JJ619 INDUSTRIAL

MANAGEMENT
CHAPTER 3
INVENTORY CONTROL
MANAGEMENT

Jabatan kejuruteraan Mekanikal

Politeknik Sultan Haji Ahmad Shah
Semambu 25350 Kuantan, Pahang
 INVENTORY (INTRODUCTION)
A) Inventory is a stock or store of goods
Demands determine the type of inventory Independent Demand
an organization will carry. (e.g., customer demand
for finished products)
A Dependent Demand
(e.g., necessary parts
to assemble a
B(4) C(2) finished good)

D(2) E(1) D(3) F(2)

Independent demand is uncertain

Dependent demand is certain
INTRODUCTION (CONT.)
B) Inventory is carried for many different reasons
across different industries.
To meet anticipated demand
Meeting demand in a timely manner enhances
customer satisfaction
Smooth production requirements across seasons
Produce one season, sell in next (or throughout
year)
To decouple successive operations and maintain
continuity of production
Protects against machine breakdowns
To protect against stock-outs
Vendors do not always deliver on time
INTRODUCTION (CONT.)
To take advantage of order cycles to minimize
purchasing and inventory costs
Minimum order size requirements, full truck
loads
To help hedge against price increases
Buy now at low price, store goods for future
use
To permit operations to operate
Operations require a certain amount of WIP
inventory
To take advantage of quantity discounts
Vendors often give discounts when ordering
large quantities
OBJECTIVE OF INVENTORY
CONTROL
1) Maximize the level of customer
service by avoiding under stocking.
2) Promote efficiency in production and
purchasing by minimizing the cost of
providing an adequate level of customer
service.
3) To achieve satisfactory levels of
customer service while keeping inventory
costs within reasonable bounds.
INVENTORY MANAGEMENT
(INTRODUCTION)
Operations :
Marketing : stocks in sufficient
Level of service quantities

Inventory
Management Finance :
Cash flow and
Cost of money
Information Systems :
Inventory control
Judicial Aspects :
systems
Ownership and
responsibility
OBJECTIVE OF INVENTORY
MANAGEMENT

to provide the desired level of

customer service, to allow cost-
efficient operations, and to
minimize inventory investment.
TYPES OF INVENTORY

Work Finished Maintenance,

Raw Repair, & Resale
In Process Goods
Materials Operating Items
(WIP) (FGI)
Supplies (MRO)
Manufacturing All

Independent Demand
Chocolate
Finished Goods
Cake

Subassembly (WIP) Cake Icing Raw Material

Dependent Demand

Egg Mix Water MRO

Raw
TYPES OF INVENTORY (CONT.)
Raw material purchased items received which have
not entered the production process.
Works-In-Process raw materials that have entered
the manufacturing process and are being worked on
or waiting to be worked on.
Finished Goods ready to be sold as completed
items.
Distribution inventories finished goods located in
distribution system.
Maintenance, repair & operating (MRO)
item used in production that do not become part
of the product.
include hand tools, spare parts, lubricants and
cleaning supplies.
INVENTORY CLASSIFICATIONS

Inventory

Process Number Demand

Other
Stage & Value Type

Raw Mat'l A Items Mainten.

Independent
WIP B Items Repair
Dependent
Fin. Goods C Items Operating
INVENTORY COST
Carrying Costs Other Costs
Capital (Interest Ordering Costs
and Opportunity Setup Costs
Costs) Stockout Costs
Warehouses and Lost Sales
Stock rooms Idle labor and
Personnel equipment
Insurance Expedite fees
Damage and
Loss
Theft
Insurance
Taxes
INVENTORY REQUIREMENTS
Net requirements:
Net Requirements = Gross Requirements
Available Inventory

Available Inventory:
Available Inventory = Projected on hand
Safety stock
Inventory allocated to
other items
DIFFERENTIATE
Holding (carrying) costs: cost to carry an item in
inventory for a length of time, usually a year
Annual cost of 20%-40% of value (unit price) of
an item
Ordering costs: costs of ordering and receiving
inventory
fixed dollar amount per order, regardless of
order size
Shortage costs: costs when demand exceeds
supply
difficult to calculate often assumed
INVENTORY MODELS

Economic
Order Quantity
(EOQ) model
Economic
Production Quantity
(EPQ) model
Quantity Discount (QD) model
ECONOMIC ORDER QUANTITY
(EOQ) MODEL
The order size that minimizes total annual
cost.
Assumptions :
Only one product is involved.
Annual demand requirements are known.
Demand is even throughout the year.
Lead time does not vary.
Each order is received in a single delivery.
There are no quantity discounts.
EOQ (INVENTORY CYCLE)
Profile of Inventory Level Over Time
Q Usage
Quantity rate
on hand

Reorder
point

Time
Receive Place Receive Place Receive
order order order order order

Lead time
EOQ (ANNUAL CARRYING COST)
Annual carrying cost is computed by
multiplying the average amount of
inventory on hand by the cost to carry one
unit for one year, even though any given
unit would not necessarily be held for a
year.
Q
Total annual carrying cost H
2
where Q = Order quantity in units
H = Holding (carrying) cost per unit
EOQ (ANNUAL ORDERING COST)

Annual ordering cost is a function of the

number of orders per year and the
ordering cost per order.
D
Annual ordering cost S
Q

where D = Demand, usually in units per year

S = Ordering cost
EOQ (TOTAL ANNUAL COST)

The total annual cost (TC) associated with

carrying and ordering inventory when Q
units are ordered each time is
Annual Annual
TC = carrying + ordering
cost cost

Q D
TC = H + S
2 Q
EOQ (OPTIMAL ORDER QUANTITY)

Optimal (economic) order quantity,

2(Annual Demand)(Or der or Setup Cost)
QO =
AnnualHold ing Cost

2 DS
Q0
H

Minimum Total Cost

The total cost curve reaches its minimum
where the carrying and ordering costs are
equal.
EOQ (LENGTH OF ORDER CYCLE)
The length of an order cycle (the time
between orders) is

Q
Length of order cycle
D
Number of order per year, N

Demand D
N=
Order Quantity Q
EOQ (COST MINIMIZATION GOAL)
The Total-Cost Curve is U-Shaped
Q D
TC H S
2 Q
Annual Cost

Ordering Costs

Order Quantity
QO (optimal order quantity) (Q)
EXAMPLE 1 (EOQ)
Omega is a company which manufactures
megaphones. The company buys its
speakers at a cost of RM20 each. With each
order, Omega must spend RM50
(preparation of the purchase order, delivery,
receiving). The annual demand for speakers
is 10,000 units and the annual carrying cost
is 20 % of the unit cost.
Which quantity, Q would minimize the
annual total cost?
SOLUTION : EXAMPLE 1 (EOQ)

D = 10,000 units
H = 20% of the unit cost RM20
S = RM50

2DS
Qo =
H
2 x 10000 x RM50
=
20% x RM20
= 500 units
EXAMPLE 2 (EOQ)
A local distributor for a national tire company
expects to sell approximately 9,600 steel-belted
radial tires of a certain size and tread design next
year. Annual carrying cost RM16 per tire, and
ordering cost is RM75. The distributor operates
288 days per year.
a. What is the EOQ?
b. How many times per year does the store
reorder?
c. What is the length of an order cycle?
d. What is the total annual cost if the EOQ
quantity is ordered?
SOLUTION : EXAMPLE 2 (EOQ)
D = 9,600 tires per year
H = RM16 unit per year
S = RM75

a. Q = 2DS 2(9600)(75)

o = 300tires
H 16

b. Number of order per year, N

D 300tires
N= = 32
Q 9600tires per year
SOLUTION : EXAMPLE 2 (EOQ)
c. Length of order cycle,
Q 300tires 1
= of a year
D 9600tires per year 32
1
Which is x288 = 9 workdays
32

Q D
d. TC = H S
2 Q
300 9600
= 16 75
2 300
RM 2,400 RM 2,400
RM 4,800
ECONOMIC PRODUCTION
QUANTITY (EPQ) MODEL
Production is done in batches or
lots.
Capacity to produce a part exceeds
the parts usage or demand rate.
Assumptions of EPQ are similar to
EOQ except orders are received
incrementally during production.
EPQ
ASSUMPTIONS :
Only one item is involved
Annual demand is known
Usage rate is constant
Usage occurs continually
Production rate is constant
Lead time does not vary
No quantity discounts
EPQ (INVENTORY CYCLE)
Quantity

Production
Production

& Usage
& Usage
Usage
Usage

Time
ECONOMIC RUN SIZE
Solving a similar equation as for EOQ, we
get the following equation for the optimal
run size for EPQ.
The economic run quantity is

2 DS p
QP
H p u
p = production or delivery rate
u = usage rate
ECONOMIC RUN SIZE (CONT.)
The cycle time (the time between orders or
between the beginnings of runs) is a function of
the run size and usage (demand) rate :
QP
Cycle time
u
The run time (the production phase of the
cycle) is a function of the run (lot) size and the
production rate :
QP
Run time
P
ECONOMIC RUN SIZE (CONT.)

The maximum and average inventory levels

are
QP
I max ( p u)
u

I max Qp
I average or ( p u)
2 2p
ECONOMIC RUN SIZE (CONT.)
The annual setup cost is equal to the number
of runs per year times the setup cost,
D
S, per run S
Q

The total cost is,

TCmin = Carrying cost + Setup cost
I max D
TCmin H S
2 Q

where I max= maximum inventory

EXAMPLE (EPQ)
A toy manufacturer uses 48,000 rubber wheels per
year for its popular dump truck series. The firm
makes its own wheels, which it can produce at a
rate of 800 per day. The toy trucks are assembled
uniformly over the entire year. Carrying cost is
RM1 per wheel a year. Setup cost for a production
run of wheels is RM45. The firm operates 240 days
per year. Determine :
a. The optimal run size,
b. Minimum total annual cost for carrying and
setup,
c. Cycle time for the optimal run size,
d. Run time.
SOLUTION EXAMPLE (EPQ)
D = 48,000 wheels per year
H = RM1 per wheel per year
S = RM45
p = 800 wheels per year
u = 48,000 wheels /240 days, or 200 wheel /day

a. 2 DS p
QP
H p u
2(48000)45 800

2 800 200
2,400wheels
SOLUTION EXAMPLE (EPQ)
b. TCmin = Carrying cost + Setup cost
I max D
TCmin H S
2 Q
Qp H D
TCmin p u S
p 2 Qp
2400 RM 1 48000
800 200 RM 45
800 2 2,400
RM 900 RM 900
RM 1,800
SOLUTION EXAMPLE (EPQ)

QP 2400
c. Cycle time
u 200
12days
A run of wheels will be made every 12 days.

QP2400
d. Run time
p 800
3days
Each run will require three days to
complete.
QUANTITY DISCOUNTS (QD) MODEL
Quantity discount are price reductions for large
orders offered to customers to induce them to
buy in large quantities.
The price per units decreases as order quantity
increase.
For example :
Volume (Per Unit) Discounts
1 to 49 = RM10/unit
50 to 100 = RM9/unit
100 and up = RM8/unit
Case Discounts
Single units = RM10/unit
Case of 10 = RM90 = RM9/unit
QD (TOTAL COST WITH PURCHASING
COST)
Quantity discounts are price reductions offered to
customers to induce them to buy in large
quantities.
TC = Annual carrying + Ordering + Purchasing
cost cost cost

Q D
TC H

S PD
2 Q
where P = Unit price
The buyers goal is to select the order quantity that
will minimize total cost.
TAKING THE DRIVATIVE WITH RESPECT TO
Q DOSENT CHANGE THE EOQ FORMULA
Cost

Adding Purchasing cost

doesnt change EOQ TC with PD

TC without PD

PD

0 EOQ Quantity
TOTAL COST WITH CONSTANT
CARRYING COSTS
TCa
Total Cost

TCb
Decreasing
TCc Price

CC a,b,c

OC

EOQ Quantity
EXAMPLE (QD)
The maintenance department of a large
hospital uses about 816 cases of liquid
cleanser annually. Ordering costs are RM12,
carrying costs are RM4 per case a year, and
the new price schedule indicates that orders
of less than 50 cases will cost RM20 per
case; 50 to 79 cases will cost RM18 per case;
80 to 99 cases will cost RM17 per case; and
larger orders will cost RM16 per case.
Determine the optimal order quantity and
the total cost.
SOLUTION EXAMPLE (QD)

D = 816 cases per year H = RM4 per case per year

S = RM12
Range Price
1 to 49 ... RM20
50 to 79 ... RM18
80 to 99 ... RM17
100 and more ... RM16

a. Compute the common minimum quantity, Q

2 DS 2(816)12
Q
H 4
Q 69.97 70cases
SOLUTION EXAMPLE (QD)
b. - The 70 cases can be bought at RM18 per case
because 70 falls in the range of 50 to 79 cases.
- The total cost to purchase 816 cases a year,
at the rate of 70 cases per order, will be
TC = Carrying + Ordering + Purchasing
cost cost cost
Q D
TC70 H
S PD
2 Q
70 816
4 12 18(816)
2 70
RM 14,986
MASTER PRODUCTION SCHEDULE
(MPS)
Provides basis for:
Making good use of manufacturing resources
Making customer delivery promises
Resolving tradeoffs between sales and
manufacturing
Attaining strategic objectives in the sales and
operations plan
Start with Aggregate plan
(Aggregate Sales & Ops Plan)
Output level designed to meet targets
Disaggregates
Converts into specific schedule for each item
MPS PROBLEM
Capacity Constants Product Characteristic

Company Economic
Policies Considerations

Placed Orders
Master Production
Forecasted Demand Schedule:

Current and Planned

MPS When & How
Much to produce
Availability, eg., for each product
Initial Inventory,
Initiated Production,
Subcontracted quantities

Planning Time
Horizon unit
Capacity
Planning
MPS EXAMPLE : COMPANY OPERATIONS
Grain cracking
Mashing Boiling
(1 milling
(1 mashing tun) (1 brew kettle)
machine)

Fermentation Bottling
Filtering
(3 40-barrel (1 bottling
(1 filter tank)
ferm. tanks) station)

Fermentation Times:
Brew Ferm. Time
Bali Ale 2 weeks
Semangka 3 weeks
Winter Ale 2 weeks
Summer Brew 2 weeks
MASTER SCHEDULING PROCESS

Inputs Outputs

Beginning inventory Projected

inventory

Forecast Master Master production

Scheduling schedule

Customer orders Uncommitted

inventory
MASTER PRODUCTION
SCHEDULING TECHNIQUES
Available
= inventory position at end of week
= starting inventory + MPS forecast
Plan to have positive inventory level
Buffer in case production below plan
Or demand higher than anticipated
MPS row is amount to make, MRP system
has to figure out how to make it.
MATERIAL REQUIREMENTS
PLANNING (MRP)

Materialrequirements planning (MRP):

Computer-based information system
that translates master schedule
requirements for end items into time-
phased requirements for
subassemblies, components, and raw
materials.
WHAT CAN MRP DO?
Reduce Inventory Reduce Purchasing
Levels Cost
Reduce Component Improve Production
Shortages Schedules
Improve Shipping Reduce
Performance Manufacturing Cost
Improve Customer Reduce Lead Times
Service Less Scrap and
Improve Productivity Rework
Simplified and Higher Production
Accurate Scheduling Quality
WHAT CAN MRP DO?
Improve Communication
Improve Plant Efficiency
Reduce Freight Cost
Reduction in Excess Inventory
Reduce Overtime
Improve Supply Schedules
Improve Calculation of Material
Requirements
Improve Competitive Position
MRP PURPOSE
Coordination of Production and
Inventory in large, multi-stage production
systems.
Capacity planning, scheduling, supplier
coordination.
Timely dissemination of information
Synchronized production and
procurement .
Central engineering and logistic database
(Central element of the ERP system).
MRP IN SERVICES
Service applications such as:
Professional services
Postal services
Retail
Banking
Healthcare
Higher education
Engineering
Logistical services
Real estate
MRP IN SERVICES (EXAMPLE)
Food catering service
End item => catered food
Dependent demand => ingredients
for each recipe, i.e. bill of materials
Hotel renovation
Activities and materials exploded
into component parts for cost
estimation and scheduling
MRP BENEFITS

Increased customer satisfaction due to

meeting delivery schedules.
Faster response to market changes.
Improved labor & equipment
utilization.
Better inventory planning & scheduling.
Reduced inventory levels without
reduced customer service.
MRP BENEFITS (CONT.)
Low levels of in-process inventories
Ability to track material requirements
Ability to evaluate capacity requirements
Means of allocating production time
Ability to easily determine inventory usage
by backflushing
Backflushing: Exploding an end items bill of
materials to determine the quantities of the
components that were used to make the
item.
REQUIREMENTS OF MRP
Computer and necessary software
Accurate and up-to-date
Master schedules
Bills of materials
Inventory records
One of the three primary inputs in MRP
Includes information on the status of each item by
time period
Gross requirements
Scheduled receipts
Amount on hand
Lead times
Lot sizes
And more
Integrity of data
IMPORTANCE OF AN MRP SYSTEM
Without an MRP system:
Component is ordered at time A, when
the inventory level of the component hits
reorder point, R.
So, the component is received at time B.
However, the component is actually
needed at time C, not B. So, the inventory
holding cost incurred between time B
and C is a wastage.
INVENTORY WITHOUT AN MRP
SYSTEM
IMPORTANCE OF AN MRP SYSTEM

With an MRP system:

We shall see in this lesson that given the
production schedule of the finished
goods and some other information (see
the next slide), it is possible to predict
the exact time, C when the component
will be required. Order is placed
carefully so that it is received at time C.
INVENTORY WITH AN MRP SYSTEM
OVERVIEW OF MRP
MRP Inputs MRP Processing MRP Outputs

Changes

Order releases
Master
schedule Planned-order
schedules
Primary
reports
Exception reports
Bill of Planning reports
materials MRP computer Secondary
programs reports Performance-
control
reports

Inventory
Records/ Inventory
file transaction
MRP INPUTS

1. Master Production Schedule (MPS),

2. Bill of Materials (BOM) Time-
phased plan specifying timing and
quantity of production for each
end item,
3. Inventory Records/file.
MRP INPUTS : 1. MPS
Master Production Schedule (MPS):
The MPS of the finished product provides information on the
net requirement of the finished product over time.
Time-phased plan specifying timing and quantity of
production for each end item.
MPS comes from sales and marketing.
MPS covers about 1-3 months into the future :
Must cover cumulative lead time
Cumulative lead time: The sum of the lead times that
sequential phases of a process require, from ordering of
parts or raw materials to completion of final assembly.
From Now until Cumulative lead time plans are generally
frozen.
Sometimes MPS is capacity filtered; MPS is curtailed after
taking the available capacity into account.
MPS : EXAMPLE
Shows items to be produced
End item, customer order, module

Item/Week Oct 3 Oct 10 Oct 17 Oct 24

Drills 300 200 310 300

Saws 300 450 310 330

MRP INPUTS : 2. BOM
Bill of Materials (BOM) : A listing of all of the
raw materials, parts, subassemblies, and
assemblies needed to produce one unit of a
product.
For each component, the bill of materials
provides information on the number of units
required, source of the component
(purchase/ manufacture), etc.
There are two forms of the bill of materials:
i) Product Structure Tree
ii) Bill of Materials
i) PRODUCT STRUCTURE TREE
Product Structure Tree : Visual depiction of the
requirements in a bill of materials, where all
components are listed by levels.
Example 1 : Production decisions (MRP)

Back slats Seat cushion

Leg supports Seat-frame

boards
Back Front
legs legs
EXAMPLE 2 : PRODUCT STRUCTURE TREE
Level
0

Level
1

Level
2

Level
3
PRODUCT STRUCTURE TREE
From example 2 :
The finished product is shown at the top, at level 0.
The components assembled to produce the finished
product is shown at level 1 or below. The sub-
components used to produce the components at
level 1 is shown at level 2 or below, and so on. The
number in the parentheses shows the requirement of
the item. For example, G(4) implies that 4 units of
G is required to produce 1 unit of B.
The levels are important. The net requirements of the
components are computed from the low levels to
high. First, the net requirements of the components at
level 1 is computed, then level 2, and so on.
EXAMPLE 3
The following product structure tree indicates the
components needed to assemble one unit of product W.
Determine the quantities of each component needed to
assemble 100 units of W.
W Level 0

A B(2) C(4) Level 1

Level 0

D(2) E E(2) F D(3) G(2) Level 2

D Level 3
 SOLUTION : EXAMPLE 3
W 100

A B(2) C(4)
1 x 100 2 x 100 4 x 100
= 100 = 200 = 400

D(2) E E(2) F D(3) G(2)

2 x 100 1 x 100 2 x 200 1 x 200 3 x 400 2 x 400
= 200 = 100 = 400 = 200 = 1200 = 800

D
1 x 800
= 800
SOLUTION : EXAMPLE 3

Summary :
Level Item Quantity
0 .. W 100
1 .. A 100
B 200
C 400
2 .. E 500 (100 + 400)
F 200
G 800
3 .. D 2,200 (200 + 1,200 + 800)
ii) BILL OF MATERIALS FORM
Bill of Materials: For each item, the name, number, source,
and lead time of every component required is shown on
the bill of materials in a tabular form.
BILL OF MATERIALS
Product Description: Ladder-back chair
Item: A
Component Quantity Source
Item Description Required
B Ladder-back 1 Manufacturing
C Front legs 2 Purchase
D Leg supports 4 Purchase
E Seat 1 Manufacturing

BILL OF MATERIALS
Product Description: Seat
Item: E
Component Quantity Source
Item Description Required
H Seat frame 1 Manufacturing
I Seat cushion 1 Purchase
MRP INPUTS : 3. INVENTORY
RECORDS
Inventory file : For each item, the number of units
on hand is obtained from the inventory file.
Includes information on the status of each item by
time period.
On-Hand Quantities
On-Order Quantities
Lot Sizes
Safety Stock
Lead Time
Past-Usage Figures
LOT SIZES
Lot-for-lot ordering (L4L)
Order quantity equals the net requirement,
Sometimes, lot-for-lot policy cannot be
used. There may be restrictions on
minimum order quantity or order quantity
may be required to multiples of 50, 100 etc.
Economic order quantity
Fixed-period ordering
Part-period model
ON HAND INVENTORY AND LEAD TIME

Component Units in Lead

Inventory time
(weeks)

Seat
Subassembly 25 2

Seat frame 50 3

Seat frame
boards 75 1
MRP PROCESSING

Gross requirements
Total expected demand.
Scheduled receipts
Open orders scheduled to arrive,
Items ordered prior to the current
planning period and/or,
Items returned from the customer.
Planned on hand
Expected inventory on hand at the
beginning of each time period.
MRP PROCESSING (CONT.)
Net requirements
Actual amount needed in each time period.

Planned-order receipts
Quantity expected to received at the
beginning of the period,
Offset by lead time.

Planned-order releases
Planned amount to order in each time
period.
MRP OUTPUT
Every required item is either produced or
purchased. So, the report is sent to production or
purchasing.
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.
Performance-control reports
Planning reports
Exception reports
SUMMARY : MRP INPUT AND OUTPUT

Master
Orders Production Forecasts
Schedule

Bill of MRP
computer Inventory
Materials
file
file program

To Production Reports To Purchasing

EXAMPLE (MRP)
The product structure tree for end item E
follows (figure 1). The manager wants to
know the material requirements for ordered
part R that will be needed to complete 120
units of E by the start of week 5. Lead times
for items are one week for level 0 items, one
week for level 1 items, and two weeks for
level 2 items. There is a scheduled receipt of
60 units of M at the start of week 2 and 100
units of R at the start of week 1. Lot-for-lot
ordering is used.
EXAMPLE (MRP) : FIGURE 1

E Level 0

M(3) F(2) Level 1

R(2) P N(4) V Level 2

SOLUTION : EXAMPLE (MRP)
A partial assembly-time chart that includes R and
leads to completion of E by the start of week 5
looks like this :
Assemble E

Assemble M

Procure R Procure R
1 2 3 4 5
The table entries are arrived at as follows :
Master Schedule : 120 units of E to be available at
the start of week 5.
SOLUTION : EXAMPLE (MRP)
Item E : Gross requirements = 120 units (equal the quantity
specified in the master production schedule). There is no
on-hand inventory, net requirements = 120 units (start of
week 5). An order will need to be released at the beginning
of week 4 (one week lead time for assembly of E at level 0).
Item M : Gross requirements = 3 x net requirements for E
(start of week 4). Net requirements = 300 units (60 units
less due to the 60 units expected to be on hand / schedule
receipt). An order release at start of week 3 (one week lead
time for level 1).
Item R : Gross requirements = 2 x 300 units of M. Only 500
units need to be ordered (100 units will be on hand). Must
be ordered at the start of week 1 (two weeks lead time for
level 2).
SOLUTION : EXAMPLE (MRP)
The master schedule for E and requirements plans for E, M and R
follow :
REFER THE FORMAT OF MRP PROCESSING

Master schedule for

Beg.
Week number 1 2 3 4 5 6 7 8 9 10
Inv.
Quantity

Item = Beg.
1 2 3 4 5 6 7 8 9 10
LT = Inv.
Gross Requirements
Scheduled receipts
Projected on hand
Net requirements
Planned-order receipt
Planned-order release
THANK YOU