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Material Requirement Planning (MRP)
Chapter 16Feb 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 raw
material Determine when they are needed Generate work orders and purchase order Consider lead time
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When to use MRP ___________________________________ ___________________________________ ___________________________________ ___________________________________
Top clip (1) Bottom clip (1)
Pivot (1) Spring (1)
Rivets (2)Finished clipboard Pressboard (1)
Clipboard
Dependent / Independent Demand?
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Demand Characteristics
11 22 33 44 55WeekWeek
400 400 –
300 300 –
200 200 –
100 100 –No
. o
f ta
ble
sN
o.
of
tab
les
Continuous demandContinuous demand
M T W Th F M T W Th FM T W Th F M T W Th F
400 400 –
300 300 –
200 200 –
100 100 –No
. o
f ta
ble
sN
o.
of
tab
les
Discrete demandDiscrete demand
Independent demandIndependent demand
100 tables100 tables
Dependent demandDependent demand
100 x 1 = 100 x 1 = 100 tabletops100 tabletops
100 x 4 = 400 table legs100 x 4 = 400 table legs
Demand Characteristics for Finished Products and Their Components
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MRP Input & Output
MaterialRequirements
Planning (MRP)
Work orders
Purchase orders
Rescheduling notices
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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 RecordProduct Structure Record
ClipboardLevel 0Level 0
Level 1Level 1
Level 2Level 2Spring (1)
Bottom Clip (1)
Top Clip (1)
Pivot (1)
Rivets (2)
Clip Assembly
(1)
Pressboard (1)
Top clip (1) Bottom clip (1)
Pivot (1) Spring (1)
Rivets (2)Finished clipboard Pressboard (1)
Clipboard
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Major Inputs to MRP Process:2. Master Production Schedule (MPS)
Drives MRP process with a schedule of finished products Quantities represent production not demand Quantities may consist of a combination of customer orders &
demand forecasts Quantities represent what needs to be produced, not what can be
produced Example
PERIODMPS ITEM 1 2 3 4 5
Clipboard 85 95 120 100 100Lapdesk 0 50 0 50 0Lapboard 75 120 47 20 17Pencil Case 125 125 125 125 125
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Major Inputs to MRP Process:3. Inventory Record
_________________________________________________ Contains an extensive amount of information on every item that
is 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 50
Value 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 Steps
1. 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
Gross Requirement Derived from planned order releases of the parent Actual / estimated demand, in case of final productSchedule Receipts Items on order Scheduled to arrive in the future time periodProjected on hand Current inventory, or anticipated inventory at the end of period
Projected on-handInventory at end of period t
Projected on-handInventory at end of period t
Inventory on-hand at end of period t - 1
Inventory on-hand at end of period t - 1= +
Scheduled / planned receipts in period t
Scheduled / planned receipts in period t
-
Gross requirements in period t
Gross requirements in period t
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MRP Matrix
Net requirements
Actual quantity to produce based on projected on hand and on-order quantity
Planned Order Receipts
Quantity, when orders need to be received
Consider lot sizing rule:
Planned Order Release
When order need to be placed to receive on time
Consider lead time
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MRP Matrix(You can download the template from our class webpage)
Gross Requirements Derived from MPS or planned order releases of the parent
Scheduled Receipts On order and scheduled to be received
Projected on Hand Beg Inv Anticipated quantity on hand at the end of the period
Net Requirements Gross requirements net of inventory and scheduled receipts
Planned Order Receipts When orders need to be received
Planned Order Releases When orders need to be placed to be received on time
ITEM NAME OR NO. PERIODLOT 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 5
Gross Requirements 85 95 120 100 100
Scheduled Receipts 175
Projected on Hand 25
Net Requirements
Planned Order Receipts
Planned Order Releases
Example MRP Matrix
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MRP Example 1
Given the following information, determine when orders should be released for A, C, and D and the size of those orders
Parts On hand Scheduled Receipts
Lot Size Demand
ACD
10140200
00250, period 2
L4LMult 50Mult 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 be released for A, B, C, and D and the size of those orders.
Parts On hand Scheduled Receipts
Lot Size Demand
ABCD
105
140200
000
250, period 2
L4LL4L
Mult 50Mult 250
100, period 8200, 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 company’s 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 ERP’s Central Database]
Finance & Accounting
Sales &
Marketing
Human Resources
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