13-14 MRP

Material Requirements Planning
Class 13, 14
Learning Objectives
MRP Concept, Master Production Schedule, Material Requirements Planning System Structure, MRP Examples
Firm orders from known customers
Aggregate product plan
Forecasts of demand from random customers
Engineering design changes
Master production Schedule (MPS)
Inventory transactions
Bill of material file
Material Requirement Planning
Inventory record file
Secondary reports
Primary reports Planned order schedule for inventory and production control Exception reports Planning reports Reports for performance control
Resource Requirements Planning

Aggregate Planning Master Production Scheduling (MPS) Resource Requirements Planning Material Requirements Planning (MRP) Capacity Requirements Planning (CRP)
Material Requirements Planning
MRP is a logical, easily understandable approach to the problem of determining the number of parts, components and material needed to produce the End Item.
Material Requirements Planning Provides schedule for production or ordering of materials, parts and components required for the end item. Based on Dependent demand Based on End Item only
Independent vs. Dependent Demand

Independent Demand (Demand not related to other items or the final end-product). Depend upon Market Forecast. Dependent Demand (Derived demand items for component parts, subassemblies, raw materials, etc.)
E(1 )
Independent vs. Dependent Demand
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
Materials Requirements Planning

Computer based system, Explodes Master Schedule (MPS) into required amounts of raw materials and subassemblies to support MPS, Nets against current orders and inventories to develop production and purchased material ordering schedules, Offsets orders to allow for lead time.
Example of MRP Logic and Product Structure Tree

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
Product Structure Tree for Assembly A Lead Times A 1 day B 2 days C 1 day D 3 days E 4 days F 1 day
A B(4) D(2) E(1) D(3) C(2) F(2)
Total Unit Demand Day 10 50 nos. of A Day 8 20 nos. of B (Spares) Day 6 15 nos. of D (Spares)
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 on the 9th day to receive them on day 10.
Day: A Required Order Placem ent 1 2 3 4 5 6 7 8 9 50 10 50
Lead Times A 1 day B 2 days C 1 day D 3 days E 4 days F 1 day
LT = 1 day
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 days of lead time.
Day: A B R e q u ire d O rd e r P la c e m e n t R e q u ire d O rd e r P la c e m e n t 20 200 20 50 200 1 2 3 4 5 6 7 8 9 10 50
Lead Times A 1 day B 2 days C 1 day D 3 days E 4 days F 1 day
LT = 2 A B(4) C(2) E(1) D(3) F(2)
Spares
4x50=200
D(2)
14
Finally, repeating the process for all components, we have the final materials requirements plan:
Day: A LT=1 B LT=2 C LT=1 D LT=3 E LT=4 F LT=1 Required Order Placement Required Order Placement Required Order Placement Required Order Placement Required Order Placement Required Order Placement 1 2 3 4 5 6 7 8 9 50 200 100 55 55 20 200 200 200 400 300 20 200 400 100 300 10 50
20 20 200
A
Part D: Day 6
B(4) D(2) E(1) D(3)
C(2) F(2)
40 + 15 spares
Example of MRP Logic and Product Structure Tree

Product A is an end item and is made from 4 units of B , 2 units of C and 3 units of D. B is made of 2 units of E and one unit of F. C is made of 3 units of E and 2 units of F. A has lead time of one week, B, C, D, E & F have lead time of two , one , three, four and one week respectively. a. Show the bill of materials (product structure tree) b. Develop MRP schedule, if 100 units of A are required in week 10 and 40 units of Spares B and 30 units of Spares C are required in week no. 8 and 6 respectively. Also specify when items are to be ordered and required. There are currently no units of inventory on hand.
Week: Required
1 0 0 0 0 0 0 0 0 0 0 0 0
2 0 0 0 0 0 0 0 0 0 80 0 0
3 0 0 0 0 0 0 0 30 0 800 0 0
4 0 0 0 0 0 0 0 0 0 600 0 0
5 0 0 0 0 0 0 0 0 0 0 0 40
6 0 0 0 40 0 0 30 300 80 0 40 400
7 0 0 0 400 0 0 0 0 800 0 400 400
8 0 0 40 0 0 200 0 0 600 0 400 0
9 0 100 400 0 200 0 300 0 0 0 0 0
10 100 0 0 0 0 0 0 0 0 0 0 0
Order LT=1 Placement B Required Order LT=2 Placement C Required Order LT=1 Placement D Required Order LT=3 Placement E Required Order LT=4 Placement F Required Order LT=1 Placement
Project Work
Synopsis on the Project work undertaken by 23-02-2013 5PM. Weightage 2 marks
19
Firm orders from known customers
Aggregate product plan
Forecasts of demand from random customers
Engineering design changes
Master production Schedule (MPS)
Inventory transactions
Bill of material file
Material planning (MRP computer program)
Inventory record file
Secondary reports
Primary reports Planned order schedule for inventory and production control Exception reports Planning reports Reports for performance control
Master Production Schedule (MPS)

Time-phased plan specifying how many and when the firm plans to build each end item Info of Lead time
Aggregate Plan (Product Groups) Firm Order
Demand Forecast
for Purchase, Receiving, Fabrication, Assly. Etc.
MPS (Specific End Items)
Bill of Materials (BOM) File A Complete Product Description

A Bill of Material (BOM) is a record of
All components of an item Parent component relationship Usage quantities
derived from engineering and process design. Often called as Product structure file or product tree.
Bill of Materials (BOM)

Component
An item that may go through one or more operations to be transformed into or become part of one or more parents.
Parent
Any item manufactured from one or more components.
Usage Quantity
The number of units of a component needed to make one unit of its immediate parent.

Intermediate Item
An item that has at least one parent and at least one component.
Sub-Assembly
An intermediate item that is assembled from more than one component.
Purchased Item
An item that has one or more parents, but no component because it comes from supplier.

Part Commonality
The degree to which one has more than one intermediate parent.
Inventory Records File

A record that shows an items lot size policy, lead time, and various time phased data. The purpose of inventory record is to keep a track of inventory levels and components replenishment needs. The time phased information consists of
Gross requirement On-hand inventory Net Requirement Planned receipt Planned order release

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

Gross Requirement
The total demand derived from all parent production plans.
On-Hand Inventory
An estimate of the amount of inventory available each week after gross requirements have been satisfied.
Net Requirement
Total requirement to be executed after considering onhand inventory.

Planned Receipts
Target for receipt of the material from supplier.
Planed order release

An indication of when an order for the specified quantity of an item is to be issued.

Lot Size: 230 units Lead Time: 2 weeks Week 1 Gross Requirement On-hand inventory Net Requirement Planned receipts Planned Order releases 230 150 2 0 3 0 4 120 5 0 6 100 7 120 8 0
180
30
30
30
140
140
40
150
90
80
230
230
230
MRP System Information Processing

Explosion
Netting
Offsetting
Primary 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 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
MRP Example
X A(2) C(3) C(2) B(1) D(5)
Item X A B C D On-Hand Lead Time (Weeks) 50 2 75 3 25 1 10 2 20 2
Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10
Day: X LT=2 Onhand 50 A LT=3 Onhand 75 B LT=1 Onhand 25 C LT=2 Onhand 10 D LT=2 Onhand Gross requirements Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Proj. avail. balance Net requirements Planned order receipt
5 50
6 50
7 50
8 50
9 50
50 50
50 50
A(2)
75 75
75 75
75
75
75
45 90 75 15 15 45 25 20 20
15 25 25 25 25 25 25 25
It takes 2 As for each X
10 10
10 10
35 20 20 20 20
45 10 35 35 40 20
20 40 40 40 100 20 20 80 80
5 50
6 50
7 50
8 50
9 50
50 50
50 50
A(2)
B(1)
75 75
75 75
75
75
75
45 90 75 15 15 45 25 20 20
15 25 25 25 25 25 25 25
It takes 1 B for each X
10 10
10 10
35 20 20 20 20
45 10 35 35 40 20
20 40 40 40 100 20 20 80 80
5 50
6 50
7 50
8 50
9 50
50 50
50 50
A(2)
B(1)
75 75
75 75
75
75
75
45 90 75 15 15 45 25 20 20
C(3)
15 25 25 25 25 25 25 25
It takes 3 Cs for each A
10 10
10 10
35 20 20 20 20
45 10 35 35 40 20
20 40 40 40 100 20 20 80 80
5 50
6 50
7 50
8 50
9 50
50 50
50 50
A(2)
B(1)
75 75
75 75
75
75
75
45 90 75 15 15 45 25 20 20
C(3)
C(2)
15 25 25 25 25 25 25 25
It takes 2 Cs for each B
10 10
10 10
35 20 20 20 20
45 10 35 35 40 20
20 40 40 40 100 20 20 80 80
5 50
6 50
7 50
8 50
9 50
50 50
50 50
A(2)
B(1)
75 75
75 75
75
75
75
45 90 75 15 15 45 25 20 20
C(3)
C(2)
D(5)
15 25 25 25 25 25 25 25
It takes 5 Ds for each B
10 10
10 10
35 20 20 20 20
45 10 35 35 40 20
20 40 40 40 100 20 20 80 80
Closed Loop MRP

Production Planning Master Production Scheduling Material Requirements Planning Capacity Requirements Planning
No Feedback Realistic?
Feedback
Yes
Execute: Capacity Plans Material Plans
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
Material Requirements Planning Benefits

Effective Inventory Management and Control
Balanced Inventories Reduction in WIP Reduction in FGI

Improved Capacity Planning
Improvement in equipment utilization
Improvement in maintenance
Easy identification of problem areas

Enhanced Customer Service
Improved Cost
Timely Delivery
Improvement in Quality of the Product
Reduction in Lost sales

Improved Management
Improved Control and Management through
performance measure
Provide detail overview of Manufacturing process

Better Priority
Reduction in Production Lead time
Rescheduling Capabilities

Enhanced Employee Morale
Enhanced Interdepartmental
Coordination
Confidence in the system

Effective Long range Planning tool
Marketing Production
Personnel
Finance Purchasing Top Management
Thank You

13-14 MRP

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13-14 MRP

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Material Requirements Planning

Firm orders from known customers

Aggregate product plan

Forecasts of demand from random customers

Engineering design changes

Master production Schedule (MPS)

Bill of material file

Material Requirement Planning

Inventory record file

Resource Requirements Planning

Material Requirements Planning

Independent vs. Dependent Demand

Independent vs. Dependent Demand

Material Requirements Planning System

Materials Requirements Planning

Example of MRP Logic and Product Structure Tree

A B(4) D(2) E(1) D(3) C(2) F(2)

Lead Times A 1 day B 2 days C 1 day D 3 days E 4 days F 1 day

Lead Times A 1 day B 2 days C 1 day D 3 days E 4 days F 1 day

LT = 2 A B(4) C(2) E(1) D(3) F(2)

B(4) D(2) E(1) D(3)

Example of MRP Logic and Product Structure Tree

7 0 0 0 400 0 0 0 0 800 0 400 400

8 0 0 40 0 0 200 0 0 600 0 400 0

9 0 100 400 0 200 0 300 0 0 0 0 0

Firm orders from known customers

Aggregate product plan

Forecasts of demand from random customers

Engineering design changes

Master production Schedule (MPS)

Bill of material file

Material planning (MRP computer program)

Inventory record file

Master Production Schedule (MPS)

MPS (Specific End Items)

Bill of Materials (BOM) File A Complete Product Description

Bill of Materials (BOM)

Bill of Materials (BOM)

Bill of Materials (BOM)

Inventory Records File

Inventory Records File

Status according to time buckets

Identify each parent item that created demand

Inventory Records File

Inventory Records File

Planed order release

Inventory Records File

MRP System Information Processing

Primary MRP Reports

Secondary MRP Reports

Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10

It takes 2 As for each X

It takes 1 B for each X

It takes 3 Cs for each A

It takes 2 Cs for each B

It takes 5 Ds for each B

Closed Loop MRP

Manufacturing Resource Planning (MRP II)

manufacturing marketing finance engineering

Simulate the manufacturing system

Material Requirements Planning Benefits

Material Requirements Planning Benefits

Material Requirements Planning Benefits

Reduction in Lost sales