Material Requirements Planning

1
Chapter 13

• Material Requirements Planning

2
Materials Requirement Planning (MRP)

• Computer based information system to handle
  ordering and scheduling of dependent demand items

Product Structure Tree
3

• Dependent items are needed just prior to when
  they are needed for production
• Demand is lumpy
• Little or no safety stock

4

• MRP converts the production plan for final
  products into requirements for component items
  and raw materials
• What is needed
• When is needed
• How much is needed
• When should procurement, fabrication assembly
  start for completing end items on time

5
(No Transcript)
6
MRP Inputs

• Master Schedule Which end items are to be
  produced, when these are needed, and in what
  quantities.
• The planning horizon is divided into time periods
  called time-buckets (typically weeks)

• The planning horizon should be long enough to
  cover the cumulative leadtime. (total lead time
  required from ordering of parts or raw materials
  to completion of final assembly)

7
MRP Inputs

• Bill-of-Materials (BOM) File List of all raw
  materials,parts, subassemblies needed to produce
  the product.
• Illustrated using a product-structure tree

8

• End Item final product sold to the customer it
  is a parent, not a component, e.g., C.
• Intermediate Item has at least one parent and
  one component, e.g., LA, BA.
• Purchased Item No component but has parent,
  e.g., L, CB, S, SR, BS.

9
MRP Inputs

• Inventory Records File Info on the inventory
  status of each item by time period.
• Requirements
• Scheduled receipts
• Projected on-hand inventory levels
• Leadtime information
• Other details (supplier, lot size etc)
• Transactions are recorded and updates done every
  time period

10
MRP Processing (Explosion Calculus)

• Time-phased requirement of all items using BOM
  and leadtimes. For every item and for every time
  period calculate
• Gross requirements Total demand
• Scheduled receipts Orders scheduled to arrive at
  the beginning of the period
• Projected on hand Expected Inventory at the
  beginning of the period
• Net requirements Actual amount needed
• Planned-order receipts Quantity expected to be
  received at the beginning of the period
• Planned-order releases Planned amount to order
  in the period (P.O.R. offset by leadtime)

11
Example (Chair Assembly)

• Suppose that a 100-unit delivery of chairs is
  scheduled at the start of week 6. Determine the
  size and the timing of back-support parts to meet
  this delivery.

• The firm has 20 back support units available and
  60 more is scheduled to arrive at the beginning
  of Week 4.

12
(No Transcript)
13

• Should Net Requirements Planned Order
  Receipts?
• Lot-for-lot production
• Other common lot sizing rules
• Economic Order Quantity (EOQ)
• Fixed Period Ordering (Order to cover a fixed
  of coming periods)
• Fixed Multiple batch size
• Extra production is carried into future periods
  as inventory

14

• Suppose that the lot-size of back support units
  is 50.
• Can only produce at multiples of 50.

15
MRP Outputs

• Planned orders - schedule indicating the amount
  and timing of future orders.
• Order releases - Authorization for the execution
  of planned orders.
• Changes - revisions of due dates or order
  quantities, or cancellations of orders.

Secondary Reports

• Performance-control reports
• Planning reports
• Exception reports

16
Capacity Planning

• How do we ensure that the resulting production
  orders and schedule is feasible (does not exceed
  capacity)?
• Capacity requirements planning The process of
  determining short-range capacity requirements.
  MRP systems can create
• Load reports Department or work center reports
  that compare known and expected future capacity
  requirements with projected capacity
  availability.

17
MRP Planning in Practice
18
Benefits of MRP

• Low levels of in-process inventories
• Ability to track material requirements
• Ability to evaluate capacity requirements
• Means of allocating production time

Requirements of MRP

• Computer and necessary software
• Accurate and up-to-date inputs (master
  schedules,BOM,inventory records)
• Integrity of data

19
Shortcomings of MRP

• Uncertainty not taken into account
• Capacity till now mostly uncapacitated
• Nervousness major changes in production plan due
  to revised schedule

20
Manufacturing Resource Planning (MRPII)

• Expanded MRP with and emphasis placed on
  integration
• Financial planning
• Marketing
• Engineering
• Purchasing
• Manufacturing

Precursor of ERP
21
Master production schedule
Finance
Manufacturing
Marketing
MRP
Adjust master schedule
Capacity planning
Adjust production plan
No
Yes
No
Yes
Problems?