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Material Requirement Planning

(MRP)

Chapter 16

Feb 9, 2006

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Material Requirement Planning (MRP) ______________________________________

______________________________________

Key Outputs of MRP

Calculate demand for component items

Determine requirements for subassemblies, components, and rawmaterial

Determine when they are needed

Generate work orders and purchase order

Consider lead time

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When to use MRP

___________________________________

___________________________________

___________________________________

___________________________________Dependent / Independent Demand?

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Demand Characteristics

1 2 3 4 5

Week

400

300

200

100

No.oftable

s

Continuous demand

M T W Th F M T W Th F

400

300

200

100

No.oftables

Discrete demand

Independent demand

100 tables

Dependent demand

100 x 1 =100 tabletops

100 x 4 = 400 table legs

Demand Characteristics for Finished Products and Their Components

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MRP Input & Output

MaterialRequirementsPlanning

(MRP)

Workorders

Purchaseorders

Reschedulingnotices

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Major Inputs to MRP Process:1. Bill of Material

Product structure file

Determines which component items need to be scheduled

Product Structure Record

ClipboardLevel 0

Level 1

Level 2Spring (1)

BottomClip (1)

TopClip (1)

Pivot(1)

Rivets (2)

ClipAssembly

(1)

Pressboard (1)

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Major Inputs to MRP Process:3. Inventory Record

_________________________________________________

Contains an extensive amount of information on every item thatis produced, ordered, or inventoried in the system

_________________________________________________

DESCRIPTION INVENTORY POLICY

Item Pressboard Lead time 1

Item no. 734 Annual demand 5000

Item type Purch Holding cost 1

Product/sales class Comp Ordering/setup cost 50Value class B Safety stock 0

Buyer/planner RSR Reorder point 39

Vendor/drawing 07142 EOQ 316

Phantom code N Minimum order qty 100

Unit price/cost 1.25 Maximum order qty 500

Pegging Y Multiple order qty

LLC 1 Policy code 3

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MRP Processes 4 Basic Steps1. Exploding the bill of material

___________________________________

2. Netting out inventory ___________________________________

___________________________________

3. Lot sizing rule How many units

___________________________________ ___________________________________

___________________________________

4. Time-phasing requirements

___________________________________

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Lot Sizing Rule Comparison

The FOQ rule__________________________________

The POQ rule__________________________________

_______________________

_______________________

The L4L rule__________________________________

_______________________

_______________________

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MRP Matrix(You can download the template from our class webpage)

Gross Requirements Derived from MPS or planned orderreleases of the parent

Scheduled Receipts On order and scheduled to be received

Projected on Hand Beg Inv Anticipated quantity on hand at the endof the period

Net Requirements Gross requirements net of inventory andscheduled receipts

Planned Order Receipts When orders need to be received

Planned Order Releases When orders need to be placed to bereceived on time

ITEM NAME OR NO. PERIOD

LOT SIZE LT 1 2 3 4 5

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ITEM: CLIPBOARD LLC: 0 PERIOD

LOT SIZE: L4L LT: 1 1 2 3 4 5Gross Requirements 85 95 120 100 100

Scheduled Receipts 175

Projected on Hand 25

Net RequirementsPlanned Order Receipts

Planned Order Releases

Example MRP Matrix

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MRP Example 1

Given the following information, determine whenorders should be released for A, C, and D and thesize of those orders

Parts On hand ScheduledReceipts

Lot Size Demand

A

C

D

10

140

200

0

0

250, period 2

L4L

Mult 50

Mult 250

100, period 8

ALT=3

C(3)LT=4

D(2)LT=2

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MRP Example 2

Given the following information,determine when orders should bereleased for A, B, C, and D andthe size of those orders.

Parts On hand ScheduledReceipts

Lot Size Demand

A

B

C

D

10

5

140

200

0

0

0

250, period 2

L4L

L4L

Mult 50

Mult 250

100, period 8

200, period 6

-

-

ALT=3

C(3)LT=4

D(2)LT=2

BLT=2

D(3)LT=2

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Evolution of MRP

MRP (material requirements planning) was the

precursor to ERP

Primarily a production planning and control system

MRP evolved to MRP II (manufacturing resource

planning)

ERP (Enterprise Resource Planning) and ERP II

continue to extend the links through all business

processes

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Enterprise Resource Planning (ERP)An Overview

Organizes and manages a companys business processes

by sharing information across functional areas

Connects with supply-chain and customer management

applications

ERP in the nutshell*

Client server software

Integrates majority of business processes

Processes majority of transactions

Enterprise wide database

Real time data access

* adapted from e-courseware, MIT Sloan

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ERP Modules[Figure 12.1 Organizational Data Flow]

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ERP Modules[Figure 12.2 ERPs Central Database]

Finance &Accounting

Sales&

Marketing

HumanResources

Production &Materials

ManagementERP Data

Repository

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ERP Implementation Process

First step is to analyze business processes

Which processes have the biggest impact on customer

relations?

Which process would benefit the most from integration?

Which processes should be standardized?

Use of Internet portals can aid implementation