MATERIAL REQUIREMENTS PLANNING
CONCEPTS OF MRP
Relationship With Other Planning
 Aggregated Planning
 Master Production Schedule
 Material Requirement Planning
 Short-term Scheduling
Objective:
-- to determine when and how many components/subassemblies to order/produce
When to Use MRP?
 Dependent and discrete items
-Independent Demand:
-Dependent Demand:
 Complex products
 Assemble-to-order environments
Inputs of MRP
 Master Production Schedule
 Bill of Material
 Lead Times
 Inventory On Hand
 Purchasing (outstanding) Orders
Outputs of MRP
 Planned Order Release
 Other Reports
MRP PROCESSING
Step 1. Preprocessing BOM
* Create low level coding of BOM
Example: Given the following BOM for the final product A,
determine the total requirements for each component to
produce 20 units of A.
A
|
---------------B(2)
D(3)
|
----------C(3)
D(2)
Low-level coding: An item with multiple appearances in
BOM is coded at the lowest level it occurs.
* Create Time-Phased Product Structure Based on Lead Time
and BOM
Example Continued: Draw the time-phased product structure
based on the above BOM and the following lead time
information for the final product and each component.
Item
Lead Time
A
1
B
2
C
3
D
1
Step 2. Create master production schedule
Master Production Schedule: Schedule of finished products
 Derived from aggregate planning
 Drive the MRP process with a schedule of finished
products
 Quantities represent production not demand
 Quantities may consist of customer orders and forecasts
 Quantities represent what need to be produced not what
can be produced
Example continued: The following master production schedule
for product A was determined from an aggregate planning:
Period
Gross Req
7
30
8
9
60
10
40
Step 3. Translate the end item requirements to components’
requirements
Example continued: The inventory on hand and scheduled
receipts for each components are shown in the following
table:
Item
A
B
C
D
Inv. on Hand
10
25
15
30
Sch.
10 at
40 at
60 at
Receipts
Period 3
Period 2
Period 6
Prepare the planned-order release for all items.






Gross requirements: Total expected demand for an
item or raw material during each time period.
Scheduled receipts: Open orders scheduled to arrive
from vendors or elsewhere in the pipeline.
Projected on hand: Expected amount of inventory that
will be on hand at the beginning of each time
period.
Net requirements: The actual amount needed in each
time period.
Planned-order receipts: Quantity expected to be
received by the beginning of the period in which it
is shown.
Planned-order release: Planned amount to order in
each time period; planned-order receipts offset by
lead time.
1
Item
Info
r
Item
Info
r
Item
Info
r
Item
Info
r
Gross
Requirements
Scheduled
Receipts
Projected on hand
Net Requirements
Planned-order
Receipts
Planned-order
Releases
Gross
Requirements
Scheduled
Receipts
Projected on hand
Net Requirements
Planned-order
Receipts
Planned-order
Releases
Gross
Requirements
Scheduled
Receipts
Projected on hand
Net Requirements
Planned-order
Receipts
Planned-order
Releases
Gross
Requirements
Scheduled
Receipts
Projected on hand
Net Requirements
Planned-order
Receipts
Planned-order
Releases
2
3
4
5
6
7
8
9
10
LOT-SIZING TCHNIQUES
Lotsizing: determining the planed-order receipts based on
the net requirements
Example: The net requirements for a component is given by
the following table:
Period
1
2
3
4
5
6
7
Net
8
14
6
12
5
15
8
Requirement
Suppose the setup cost = $40/setup, inventory holding cost =
$1/unit/period. Determine the planned-order receipts based
on the following lotsizing policies:
1. Lot for lot (L4L): set planned-order receipts = net
requirements.
Period
1
2
3
4
5
6
Net
8
14
6
12
5
15
Requirements
Planned-order
Receipts
7
8
8
12
8
12
Total cost =
2. Part Period Balancing: choose planned-order receipts such
that the holding cost is close to the setup cost in the
periods covered by each planned-order receipt.
Period
1
2
3
4
5
6
7
Net
8
14
6
12
5
15
8
Requirements
Planned-order
Receipts
Inventory
Economic Part Period =
Periods Combined
Trial Lot Size
Total cost =
3. Other Lot Sizing Rules
Part Periods
8
12
IMPLEMENTATION AND EXTENSIONS
Updating MRP
 Regenerative MRP
 Net-change MRP
 System nervousness
Closed-Loop MRP, Capacity Planning
MRP-II: Manufacturing Resource Planning
 Expanded MRP
 Including planning for other area
 Computer supporting system
 Simulation capability; what if?
BENEFITS AND LIMITATIONS OF MRP
Benefits:
 Improve customer service
 Better use of resources
 Low level of WIP inventory
 faster response to demand changes
Limitations:
 Need to have an expensive computer system
 MRP plans for material requirements first, the
capacity planning is an after thought
 Need accurate and up-to-date inputs
 The reporting requirements are excessive
 Resistance from inside company
* Gross requirements plan (assume no inventory on hand)
Example Continued: Construct a gross requirements plan to
meet the demand of 50 units of product A by week seven.
1
A Req. Date
B
C
D
Order Release
Req. Date
Order Release
Req. Date
Order Release
Req. Date
Order Release
2
3
4
5
6
7
L.T.