Materials Requirement Planning
(MRP)
The approach to coordinated
scheduling for dependent
demand items.
Introduction to lean
1
The Responsibility of Manufacturing
activities
1.
2.
3.
4.
5.
6.
Design requirements and specifications and standards.
Be manufactured economically and environmentally
friendly.
Build-in quality at each stage.
Production methods must be sufficiently flexible to
respond to changing market demands, types of
products, production rates, and production quantities
and to provide on-time delivery to the customer.
New developments in materials, production methods,
and computer integration of both technological and
managerial activities.
Safety.
Introduction to lean
2
Production Planning and Control
Planning and control of the flow of materials through the
manufacturing process
1. Production planning
Production must be able to meet the demand of the
marketplace
a). Forecasting
b). Master planning
c). Material requirements planning
d). Capacity planning
2. Implementation and control
3. Inventory management
Introduction to lean
3
Production Planning System
Introduction to lean
4
Material Requirements Plan (MRP)
The quantities of each product group that must
be produced in each period.
 The desired inventory levels.
 The resources of equipment, labor, and
material needed in each period.
 Time

Introduction to lean
5
Example 1.
Amalgamated Fish Sinkers makes a product group of fresh
fish sinkers and wants to develop a production plan for
them. The expected opening inventory is 100 cases, and
they want to reduce that to 80 cases by the end of the
planning period. The number of working days is the same
for each period. There are no back orders. The expected
demand for the fish sinkers is as follows:
a). How much should be produced each period?
b). What is the ending inventory for each period?
c). If the cost of carrying inventory is $5 per case per period
based on ending inventory, what is the total cost of carrying
inventory?
d). What will be the total cost of the plan?
Introduction to lean
6
Period
1
2
3
4
5
Total
Forecast (cases)
110
120
130
120
120
600
Production
Ending
Inventory
100
Introduction to lean
7
Answer
a). Total production required = 600 + 80 - 100 = 580 cases
Production each period = 580 / 5 = 116 cases
Period
1
2
3
4
5
Total
Forecast (cases)
110
116
120
116
130
116
120
116
120
116
600
580
Production
Ending
Inventory
100
Introduction to lean
8
b). Ending inventory = opening inventory + production - demand
Ending inventory after the first period = 100 + 116 - 110 = 106 cases
+
-
=
Period
1
2
3
4
5
Total
Forecast (cases)
110
116
120
116
130
116
120
116
120
116
600
580
Production
Ending
Inventory
100
106
Introduction to lean
9
b). Ending inventory = opening inventory + production - demand
Ending inventory after the first period = 100 + 116 - 110 = 106 cases
+
-
=
Period
1
2
3
4
5
Total
Forecast (cases)
110
116
120
116
130
116
120
116
120
116
600
580
Production
Ending
Inventory
100
106
Introduction to lean
10
c). The total cost of carrying inventory would be:
(106 + 102 + 88 + 84 + 80)($5) = $2300
d). Since there were no stockouts and no changes in the level of
production, this would be the total cost of the plan.
Period
1
2
3
4
5
Total
Forecast (cases)
110
116
120
116
130
116
120
116
120
116
600
580
106
102
88
84
80
Production
Ending
Inventory
100
Introduction to lean
11
Master Scheduling

Production plan:
Families of products

Master production schedule (MPS):
End items.
It breaks down the production plan into the requirements for
individual end items, in each family, by date and quantity.
The total of the items in the MPS should be equal to the total
shown on the production plan.
Master Scheduling
12
Master Scheduling
The information needed to develop an MPS :

The production plan

Forecasts for individual end items

Actual orders received from customers and for
stock replenishment

Inventory levels for individual end items

Capacity restraints
Master Scheduling
13
Example 1.
The Hotshot Lightning Rod Company makes a
family of two lightning rods, Models H and I. It bases
its production planning on months. For the present
month, production is leveled at 1000 units. Opening
inventory is 500 units, and the plan is to reduce that
to 300 units by the end of the month. The MPS is
made using weekly periods. There are four weeks in
this month, and production is to be leveled at 250
units per week. The forecast and projected available
for the two lightning rods follows. Calculate an MPS
for each item.
Master Scheduling
14
Answer
Production Plan:
Period
1
2
3
4
Total
Forecast
300
350
300
250
1200
500
450
350
300
300
Production Plan
250
250
250
250
Projected
Available
Master Scheduling
1000
15
Forecasts for individual end items , Model H and I
Period
1
2
3
4
Total
Forecast
300
350
300
250
1200
Forecast for H
200
300
100
100
700
Forecast for I
100
50
200
150
500
Opening inventories are:
Model H
200
Model I
300
Master Scheduling
16
Master Schedule: Model H:
Period
1
2
3
4
Total
Forecast
200
300
100
100
700
250
200
100
100
250
250
Projected
Available
200
MPS
100
Master Schedule: Model I:
Period
1
2
3
4
Total
Forecast
100
50
200
150
500
200
150
200
200
250
150
Projected
Available
MPS
300
Master Scheduling
17
Master Schedule: Model H:
Period
1
2
3
4
Total
Forecast
200
300
100
100
700
Projected
Available
200
MPS
Master Schedule: Model I:
Period
1
2
3
4
Total
Forecast
100
50
200
150
500
Projected
Available
300
MPS
Master Scheduling
18
The objectives in developing an
MPS

To maintain the desired level of customer service
by maintaining finished-goods inventory levels or by
scheduling to meet customer delivery requirements.

To make the best use of material, labor, and
equipment .

To maintain inventory investment at the required
levels.
Master Scheduling
19
MRP Process

MRP Process uses four basic
techniques
Exploding and offsetting
 Gross and net requirements
 Releasing orders
 Low-level coding and netting


The most important thing to consider
before making any decisions is lead time
MRP
20
MRP Process


Exploding requires a planner determine
actual material required by multiplying
usage by the quantity needed. Information
is collected from the product tree.
Offsetting takes information from explosion
and plans production based upon lead-time
and relationship to parent.
MRP
21
MRP Process

Planned order composes of two elements:
Planned order receipt.
 Planned order release.


Gross and Net requirements
Net = Gross requirements – Available inventory
MRP
22
Example 2:
Using the product tree and lead times shown in
figure below, determine the planned order receipts
and releases. There are 50 As required in week 5.
Suppose there are 10 Bs available as well as the 20
As.
MRP
23
Week
Part #
A
B
1
Gross Requirements
Projected Available
Net requirements
Planned Order Receipt
Planned Order Release
Gross Requirements
Projected Available
Net requirements
Planned Order Receipt
Planned Order Release
C
Gross Requirements
Projected Available
Net requirements
Planned Order Receipt
Planned Order Release
D
Gross Requirements
Projected Available
Net requirements
Planned Order Receipt
Planned Order Release
E
Gross Requirements
Projected Available
Net requirements
Planned Order Receipt
Planned Order Release
20
2
3
4
20
5
50
0
30
30
30
10
MRP
24
Week
Part #
A
B
C
1
Gross Requirements
Projected Available
Net requirements
Planned Order Receipt
Planned Order Release
Gross Requirements
Projected Available
Net requirements
Planned Order Receipt
Planned Order Release
D
E
Gross Requirements
Projected Available
Net requirements
Planned Order Receipt
Planned Order Release
3
20
4
20
5
50
0
30
30
30
10
10
30
0
20
20
20
Gross Requirements
Projected Available
Net requirements
Planned Order Receipt
Planned Order Release
Gross Requirements
Projected Available
Net requirements
Planned Order Receipt
Planned Order Release
2
30
0
30
30
30
MRP
25
Week
Part #
A
B
C
D
E
1
Gross Requirements
Projected Available
Net requirements
Planned Order Receipt
Planned Order Release
Gross Requirements
Projected Available
Net requirements
Planned Order Receipt
Planned Order Release
2
20
Gross Requirements
Projected Available
Net requirements
Planned Order Receipt
Planned Order Release
4
20
5
50
0
30
30
30
10
10
30
0
20
20
20
Gross Requirements
Projected Available
Net requirements
Planned Order Receipt
Planned Order Release
Gross Requirements
Projected Available
Net requirements
Planned Order Receipt
Planned Order Release
3
30
0
30
30
30
20
0
20
20
20
20
0
20
20
20
MRP
26
MRP Process

Scheduled Receipts:



Open Orders:



Promised materials
Become available to use immediately
Incomplete orders that have not been fully satisfied
Example, we completed the production of markers but do
not have packaging
Net Requirements (Modified) = gross requirementsscheduled receipts – available inventory
MRP
27
Example 3:
Complete the following table. The lead time for
the item is two weeks, and the order quantity is 200.
What action should be taken?
Week
1
Gross Requirements
50
Scheduled Receipts
Projected Available
150
Net requirements
Planned Order Receipt
Planned Order Release
MRP
2
3
250
200
100
4
50
28
Answer
Week
1
2
3
Gross Requirements
50
Scheduled Receipts
Projected Available
150 100
Net requirements
Planned Order Receipt
Planned Order Release
250
200
100
1
2
3
Gross Requirements
50
Scheduled Receipts
Projected Available
150 100
Net requirements
Planned Order Receipt
Planned Order Release
250
200
50
100
Week
MRP
4
50
4
50
29
Answer
Week
1
2
3
Gross Requirements
50
Scheduled Receipts
Projected Available
150 100
Net requirements
Planned Order Receipt
Planned Order Release
250
200
50
100
Week
50
50
50?
1
2
3
Gross Requirements
50
Scheduled Receipts
Projected Available
150 100
Net requirements
Planned Order Receipt
Planned Order Release
200
250
200
50
100
MRP
4
X
4
50
150
50
200
30
Example 1 of MRP
Given the following product tree, explode, offset, and determine
the gross and net ret requirements. All lead times are one week,
and the quantities required are shown in parentheses. The
master production schedule calls for the completion of 100 As in
week 5. There is scheduled receipt of 100 Bs in week 1. There
are also 200 Fs available.
Introduction to lean
31
Example 2 of MRP
Given the following product tree, explode, offset, and determine
the gross and net ret requirements. All lead times are one week,
and the quantities required are shown in parentheses. The
master production schedule calls for the completion of 100 As in
week 4 and 50 in week 5. There are 300 Bs scheduled to be
received in week 1 and 200 Ds in week 3. There are also 20 As
available. The ordering quantity for all parts is lot-for lot.
Introduction to lean
32
Example 3 of MRP
Given the following product tree, explode, offset, and determine
the gross and net ret requirements. All lead times are one week,
and the quantities required are shown in parentheses. The
master production schedule calls for the completion of 100 As in
week 4 and 50 in week 5. There are 100 Cs scheduled to be
received in week 2. Lot size for part E is 500. Other parts are all
lot-for lot.
Introduction to lean
33
References


Dave Dixon (2004), The truce between lean
and IT, IE Industrial Engineer, 36(6), 42-45.
Charles M. Parks (2003), The Bare
Necessities of Lean, IE Industrial Engineer,
35(8), 39-42.
Introduction to lean
34