Chapter 16: Material Requirements Planning
Outline
•
•
•
•
•
Finished Product and Components
Importance of an MRP system
Input and Output of an MRP system
MRP Calculation
Lot Sizing
1
Material Requirements Planning
• Used for dependent demand management
• Useful for Assembly/Manufacturing
• If the finished product is composed of many
components, MRP can be be used to optimize the
inventory costs.
2
Finished Product and Components
Back slats
Leg supports
Back
legs
Seat cushion
Seat-frame
boards
Front
legs
3
Inventory without an MRP System
4
Inventory with an MRP System
5
MRP Input and Output
Master
Production
Schedule
Forecasts
Bill of
Materials
file
MRP
computer
program
Inventory
file
To Production
Reports
Orders
To Purchasing
6
Master Production Schedule
April
14
Ladder-back chair
15
May
16
18
150
19
20
21
150
Kitchen chair
Desk chair
17
120
200
200
120
200
200
Aggregate
production plan
550
790
for chair family
7
Bill of Material: Product Structure
Level 0
Level 1
Level 2
Level 3
8
Bill of Material
Item
B
C
D
E
BILL OF MATERIAL
Product Description: Ladder-back chair
Item: A
Component
Quantity
Source
Required
Description
Ladder-back
1
Manufacturing
Front legs
2
Purchase
Leg supports
4
Purchase
Seat
1
Manufacturing
9
Bill of Material
Item
H
I
BILL OF MATERIAL
Product Description: Seat
Item: E
Component
Quantity
Required
Description
Seat frame
1
Seat cushion
1
Source
Manufacturing
Purchase
10
On Hand Inventory and Lead time
Component
Units in
Inventory
Lead
time
(weeks)
Seat
Subassembly
25
2
Seat frame
50
3
Seat frame
boards
75
1
11
MRP Calculation
Quantity of ladder-back chairs to be produced
Gross requirement, seat subassembly
Less seat subassembly in inventory
Net requirement, seat subassembly
Gross requirement, seat frames
Less seat frames in inventory
Net requirement, seat frames
Gross requirement, seat frame boards
Less seat frame boards in inventory
Net requirement, seat frame boards
Units
150
25
50
75
Assume that 150 units of ladder-back chairs are to be
produced at the end of week 15
12
Time of Order Placement
Complete order for seat subassembly
Minus lead time for seat subassembly
Place an order for seat subassembly
Complete order for seat frames
Minus lead time for seat frames
Place an order for seat frames
Complete order for seat frame boards
Minus lead time for seat frame boards
Place an order for seat frame boards
Week
14
2
3
1
Assume that 150 units of ladder-back chairs are to be produced at
the end of week 15 and that there is a one-week lead time for
ladder-back chair assembly
13
Text Problem 16-10: Each unit of A is composed of one unit
of B, two units of C, and one unit of D. C is composed of
two units of D and three units of E. Items A, C, D, and E
have on-hand inventories of 20, 10, 20, and 10 units,
respectively. Item B has a scheduled receipt of 10 units in
period 1, and C has a scheduled receipt of 50 units in
Period 1. Lot-for-lot (L4L) is used for Items A and B. Item C
requires a minimum lot size of 50 units. D and E are
required to be purchased in multiples of 100 and 50,
respectively. Lead times are one period for Items A, B, and
C, and two periods for Items D and E. The gross
requirements for A are 30 in Period 2, 30 in Period 5, and
40 in Period 8. Find the planned order releases for all
items.
14
Level 0
Level 1
Level 2
15
Period
1
Item Gross
Requirements
A Scheduled
receipts
LT= On hand from
prior period
Net
requirements
Q= Time-phased Net
Requirements
Planned order
releases
2
3
4
5
6
7
8
9
10
16
Period
1
Item Gross
Requirements
B Scheduled
receipts
LT= On hand from
prior period
Net
requirements
Q= Time-phased Net
Requirements
Planned order
releases
2
3
4
5
6
7
8
9
10
17
Period
1
Item Gross
Requirements
C Scheduled
receipts
LT= On hand from
prior period
Net
requirements
Q= Time-phased Net
Requirements
Planned order
releases
2
3
4
5
6
7
8
9 10
18
Period
1
Item Gross
Requirements
D Scheduled
receipts
LT= On hand from
prior period
Net
requirements
Q= Time-phased Net
Requirements
Planned order
releases
2
3
4
5
6
7
8
9
10
19
Period
1
Item Gross
Requirements
E Scheduled
receipts
LT= On hand from
prior period
Net
requirements
Q= Time-phased Net
Requirements
Planned order
releases
2
3
4
5
6
7
8
9
10
20
Lot-Sizing
• Plan order releases from the given net requirements of an
items over the next T periods.
• Techniques:
– Lot-for-Lot (L4L)
– EOQ
– Least Total Cost (LTC)
– Least Unit Cost (LUC)
• Notes
– Inventory costs are computed on the ending inventory.
– L4L minimizes carrying cost
– LTC is useful if the costs do not change over time
– LUC may be useful if the costs change over time
– The problem extended to all items is difficult to solve
21
Text Problem 16-11: The MRP gross requirements for Item A
are shown here for the next 10 weeks. Lead time for A is
three weeks and setup cost is $10. There is a carrying cost
of $0.01 per unit per week. Beginning inventory is 90 units.
Week
1
2
3
4
5
Gross requirements Week
30
6
50
7
10
8
20
9
70
10
Gross requirements
80
20
60
200
50
Determine the lot sizes.
22
Lot-for-lot
Period
1 2 3 4 5 6 7 8 9 10
Gross
30 50 10 20 70 80 20 60 200 50
Requirements
Beginning
90 60 10 0
Inventory
Net
0 0 0 20
Requirements
Time-phased Net
Requirements
Planned order
Release
Planned
Deliveries
Ending
60 10 0
Inventory
23
EOQ
Period
1 2 3 4 5 6 7 8 9 10
Gross
30 50 10 20 70 80 20 60 200 50
Requirements
Beginning
90 60 10 0
Inventory
Net
0 0 0 20
Requirements
Time-phased Net
Requirements
Planned order
Release
Planned
Deliveries
Ending
60 10 0
Inventory
24
Least Unit Cost
j
rj
Order for weeks
1 week, week 4
2 weeks, weeks 4 to 5
3 weeks, weeks 4 to 6
4 weeks, weeks 4 to 7
5 weeks, weeks 4 to 8
6 weeks, weeks 4 to 9
7 weeks, weeks 4 to 10
1
2
3
4
5
6
7
20 70 80 20
60 200 50
Units in the inventory at the end of Week
Q
4
5
6
7
8
9 10
H. Ord. Unit
Cost Cost Cost
25
Least Unit Cost
Period
1 2 3 4 5 6 7 8 9 10
Gross
30 50 10 20 70 80 20 60 200 50
Requirements
Beginning
90 60 10 0
Inventory
Net
0 0 0 20
Requirements
Time-phased Net
Requirements
Planned order
Release
Planned
Deliveries
Ending
60 10 0
Inventory
26
Least Total Cost
j
rj
Order for weeks
1 week, week 4
2 weeks, weeks 4 to 5
3 weeks, weeks 4 to 6
4 weeks, weeks 4 to 7
5 weeks, weeks 4 to 8
6 weeks, weeks 4 to 9
7 weeks, weeks 4 to 10
1 2 3
4
5
6
7
20 70 80 20 60 200 50
Units in the inventory at the end of Week
H. Ord. Total
Q 4 5 6
7
8
9 10 Cost Cost Cost
27
Least Total Cost
Period
1 2 3 4 5 6 7 8 9 10
Gross
30 50 10 20 70 80 20 60 200 50
Requirements
Beginning
90 60 10 0
Inventory
Net
0 0 0 20
Requirements
Time-phased Net
Requirements
Planned order
Release
Planned
Deliveries
Ending
60 10 0
Inventory
28
Reading and Exercises
• Reading: Chapter 16 up to p. 644, 649-652
• Exercises:
Chapter end problems 9, 15, 17
29