Foreign Trade University

Content
MRP overview
Benefits of MRP
MRP application
Requirements of an effective MRP system
MRP system
The development of MRP

- MRP II Manufacturing resources planning

- ERP Enterprise resources planning

An Overview of MRP
MRP is a computer-based information system

designed to handle ordering and scheduling of

dependent-demand inventories, e.g.: raw
materials, component parts, and
subassemblies
Dependent demand vs. independent
demand!!!

An Overview of MRP
Dependent demand: demand for a higher-

level item. E.g.: Tires, wheels, engines are

demand for automobiles.
Independent demand: demand for finished

products, which are not components of any

items.
E.g.: cars, trucks

Benefits of MRP
Ability to keep track of material requirements:

How many number of parts, components, and

materials needed to produce each end item
and when
A means of allocating production time
Low level of in-process inventories

MRP application
Apply for the typical manufacturing or

assembly type of operation, where a number

of products are made in batches using the
same productive equipments

Industry type

Assemble-tostock

Examples

Combines multiple component parts into a

finished product, which is then stocked in
inventory to satisfy customer demand. E.g.:
watches, tools, appliances
Fabricate-toItems are manufactured by machine rather
stock
than assembled from parts. These are
standard stock items carried in anticipation
of customer demand. E.g.: piston rings,
electrical switches
Assemble-toA final assembly is made from standard
order
options that customer chooses. E.g.: trucks,
generators, motors
Fabricate-toItems are manufactured by machine to
order
customer order. These are generally
industrial orders. E.g.: bearings, gears,
fasteners
Manufacturing- Items are fabricated or assembled
to-order
completely to customer specification. E.g.:
turbine generators, heavy machine tools

Expecte
d
benefits
High

Low

High

Low

High

Requirements of An
Effective
system
A computer andMRP
necessary software
programs;
Accurate and up-to-date master schedules,
bills of materials and inventory records;
Integrity of file data.

MRP System
Includes 3 major sources:
Master production schedule
Bill of materials
Inventory records
Answer 3 questions:
What is needed?
How much is needed?
When is it needed?

MRP System
MRP
Input Master
Orders
Production
MRP
Forecast Output
Schedule

MRP ProcessingChanges
Planned-order
schedules
Order releases

Design

Bill of
Materials

change

MRP
Computer
Programs

Exception reports
Planning reports

Receipts
Withdrawals

Inventory
Records

Bo
Performanceco n
hng
controlthc
reports
hin
Cc
Inventory
nghip v
d
transactions
tr

MRP Input
Includes:
- Master Production Schedule
- Bill of Materials
- Inventory Records

MRP Input
Master Production Schedule
Are made by:
- Demand from the known customers
- Forecast demand
=>Questions:
- Which end items are to be produced;
- When these are needed;
- And in what quantities?

MRP Input
Master Production Schedule
The schedule indicates that 100 units of X will
be needed at the start of week 8
X
Quantity
(units)

8
100

MRP Input

Bill of Materials (BOM)

- Called as Production Structure Tree

- Contains a list of all assemblies, subassemblies,

parts and raw materials that are needed to

produce one unit of finished product.
Level 0
X
Level 1

B(2) C(1)

Level 2

E(4) D(3)

Level 3

H (4)

G(2)
I (5)

F(2)

MRP Input
Bill of Materials
Example: Determine the quantities of B, C, D, E,
F, G, H and I needed to assemble one unit of X
Answer:

MRP Input
Inventory Records
Information on the status of each item by time
period
- Gross requirements, scheduled receipts,
expected amount on hand;
- Details for each item: supplier, lead time, lot
size;
- Changes due to stock receipts and withdrawals,
canceled orders
=> Must be accurate and up-dated

Inventory Status Record for an Item

in Inventory
Item master
data segment

Part No.

Description

Order quantity

Class

Scrap allowance Cutting data

Allocated
Gross
Requirements
Inventory
Scheduled
status segment receipts

Control balance

Lead time Std. Cost Safety Stock

Last year's
Setup
Cycle
usage
Pointers
Period 1 2 3 4 5 6 7
8

Totals

Projected
available balance
Planned order
releases

Order details

Subsidiary data
segment
Pending action
Counters
Keeping track

Etc.

MRP Processing
MRP Computer Program
Steps to follow:
- Specify end item requirement by the master
schedule
- Explode them into time-phased
requirement for assemblies, parts, and raw
materials using the BOM offset by lead times;
- Determine net requirements in period t

MRP Processing
Step 1: specify end item requirement
X

Quantity

100

(units)

Step 2: Time-phased requirement

Item X

Wee 1
k

MRP Processing
Step 2: Assembly Time chart
Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8
Procurement
of H
Fabrication of D
Procurement
of I

Subassembly B
Final
assembly
X

Procurement of E
Procurement of G
Subassembly C
Fabrication of F

MRP Processing
Step 3: Determine net requirements in
periodProjecte
t:

Net
Gross
d
requirem
requirem
Safety
=
- inventor +
ents in
ents in
stock
y in
period t
period t
period t

MRP Processing

Step 3: Determine net requirements in period

t:

- Gross requirement: total expected demand for an

-

item or raw material in a time period

Projected inventory: scheduled receipts at the
beginning of a period plus available inventory from last
period.
Net requirements: actual amount needed in each
time period.
Planned-order releases: planned amount to order in
each time period
Planned-order receipts: quantity expected to be
received by the beginning of the period in which it is
shown

MRP Output
Primary reports:
Planned orders: amount and timing of future
orders
Order releases: authorization for executing
planned orders
Changes: in date, quantity, cancellation, etc.
Secondary reports:
Performance-control reports
Planning reports
Exception reports

Example
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, and its
assembly takes 1 week. The wood sections are made by the
firm, and fabrication takes 1 week. The frames are ordered,
and lead time is 2 weeks. There is a scheduled receipt of 70
wood sections in week 1. Determine the size and timing of
planned-order released necessary to meet delivery
requirements under each of these conditions:
1. Lot-for-lot ordering
2. Lot-size ordering with a lot size of 320 units for frames and 70
units for wood sections.

Development of MRP
Manufacturing resources planning (MRP

II): planning production resources, that

involves other functional areas of the firm in
the planning process.
Enterprise resource planning (ERP):

integration of standardized record- keeping,

that allows different areas of an organization
sharing information.

Exercise. An organisation produces X, which includes 3

parts A, B, and C and in particular quantity: 2 A, 1 B and
1 C.
A is made from 1F
B from 1D, 2E, 1G
C from 2D and 2H
D from 1F
The assembly time for each component and part is as
followed:
Unit
X A B C
D E F G H
Time(weeks)
1
1
2
1
2
1
3 2 3
a.Build up the master production schedule for X (required
for delivery at the beginning of week 9)
b.Make a production structure tree,
c.Draw an assembly time chart
d.The organisation received an order of 300 X at the
beginning of week 9, determine the net requirement of F
and its planned-order released.