MRP
Material requirements planning (MRP): Computerbased information system (i.e. glorified
database) for ordering and scheduling of
dependent demand inventories
It is a production planning process that starts from the
demand for finished products and plans the production
step by step of subassemblies and parts.
INDEPENDENT AND DEPENDENT
DEMAND
Independent demand: Demand for final products.
Dependent demand: Demand fort items that are subassemblies or component parts to
be used in production of finished goods.
Independent Demand
A
Dependent Demand
C(2)
B(4)
D(2)
E(1)
D(3)
F(2)
Independent demand is uncertain.
Dependent demand is certain.
IS DEPENDANT DEMAND LUMPIER?
Dep. Demand
Stable demand
Time
Safety stock
Time
Lumpy demand
Time
Amount on hand
Amount on hand
Indep. Demand
The book claims that the independent demand is continuous while the
dependent demand is lumpy. I do not believe in this statement.
Time
THE DEPENDENT DEMAND IS NOT NECESSARILY
ANY LUMPIER THAN THE INDEPENDENT DEMAND
Example: Say shoe demand rate is 80 pairs per week at a
retailer. The demand rate for shoe sole is 80 for left and
80 for the right pair. The demand rate for shoe laces is 160
per week.
Example continued: What is the demand rate for the shoe
lace supplier? Still 160 per week. But if the orders for the
laces are placed once a week, lace demand is lumpy.
Lumpy dependent
demand
Order once in a week
Smooth dependent
demand
Order twice
Order 4 times
MRP Inputs
MRP Processing
MRP Outputs
Changes
Order releases
Master
schedule
Planned-order
schedules
Primary
reports
Bill of
materials
Inventory
records
MRP computer
programs
Exception reports
Planning reports
Secondary
reports
Performancecontrol
reports
Inventory
transaction
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MRP INPUTS: 1. MPS
Master Production Schedule: MPS
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.
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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.
Product structure tree: Visual depiction of the
requirements in a bill of materials, where all
components are listed by levels.
Most often people do not use the term product
structure tree. Instead use BOM to mean the
product structure tree.
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PRODUCT STRUCTURE TREE
Level
0
1
Chair
Leg
Assembly
2 Legs (4)
Cross
Bar(2)
Seat
Back
Assembly
Side
Cross Back
Rails (2) bar
Supports (3)
EXPLOSION EXAMPLE
How many leg assemblies are needed for 1 chair?
How many Cross bars are needed for 5 chairs?
Computing how many parts are required per a
final product is called BOM explosion.
MRP answers these questions by taking
production lead times into account: Not only it
tells how many, but also when.
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Bill of Materials Example 1
How many more of each component is needed to make 15 Xs if there are 5 of
each already in stock?
X
B(2)
D(3)
E(4
)
C
E(2)
F(2)
X:10, B:15, C:5, D:40, E: 180, F:5
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Bill of Materials Example 2
How many more of each component is needed to make 15 Xs if there are 8 of
each already in stock?
X
B(2)
D(3)
E(4
)
C
E(2)
F(2)
X:7, B:6, C:0, D:10, E: 38, F:0
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LEAD TIMES
Assembly
Subassembly
Fabrication
Procurement
12
10
ASSEMBLY TIME CHART
Procurement of
raw material D Fabrication
of part E
Subassembly A
Procurement of
raw material F
Procurement of
part C
Final assembly
and inspection
Procurement of
part H
Fabrication
of part G
Procurement of
raw material I
Subassembly B
10
11
Days
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MRP INPUT: 3. INVENTORY
LEVELS
Beginning inventory on hand
Scheduled receipts
Pipeline
inventory not received yet but it is in the process of
coming to the inventory. We know when this will be available
for use.
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MPR PROCESSING
Gross requirements
Scheduled receipts
Expected inventory on hand at the beginning of each time period
Net requirements
Open orders scheduled to arrive
Planned on hand
Total expected demand
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
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MRP PROCESSING
Gross requirements: (Forecasted)Demand period by period
Net requirements(t)
=Gross requirements(t)-Projected inventory(t-1)
-Scheduled receipt(t)
If Net requirement(t) > 0
set Planned order receipts(t)>=Net requirement(t)
Planned-order receipts is the production planned
Projected inventory(t)
=Projected inventory(t-1)+Scheduled receipt(t)
+Planned order receipts(t)-Gross requirements(t)
Planned order release(t-LT)=Planned-order receipts(t)
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MRP EXAMPLE WITH LT=2 AND 1
LEVEL
Periods
Gross requirements
Scheduled receipts
Projected on hand
10
Net requirements
1
6
2
2
11
3
3
7
0
Planned order receipts
Planned order releases
7
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Inputs
Outputs
FIGURE 13-8
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OTHER CONSIDERATIONS
Safety Stock
Not
much for items with dependent demand
Lot sizing
Lot-for-lot
ordering
Economic order quantity
Fixed-period ordering
Part-period model
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MRP EXAMPLE WITH LOT SIZE=5, LT=2
AND 1 LEVEL
Periods
Gross requirements
Scheduled receipts
1
6
2
2
11
3
3
9
0
Net requirements
10
Planned order receipts
10
Projected on hand
Planned order releases
10
10
20
Inputs
Outputs
FIGURE 13-9
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MRP UPDATES
Regenerative MRP
Do
the planning from scratch
Time between regenerations is long
Ok for stable environments
Net Change MRP
Update
the plan according to changes
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MRP OUTPUTS
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
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CAPACITY PLANNING
Capacity requirements planning: The process of
determining short-range capacity requirements.
Load reports: Department or work center reports
that compare known and expected future capacity
requirements with projected capacity availability.
Time fences: Series of time intervals during which
order changes are allowed or restricted.
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MRP PLANNING
Develop a tentative
master production
schedule
Use MRP to
simulate material
requirements
Convert material
requirements to
resource requirements
Revise tentative
master production
schedule
No
Is shop
capacity
adequate?
Can
capacity be
changed to meet
requirements
No
Yes
Yes
Firm up a portion
of the MPS
Change
capacity
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MRP IN SERVICES
Food catering service
End
items are the catered food
Dependent demands are ingredients for each recipe,
i.e. bill of materials
Taco Bell menu items
Hotel renovation
Activities
and materials exploded into component
parts
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BENEFITS OF MRP
Low levels of in-process inventories
Ability to track material requirements
Ability to evaluate capacity requirements
Means of allocating production time
Eventually it is a database with limited decision
making capability
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REQUIREMENTS OF MRP
Computer and necessary software
Accurate and up-to-date inputs:
Master
Bills
schedules
of materials
Inventory
records
Integrity of data
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MRP II
Expanded MRP with and emphasis placed on
integration
Financial
planning
Marketing
Engineering
Purchasing
Manufacturing
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MRP II
Manufacturing
Master
production schedule
Marketing
Production
plan
MRP
Rough-cut
capacity planning
Capacity
planning
Adjust
production plan
Yes
Problems?
No
Requirements
schedules
No
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Problems?
Adjust master schedule
Market
Demand
Finance
Yes
ERP
Enterprise resource planning (ERP):
An expanded effort to integrate standardized record
keeping that will permit information sharing throughout
the organization
Strategic considerations
High
initial cost
High cost to maintain
Future upgrades
Training
See ERP courses in the course catalog
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SUMMARY
MRP:
Dependent
vs Independent demand
Inputs (BOM),
Processing,
Outputs
Benefits and requirements
Capacity planning
MRP-II and ERP
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