Materials Requirements Planning

Chapter 16

Material Requirements Planning

How

much of an item is needed?

is an item needed to complete

When
a

specified number of units... in a specified period of time?

Dependent

demand drives MRP

Master Production Schedule (MPS)

Time-phased

plan specifying how many and when the firm plans to build each end item
Aggregate Plan (Product Groups)

Master Production Schedule

MPS (Specific End Items)

Master Production Schedule Functions

Schedules production and purchases Principal input to MRP schedule Basis for determining resource requirements Provides basis for making delivery promises to customers

Information Inputs to the MPS

demand data

Marketing forecasts Sales orders on hand inventory safety stock levels

inventory status

production data processing times (lead times)

Terminology
Parent

item: An item manufactured from one or more components. An item that goes into one or more parent items. of Materials (BOM): A diagram or record that shows all components going into an item and the usage quantities.

Component: Bill

Bill of Materials (BOM) File A Complete Product Description

Materials

Parts
Components Production

sequence Modular BOM

Subassemblies

Planning

BOM
options

Fractional

Bill-of-Material Product Structure Tree

Bicycle(1) P/N 1000 Handle Bars (1) P/N 1001 Frame Assy (1) P/N 1002 Frame (1) P/N 1004

Wheels (2) P/N 1003

Terminology
Usage

quantity: Number of units of components needed to make one unit of parent.

Part

commonality: Degree to which a part has more than one parent.

Item: A parent, but not a component,typically a final product.

End

Bill-of-Material Product Structure Tree

Bicycle(1) P/N 1000 Handle Bars (1) P/N 1001 Frame Assy (1) P/N 1002 Frame (1) P/N 1004

Wheels (2) P/N 1003

Terminology
Intermediate

Item: An item with at least one parent and at least one component. Special case of intermediate item; it is assembled from more than one component. Item: An item with no components, coming from a supplier.

Subassembly:

Purchased

Time Fences

Frozen

No schedule changes allowed within this window

Specific changes allowed within product groups as long as parts are available Significant variation allowed as long as overall capacity requirements remain at the same levels

Moderately Firm

Flexible

Time Fences
Frozen Capacity Firm Customer Orders Moderately Firm Flexible Forecast and available capacity

15 Weeks

26

MRP Requirements
Computer

system Mainly discrete products Accurate bill-of-material Accurate inventory status

99%

inventory accuracy

Stable

lead times

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

Structure of the MRP System

BOM
(Bill-of-Material)

Master Production Schedule

MRP by period report

Lead Times

(Item Master File)

MRP by date report

MRP Programs

Inventory Data

Planned orders report

Purchase requirements Purchasing data Exception reports

Material Requirements Planning

Based on a master production schedule, a MRP system:

Creates schedules identifying the specific parts and materials required to produce end items
Determines exact numbers needed Determines the dates when orders for those materials should be released, based on lead times

Example - Dependent Demand

Lead Times Product Structure Tree for Assembly A Bill of Material (BOM) A B C D E F Demand 1 day 2 days 1 day 3 days 4 days 1 day

B(4)
D(2) E(1) D(3)

C(2)
F(2)

Day 10 50 A Day 8 20 B (Spares) Day 6 15 D (Spares)

Create a schedule to satisfy demand.

Day: A Required Order Placement

9 50

10 50

LT = 1 day

Day: A B R e q u ire d O rd e r P la c e m e n t R e q u ire d O rd e r P la c e m e n t

9 50

10 50

20 20 200

200

LT = 2 A B(4) D(2) E(1) D(3) C(2) F(2)

Spares

Day: A LT=1 B LT=2 C LT=1 D LT=3 E LT=4 F LT=1 Required Order Placement Required Order Placement Required Order Placement Required Order Placement Required Order Placement Required Order Placement

9 50 200 100

10 50

20 20 200 100 300

55 55 20 200 400 300 20

400 200

200 200

A B(4) D(2) E(1) D(3)

Part D: Day 6
40 + 15 spares

C(2) F(2)

Lead Times A 1 day B 2 days C 1 day D 3 days E 4 days F 1 day

Demand Day 10 Day 8 Day 6

50 A 20 B (Spares) 15 D (Spares)

Primary MRP Reports

Planned
to

orders

be released at a future time

Order
to

release notices

execute the planned orders

Changes

in due dates of open orders due to rescheduling

Primary MRP Reports

Cancellations

or suspensions of open

orders
due

to cancellation or suspension of orders on the master production schedule.

Inventory

status data

Another MRP Example

X A(2) C(3) C(2) B(1) D(5)
Item X A B C D On-Hand Lead Time (Weeks) 50 2 75 3 25 1 10 2 20 2

Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10.

Adding some more terminology

Gross

Requirements

On-hand Net

requirements order receipt

Planned Planned

order release

X A(2) C(3) C(2) B(1) D(5) Requirements: 95 units of X in Week 10

Lead Time Item

On Hand Required

2
3 1

X
A B

50
75 25

45 15 20 35 40 80

2
2

C
D

10
20

Released = Planned Order Release

Item X A B C D Week Required Released Required Released Required Released Required Released Required Released 1 2 3 4 5 6 7 8 9 10

45 45

X A(2) C(3) C(2) B(1) D(5)

Lead Time Item

On Hand Required

2
3 1

X
A B

50
75 25

45 15

2
2

C
D

10
20

20 35/40 80

Item X A B C D

Week Required Released Required Released Required Released Required Released Required Released

10

45 45 15 15 20 35 40 80 20 40 80

35

Closed Loop MRP

Production Planning Master Production Scheduling Material Requirements Planning Capacity Requirements Planning Feedback No Realistic? Yes Feedback

Execute: Capacity Plans Material Plans

Manufacturing Resource Planning (MRP II)

Goal:

Plan and monitor all resources of a manufacturing firm (closed loop):

manufacturing marketing finance engineering purchasing

Simulate

the manufacturing system

Enterprise Resource Planning

SAP

- Systems, Applications, and Products in Data Processing

incorporates

accounts payable, project planning, work force planning, etc. into MRP

Oracle