure Trees MRP Example Time
Fences MRP II and Lot Sizing
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Material Requirements Planning

• Materials requirements planning (MRP)
• is a technique for managing items with dependent
  demand parts, components, and materials needed
  to produce a product,
• i.e., Raw Materials Work-in-process
• MRP provides time scheduling information
  specifying when each of the materials, parts, and
  components should be ordered or produced

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Material Requirements Planning System
From Exhibit 15.6
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Master Production Schedule (MPS)

• A schedule of planned completions of end-items
• Usually week-by-week

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Inventory Status Record
Also called the Item Master File

• Lists
• Item number
• Quantity physically in stock
• Safety stock requirement
• Quantity allocated
• Lot size
• Lead time on orders
• Scheduled Receipts
• On order quantity timing

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Bill 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
• Lowest level in structure item occurs
• Top level is 0 next level is 1 etc.

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The BOM Product Structure Tree
The Bill of Material can be drawn as a product
structure tree for A. Lead times are shown
below.
Product Structure Tree for Assembly A
Lead Times A 1 week B 2 weeks C 1 week D 3
weeks E 4 weeks F 1 week
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The MRP Process Time Phasing
First, the number of units of A are scheduled
backwards to allow for their lead time. So, in
the materials requirement plan below, we have to
place an order for 50 units of A by end of the
9th week to receive them by end of week 10.
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The MRP Process Dependent demand
Next, we need to start scheduling the components
that make up A. In the case of component B
we need 4 Bs for each A. Since we need 50 As,
that means 200 Bs. And again, we back the
schedule up for the necessary 2 weeks of lead
time.
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The Final MRP
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Netting-out Requirements
MRP systems also look at our inventory (on-hand
on-order) to determine how many more units are
needed (net requirements).
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Lot Sizing in MRP Programs

• Lot-for-lot (L4L)
• Economic order quantity (EOQ)
• Least total cost (LTC)
• Least unit cost (LUC)
• Which one to use?
• The one that is least costly!
• Most firms use L4L

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MRP Example
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Time Fences

• Frozen
• No schedule changes allowed within this window
• Moderately Firm
• Specific changes allowed within product groups as
  long as parts are available
• Flexible
• Significant variation allowed as long as overall
  capacity requirements remain at the same levels

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Example of Time Fences
Exhibit 15.5
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Closed Loop MRP
Master Production Schedule
Aggregate Plan
Material Requirements Plan
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Manufacturing Resource Planning
Called MRP II

• Goal Plan and monitor all resources of a
  manufacturing firm (closed loop)
• manufacturing
• marketing
• finance
• engineering
• Simulate the manufacturing system

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End of Chapter 16