MS 401
Production and Service Systems Operations
Spring 2009-2010
Material Requirements Planning (MRP)
Slide Set #10
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MRP
• MRP stands for Material Requirements Planning
• MRP provides time scheduling information specifying
when each of the materials, parts, and components should
be ordered or produced
• Managerial objective is to provide the right part at the
right time to meet the schedules for completed products
• MRP is a basic tool for performing detailed material
planning function in the manufacturing of component parts
and their assembly into finished items
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The MPC Framework
Resource
planning
Rough-cut
capacity planning
Detailed capacity
planning
Sales and operations
planning
(Aggregate planning)
Master production
scheduling (MPS)
Demand
management
Front End
Detailed material
planning (using MRP)
Engine
Material and capacity
plans
Shop floor
systems
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Supplier
systems
Back End
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Before MRP
• Before MRP, most MPC Systems revolved around some
variant of statistical reorder points
• Orlicky’s (father of MRP) insight was that this approach
better suited to final products than components
• Why?
– final product demand originates from outside the
company - subject to uncertainty
– component demand is a function of final product
demand - known for a given final assembly schedule
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Dependent versus Independent Demand
• Independent demand
– subject to demand outside the firm
– for ex: demand for the snow shovels
– have to be forecasted
• Dependent demand
–
–
–
–
demand for the components
for ex: demand for the “top handles” of the snow shovel
depends on the net requirements for the “top handle assemblies”
can be exactly calculated
• using BOM, inventory, scheduled receipts information
• no need for forecasting
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The Basic MRP Record Terminology
• Gross Requirements (GR): Anticipated future usage (or,
demand) of the item during a period
• Scheduled Receipts (SR): Existing replenishment orders for
the item to arrive at the beginning of a period
• Projected Available Balance (PAB): Projected inventory
status for the item at the end of a period
• Planned Order Releases (POR): Planned replenishment
orders for the item at the beginning of a period
– not “released” yet, only planned
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The Basic MRP Record
Now
Gross Requirements
Scheduled Receipts
Projected Available Balance
Planned Order Releases
Lead Time = 1 period
Lot size = 50
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1
50
54
Period (time bucket)
2
3
4
10
40
44
44
4
50
5
10
44
7
Linking Records Together
• The basic MRP record provides the information on each
part in the system
• How to link these single part records together?
–
–
–
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Bill-of-Materials (BOM)
• An engineering document that specifies the components &
quantities needed to make an assembly (product)
• Provides product structure (tree)
• Parents: Items above given level
• Children: Items below given level
• Shows low-level coding
• to show where in the product structure a particular part is
with respect to the end product (level 0)
• components of the end product: level 1…
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BOM - Example
Indented BOM
Product Structure Diagram
quantity
required
The end item
A
A
B (2)
E (1)
1
E
H (3)
J (2)
4
C
2
B
J (3)
F (3)
G (4)
Level 0
3
J
3
F
4
G
3
H
Level 1
Level 2
2
J
3
H
Level 3
C (4)
H (3)
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Snow Shovel (VBWJ, page 227)
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Snow Shovel: Product Structure Diagram
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Snow Shovel: Indented BOM
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Gross to Net Explosion
• Process of translating end product requirements into
component parts requirements
– taking into account the existing inventories and scheduled receipts
• For any part number, determine the quantities for all
immediate predecessors of that part in the BOM
• Continue this process for every part number until all
purchased part and/or raw material requirements are
exactly calculated
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Gross to Net Explosion
• Consider the BOM for “snow shovel”
• Suppose the company want to produce 100 shovels, and
we are responsible for making the top handle assembly
Part
Scheduled
Part Description
Number Inventory receipts
Top handle assembly
13122
25
Top handle
457
22
25
Nail(2 required)
82
4
50
Bracket assembly
11495
27
Top handle bracket
129
15
Top handle coupling
1118
39
15
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Gross
req.
100
75
150
75
48
48
Net
req.
75
28
96
48
33
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Lead Time Offsetting: Front Schedule
Start production of parts as early as possible. Drawbacks?
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Lead Time Offsetting: Back Schedule
Start production of parts as late as possible: MRP uses this
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Linking MRP Records
13122 Top handle assembly
Lead Time=2, Lot Size=L4L
Gross Requirements
Scheduled Receipts
Projected Available Balance
Planned Order Releases
457 Top handle
Lead Time=2, Lot Size=L4L
Gross Requirements
Scheduled Receipts
Projected Available Balance
Planned Order Releases
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Week
1 2 3 4 5 6
20
10
20
25 25
5
5
5
0
20
0
5
0
7
5
8
0 0
35 10
Week
1 2 3 4 5 6 7 8
5
20 5
35 10
25
22 22 17 42 22 17 17 0 0
18 10
9 10
35 10
0
0
9 10
0
0
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Linking MRP Records
13122 Top handle assembly
Lead Time=2, Lot Size=L4L
Gross Requirements
Scheduled Receipts
Projected Available Balance
Planned Order Releases
082 Nail (2 required)
Lead Time=1, Lot Size=50
Gross Requirements
Scheduled Receipts
Projected Available Balance
Planned Order Releases
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Week
1 2 3 4 5 6
20
10
20
25 25
1
5
5
5
0
20
0
5
0
7
5
8
0 0
35 10
Week
2 3 4 5 6 7 8
10
40 10
70 20
50
4 54 44 44
4 44 44 24
50
50
4
9 10
35 10
0
0
9 10
4
4
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Technical Issues
•
•
•
•
•
Processing frequency
Safety stock and safety lead time
Low level coding
Pegging
Lot sizing
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Processing Frequency
• Whether all records should be processed in one computer
run
– Regeneration: processing all of the records in one run
– Net change: processing only the items that are affected by the new
or changed information
• Processing frequency depends on the firm, its products, and
its operations.
– the most common practice is weekly processing using regeneration
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Safety Stock and Safety Lead Time
• Safety stock is a buffer stock above what is needed to
satisfy the gross requirements
– SS tends to be used in MRP systems where uncertainty about
quantities is the problem
• Safety lead time is a procedure whereby shop orders or
purchase orders are released and scheduled to arrive one or
more periods before necessary to satisfy GR
– SLT tends to be used when the major uncertainty is the timing
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MRP Record with SS
Part 119
Now
Gross Requirements
Scheduled Receipts
Projected Available Balance
5
Planned Order Releases
Lead Time=1; Q=L4L; SS=5
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1
10
10
Week
2
3
15
15
4
20
5
10
23
MRP Record with SLT
Week
Now 1 2 3 4 5 6 7 8 9 10
3
35 10
Part 129
Gross Requirements
Scheduled Receipts
Projected Available Balance
15
Planned Order Releases
Lead Time=1; Q=L4L; SLT=1
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0 0 0 0 0
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Low Level Coding
• A low level code number is given to each part in the
product structure diagram
• Why?
– eliminate recalculations
– satisfy accurate accumulated requirements for each part
• By convention, LLC of the end product is 0
• Immediate component part numbers are 1 and assignment
procedure proceeds level by level
• Important
– the last level code assigned to a part indicates its LLC
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Low Level Coding Example
End Item A
1
Component C LT=1
LT=1
2
Sub-Assembly B
LT=2
1
LLCA = 0
LLCB = 1
LLCC = 2
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Component C
LT=1
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Pegging
• Pegging relates all the gross requirements for a common item
to all planned order releases that created the requirement
– each component of the gross requirement is pegged with the part
number of its source
• By pegging it is possible to go up through the MRP records,
and identify the end product of a raw material
– reverse of the explosion logic: implosion
• Advantage: when an item shortage occurs, pegging allows to
trace the impact on all subassemblies and end products
affected by this shortage
• Drawback: it adds complexity in MRP information storage
requirements
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Sample Problem
• VBWJ Problem 2-7
A
G
(2 required)
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C
F
D
G
H
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Sample Problem
Part A
Now
Gross Requirements
Scheduled Receipts
Projected Available Balance
10
Planned Order Releases
Lead Time=1; Q=L4L; SS=0
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1
5
5
10
5
Week
2
3
15
10
0
10
0
15
4
15
0
15
5
15
0
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Sample Problem
Part F
Now
Gross Requirements
Scheduled Receipts
Projected Available Balance
15
Planned Order Releases
Lead Time=2; Q=L4L; SS=0
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1
10
Week
2
3
20
5
15
5
5
0
15
0
5
4
15
0
5
5
0
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Sample Problem
Planned Order Releases (A)
Planned Order Releases (F)
2A+F
5
5
15
Part G
Now 1
Gross Requirements
15
Scheduled Receipts
20
Projected Available Balance
30 35
20
Planned Order Releases
Lead Time=1; Q=mult. of 20; SS=10
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10
15
35
15
5
35
Week
2
3
35
35
20
40
25
20
15
30
4
30
15
5
15
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MRP: Transactions During a Period
Now
Gross Requirements
Scheduled Receipts
Projected Available Balance
Planned Order Releases
Lead Time=2; Lot Size=50
10
1
30
50
30
50
Week
2
3
20
20
10
40
50
4
0
5
45
40
45
First, launch the POR of 50. This becomes SR for week 3
The following events occurred during week 1:
• Actual disbursements from stock were only 20 instead of the planned 30
• Scheduled receipt of 50 received, but 10 units rejected due to quality issues
• Inventory was counted and 20 additional pieces were found
• The requirement date for 45 pieces was changed to week 4
• Marketing requested additional 5 pieces in week 2
• The requirement for week 6 has been set at 25
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MRP: Transactions During a Period
• The resulting MRP record at the beginning of week 2 is as follows
Now
Gross Requirements
Scheduled Receipts
Projected Available Balance
Planned Order Releases
Lead Time=2; Lot Size=50
2
25
Week
3
4
20
45
5
0
6
25
50
• Note that the planned order release of 50 units scheduled previously to week
3 is now rescheduled to week 4
• The 50 units currently scheduled to be received at Period 3 is not needed
until period 4. MRP will issue a message for this.
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Alternative Table Format (6-row)
Stool
Gross Requirements
Scheduled Receipts
Projected Ending Inv.
Net requirements
Planned order receipts
Planned order releases
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0
1
2
3
4
5
6
7
10
20
15
20
15
40
10
30
34