3 rd. Industrial Eng.
Chapter 3
Production Planning & control
2011- 2012
Dr. May George
Materials requirements planning
Materials requirements planning (MRP) is used for determining the number of parts,
components, and materials needed to produce a product (end item) . In brief, MRP is a
means designed to answer what, when, how many for each part, component,
subassemblies and final products.

MRP provides time scheduling information specifying when each of the
subassemblies, parts, and components should be ordered or produced

The objectives of MRP are to determine quantity and timing of material
requirements to keep schedule priorities updated and valid.
MRP needs three inputs: the authorized MPS, the BOM file, and the inventory records
file.
Once the MPS has been input, MRP checks inventory availability. If a need is
determined, MRP checks the BOM file for material needed, and then generates planned
orders.
MRP outputs are:
- 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: Planned order releases. The inventory record: consist of
- Gross requirements: The total period demand for the item
- Scheduled receipts: An open order with an assigned due date
- Projected available: The projected inventory balance for the period
- Planned orders: Quantities & released dates suggested by the MRP system
There are two types of demand
 Independent Demand
- The demand for finished products.
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3 rd. Industrial Eng.
Chapter 3
Production Planning & control
2011- 2012
Dr. May George
- Does not depend on the demand of other products
- Needs to be forecasted
 Dependent Demand
- Is the demand derived from finished products
- Is the demand for component parts based on the number of end items being produced
and is managed by the MRP system
Bill Of Materials:
 BOM: a listing of all of the raw materials, parts, subassemblies, and assemblies,
purchased and manufactured needed to produce one unit of a product.
 Product structure tree: Visual depiction of the requirements in a bill of materials,
where all components are listed by levels.
MRP System
Fig. (1) MRP system
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3 rd. Industrial Eng.
Chapter 3
Production Planning & control
2011- 2012
Dr. May George
Fig. (2) MPS
Some terms used with MRP:
 Time bucket: period, usually 1 week.
 Planning horizon: number of periods, then this is divided into time fences.
 Lead time offset: offsets a planned order release from a required replenishment.
 Net requirement: difference between the gross requirements and the available
inventory.
(Net Req. = Gros.Req – Avi. Inv.)
 Gross requirements: anticipated future usage of (or demand for) the item during
each period.
 Scheduled receipts: existing replenishment orders due in at the beginning of the
period.
 Projected on hand: projected inventory status for the item at the beginning of
each period.
 Net requirements: Gross Requirements minus Scheduled Receipts minus
Projected on hand.
( Net.Req.= Gros.Req.- Scheduled Receipt –POH).
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3 rd. Industrial Eng.
Chapter 3
Production Planning & control
2011- 2012
Dr. May George
 Planned order receipt: planned receipt of replenishment orders at the beginning
of the period.
 Planned order release: release of planned replenishment orders for the item
using lead-time offset.
Available inventory for the first period =
On hand inventory + schedule Receipt of the first period- allocation – backorders safety stock.
Available inventory for other periods =
Projected Available balance at the end of last period + scheduled receipt of the current
period.
Time Fences
A policy or guideline established to note where various restrictions or changes in
operating procedures take place. For example, changes to the master production
schedule can be accomplished easily beyond the cumulative lead time, while changes
inside the cumulative lead time become increasingly more difficult to a point where
changes should be resisted. Time fences can be used to define these points.
Time Zones
1-Frozen Zone
 In forecasting, this is the period in which no changes can be made to scheduled work
orders based on changes in demand. Use of a frozen zone provides stability in the
manufacturing schedule.
2- Firm planned order (FPO):
 A planned order that can be frozen in quantity and time. The computer is not
allowed to change it automatically; this is the responsibility of the planner in charge
of the item that is being planned. This technique can aid planners working with MRP
systems to respond to material and capacity problems by firming up selected planned
orders. In addition, firm planned orders are the normal method of stating the master
production schedule.
3- Slushy Zone
 Capacity and material are committed to less extent. Tradeoffs must be met between
marketing and manufacturing
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3 rd. Industrial Eng.
Chapter 3
Production Planning & control
2011- 2012
Dr. May George
4- Liquid Zone
 Any changes can be made to the MPS
Fig.(2) product structure tree without lead time
Master Production Schedule Record
For Make-to-stock environment, with fixed orders of 125 units. There are 110 units in
inventory to start. When is new order (quantities) needed to satisfy the forecasted
demand?
For a given product, the demand for 12 months, and Projected available are listed in the
table (1). The calculation will follow these equations (lead times, lot size and time
fence: fixed period, must be known):
Projected Available = beginning inventory + MPS shipments – forecasted
demand
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3 rd. Industrial Eng.
Chapter 3
Production Planning & control
2011- 2012
Dr. May George
The MPS row shows when replenishment shipments need to arrive to avoid a stock
out (negative projected available just to show the calculation)
W eek
BI
1
2
3
4
5
6
7
8
9
10
11
12
50
50
50
50
75
75
75
75
50
50
50
50
110
60
10
-4 0
BI
1
2
3
4
5
6
7
8
9
10
11
12
50
50
50
50
75
75
75
75
50
50
50
50
60
10
85
35
-4 0
F o re c a s t
P ro je c t e d a va ila b le
MPS
W eek
F o re c a s t
P ro je c t e d a va ila b le
110
MPS
W eek
125
BI
F o re c a s t
P ro je c te d a va ila b le
110
1
2
3
4
5
6
7
8
9
10
11
12
50
50
50
50
75
75
75
75
50
50
50
50
60
10
85
35
85
10
-6 5
MPS
W eek
125
BI
F o re c a s t
P ro je c te d a va ila b le
MPS
110
125
1
2
3
4
5
6
7
8
9
10
11
12
50
50
50
50
75
75
75
75
50
50
50
50
60
10
85
35
85
10
60
110
60
10
85
35
125
125
125
125
6
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3 rd. Industrial Eng.
Chapter 3
Production Planning & control
2011- 2012
Dr. May George
Typical Product structure diagram:
Set parts and Quantities for Product -X in table below:
parts
quantity
X
A
B
C
D
E
500
2
1
3
2
3
Unit scale
Lead
time(week)
1
1
2
2
1
2
each
=
=
=
=
7
Items Q.
Total Q.
500
500X2
500X1
500X3
500X2
500X3
500
1000
500
1500
1000
1500
3 rd. Industrial Eng.
Chapter 3
Production Planning & control
2011- 2012
Dr. May George
D
A- sub
C
E
5 weeks
X:
end
product
product
B- sub assemble
4
3
2
1
0
Fig. (3) lead times for Product X
Time-phased Bills: lead time scheduling:
Forward scheduling: start at today‘s date and schedule forward to determine the
earliest date the job can be finished. If each item takes one period to complete, the
clipboards can be finished in three periods.
Backward scheduling: start at the due date and schedule backwards to determine when
to begin work. If an order for clipboards is due by period three, we should start
production now. See the example:
Fig. (4)lead times for clipboard
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3 rd. Industrial Eng.
Chapter 3
Production Planning & control
2011- 2012
Dr. May George
Lot sizing rules:
For purchased items or for technical reasons, there may be a minimum or maximum
order sizes .Purchased items/subassemblies may require multiples of predetermined
amounts (e.g., multiples of 50).
Rules are used to change the frequency of replenishment orders & set the quantity of
each order (balance holding & ordering costs to reduce total costs).
Common rules used for lot sizing determination are:
 Fixed Order Quantity (FOQ): It is useful to select a fixed lot size for a
material, if it is only delivered, for example, in pallets of a certain quantity or
in tanks of a certain size
 Lot-for-Lot (L4Lor LFL) you plan using lot-for-lot order quantity, when you
want to procure the exact lot size again. Lots as required or planned.
 Periodic Order Quantity (POQ): In period lot-sizing procedures, the system
groups several requirements within a time interval together to form a lot.
 Other lot sizes:
o Economic order quantity (EOQ)
o Least total cost (LTC): calculates a lot size that equalizes holding and ordering
costs.
o Least unit cost (LUC): averages the LTC across the lot size.
o Optimal lot size.
Example Comparing Lot Size Rules: Three common lot sizing rules used within MRP
Systems are fixed order quantity (FOQ), lot for lot (L4L), and period order quantity
(POQ). Cost comparison is based on Inventory holding costs ($0.10 per period) and
ordering cost ($25 per order). In this example POQ is best at $133.50.
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3 rd. Industrial Eng.
Chapter 3
Production Planning & control
2011- 2012
Dr. May George
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