material requirements planning. materials requirements planning (mrp) is a means for determining the...
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Material Requirements Planning
• Materials requirements planning (MRP) is a means 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
• Dependent demand drives MRP
Material Requirements PlanningDefined
Dependent Demand
The demand for one item is related The demand for one item is related to the demand for another itemto the demand for another item
Given a quantity for the end item, Given a quantity for the end item, the demand for all parts and the demand for all parts and components can be calculatedcomponents can be calculated
In general, used whenever a In general, used whenever a schedule can be established for an schedule can be established for an itemitem
MRP is the common techniqueMRP is the common technique
Benefits of MRP
1.1. Better response to customer Better response to customer ordersorders
2.2. Faster response to market Faster response to market changeschanges
3.3. Improved utilization of facilities Improved utilization of facilities and laborand labor
4.4. Reduced inventory levelsReduced inventory levels
• 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
Material Requirements PlanningSystem
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©The McGraw-Hill Companies, Inc., 2004
Firm orders from knowncustomers
Forecastsof demand
from randomcustomers
Aggregateproduct
plan
Bill ofmaterial
file
Engineeringdesign
changes
Inventoryrecord file
Inventorytransactions
Master productionSchedule (MPS)
Primary reportsSecondary reports
Planned order schedule for inventory and production control
Exception reportsPlanning reportsReports for performance control
Materialplanning(MRP
computer program)
Elemen MRP
1.1. Master production scheduleMaster production schedule
2.2. Specifications or bill of materialSpecifications or bill of material
3.3. Inventory availabilityInventory availability
4.4. Purchase orders outstandingPurchase orders outstanding
5.5. Lead timesLead times
Effective use of dependent demand Effective use of dependent demand inventory models requires the inventory models requires the followingfollowing
Master Production Schedule (MPS)
Specifies what is to be made and whenSpecifies what is to be made and when Must be in accordance with the aggregate Must be in accordance with the aggregate
production planproduction plan Aggregate production plan sets the Aggregate production plan sets the
overall level of output in broad termsoverall level of output in broad terms As the process moves from planning to As the process moves from planning to
execution, each step must be tested for execution, each step must be tested for feasibilityfeasibility
The MPS is the result of the production The MPS is the result of the production planning processplanning process
MPS is established in terms of specific MPS is established in terms of specific productsproducts
Master Production Schedule (MPS)
A customer order in a job shop (make-A customer order in a job shop (make-to-order) companyto-order) company
Modules in a repetitive (assemble-to-Modules in a repetitive (assemble-to-stock) companystock) company
An end item in a continuous (make-to-An end item in a continuous (make-to-stock) companystock) company
Can be expressed in any of the Can be expressed in any of the following terms:following terms:
• Materials
• Parts
• Components
• Production sequence
• Modular BOM – Subassemblies
Bill of Materials (BOM) FileA Complete Product Description
BOM (Table Example)
Top
Leg
Long Rail
Short Rail
BOM (Product Structure)
Short Rails(2)
Table(End Item)
Long Rails(2)
Legs(4)
Top(1)
Leg Assembly(1)
Code
Level Code Component
0 Table (end-item)
1 Leg assembly (1)
2 Short rails (2)
2 Long rails (2)
2 Legs (4)
1 Top(1)
Attribute MRP Order Point
Demand Dependent Independent
Order philosophy
Requirements Replenishment
Forecast Based on master schedule
Based on past demand
Control concept
Control all items ABC
Objectives Meet manufacturing needs
Meet customer needs
Lot sizing Discrete EOQ
Types of inventory
Work in process and raw materials
Finished goods and spare parts
Attribute MRP Order Point
Demand Dependent Independent
Order philosophy
Requirements Replenishment
Forecast Based on master schedule
Based on past demand
Control concept
Control all items ABC
Objectives Meet manufacturing needs
Meet customer needs
Lot sizing Discrete EOQ
Types of inventory
Work in process and raw materials
Finished goods and spare parts
MRP versus Order-Point Systems
Elements of Success in MRP
• Implementation planning
• Adequate computer support
• Accurate data
• Management support
• User knowledge
Example of MRP Logic and Product Structure Tree
B(4)
E(1)D(2)
C(2)
F(2)D(3)
A
Product Structure Tree for Assembly A Lead TimesA 1 dayB 2 daysC 1 dayD 3 daysE 4 daysF 1 day
Total Unit DemandDay 10 50 A
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
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
LT = 1 day
Day: 1 2 3 4 5 6 7 8 9 10A Required 50
Order Placement 50
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.
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.
Next, we need to start scheduling the components that make up “A”. In the case of component “B” we need 4 B’s for each A. Since we need 50 A’s, that means 200 B’s. And again, we back the schedule up for the necessary 2 days of lead time.
Next, we need to start scheduling the components that make up “A”. In the case of component “B” we need 4 B’s for each A. Since we need 50 A’s, that means 200 B’s. And again, we back the schedule up for the necessary 2 days of lead time.
Day: 1 2 3 4 5 6 7 8 9 10A Required 50
Order Placement 50B Required 200
Order Placement 200
B(4)
E(1)D(2)
C(2)
F(2)D(3)
A
SparesLT = 2
4x50=200
Day: 1 2 3 4 5 6 7 8 9 10A Required 50
LT=1 Order Placement 50B Required 200
LT=2 Order Placement 200C Required 100
LT=1 Order Placement 100D Required 400 300
LT=3 Order Placement 400 300E Required 200
LT=4 Order Placement 200F Required 200
LT=1 Order Placement 200
B(4)
E(1)D(2)
C(2)
F(2)D(3)
A
Finally, repeating the process for all components, we have the final materials requirements plan:
Finally, repeating the process for all components, we have the final materials requirements plan:
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MRP Example
A(2) B(1)
D(5)C(2)
X
C(3)
Item On-Hand Lead Time (Weeks)X 50 2A 75 3B 25 1C 10 2D 20 2
Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10
Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10
A(2)
X
Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95
LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90
LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45
LT=1 Scheduled receipts Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40
LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100
LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80
It takes 2 A’s for each X
It takes 2 A’s for each X
Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95
LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90
LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45
LT=1 Scheduled receipts Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40
LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100
LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80
B(1)A(2)
X
It takes 1 B for each X
It takes 1 B for each X
A(2) B(1)
X
C(3)
Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95
LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90
LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45
LT=1 Scheduled receipts Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40
LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100
LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80
It takes 3 C’s for each A
It takes 3 C’s for each A
A(2) B(1)
C(2)
X
C(3)
Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95
LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90
LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45
LT=1 Scheduled receipts Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40
LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100
LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80
It takes 2 C’s for each B
It takes 2 C’s for each B
A(2) B(1)
D(5)C(2)
X
C(3)
Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95
LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90
LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45
LT=1 Scheduled receipts Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40
LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100
LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80
It takes 5 D’s for each B
It takes 5 D’s for each B
Closed Loop MRP
Production PlanningMaster Production SchedulingMaterial Requirements PlanningCapacity Requirements Planning
Realistic?No
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Execute:Capacity PlansMaterial Plans
Yes
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