gross requirements for all components parts to the inventory status file, where the on-hand balances are listed. It then subtracts the on-hand balances and open orders from thegross requirements for components yielding the net requirements for each component.Of course, we now know not only how many components are needed but when they areneeded in order to complete the schedule for finished goods on time. By subtracting thelead time from the due date for each part, we now see when an order must be placed for each part so that it can be received in time to avoid a delay in the MPS. A manual versionof MRP for a part with requirements of 100 in period 3 and 250 in period 6 and with atwo-period lead time is shown in Figure 2. Notice that in order for the firm to meet demand on time (the MPS), they must place anorder for 25 in Period 1 and an order for 200 in Period 4. The reader should be aware thatthis is an overly simplified version of MRP, which does not include such relevant factorsas lot sizing and safety stock.
EXPANDING INTO MRP II
With MRP generating the material and schedule requirements necessary for meeting theappropriate sales and inventory demands, more than the obvious manufacturing resourcesfor supporting the MRP plan was found to be needed. Financial resources would have to be generated in varying amounts and timing. Also, the process would require varyingdegrees of marketing resource support. Production, marketing, and finance would beoperating without complete knowledge or even regard for what the other functional areasof the firm were doing.In the early 1980s MRP was expanded into a much broader approach. This new approach,manufacturing resource planning (MRP II), was an effort to expand the scope of production resource planning and to involve other functional areas of the firm in the planning process, most notably marketing and finance, but also engineering, personnel,and purchasing. Incorporation of other functional areas allows all areas of the firm tofocus on a common set of goals. It also provides a means for generating a variety of reports to help managers in varying functions monitor the process and make necessaryadjustments as the work progresses.When finance knows which items will be purchased and when products will be delivered,it can accurately project the firm's cash flows. In addition, personnel can project hiring or layoff requirements, while marketing can keep track of up-to-the-minute changes indelivery times, lead times, and so on. Cost accounting information is gathered,engineering input is recorded, and a distribution requirement planning is performed.An MRP II system also has a simulation capability that enables its users to conductsensitivity analyses or evaluate a variety of possible scenarios. The MRP II system cansimulate a certain decision's impact throughout the organization, and predict its results interms of customer orders, due dates, or other "what if" outcomes. Being able to answer