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Chapter 16
Materials
Requirements
Planning
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OBJECTIVES
Material Requirements Planning
(MRP)
MRP Logic and Product Structure

Trees
Time Fences

MRP Example

MRP II and Lot Sizing

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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
MRP is a software system

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Example of MRP Logic and

Product Structure Tree
Given
Giventhe
theproduct
productstructure
structuretree
treefor
forA
Aand
andthe
thelead
leadtime
timeand
and
demand
demandinformation
informationbelow,
below,provide
provideaamaterials
materialsrequirements
requirements
plan
planthat
thatdefines
definesthe
thenumber
numberof ofunits
unitsof
ofeach
eachcomponent
componentandand
when
whenthey
theywill
willbe
beneeded
needed
Product Structure Tree for Assembly A Lead Times
A 1 day
A B 2 days
C 1 day
D 3 days
E 4 days
B(4) C(2) F 1 day

Total Unit Demand

Day 10 50 A
D(2) E(1) D(3) F(2) Day 8 20 B (Spares)
Day 6 15 D (Spares)

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First,
First, the
the number
numberof of units
units of
of A
A are
arescheduled
scheduled
backwards
backwards to to allow
allowfor
fortheir
theirlead
lead time.
time. So,So, in
in the
the
materials
materials requirement
requirement planplan below,
below,we wehavehavetotoplace
place
an
an order
orderfor for50
50 units
units of
of A
A onon the
the 99th day
th
day to
to receive
receive
them
them onon day
day 10.
10.

Day: 1 2 3 4 5 6 7 8 9 10
A Required 50
Order Placement 50

LT = 1 day

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Next,
Next,we
weneed
needto
tostart
startscheduling
schedulingthe
thecomponents
componentsthat
thatmake
makeupup
A.
A. In
Inthe
thecase
caseof
ofcomponent
componentBBwe
weneed
need44Bs
Bsfor
foreach
eachA.
A.
Since
Sincewe
weneed
need50
50As,
As,that
thatmeans
means200
200Bs.
Bs. And
Andagain,
again,we
weback
back
the
theschedule
scheduleupupfor
forthe
thenecessary
necessary22days
daysof
oflead
leadtime.
time.
Day: 1 2 3 4 5 6 7 8 9 10
A Required 50
Order Placement 50
B Required 20 200
Order Placement 20 200

LT = 2
Spares
A 4x50=200

B(4) C(2)

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

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Finally,
Finally,repeating
repeatingthe
theprocess
processfor
forall
allcomponents,
components,we
wehave
havethe
the
final
finalmaterials
materialsrequirements
requirementsplan:
plan:
Day: 1 2 3 4 5 6 7 8 9 10
A Required 50
LT=1 Order Placement 50
B Required 20 200
LT=2 Order Placement 20 200
C Required 100
LT=1 Order Placement 100
D Required 55 400 300
LT=3 Order Placement 55 400 300
E Required 20 200
LT=4 Order Placement 20 200
F Required 200
LT=1 Order Placement 200

A
Part D: Day 6
B(4) C(2) 40 + 15 spares

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

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Master Production Schedule (MPS)

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

MPS
(Specific End Items)

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Types of Time Fences

Frozen
No schedule changes allowed within
this window
Moderately Firm
Specific changes allowed within
product groups as long as parts are
available
Flexible
Significant variation allowed as long
as overall capacity requirements
remain at the same levels

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Exhibit
Exhibit15.5
Example of Time Fences 15.5

Moderately
Frozen Firm Flexible

Capacity
Forecast and available
capacity
Firm Customer Orders

8 15 26

Weeks

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 Material Requirements Planning
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System

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

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Aggregate Forecasts
Firm orders product of demand
from known plan from random
customers
customers

Engineering Master production

Schedule (MPS) Inventory
design
transactions
changes

Material From
FromExhibit
Exhibit15.6
15.6
planning
Bill of (MRP Inventory
material computer record file
file program)
Secondary reports
Primary reports
Exception reports
Planned order schedule for Planning reports
inventory and production Reports for performance
control control
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Bill of Materials (BOM) File

A Complete Product Description
Materials
Parts

Components

Production sequence

Modular BOM

Subassemblies
Super BOM
Fractional options

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Inventory Records File

Each inventory item carried as a
separate file
Status according to time buckets

Pegging
Identify each parent item that created
demand

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Primary MRP Reports

Planned orders to be released at a future
time
Order release notices to execute the
planned orders
Changes in due dates of open orders
due to rescheduling
Cancellations or suspensions of open
orders due to cancellation or suspension
of orders on the master production
schedule
Inventory status data

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Secondary MRP Reports

Planning reports, for example,
forecasting inventory
requirements over a period of time
Performance reports used to
determine agreement between
actual and programmed usage
and costs
Exception reports used to point
out serious discrepancies, such
as late or overdue orders

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Additional MRP Scheduling Terminology

Gross Requirements
Scheduled receipts
Projected available balance
Net requirements
Planned order receipt
Planned order release
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MRP Example

Item On-Hand Lead Time (Weeks)

X X 50 2
A 75 3
B 25 1
A(2) B(1) C 10 2
D 20 2

C(3) C(2) D(5)

Requirements
Requirementsinclude
include95
95units
units(80
(80firm
firmorders
ordersand
and15
15forecast)
forecast)of
ofXX
in
inweek
week10
10

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Day: 1 2 3 4 5 6 7 8 9 10
X Gross requirements 95
X LT=2 Scheduled receipts
Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45
hand Planned order receipt 45
50 Planner order release 45
A Gross requirements 90
A(2) 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
ItIttakes
takes
LT=1 Scheduled receipts
Proj. avail. balance 25 25 25 25 25 25 25 25
22As
Asfor
for On-
hand
Net requirements
Planned order receipt
20
20
each
eachXX 25
C
Planner order release
Gross requirements 45
20
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

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Day: 1 2 3 4 5 6 7 8 9 10
X Gross requirements 95
X LT=2 Scheduled receipts
Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45
hand Planned order receipt 45
50 Planner order release 45
A Gross requirements 90
A(2) B(1) 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
ItIttakes
takes Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20
11BBforfor hand Planned order receipt 20

each
eachXX
25
C
Planner order release
Gross requirements 45
20
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

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Day: 1 2 3 4 5 6 7 8 9 10
X Gross requirements 95
X LT=2 Scheduled receipts
Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45
hand Planned order receipt 45
50 Planner order release 45
A Gross requirements 90
A(2) B(1) 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
C(3) 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

ItIttakes
takes33
C
LT=2
Gross requirements
Scheduled receipts
45 40

Cs
Csforfor On-
Proj. avail. balance
Net requirements
10 10 10 10 10
35 40
each
eachAA
hand
10
Planned order receipt
Planner order release 35
35
40
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

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Day: 1 2 3 4 5 6 7 8 9 10
X Gross requirements 95
X LT=2 Scheduled receipts
Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45
hand Planned order receipt 45
50 Planner order release 45
A Gross requirements 90
A(2) B(1) 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
C(3) C(2) 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

ItIttakes
takes22
C
LT=2
Gross requirements
Scheduled receipts
45 40

Cs
Csforfor On-
Proj. avail. balance
Net requirements
10 10 10 10 10
35 40
each
eachBB
hand
10
Planned order receipt
Planner order release 35
35
40
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

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Day: 1 2 3 4 5 6 7 8 9 10
X Gross requirements 95
X LT=2 Scheduled receipts
Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45
hand Planned order receipt 45
50 Planner order release 45
A Gross requirements 90
A(2) B(1) 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
C(3) C(2) D(5) 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

ItIttakes
takes55
C
LT=2
Gross requirements
Scheduled receipts
45 40

Ds
Dsforforeach
each On-
Proj. avail. balance
Net requirements
10 10 10 10 10
35 40
BB hand
10
Planned order receipt
Planner order release 35
35
40
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

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Closed Loop MRP

Production Planning
Master Production Scheduling
Material Requirements Planning
Capacity Requirements Planning

No
Realistic? Feedback
Feedback
Yes
Execute:
Capacity Plans
Material Plans

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 Manufacturing Resource 26

Planning
(MRP II)

Goal: Plan and monitor all resources of

a manufacturing firm (closed loop):
manufacturing
marketing
finance
engineering
Simulate the manufacturing system

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Lot Sizing in MRP Programs

Lot-for-lot (L4L)
Economic order quantity (EOQ)

Least total cost (LTC)

Least unit cost (LUC)

Which one to use?

The one that is least costly!

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End of Chapter 16

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