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MATERIALS REQUIREMENTPLANNING
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Materials requirement Planning (MRP)
MRP Logic and Product Structure Trees
Time Fences
MRP Example
MRP II and Lot Sizing
OBJECTIVES
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MATERIALS REQUIREMENT PLANNING (MRP)
Fundamental Questions in Manufacturing are –
• What are we going to make?
• What does it take to make it?
• What do we have?
• What do we have to get?
4Materials Requirement Planning
• Materials requirement planning (MRP) is a means for determining the number of parts, components, and materials needed to produce a product
• MRP provides time scheduling information specifying when each of the materials, parts, and components should be ordered or produced
• Dependent demand drives MRP
• MRP is a software system
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Product Hierarchy
End Product
Assembly 1
Subassembly 1 Subassembly 2
Component A Component B
Assembly 2
Component E
Component C Component D
Raw Material X Raw material Y
Component F
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16-6
MRP Example of BOM
Top
Leg
Long Rail
Short Rail
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16-7
BOM (Product Structure)
Short Rails (2)1 week
Table (End Item)1 week
Long Rails (2)1 week
Legs (4)1 week
Top (1)2 weeks
Leg Assembly (1)1 week
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Example of MRP Logic and Product Structure Tree
B(4)
E(1)D(2)
C(2)
F(2)D(3)
A
Product Structure Tree for Assembly A Lead TimesA 1 dayB 2 daysC 1 dayD 3 daysE 4 daysF 1 day
Total Unit DemandDay 10 50 ADay 8 20 B (Spares)Day 6 15 D (Spares)
Given the product structure tree for “A” and the lead time and demand information below, provide a materials requirements plan that defines the number of units of each component and when they will be needed
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LT = 1 day
Day: 1 2 3 4 5 6 7 8 9 10A Required 50
Order Placement 50
First, the number of units of “A” are scheduled backwards to allow for their lead time. So, in the materials requirement plan below, we have to place an order for 50 units of “A” on the 9th day to receive them on day 10.
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Next, we need to start scheduling the components that make up “A”. In the case of component “B” we need 4 B’s for each A. Since we need 50 A’s, that means 200 B’s. And again, we back the schedule up for the necessary 2 days of lead time.
Day: 1 2 3 4 5 6 7 8 9 10A Required 50
Order Placement 50B Required 20 200
Order Placement 20 200
B(4)
E(1)D(2)
C(2)
F(2)D(3)
A
SparesLT = 2
4x50=200
Day: 1 2 3 4 5 6 7 8 9 10A Required 50
LT=1 Order Placement 50B Required 20 200
LT=2 Order Placement 20 200C Required 100
LT=1 Order Placement 100D Required 55 400 300
LT=3 Order Placement 55 400 300E Required 20 200
LT=4 Order Placement 20 200F Required 200
LT=1 Order Placement 200
B(4)
E(1)D(2)
C(2)
F(2)D(3)
A
40 + 15 spares
Part D: Day 6
Finally, repeating the process for all components, we have the final materials requirements plan:
©The McGraw-Hill Companies, Inc., 2001
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Master Production Schedule (MPS)
Time-phased plan specifying how many and when the firm plans to build each end item
Aggregate Plan(Product Groups)
Aggregate Plan(Product Groups)
MPS(Specific End Items)
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Types of Time Fences
Frozen
– No schedule changes allowed within this
window
Moderately Firm
– Specific changes allowed within product
groups as long as parts are available
Flexible
– Significant variation allowed as long as overall
capacity requirements remain at the same
levels
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Example of Time Fences
8 15 26
Weeks
FrozenModerately
Firm Flexible
Firm Customer Orders
Forecast and availablecapacity
Capacity
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Materials Requirement Planning System
Based on a Master Production Schedule, a Materials Requirement Planning system:
• Creates schedules identifying the specific parts and materials required to produce End Items
• Determines exact unit numbers needed
• Determines the dates when orders for those materials should be released – based
on Leadtimes
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©The McGraw-Hill Companies, Inc., 2004
Firm orders from knowncustomers
Forecastsof demand
from randomcustomers
Aggregateproduct
plan
Bill ofmaterial
file
Engineeringdesign
changes
Inventoryrecord file
Inventorytransactions
Master productionSchedule (MPS)
Primary reportsSecondary reports
Planned order schedule for inventory and production control
Exception reportsPlanning reportsReports for performance control
MaterialsPlanning
(MRP computer program)
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Bill of Materials (BOM) FileA Complete Product Description
• Materials
• Parts
• Components
• Production sequence
• Modular BOM
• Subassemblies
• Super BOM
• Fractional options
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Inventory Records File
•Each inventory item carried as a separate file
•Status according to “time buckets”
•Pegging
• Identify each parent item that created demand
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Primary MRP Reports
• 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
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Secondary MRP Reports
• Planning reports, for example, forecasting
inventory requirements over a period of
time
• Performance reports used to determine
agreement between actual and
programmed usage and costs
• Exception reports used to point out
serious discrepancies, such as late or
overdue orders
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Additional MRP Scheduling Terminology
• Gross Requirements
• Scheduled receipts
• Projected available balance
• Net requirements
• Planned order receipt
• Planned order release
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MRP Example
A(2) B(1)
D(5)C(2)
X
C(3)
Item On-Hand Lead Time (Weeks)X 50 2A 75 3B 25 1C 10 2D 20 2
Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10
Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10
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A(2)
X
Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95
LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90
LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45
LT=1 Scheduled receipts Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40
LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100
LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80
It takes 2 A’s for each X
It takes 2 A’s for each X
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Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95
LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90
LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45
LT=1 Scheduled receipts Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40
LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100
LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80
B(1)A(2)
X
It takes 1 B for each X
It takes 1 B for each X
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A(2) B(1)
X
C(3)
Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95
LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90
LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45
LT=1 Scheduled receipts Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40
LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100
LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80
It takes 3 C’s for each A
It takes 3 C’s for each A
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A(2) B(1)
C(2)
X
C(3)
Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95
LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90
LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45
LT=1 Scheduled receipts Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40
LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100
LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80
It takes 2 C’s for each B
It takes 2 C’s for each B
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A(2) B(1)
D(5)C(2)
X
C(3)
Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95
LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90
LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45
LT=1 Scheduled receipts Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40
LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100
LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80
It takes 5 D’s for each B
It takes 5 D’s for each B
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Closed Loop MRP
Production PlanningMaster Production SchedulingMaterial Requirements PlanningCapacity Requirements Planning
Realistic?No
Feedback
Execute:Capacity PlansMaterial Plans
Yes
Feedback
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EVOLUTION OF MRP - II
MRP - Materials Requirement Planning
MPS - Master Production Schedule
PPC - Production Planning and Control
IC - Inventory ControlENG - Engineering DataCC - Cost Control
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Manufacturing Resource Planning (MRP II)
Goal: Plan and monitor all resources of
a manufacturing firm (closed loop):
– manufacturing
– marketing
– finance
– engineering
Simulate the manufacturing system
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Question Bowl
Which type of industry has only “medium”
expected benefits from the use of MRP?
a. Assemble-to-stock
b. Fabricate-to-stock
c. Assemble-to-order
d. Fabricate-to-order
e. Process
Answer: e. Process
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Question BowlTo ensure good master scheduling, a master
scheduler must do which of the following?
a. Never lose sight of the aggregate plan
b. Identify and communicate all problems
c. Be involved with customer order promising
d. Be visible to all levels of management
e. All of the above
Answer: e. All of the above (Correct answer can also include objectively trade off manufacturing, marketing, and engineering conflicts and include all demands from product sales, warehouse replenishment, spares, and interplant requirements.)
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Question Bowl
The purpose of a “time fence” is which of the
following?
a. Make sure the cows don’t get out of the barn
b. Control flow through the production system
c. Maximize sales to retailers
d. All of the above
e. None of the above
Answer: b. Control flow through the production system
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Question Bowl
Which of the following is an objective under an
MRP system?
a. To improve customer service
b. Minimize inventory investment
c. Maximize production operating efficiency
d. All of the above
e. None of the above
Answer: d. All of the above
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Question Bowl
Which of the following is one of the three
main inputs into an MRP system?
a. BOM file
b. Exception report
c. Planning report
d. All of the above
e. None of the above
Answer: a. BOM file (Correct answer can also include Master Schedule and Inventory Records File.)
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Question Bowl
An MRP program accesses the status of a job
according to specific time periods called which
of the following?
a. Peg record
b. Time fence
c. Time bucket
d. Time clock
e. None of the above
Answer: c. Time bucket
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Question BowlIn MRP, workload per work center can be determined. When the work capacity is exceeded, which of the following options can be implemented to correct the imbalance of workload?
a. Work overtimeb. Renegotiate the due date and reschedulec. Subcontract to an outside shopd. All of the abovee. None of the aboveAnswer: d. All of the above (Correct answer can also include selecting an alternative work center and rescheduling the work at a different time.)
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Question Bowl
Which of the following are reasons why a Lot-For-
Lot (L4L) method of lot sizing can be used in an
MRP application?
a. Minimizes carrying costs
b. Sets planned orders to exactly match the net
requirements
c. Produces exactly what is needed
d. Does not carry any units over into future periods
e. All of the above
Answer: e. All of the above