Detailed Scheduling and Planning

Unit 2
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Lesson 4
Basic MRP Logic

Detailed Scheduling and Planning

Unit 2
© 2004 e - SCP -The Centre for Excellence in Supply Chain Management
No portion of this publication may be reproduced in whole or in part.
The Leading Edge Group will not be responsible for any statements, beliefs, or opinions expressed by the
authors of this workbook. The views expressed are solely those of the authors and do not necessarily
reflect any endorsement by The Leading Edge Training Institute Limited.
This publication has been prepared by E-SCP under the guidance of Yvonne Delaney MBA, CFPIM,
CPIM. It has not been reviewed nor endorsed by APICS nor the APICS Curricula and Certification
Council for use as study material for the APICS CPIM certification examination.

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Detailed Scheduling and Planning

Unit 2
Preface............................................................................................................4
Course Description................................................................................................................. 4
Lesson 4 – Basic MRP Logic...........................................................................5
Introduction and Objectives.................................................................................................. 5
Material Planning Process..................................................................................................... 5
MRP Design Features ............................................................................................................ 6
Operation and Performance of Material Planning Process............................................... 8
MRP Mechanics.................................................................................................................... 10
Starting Requirements for MRP......................................................................................... 11
MRP Grid.............................................................................................................................. 11
Low-Level Codes .................................................................................................................. 12
MRP Calculations ................................................................................................................ 14
Gross Requirements of Independent Demand from the MPS ......................................... 14
Bill of Material for items A and F....................................................................................... 16
Gross Requirements of Independent Demand for Service Parts ..................................... 16
Inventory Status ................................................................................................................... 16
Net Requirements and Planned Orders ............................................................................. 17
Lower Level Gross Requirements – Level 1...................................................................... 17
Level 1 Gross Requirements................................................................................................ 20
Determining Level 1 Net Requirements and Planned Orders ......................................... 20
Level 2 Gross Requirements................................................................................................ 22
MRP Exercise ....................................................................................................................... 24
Summary ............................................................................................................................... 27
Further Reading ................................................................................................................... 27
Review ................................................................................................................................... 28
What’s Next? ........................................................................................................................ 29
Appendix.......................................................................................................30
Answers to Review Questions .............................................................................................. 31
Glossary ........................................................................................................33

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Before completing the Detailed Scheduling and Planning unit. Detailed Scheduling and Planning Unit 2 Preface Course Description This document contains the fourth lesson in the Detailed Scheduling and Planning unit. This publication has been prepared by E-SCP under the guidance of Yvonne Delaney MBA. The five units that cover the CPIM syllabus are: Basics of Supply Chain Management Detailed Scheduling and Planning Master Planning of Resources Execution and Control of Operations Strategic Management of Resources Please refer to the preface of Lesson 1 for further details about the support available to you during this course of study. you should complete the Basics of Supply Chain Management unit or gain equivalent knowledge. It has not been reviewed nor endorsed by APICS nor the APICS Curricula and Certification Council for use as study material for the APICS CPIM certification examination. © Copyright Leading Edge Training Institute Limited 4 . CPIM. which is one of five units designed to prepare students to take the APICS CPIM examination. CFPIM.

Beginning with the system inputs. and Plan Plan inventory data to calculate requirements for materials Planning and make recommendations regarding purchases. MRP was practiced manually at more aggregated levels. MRP Model MRP takes several inputs and converts them by means of logical processing. as a Requirements computerized approach for the planning of materials Planning (MRP) acquisition and production. pharmaceutical. Originally developed for companies with highly engineered assembled products. service. The inputs include: © Copyright Leading Edge Training Institute Limited 5 .level codes Explain how low.level codes are used Identify alternative techniques for handling various planning factors Material Planning Process Business Strategy Plan Material requirements planning (MRP) is a set of techniques or system that uses bill of material (BOM) Sales and Operations Master data. Previously. It Material originated in the early 1960s in the U. Using Purchasing and computers. the master production schedule (MPS). Detailed Scheduling and Planning Unit 2 Lesson 4 – Basic MRP Logic Introduction and Objectives This lesson examines in detail the logical processes involved in material requirements planning (MRP). the processing steps are explained through a progression of worksheet examples and exercises. food. showing how each input factor affects MRP processing and how the MRP outputs are calculated. remanufacturing. and complex processes. On completion of this lesson you will be able to: Identify components of an MRP spreadsheet Detail initial requirements for the planning process Perform the netting process for a given MRP record Explode a set of MRP records to produce a complete material plan Explain the characteristics and workings of a rolling schedule Describe the necessity for low. the technique can be applied in more detail Implementation Production Activity Control making it more effective for the planning and (PAC) management of material. Master Production MRP has been the most widely implemented large-scale Schedule production management system since the early 1970s. it is now the most widely used material planning system in businesses involving chemical.S. heavy industry. into useful outputs that are essential for further planning.

MRP then converts this information into a schedule of planned purchase order releases to suppliers.A list of all the components and their quantities that are needed to assemble a finished product. Detailed Scheduling and Planning Unit 2 MPS . MRP must plan further into the future than the longest cumulative lead time of the planned items. and the dates on which they should be ordered. If the planning horizon is too short. The principal functions of MRP are: To plan and control inventories Plan and control work order and purchase order releases Provide accurate planned order loading for capacity requirements planning (CRP) MRP Design Features Planning Horizon The length of the planning horizon is influenced by the cumulative lead times of the items being planned. and a series of action notices. MRP may generate order releases for past dates at the lowest level. an internal schedule of planned work order releases. With multilevel product structures. and scheduled receipts.A statement of physical stock on hand. Planning data – This includes lead-time. Inventory status information for every part . It provides a schedule of planned production order releases that can be used in capacity requirements planning and constraint management. Bill of Material (BOM) for every parent item . lot size. It determines the items required. MPS Schedule of Planned Order Releases BOMs MRP Schedule of Planned Production Order Releases Inventory Status Planning Data Action Notices Functions of MRP MRP helps in the planning and control of inventory.The anticipated production schedule for all BOM or inventory purchasing components that are assigned to the master scheduler. and safety stock. MRP works by predating or offsetting the order release date for an item from its due date by the lead time for that item. material allocated or released to orders but not yet drawn from physical stock. scrap factors. the effects of lot sizing and successive lead-time offsetting lead to a loss of horizon. The explosion of © Copyright Leading Edge Training Institute Limited 6 . It also ensures that the due dates are valid when circumstances change. ensuring that orders are released on an appropriate date to ensure required due dates are met. the quantities required.

whereas the next 13 weeks are flexible and not as detailed. some suppliers will not allow changes to orders close to the due date. The next time period and beyond are very flexible. usually in intervals of months. although the unit of time can be hours. a bucket-less system may be used where the time-phased data is displayed as dated records rather than buckets. days. In most manufacturing processes. design. leading to constant material plan changes. Occasionally. such as fabricated parts. item quality. and monthly buckets for the rest. where CRP often provides most benefit. which cause disruption to planners. weekly buckets for the next few weeks. In such cases. The master production schedule (MPS) and MRP are usually run weekly so as to have a new set of information every week for the agreed time span. It may be caused by changes in the MPS. supplier deliveries. Dynamic production environments demand frequent replanning but this may also cause nervousness: changes in higher level MRP planning lead to many changes of time and quantity on lower level item requirements. it is important to run MRP frequently to ensure all changes are taken into account and that the plan remains valid. the units of time are in weeks at the general MRP level and in days at the shop floor level.long planning horizons lead to wasted effort as. Short planning horizons prohibit the application of some lot-sizing techniques and limit capacity requirements planning (CRP) for lower leve l items. order quantities. Usually the MPS has a time span of between 12 and 18 months. weeks. © Copyright Leading Edge Training Institute Limited 7 . vendors and production floor. the use of weekly buckets can lead to undesirable discrepancies such as the delivery on Thursday of material required for an order the previous Tuesday. A useful way to suppress MRP nervousness is to use firm planned orders. planners may decide to use daily buckets for the first several days. Frequency of Replanning As there are continual changes to inventory status and therefore material requirements. safety stock requirements. safety. the further into the future we plan. generally. For example. Sometimes it may be preferable to hold a planned order firm against changes in quantity and time. or months. Time Buckets With MRP. Sometimes there are frequent small changes. This is sometimes termed nervousness. the greater likelihood that unexpected events will make the plan unviable. Over. lead times. Alternatively. time is typically represented as a series of weekly intervals or buckets. Detailed Scheduling and Planning Unit 2 the bill of material tends to diminish the planning horizon as MRP progresses from the parent level to the next lower one. The first 13 weeks are detailed and fixed. data mistakes and unplanned transactions. MRP recalcula tes planned orders as net requirements change. Firm Planned Orders It is up to the planner to judge whether the changes in the replanned MRP are significant enough to warrant action.

Firm planned orders may be completely firm or only partially fixed. release date and order quantity of firm planned orders in MRP cannot be changed unless the planner authorizes the change. Bar coding can be useful to speed up data entry and reduce the possibility of data entry errors. beating prices increases and adjusting orders to compensate for shutdowns or other events.level products up through the product structure to determine the originating requirement for the parent product. Which of the following is NOT a function of MRP? A. in an organization where recent inventory checks have revealed mistakes related to inventory levels in the MRP system. Client Client computers on the network have electronic access to this data. To plan and control work orders and purchase orders Review Q C. Pegging is useful to determine what orders will be affected if supplier delivery for a particular component or item will be late.making company is analyzed and reveals that 30% of the demand is for pine kitchen dressers. To plan and control inventories B. Detailed Scheduling and Planning Unit 2 The due date. This will help the planner prioritize critical orders and channel the available parts to those orders. all clients are modifying a single central data repository. Client-server MRP systems exist on a computer network. with a simple data entry process involving the fewest possible keystrokes per transaction. To provide accurate loading information to the CRP system Operation and Performance of Material Planning Process MRP should be easy to use. the demand for hinges in a furniture. allowing them to view the data. For example. to override the MRP suggested order. add data. and the final 10% is for free standing blanket boxes. All data is maintained in a central database on the server. It is a feature of MRP systems allowing the planner to trace requirements for low. or ‘where-used’. To schedule operations D. which is usually a powerful machine maintained in a secure physical location. 20% is for bedroom cabinets. 1. MRP systems have tended to follow the client-server model in computer system architecture. analysis is used to identify the source of requirements. modify and perhaps delete data. No data is stored on the client computer. More recently. However. Clients act as an interface © Copyright Leading Edge Training Institute Limited 8 . MRP does no t allow another planned order for that item to exist in the same time bucket. a firm planned order may be fixed in quantity only. For example. a further 40% is for fitted kitchen cabinets. In addition. Pegging Pegging. The firm planned order is therefore fixed against MRP logic and may be used as a tool for manipulating load.

the planner may generate reports of deviations from plan and the causes of those deviations. comparing MRP plans with actual execution. MRP reports delinquencies of allocated. the aims and objectives of the company will help to determine the most effective metrics. Performance Characteristics The MRP system should be constantly monitored. and purchase commitments may be used to measure MRP performance. In any given situation. To measure MRP performance it is necessary to: Set clear objectives for the MRP system Allocate resources to the measurement process Assign responsibility for measuring MRP Measure performance accurately Identify and correct the causes of problems Reward success Learn from all successes and failures There are many metrics that can be used to measure MRP performance. inventory investment. scheduled receipts. clients usually do some data processing. In addition. processing requests for information retrieval or storage. for example: Interpretation or translation of user requests into a format understood by the server computer Verificatio n of user identity and authorization level prior to forwarding commands to the server Validation of user commands: for example. Detailed Scheduling and Planning Unit 2 between user and server. Some ways in which MRP performance may be monitored include the measurement of: Orders without shortages Orders released on time Due dates met Late start dates Time spent waiting for materials Rescheduled orders Actual and planned order lead times Number of orders expedited Action message trends Actual and planned stock levels © Copyright Leading Edge Training Institute Limited 9 . the server provides a standardized transparent interface to clients so that the client computer does not need to be aware of the specifics of the system (hardware and software) providing the service. and projected available and planned order releases for each item. The server is usually physically accessible only to IT support staff and is often protected by an uninterruptible power supply (UPS) system to ensure that data does not become lost or corrupted. Although not concerned with the actual storage of data. Ideally. It responds to requests from client computers. not allowing a user to enter an order quantity that falls outside lot-sizing regulations for a particular item. item inactivity. They are usually located on computers near workstations. Server The server is a passive repository of information. From these. gross requirements.

by planning for all components and raw materials needed to satisfy the MPS. MRP Mechanics The starting point for MRP is the plan for satisfying independent demand. In a constantly changing environment. Materials and capacity must be sufficient to meet demands. This requires balance of both capacity and material. A first step to devising an MRP training programme is to evaluate existing employee skill sets. They should understand the importance of finding problem causes and developing solutions to those problems to prevent them occurring again. A balance must be reached between component material and demand material. Training employees can lead to them assuming greater personal ownership of the system. The training should be a hands-on approach supported by the use of system specific transactions where employees ‘learn by doing’ in a controlled environment. An essential part of training in MRP is to make employees aware of the need for problem- solving and innovation. Detailed Scheduling and Planning Unit 2 MRP Training By doubling the amount of money spend on training in MRP procedures. the due dates and. and relevant examples should be used to help employees understand the benefits of MRP. When capacity and material are independent of each other. It is important that each employee understand the benefits of MRP to the company and the impact of their own personal inputs to the overall system. when lead times are factored in. Production planning must balance what the company has with what it can produce. experiment. the order release dates. Production planning is concerned with ensuring balance of capacity and material. Then. Material requirements planning valances materials. it does not signify whether capacity or materials are planned first. The material in a company’s products cannot exceed the component material the company has to work with. the desired skill set for each level of employee with respect to MRP should be determined by management and HR. MRP calculates the items. which is derived from the MPS. Company processes. This is because employees are more likely to understand the workings of MRP and its significance to the whole company. MRP must maintain a valid plan with valid quantities and due dates. and attempt problem resolution. The MPS can be thought of as the plan for the demand for products. can result in a return on investment of up to four-to-one. the quantities. Sometimes material is wholly independent of capacity and other times it is not. where deliveries and work orders may be delayed and inventory records may be inaccurate. © Copyright Leading Edge Training Institute Limited 10 . expedited or delayed to meet required due dates. The MRP planner uses due dates to establish an order of priority for the jobs on hand. Those at management level and those with particular responsibility for MRP need intensive training. They are more confident and more likely to take risks. The second job MRP must handle is that of material planning maintenance. It is vital that employees enter data accurately and on time. required to fulfil the MPS. MRP advises the production planner when orders should be changed. How and when these balances are reached depends on the manufacturing environment. transaction forms.

It is also essential that the information is accurate. allocated quantit ative. Detailed Scheduling and Planning Unit 2 Starting Requirements for MRP The starting point for MRP is the MPS. accurate inventory data and a bill of material for each item produced by the company. It then compares this against the available inventory records to calculate how much of these items are available and how much must be manufactured or purchased. net requirements. garbage out" is very true in the case of materials management systems. The importance of having accurate data at every stage of the process cannot be over stressed. An example of a multilevel bill of material is shown below: Chair Chair 100 100 Base Base Seat Seat Back Back 200 200 622 622 500 500 Legs Legs(4) (4) Frame Frame Brace Brace Supports Supports(5) (5) 201 201 629 629 512 512 545 545 Braces Seat Seat Pad Pad Arms Arms (2) (2) Braces (2) (2) 631 570 203 631 570 Figure 2 Example of a multilevel BOM © Copyright Leading Edge Training Institute Limited 11 . If transactions or data are entered incorrectly at any point in the process. on order and allocated. projected available inventory. low. The old computer adage of "garbage in. the results can be both embarrassing and costly. the safety stock. Figure 1 Example of MPS MRP uses the MPS information (see the example above) on products required along with a bill of material for each product to calculate the amount of each inventory item required. and planned order releases for that item in each time bucket or time period in the planning horizon. planned order receipts. MRP Grid The MRP grid records such information as the order quantity.level code and lead time for an item along with the gross requirements. scheduled receipts. The inventory data must provide information of item counts on hand. MRP cannot function effectively if any of the inputs are missing.

seat and back components shown in Figure 2 on page 11) are level 1. The following graphic illustrates a three level BOM: Chair Chair 100 100 Base Base Seat Seat Back Back 200 200 622 622 500 500 Legs Legs(4) (4) Frame Frame Brace Brace Supports Supports(5) (5) 201 201 629 629 512 512 545 545 Seat Seat Pad Pad Arms Arms (2) (2) Braces Braces (2) (2) 631 631 570 570 203 Figure 3 Level Bill of Material © Copyright Leading Edge Training Institute Limited 12 . Quantity on hand 60 Component Part No: Period F131 1 2 3 4 5 6 Gross Requirements 20 30 30 20 30 20 Scheduled Receipts 50 Stock on hand 60 40 10 30 10 -20 -40 PAB 60 40 10 30 10 30 10 Net Requirements 10 Planned Order Receipts 25 Planned Order Releases MRP calculates material s form the product structure and due dates. Safety Stock. Capacity checks are then used to ensure the MRP calculations are valid and achievable. The low level code for any item is the lowest level of any BOM that uses that item. Low-Level Codes Each level of the BOM can be identified by a level code. For each item. Use of the low level code eases and speeds computations. Net requirements for that item are not calculated until all gross requirements have been calculated down to that level.level coding is used as a signal to the software to begin computing requirements for each item . Detailed Scheduling and Planning Unit 2 Each of the items at the lowest level must be available for the chair to be produced.Some bills of material have many items and the software recomputes net requirements frequently.level coding. The items at the next level of the BOM (the base. These codes are used in low. Level 2 contains items needed to produce level 1 items and so on. Lot size 25. A typical MRP grid for an item is illustrated in the table below: Lead Time 3 days. 0. Low. an MRP grid should be maintained to track availability and orders. Usually the final product is set at level 0.

while in product A. part number 9 is at level 2 of the BOM. 4. Detailed Scheduling and Planning Unit 2 Low Level Codes and Requirements Calculations To cut out unnecessary calculations. in product A. the requirements for an item are not calculated until the low level code for that item is reached. Parent Part No: B Rocking Chair BOM Level Part No. The following example explains the concept: Two BOMs are displayed in tabular form below. In product B. The low level code for part 9 is therefore 5. MRP will not review requirements for part 9 along with other level 2 parts (3. each requiring part number 9. It will be reviewed after requirements for parts 7 and 8 have been determined. 1 1 2 1 10 Note that although item 9 appears at level 2 in product B. 3 5 6 The low. it appears at level 5. Description Qty UM 0 1 2 3 4 5 6 7 8 9 0 A Dresser 1 EA 1 1 Base 1 EA 1 2 Back 1 EA 2 3 Bench 1 EA 2 4 Rack 1 EA 3 5 Glass door 3 EA 3 6 Wood door 3 EA 4 7 Shelf 2 EA 4 8 drawer 3 EA 5 9 Fixing dowels 20 EA Figure 4 BOM for product A 0 A B The graphic to the right illustrates the netting process in MRP for the two BOMs above. level 5. it is not netted until all the other 2 3 4 9 11 parts have been netted as it occurs at the lowest level. Description Qty UM 0 1 2 3 4 5 6 7 8 9 0 B Rocking Chair 1 EA 1 1 Base 4 EA 1 10 Leg 2 EA 2 11 Brace 1 EA 2 9 Fixing dowels 6 EA Parent Part No: A Dresser BOM Level Part No. 4 7 8 5 9 © Copyright Leading Edge Training Institute Limited 13 .level code of part 9 is 5. and 11) because it occurs at level 5 in product A.

The process is illustrated in the following graphic: Go to next BOM Level 0 Safety Scheduled period MPS Stock receipts Lot Size Lead Time No Gross Net Planned Order Available Planned Order Are all periods Requirements Requirements Receipt Inventory Release calculated? Allocations Available inventory Yes Go to next BOM level BOM Level 1 Go to next Level 0 Planned Safety Scheduled period Order Releases Stock receipts Lot Size Lead Time No Gross Net Planned Order Available Planned Order Are all periods Requirements Requirements Receipt Inventory Release calculated? Allocations Available inventory Yes Go to next BOM level BOM Level 2 Go to next Level 1 Planned Safety Scheduled period Order Releases Stock receipts Lot Size Lead Time No Gross Net Planned Order Available Planned Order Requirements Requirements Are all periods Receipt Inventory Release calculated? Allocations Available inventory Yes Go to next BOM level Gross Requirements of Independent Demand from the MPS The following MRP grid shows gross requirements (quantities required to support parent orders) for several items. inventory on-hand. by taking into account the gross requirements. Planned order releases are calculated by offsetting planned order receipts by the lead time for the item in question. net requirements are calculated. These net requirements are converted into planned order receipts. Here. Then. Detailed Scheduling and Planning Unit 2 MRP Calculations The calculation of material requirements begins by extracting gross requirements for items from the MPS. scheduled receipts. some order receipts may exceed net requirements so inventory on-hand must be increased accordingly. using the lot sizing method for the item in question. The planned order releases are added to the gross requirements for items at the next level of the BOM and the entire process begins again at the next level. Gross requirements for lower level items are derived from their parent products. © Copyright Leading Edge Training Institute Limited 14 . Depending on lot sizing rules. at each level of the BOM for each item whose low level code is equal to the level at which MRP is currently being calculated. they are derived from the MPS. allocations and required safety stock levels. Gross requirements come from a higher level of planning.

Safety Stock D Net Requirements Low Level Code 1 Planned Order Receipts Lead Time (wks) 1 Planned Order Releases Technique : Lot for lot Gross Requirements 20 20 20 20 20 20 20 20 20 Order Quantity 300 Scheduled Receipts Allocated Qty Projected Avail. Safety Stock F Net Requirements Low Level Code 0 Planned Order Receipts Lead Time (wks) 1 Planned Order Releases Technique : Lot for lot Gross Requirements Order Quantity Scheduled Receipts Allocated Qty Projected Avail. 240 Safety Stock 30 C Net Requirements Low Level Code 2 Planned Order Receipts Lead Time (wks) 2 Planned Order Releases Technique : Lot for lot Gross Requirements Order Quantity 280 Scheduled Receipts Allocated Qty Projected Avail. Safety Stock A Net Requirements Low Level Code 0 Planned Order Receipts Lead Time (wks) 2 Planned Order Releases Technique : Lot for lot Gross Requirements 40 40 20 Order Quantity Scheduled Receipts Allocated Qty Projected Avail. Detailed Scheduling and Planning Unit 2 Item 1 2 3 4 5 6 7 8 9 Technique : Lot for lot Gross Requirements 20 200 20 Order Quantity Scheduled Receipts Allocated Qty Projected Avail. Safety Stock B Net Requirements Low Level Code 1 Planned Order Receipts Lead Time (wks) 1 Planned Order Releases Technique Gross Requirements Order Quantity 150 Scheduled Receipts Allocated Qty 240 Projected Avail. Safety Stock E Net Requirements Low Level Code 2 Planned Order Receipts Lead Time (wks) 1 Planned Order Releases Table 1 MRP Grid © Copyright Leading Edge Training Institute Limited 15 .

The information required. MRP treats this as an increase in demand during level-by. Parent Part No: A BOM Level Part No. information on each inventory item must be input to allow for the planning of the inventory items and the calculation of net requirements.level explosion of dependent item requirements. allocated inventory and scheduled receipts © Copyright Leading Edge Training Institute Limited 16 . Detailed Scheduling and Planning Unit 2 Bill of Material for items A and F The following tables provide some BOM information for items A and F. which has been forecast at 20 units per period. (Parent) Lead time (weeks) Qty Unit of Measure 0 1 2 3 4 5 6 7 8 9 0 F 1 EA 1 B (F) 1 1 EA 1 D (F) 1 1 EA 1 E (F) 1 1 EA 2 C (B) 2 2 2 E (B) 1 3 EA Figure 5 BOMS for Items A and F Gross Requirements of Independent Demand for Service Parts Most independent demand is derived from the MPs. You will need this information. which is usually in the item master record. includes: planning factors such as lot size. However. as well as the information in Table 1. (Parent) Lead time (weeks) Qty Unit of Measure 0 1 2 3 4 5 6 7 8 9 0 A 2 EA 1 B (A) 1 1 EA 1 C (A) 2 2 EA 1 D (A) 1 2 EA 2 C (B) 2 2 2 E (B) 1 3 EA Parent Part No: F BOM Level Part No. page 15 to answer some of the questions in this lesson. Inventory Status Before the MRP can run. service part requirements and interplant requirements are also independent demand. Item C in the grid above is an example of service part demand. lead time and safety stock inventory status information such as on-hand inventory. This forecast must be entered into the MRP system by increasing the automatically generated gross requirements for the item.

and E.) Item B Gross Requirements Items A and F each require one item B for assembly. Detailed Scheduling and Planning Unit 2 Net Requirements and Planned Orders Net requirements are determined by adding allocations to gross requirements and then reducing gross requirements. Note that because the lead time for item A is 2 weeks the order must be released in period 2 to ensure it will be there when required in period 4. 2. C. determine the planned order releases for each period. For item A. net requirements are equal to gross requirements. using the data above. so. This planned order anticipates future needs. D and E is dependent on demand for A and F. determine the planned order releases for each period. items A and F are the parent items for items B. on a period-by-period basis. Therefore.(scheduled receipts + available inv. a new planned order is scheduled for receipt in the period where the requirement arises. Much of the demand for B. scheduled receipts or projected available inventory. Therefore. So gross requirements for Item B are: 1 2 3 4 5 6 7 8 9 Item A Planned Order Release 20 200 20 Item F Planned Order Release 40 40 20 Item B Gross Requirements 20 240 40 20 20 © Copyright Leading Edge Training Institute Limited 17 .) For item A. using the data above. When the need for an item cannot be met by projected available inventory. 1 2 3 4 5 6 7 8 Period Review Q Planned Order release Lower Level Gross Requirements – Level 1 In the MRP grid displayed on page 15. It is not a real released order and its priority will be automatically rescheduled by MRP logic. a planned order for item A is needed in period 4. C. D. For item F. the planned order releases for A and F convert directly into gross requirements for the dependent items. the combined planned order releases for A and F will give a gross requirements figure for item B. 10 units are required in period 4. For each period: Net requirements = gross requirements + allocations . In the example above. There are no allocations. Demand for item B is wholly dependent on demand for items A and F. as you work through these calculations. by available on-order inventory (scheduled receipts) and projected inventory. (Enter figures in the MRP grid. 1 2 3 4 5 6 7 8 Period Review Q Planned Order release 10 3. in this case. page 15.

5. 8. D. However. Demand for item C also includes an independent demand of 10 units per period. gross requirements at level 1 for item E will match the planned order releases for item F in each period. which must be added to the gross requirements. Detailed Scheduling and Planning Unit 2 Item C Gross Requirements Items requires 2 Cs at level 1 for assembly. Therefore. This means the gross requirements for Item C will be as follows: 1 2 3 4 5 6 7 8 9 Item A Order Release (needs 2 of item C) 20 200 20 Independent demand for item C 20 20 20 20 20 20 20 20 20 Item C Gross Requirements 20 20 60 20 420 20 4. calculated as far as level 1 of the BOM for items A and F. There is no level 1 requirement for C in item F. What is the gross requirement for item C in periods 7. and 9? 1 2 3 4 5 6 7 8 9 Period Review Q 20 20 60 20 420 20 Gross Requirement Item D Gross Requirements Item A requires 2 units of item D for assembly. one item E is required for each item F. while item F requires 1 item D. and E. What are the gross requirements for item E in each period? 1 2 3 4 5 6 7 8 9 Period Gross Requirement Review Q The following page shows the MRP grid with net requirements for items A and F and gross requirements for B. C. This means the gross requirements for Item D will be as follows: 1 2 3 4 5 6 7 8 9 Item A Order Release (needs 2 of item D) 20 200 20 Item F Order Release (needs 1 of item D) 40 40 20 Item D Gross Requirements 40 440 40 40 20 Item E Gross Requirements At level 1. Therefore. © Copyright Leading Edge Training Institute Limited 18 . Therefore the demand for C at level 1 is dependent on item A only. there are no requirements for item E at level 1 in the BOM for item A. the gross requirements for item D are equal to the planned order release for item F plus twice the planned order release for item A.

240 Safety Stock E Net Requirements Low Level Code 2 Planned Order Receipts Lead Time (wks) 1 Planned Order Releases Table 2 MRP Grid with Level 0 net requirements and Level 1 gross requirements © Copyright Leading Edge Training Institute Limited 19 . 240 Safety Stock 30 C Net Requirements Low Level Code 2 Planned Order Receipts Lead Time (wks) 2 Planned Order Releases Technique : Lot for lot Gross Requirements 40 40 20 Order Quantity 280 Scheduled Receipts Allocated Qty Projected Avail. Detailed Scheduling and Planning Unit 2 Item 1 2 3 4 5 6 7 8 9 Technique : Lot for lot Gross Requirements 20 200 20 Order Quantity Scheduled Receipts Allocated Qty Projected Avail. Safety Stock F Net Requirements Low Level Code 0 Planned Order Receipts Lead Time (wks) 1 Planned Order Releases 40 40 20 Technique : Lot for lot Gross Requirements 20 240 40 20 20 Order Quantity Scheduled Receipts Allocated Qty Projected Avail. 200 Safety Stock B Net Requirements Low Level Code 1 Planned Order Receipts Lead Time (wks) 1 Planned Order Releases Technique Gross Requirements 40 440 40 40 40 Order Quantity 150 Scheduled Receipts Allocated Qty 240 Projected Avail. Safety Stock A Net Requirements Low Level Code 0 Planned Order Receipts Lead Time (wks) 2 Planned Order Releases 20 200 20 Technique : Lot for lot Gross Requirements 40 40 20 Order Quantity Scheduled Receipts Allocated Qty Projected Avail. 340 Safety Stock D Net Requirements Low Level Code 1 Planned Order Receipts Lead Time (wks) 1 Planned Order Releases Technique : Lot for lot Gross Requirements 20 20 60 20 420 20 60 20 20 Order Quantity 300 Scheduled Receipts Allocated Qty Projected Avail.

the net requirements cell is left empty. customer order cancellation. when using a lot. Using the formula above. D. the net requirements for item B in each period are set out below: Period 1 2 3 4 5 6 7 8 9 Gross Requirements 20 240 40 20 20 Allocations (add to gross) Scheduled receipts (subtract) Available inventory (subtract) 200 200 180 180 Net Requirements 60 40 20 20 © Copyright Leading Edge Training Institute Limited 20 . C. while the gross requirements for B and D are accurate at this stage. the net requirements for those items with a low level code of 1 can be calculated. D and E is dependent on demand for A and F. as we have not reached the low level code for those items yet. net requirements are determined by adding allocations to gross requirements and then reducing gross requirements. and E. some of the items at level 1 also recur further down the BOM at level 2. Therefore. unless due to a production overrun. available inventory and scheduled receipts combined are greater than the total gross requirements and allocations.for. items A and F are the parent items for items B. Determining Level 1 Net Requirements and Planned Orders When gross requirements for level 1 items have been posted. At this stage (level 1). Detailed Scheduling and Planning Unit 2 Level 1 Gross Requirements In the MRP grid displayed on page 15. Usually. C. Much of the demand for B. or other unexpected change in circumstances. inventory on. on a period-by-period basis.hand is minimal.) Note that there is no point in netting the requirements for items C and E at this point. net requirements can be calculated for items B and D. Where there is no net requirement. further calculations must be done to achieve the correct calculations for C and E. by ava ilable on-order inventory (scheduled receipts) and projected inventory. Item B Net Requirements There are 200 units on hand for item B. higher than expected yield.lot ordering policy. the planned order releases for A and F convert directly into gross requirements for the dependent items. Figure 6 Graphical BOM for items A and F However. This is because the production of item B will trigger further requirement for items C and E.(scheduled receipts + available inv. Therefore. As previously explained. For each period: Net requirements = gross requirements + allocations . that is. Net requirements can only be calculated for those items whose low level code has been reached.

However. There is also a scheduled receipt from a previous order due in period 1 of 320 units. Detailed Scheduling and Planning Unit 2 Item B Planned Orders (lot for lot) Now that the net requirements for item B are in place. the net requirement for 60 units in period 5 will be satisfied for an order placed in period 4. The net requirement for period 1 is therefore gross requirements added to allocations less the sum of scheduled receipts and available inventory. Using the formula above. As item B has a lead tie of 1 week.lot ordering policy is in place for item B. the allocated quantity is treated like a gross requirement in the first period. an order equal to the net requirement for each period must be scheduled to arrive in that period.for. Item D has inventory on-hand of 340 units. When calculating net requirements. As a lot. there would have been a net requirement of 140 units. this results in an available inventory of 200 for the next period. In this case: 0 + 240 – 100 – 340 = 200 As the result is a negative figure there is no net requirement in period 1. If there were no inventory on. 240 units of this have been allocated to another order. which must be factored in. The following table sets out the planned orders for item B. For example. the net requirements for item D in each period are set out below: Period 1 2 3 4 5 6 7 8 9 Gross Requirements 40 440 40 40 20 Allocations (add to gross) 240 240 Scheduled receipts (subtract) 100 Available inventory (subtract) 340 340 200 160 160 Net Requirements 380 40 40 20 © Copyright Leading Edge Training Institute Limited 21 .hand. However. Period 1 2 3 4 5 6 7 8 9 Gross Requirements 20 240 40 20 20 Allocations (add to gross) Scheduled receipts (subtract) Available inventory (subtract) 200 200 180 180 Net Requirements 60 40 20 20 Planned Order Receipt 60 40 20 20 Planned Order Release 60 40 20 20 Item D Net Requirements Each item A requires 2 of item D and each item F requires one item D. this means that an order for each net requirement must be released a week before it is needed. They are still in the stock room but have been promised to another work order and are not available to use here. it is possible to set the planned orders.

5. Planned order releases for item B in periods 4. A further order receipt in period 7 will cover requirements for periods 7 and 8 As item D has a lead time of 1 week. Review Q 1 2 3 4 5 6 7 8 9 Period Planned order release Level 2 Gross Requirements At this point all gross requirements. Period 1 2 3 4 5 6 7 8 9 Gross Requirements 40 440 40 40 20 Allocations (add to gross) 240 240 Scheduled receipts (subtract) 100 Available inventory (subtract) 340 340 200 160 160 70 30 140 120 Net Requirements 380 0 10 0 Planned Order Receipt 450 150 Planned Order Release 450 150 6. each planned order must be released a week before it is needed. As 2 of item C and 1 of item E are required for every item B. you increase the inventory on. item D has been allocated a lot size of 150. and 7 lead to gross requirements for parts C and E at level 2. which is enough to cover requirements for period 6 and part of period 7. Orders for item D can only occur in multiples of 150. Detailed Scheduling and Planning Unit 2 Item D Planned Orders (Specified lot size ) Unlike item B. Notice that the arrival of a planned order in period 6 (see below) satisfies net requirements but also results in 70 units of inventory on-hand.hand by the amount that remains once the net requirement has been taken out of the order. but are less than the specified lot size. the following gross requirements for C and E must be added to those already calculated at level 1. 1 2 3 4 5 6 7 8 9 Item B (needs 2 of C and 1 E) 60 40 20 20 Item C Gross Requirements 120 80 40 40 Item E Gross Requirements 60 40 20 20 The following table shows the calculations to date and posts gross requirements for parts C and E generated from the planned order releases for item B at level 1. 6. Where the net requirements trigger an order. net requirements and planned order receipts have been calculated as far as possible at level 1. © Copyright Leading Edge Training Institute Limited 22 . determine the planned order releases required to fulfill gross requirements. If the lot size for item D were reduced to 100 and all other parameters remained the same .

net requirements and planned orders for level 1 © Copyright Leading Edge Training Institute Limited 23 . 240 Safety Stock E Net Requirements Low Level 2 Planned Order Receipts Lead Time 1 Planned Order Releases Table 3 MRP: Gross requirements. 340 340 200 160 160 70 30 140 100 Safety Stock D Net Requirements 380 10 Low Level 1 Planned Order Receipts 450 150 Lead Time 1 Planned Order Releases 450 150 Technique : Lot for Gross Requirements 20 20 180 500 60 100 60 20 20 Order Quantity 300 Scheduled Receipts Allocated Qty Projected Avail. 200 200 200 180 Safety Stock B Net Requirements 60 40 20 20 Low Level 1 Planned Order Receipts 60 40 20 20 Lead Time 1 Planned Order Releases 60 40 20 20 Technique Gross Requirements 40 440 40 40 40 Order Quantity 150 Scheduled Receipts 100 Allocated Qty 240 Projected Avail. Safety Stock F Net Requirements Low Level 0 Planned Order Receipts Lead Time 1 Planned Order Releases 40 40 20 Technique : Lot for Gross Requirements 20 240 40 20 20 Order Quantity Scheduled Receipts Allocated Qty Projected Avail. 240 Safety Stock 30 C Net Requirements Low Level 2 Planned Order Receipts Lead Time 2 Planned Order Releases Technique : Lot for Gross Requirements 60 80 60 20 20 Order Quantity 280 Scheduled Receipts Allocated Qty Projected Avail. Detailed Scheduling and Planning Unit 2 Item 1 2 3 4 5 6 7 8 9 Technique : Lot for Gross Requirements 20 200 20 Order Quantity Scheduled Receipts Allocated Qty Projected Avail. Safety Stock A Net Requirements Low Level 0 Planned Order Receipts Lead Time 2 Planned Order Releases 20 200 20 Technique : Lot for Gross Requirements 40 40 20 Order Quantity Scheduled Receipts Allocated Qty Projected Avail.

In addition. D. These must be taken into account when calculating the net requirements for each period. Schedule planned order receipts for every positive net requirement. As can be seen below. (For example. The gross requirements for items A and F. using the BOM information to calculate the quantities. the independent service part demand for item C. In this example. Calculate the net requirements for level 0 items A and F (net requirements = gross requirements + allocations – scheduled receipts – projected available inventory + safety stock) 2. this includes items C and E. and inventory status information for all items have been entered for you. complete MRP calculations for the gross requirements detailed on Table 4. and E. Follow these steps: 1. Calculate the net requirements and planned order releases for item B and post these planned order releases as gross requirements to be added to existing gross requirements for C and E. the inventory on-hand covers all requirements for E. and offset order release by the lead time 3. every A requires 2 Ds) 4. it has a safety stock level of 30 units. page 15. 5. Period 1 2 3 4 5 6 7 8 9 Gross Requirements for C 20 20 180 500 60 100 60 20 20 Available inventory (subtract) 240 220 40 Net Requirements 490 60 100 60 20 20 Item E Net Requirements Item E has an order quantity or lot size of 280 and on. Detailed Scheduling and Planning Unit 2 Item C Net Requirements At level 2 all items with a low level code of 2 may be netted. C. Period 1 2 3 4 5 6 7 8 9 Gross Requirements for E 60 80 60 20 20 Available inventory (subtract) 240 240 240 180 100 40 20 Net Requirements MRP Exercise Using the same bill of material for items A and F as the previous example (see page 16). C and E and then determine planned order releases © Copyright Leading Edge Training Institute Limited 24 .hand inventory of 240. Item C has an order quantity or lot size of 300. Calculate net requirements for items D. These must be taken into account when calculating the net requirements for each period. Post Item A and F planned order releases as gross requirements to items B.

Safety Stock F Net Requirements Low Level 0 Planned Order Receipts Lead Time 1 Planned Order Releases Technique Gross Requirements Order Quantity 120 Scheduled Receipts Allocated Qty Projected Avail. 240 Safety Stock 30 C Net Requirements Low Level 2 Planned Order Receipts Lead Time 2 Planned Order Releases Technique: Lot for Gross Requirements Order Quantity 280 Scheduled Receipts Allocated Qty Projected Avail. 240 Safety Stock E Net Requirements Low Level 2 Planned Order Receipts Lead Time 1 Planned Order Releases Table 4 MRP Exercise © Copyright Leading Edge Training Institute Limited 25 . 340 Safety Stock D Net Requirements Low Level 1 Planned Order Receipts Lead Time 1 Planned Order Releases Technique: Lot for Gross Requirements 30 30 20 40 40 20 30 10 Order Quantity 300 Scheduled Receipts Allocated Qty Projected Avail. Detailed Scheduling and Planning Unit 2 Item 1 2 3 4 5 6 7 8 9 Technique: Lot for Gross Requirements 60 80 20 40 40 Order Quantity Scheduled Receipts Allocated Qty Projected Avail. Safety Stock A Net Requirements Low Level 0 Planned Order Receipts Lead Time 2 Planned Order Releases Technique: Lot for Gross Requirements 20 20 30 20 Order Quantity Scheduled Receipts Allocated Qty Projected Avail. 200 Safety Stock B Net Requirements Low Level 1 Planned Order Receipts Lead Time 2 Planned Order Releases Technique Gross Requirements Order Quantity 320 Scheduled Receipts Allocated Qty 40 Projected Avail.

net requirements and planned orders for all items © Copyright Leading Edge Training Institute Limited 26 . 240 240 240 240 140 120 10 10 270 270 Safety Stock E Net Requirements 140 270 10 Low Level 2 Planned Order Receipts 280 280 280 Lead Time 1 Planned Order Releases 280 280 280 Table 5 MRP Results: Gross requirements. Detailed Scheduling and Planning Unit 2 Item 1 2 3 4 5 6 7 8 9 Technique: Lot for Gross Requirements 60 80 20 40 40 Order Quantity Scheduled Receipts Allocated Qty Projected Avail. 340 300 300 180 260 150 70 50 50 Safety Stock D Net Requirements 60 Low Level 1 Planned Order Receipts 320 Lead Time 1 Planned Order Releases 320 Technique: Lot for Gross Requirements 30 150 420 80 360 100 30 10 Order Quantity 300 Scheduled Receipts Allocated Qty Projected Avail. Safety Stock A Net Requirements 60 80 20 40 40 Low Level 0 Planned Order Receipts 60 80 20 40 40 Lead Time 2 Planned Order Releases 60 80 20 40 40 Technique: Lot for Gross Requirements 20 20 30 20 Order Quantity Scheduled Receipts Allocated Qty Projected Avail. Safety Stock F Net Requirements 20 20 30 20 Low Level 0 Planned Order Receipts 20 20 30 20 Lead Time 1 Planned Order Releases 20 20 30 20 Technique Gross Requirements 60 100 40 70 40 20 Order Quantity 120 Scheduled Receipts Allocated Qty Projected Avail. 240 240 210 60 240 160 100 300 270 260 Safety Stock 30 C Net Requirements 390 230 30 Low Level 2 Planned Order Receipts 600 300 300 Lead Time 2 Planned Order Releases 600 300 300 Technique: Lot for Gross Requirements 380 20 390 20 Order Quantity 280 Scheduled Receipts Allocated Qty Projected Avail. 200 200 200 140 40 50 10 110 110 Safety Stock B Net Requirements 70 Low Level 1 Planned Order Receipts 120 120 Lead Time 2 Planned Order Releases 120 120 Technique Gross Requirements 120 180 60 110 80 20 Order Quantity 320 Scheduled Receipts Allocated Qty 40 Projected Avail.

You should be able to: Identify components of an MRP spreadsheet Detail initial requirements for the planning process Perform the netting process for a given MRP record Explode a set of MRP records to produce a complete material plan Explain the characteristics and workings of a rolling schedule Describe the necessity for low. Thomas R. South-Western Publishing Co. Fogarty. CFPIM 2nd edition. Donald W. JR.E.L. Blackstone. Cincinnati. Detailed Scheduling and Planning Unit 2 Summary This lesson looked in detail at the logical processes involved in material requirements planning (MRP)..C. Prentice Hall APICS Dictionary 10th edition. CFPIM. CIRM and Stephen Chapman CFPIM 5th edition. The system inputs and the processing required to calculate each MRP output were explained. 2004. and Hoffmann. CFPIM. John H. CFPIM. Whybark 5th edition. 2002 Manufacturing Planning and Control Systems. W.level codes Explain how low. Vollmann. JR Tony Arnold. and D. 2004.. Ohio © Copyright Leading Edge Training Institute Limited 27 . Berry.level codes are used Identify alternative techniques for handling various planning factors Further Reading Introduction to Materials Management. McGraw-Hill Production & Inventory Management. T. 1991.

To identify the parent items that generated the demand for a low. Which of the following are requirements for MRP? A. A method of tracing item requirements through the BOM structure to determine the parent items that generated the demand D. RCCP and MRO lead times 9. Scheduled receipts. safety stock. allocations. lead times D. MPS and BOM information C. Order quantity. Why are low level codes used? A. planned order releases and receipts. Inventory item identification and storage location B. Detailed Scheduling and Planning Unit 2 Review The following questions are designed to test your recall of the material covered in lesson 2. to aid MRP netting C.level item D. To set the level at which all requirements for an item should be calculated in MRP © Copyright Leading Edge Training Institute Limited 28 . A method of locking a planned order so that it will not be changed automatically by MRP logic B. actual demand. cumulative items available to promise C. Which is the most accurate definition of pegging? A. A way of identifying the lowest BOM level an item appears on. on. net requirement s B. To identify the length of the MRP planning horizon B. Production Plan BOM information D. The answers are available in the appendix of this workbook. Low level codes. The computation of the total requirements for an item 10. gross requirements. Forecast demand. To identify the total requirement for an item C.hand inventory balance 8. Which items are NOT included in the MRP grid? A. 7.

You should review your work before progressing to the next lesson which is: Detailed Scheduling and Planning – Lesson 5 Using Outputs of MRP © Copyright Leading Edge Training Institute Limited 29 . Detailed Scheduling and Planning Unit 2 What’s Next? Lesson 4 looked in detail at MRP logic. At this point you have completed 4 of the 9 lessons in Unit 2.

Detailed Scheduling and Planning Unit 2 Appendix © Copyright Leading Edge Training Institute Limited 30 .

as item E is a component of item B. and 9 taking into account the 2 week lead time. C MRP is required to plan and control inventories. At level 1. The scheduling of individual operations is completed at a lower level of planning. and 9. Planned order releases for item F are required in periods 5. Note that orders for item B will increase gross requirements for its components. Note that gross requirements for item E will change when level 2 requirements are calculated. There are no level 1 requirements for item E in the BOM for A. Item F does not require any item Cs at level 1. 7. 6 and 8 to fulfill requirements in periods 6. 5. 1 2 3 4 5 6 7 8 9 Period 20 280 80 20 40 Gross Requirements © Copyright Leading Edge Training Institute Limited 31 . work orders and purchase orders and to provide accurate loading information for CRP. However. 2. and 7 to fulfill requirements in periods 5. Item A requires 2 item Cs at level 1. Detailed Scheduling and Planning Unit 2 Answers to Review Questions 1. each item F requires an item E. items C and E. 7. this is not calculated at this point. 1 2 3 4 5 6 7 8 9 Period 20 200 20 Planned Order release 3. Planned order releases for item A are required in periods 3. 1 2 3 4 5 6 7 8 9 Period 20 20 60 20 420 20 60 20 20 Gross Requirements 5. accounting for a one week lead time 1 2 3 4 5 6 7 8 9 Period Planned Order release 4.

scheduled receipts. forecast demand and actual demand are all elements of the MPS grid which feeds into MRP. MRP calculations for an item will not be netted until all gross requirements have been calculated down to that level. an order of 400 would be required to cover demand in period 4. scrap. lead times. The rest of this order would cover demand in periods 6. B MRP requirements include the following inputs: MPS. safety stock quantities. 7 and 8. 1 2 3 4 5 6 7 8 9 Period 400 100 Planned Order release 7. lot sizes. If the lot size for D is 100. inventory status. C Pegging is used to identify the source of item requirements. MRP grids show the order quantities. net requirements. 8. © Copyright Leading Edge Training Institute Limited 32 . Detailed Scheduling and Planning Unit 2 6. and safety stock levels. gross requirements. planned order releases and receipts. B Cumulative available to promise. and projected on. 10. This helps the planner prioritize orders.hand inventory.level code for an item is the lowest level at which it is used in any BOM. allocations. It is useful for identifying the effects of late orders on finished goods inventory. It traces the requirements for an item up to the originating requirement for the parent product. D The low. BOM for each product. lead time. 9. A further order of 100 would be required for demand in period 5.

MRO inventories are used for supporting activities. This is usually greater than the cumulative lead time and allows for © Copyright Leading Edge Training Institute Limited 33 . seasonality A repetitive pattern of demand from year to year or month to month (or other time period) showing much higher demand in some periods than in others.in-process inventories support production. dependent Demand that is directly related to or derived from the bill of material demand structure for another item or end product. and customer service. Dependent demand should be calculated rather than forecast. such as the master schedule. Also called formula or recipe. activities that support production. It is used with the MPS to determine items that must be ordered. The master scheduler maintains this schedule and it drives schedule (MPS) material requirements planning. parts. quantities and dates for production. Time phased MRP begins with the requirements of the MPS and determines the quantity of all materials requires to produce those items and the date that those materials will be required. Some items may have both dependent and independent demand at the same time. lead time Lead time is the span of time required to perform a process. and finished goods and spare parts inventories support customer demand. It specifies configurations. independent Demand for an item that is unrelated to the demand for other items. Detailed Scheduling and Planning Unit 2 Glossary Term Definition bill of material A listing of all the subassemblies. Planning horizon The amount of time a plan. Raw materials and work. It recommends replenishment orders and dates for material and can suggest reschedule open orders when due dates and need dates are not in phase. showing the required quantity of each. intermediates. taking Planning (MRP) into account inventory on hand and other inventory information. extends into the future. demand Examples include finished goods and service part requirements. and raw materials (BOM) needed for a parent assembly. Inventory Stocks or items used to support production. work order An order to the machine shop for tool manufacture or equipment maintenance or an authorization to start work on an activity or product. master The anticipated build schedule for those items assigned to the master production scheduler. Material A set of methods that calculate material requirements by exploding the bill Requirements of material data against the master production schedule requirements.

net requirements are calculated by subtracting the level of inventory on hand and scheduled receipts from the total achieved by adding together gross requirements. The cell contains all the relevant data for the specified time period.used’ information Low-level code A number attached to an item identifying the lowest level of any bill of material at which that item appears. Time bucket A single cell in a spreadsheet. for example. © Copyright Leading Edge Training Institute Limited 34 . They may be changed or deleted during subsequent MRP processing or if circumstances change. Detailed Scheduling and Planning Unit 2 lot sizing of low level components. such as the total net requirement for an item in a given week. Scheduled Open orders that have been assigned a due date receipts Projected An estimate of inventory balance in the future. pegging is the ability to identify the sources of gross requirements and allocations for a given item.level code of 0. Firm planned orders are often used to state the master production schedule. or more usually a week. Planned order The date at which a planned order will be released. Net requirements are converted into planned orders by applying lot sizing and lead time parameters. G11 has a low level code of 1 and. F101 occurs at level 2. It is also called ‘where. Pegging In MRP and MPS. a day. It may also allow for capacity changes at key work centers or key suppliers. as it is the parent of F101. Planned orders at one level become the gross requirements for items at the next level. Planned orders are created by the computer and exist only in the computer. Planned order The quantity planned to be received at a particular time as a result of a receipts planned order release. which is equivalent to length of time. FPOs are an aid for planners working with MRP to respond to material and capacity issues by firming up selected planned orders. This is calculated by release MRP by processing net requirements against lot size and lead time parameters. Firm planned A planned order that is frozen in quantity and time and cannot be order (FPO) automatically changed by the computer.like grid. Planned order receipts are not scheduled receipts as they have not been released. then H28 is the parent of G11 and has a low. if item F101 is required in the production of G11 and G11 is required to make H28. Gross The total of independent and dependent demand for a component before the requirements netting of on-hand inventory and scheduled receipts. For example. Net requirements In MRP. allocations and safety stock. It is a running sum of on- available balance hand inventory minus requirements plus scheduled receipts and planned order receipts.

move time and receiving and inspection time. Detailed Scheduling and Planning Unit 2 Order quantity Order quantity or lot size is the amount of an item that is ordered or issued as a standard quantity to the production process Lot for lot A lot-sizing technique that generates planned orders equal in quantity to the net requirement for each period. It is also considered to be the amount of time between recognition of the need for an item and the receipt of an order for that item. In master production scheduling. Safety stock An amount of stock that is held in inventory to protect against fluctuations of demand or supply. © Copyright Leading Edge Training Institute Limited 35 . processing time. Allocated The amount of an item that has been assigned to a specific order but has not quantity yet been released from the stockroom to the production floor. Lead time can include order preparation time. queue time. Lead time The amount of time needed to perform a process. it is the additional inventory and capacity planned as protection against forecast errors.