MRP

The philosophy of MRP

The input and output for MRP
The relation between a master production
schedule and material requirements for
lower-level components
The benefits and difficulties with MRP
Reading: Page 634 652
Learning Objectives
Describe the conditions under which MRP is
most appropriate.
Describe the inputs, outputs, and nature of
MRP processing.
Explain how requirements in a master
production schedule are translated into
material requirements for lower-level items.
Discuss the benefits and requirements of
MRP.
Learning Objectives
Explain how an MRP system is useful in
capacity requirements planning.
Outline the potential benefits and some of the
difficulties users have encountered with MRP.
Describe MRP II and its benefits.
Describe ERP, what it provides, and its hidden
costs.
Material requirements planning (MRP):
Computer-based information system that
translates master schedule requirements for
end items into time-phased requirements for
subassemblies, components, and raw
materials.
MRP
Independent and Dependent Demand
Dependent demand: demand for compoments that make up products
mountain bike wheels X 200 street racer wheels X 100
brakes X 300
Independent demand: demand origates outside of the system
mountain bikes X 100 street racer X 50
Dependent demand: Demand for items
that are subassemblies or component
parts to be used in production of finished
goods.
Once the independent demand is known,
the dependent demand can be
determined.
Dependant Demand
Dependent vs. Independent Demand
Time
Time Time
Time
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Stable demand
Lumpy demand
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Safety stock
MRP Inputs MRP Processing MRP Outputs
Master
schedule
Bill of
materials
Inventory
records
MRP computer
programs
Changes
Order releases
Planned-order
schedules
Exception reports
Planning reports
Performance-
control
reports
Inventory
transaction
Primary
reports
Secondary
reports
Overview of MRP
Master Production Schedule
Time-phased plan specifying timing and
quantity of production for each end item.
Material Requirement Planning Process
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MPR Inputs
Master Schedule
Master schedule: One of three primary
inputs in MRP; states which end items
are to be produced, when these are
needed, and in what quantities.
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.
Planning Horizon
1 2 3 4 5
6 7
8 9 10
Procurement
Fabrication
Subassembly
Assembly
Time Period (weeks)
Bill-of-Materials
Bill of materials (BOM): One of the three
primary inputs of MRP; 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.
Low-level coding: Restructuring the bill of
materials so that multiple occurrences of a
component all coincide with the lowest level the
component occurs
Chair
Leg assembly Seat
Back Assembly
Legs (2)
Cross bar
Side rails
(2)
Cross bar
Back
supports (3)
Production structure
tree
An Example
Determine the
quantities of B,
C, D, E, and F
needed to
assemble one
X.
X
B (2)
C
D (3)
E
E (2)
F (2)
E (4)
Level
0
1
2
3
Thus, one X will require:
B: 2
C: 1
D: 6
E: 28 (=24+2+2)
F: 2
X
B: 2 x 1 = 2 B(2)
C: 1 x 1 = 1 C
D: 3 x 2 = 6 D(3)
E: 1 x 2 = 2 E E: 2 x 1 = 2 E(2)
F: 2 x 1 = 2 F(2)
E: 4 x 6 = 24 E(4)
1
Example (continued)
Determine the quantities of these
components that will be required to
assemble 10 Xs, taking into account the
quantities on hand (i.e., in inventory) of
various components:
Component On Hand
B 4
C 10
D 8
E 60
Thus, given the amounts of on-hand inventory, 10 Xs requires:
B: 16
C: 0
D: 40
E: 116
F: 0
X
B: 2 x 10 = 20 B(2)
- 4
16
C: 1 x 10 = 10 C
-10
0
D: 3 x 16 = 48 D(3)
- 8
40
E: 1 x 16 = 16 E E(2)
F(2)
E: 4 x 40 = 160 E(4)
- 60
100
10
(No lower level
components
required)
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
Inventory Requirements
Net requirements:
Available Inventory:
Net Requirements =
Gross Requirements
Available Inventory
Available Inventory =
Projected on hand
Safety stock
Inventory allocated to other items
Assembly Time Chart
1 2 3 4 5
6 7
8 9 10 11
Procurement of
raw material D
Procurement of
raw material F
Procurement of
part C
Procurement of
part H
Procurement of
raw material I
Fabrication
of part G
Fabrication
of part E
Subassembly A
Subassembly B
Final assembly
and inspection
MPR Processing
Gross requirements
Total expected demand
Scheduled receipts
Open orders scheduled to arrive
Planned on hand
Expected inventory on hand at the
beginning of each time period
MPR Processing
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
An 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. The wood sections are made by
the firm, and fabrication takes one week. The frames are
ordered, and lead time is two weeks. Assembly of the
shutters requires one week. There is a scheduled receipt
of 70 wood sections in (i.e., at the beginning of) week 1.
Example Analysis
Develop a master schedule:
Develop a product structure tree:
Week number 1 2 3 4 5 6 7 8
Quantity 100 150
Shutter
Frames (2)
Wood sections (4)
Multiple Products
What will happen if each two-pair products have
no common components?
Now, consider an example for two products with
a common component: There is a beginning
inventory of 110 units of D on hand, and all
items have lead times of one week. The master
schedule calls for 80 units of A in week 4 and 50
units of C in week 5.
A
B D
C
D (2) F
Updating the System
Regenerative system
Updates MRP records periodically
Net-change system
Updates MPR records continuously
MRP Primary Reports
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.
MRP Secondary Reports
Performance-control reports
Planning reports
Exception reports
Other Considerations
Safety Stock
Lot sizing
Lot-for-lot ordering
Economic order quantity
Fixed-period ordering
Food catering service
End item => catered food
Dependent demand => ingredients for
each recipe, i.e. bill of materials
Hotel renovation
Activities and materials explodedinto
component parts for cost estimation and
scheduling
MRP in Services
Benefits of MRP
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
Integrity of data
Evolution from MRP to ERP
Extended
ERP
ERP MRP II MRP
Calculates
component
requirements
based on Master
Production
Schedule (MPS)
Determines lot
sizes and
releases orders
Closed-loop MRP
takes capacity
constraints into
account
Closes loop with
sales, financial,
and operations
Includes
allocation of
production
equipment and
labour
Can include J IT
capabilities
Includes systems
outside MRP II
Data are
generated as a
result of diverse
transactions and
integrated to be
used by multiple
users, for multiple
purposes and at
multiple places
Includes systems
outside corporation
- Supply chain
management
- Customer
relationship
management
- Self-service systems
Views information as
asset
1970 1980 1990 2000
Manufacturing Cross- Departments Database
Cross Companies
Review Problems
Page 668-673: Problems 1, 2, 5, 8, 14, 18