Chapter 16 Materials Requirements Planning

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Chapter 16Materials Requirements Planning

• Material Requirements Planning (MRP)
• Bill of Material
• MRP Logic and Calculations
• Lot Sizes, Safety Stock and Time Fences
• MRP II
• MRP Management Issues

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Material Requirements PlanningDefined

• 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.

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Material Requirements Planning 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.

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Firm orders from known customers
Forecasts of demand from random customers
Aggregate product plan
Material planning (MRP)
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MRP InputBill-of-Material

• List of components quantities needed to make
  product
• Provides product structure (tree)
• Parents
• Children
• Shows low-level coding
• Lowest level in structure item occurs
• Top level is 0 next level is 1 etc.

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Bill-of-Material Product Structure Tree
Bicycle(1)
Bicycle(1)
P/N 1000
P/N 1000
Handle Bars (1)
Frame Assy (1)
Handle Bars (1)
Frame Assy (1)
P/N 1001
P/N 1002
P/N 1001
P/N 1002
Wheels (2)
Frame (1)
Wheels (2)
Frame (1)
P/N 1003
P/N 1004
P/N 1003
P/N 1004
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Product Structure Thinking Challenge

• The demand for product A is 50. How many of each
  component is needed to satisfy demand?

A
A
B(2)
C(3)
B(2)
C(3)
E(1)
E(3)
F(2)
E(1)
E(3)
F(2)
D(2)
D(2)
G(1)
D(2)
D(2)
G(1)
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Product Structure Solution
50
A
A
B(2)
C(3)
B(2)
C(3)
E(1)
E(3)
F(2)
E(1)
E(3)
F(2)
D(2)
D(2)
G(1)
D(2)
D(2)
G(1)
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Lead Times Product Structure
Handle Bars
2 wk.
Lead time
1 wk.
Frame
2 wk.
Bicycle
1 wk.
3 wk.
Frame Assy
Wheels
Time (weeks)
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MRP Scheduling Terminology

• Gross Requirements demand for an item from
• independent demand
• independent demand
• dependent demand

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MRP Scheduling Terminology

• Scheduled receipts orders that have already
  been released (i.e., an open order) and that are
  scheduled to arrive at the beginning of the
  period.
• Projected available balance (On-hand) amount of
  inventory at the beginning of a period

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MRP Scheduling Terminology

• Net requirements -
• Planned order receipt -
• Planned order release -

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MRP Formulas

• NRt GRt - OHt SRt (0 if negative)
• OHt OHt-1 SRt-1 POReceiptt-1 GRt-1 SS

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MRP Example - One items complete recordStarting
information
Lead time 3 lot policy lot-for-lot (LFL)
on-hand 20 units safety stock 0 units.
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Low Level Coding

• What about this?

A
Level 0
B
C
Level 1
Level 2
D
C
E
E
Level 3
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Low Level Coding - How to

• Place each item at same level - it simplifies the
  calculations

After
Before
A
A
Level 0
B
C
B
Level 1
Level 2
D
C
E
D
C
E
E
Level 3
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An MRP Example
Requirements include 95 units (80 firm orders and
15 forecast) of X in week 10 plus the following
spares
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(No Transcript)
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Lot Sizing in MRP Programs

• We need to reflect restrictions which may exist
  in actual practice
• Lot-for-lot (L4L)
• Economic order quantity (EOQ)
• Least total cost (LTC)
• Least unit cost (LUC)
• Fixed quantity
• Minimums
• Multiples

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Lot Size Effects
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Lead Time 3 Lot Size 5 units (or Multiples)
On-Hand 20 Units Safety Stock 0 Units.
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Using Safety Stock
20 - 2
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Lead time 3 lot policy lot-for-lot (LFL)
on-hand 20 units safety stock 2 units.
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MRP Thinking Challenge

• A master schedule calls for 50 units of F in week
  6, 60 in week 8. On-hand levels are F 0, G
  20, H 60. Another 20 units of G are
  scheduled to be received in week 4. Order
  quantities are lot-for-lot except for H, which
  has a lot size of 50 or multiples of 50.

F(1)
LT 2
G(1)
H(1)
LT 1
LT 2
H(4)
LT 2
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Product F Solution
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Component G Solution
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Component H Solution
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Another MRP Example
An end item (A) is assembled from 1 sub-component
C, 2 part Ds, and 1 sub-component B Each
sub-component C is assembled from 1 part D and 1
part E Each sub-component B is assembled from 1
part C and 2 part Es The master production
schedule calls for 250 units of A in week 6, 140
in week 8, and 200 in week 9. The following
information is available from the inventory
status file
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MRP Input Master Production Schedule (MPS)

• Time-phased plan specifying how many and when the
  firm plans to build each end item.

MPS (Specific End Items)
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Types of 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
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MRP InputInventory Records File

• Each inventory item carried as a separate file
• Status according to time buckets.
• Pegging
• Identify each parent item that created demand.

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MRP OutputsPrimary 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.

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Closed Loop MRP
Production Planning Master Production
Scheduling Material Requirements
Planning Capacity Requirements Planning
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Manufacturing Resource Planning (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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MRP Management Issues

• System Accuracy
• System nervousness
• Integration with Just-in-Time (JIT)