Resource Planning

Prof. Dr. Md. Mamun Habib

For Operations Management, 9e by

PowerPoint Slides
Krajewski/Ritzman/Malhotra
by Jeff Heyl © 2010 Pearson Education
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 15 – 1
Material Requirements Planning
● Materials requirements planning (MRP I) is the logic 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.
● MRP is a software system to manage dependent demand
inventory.

15 – 2
MRP Evolution
MRP Schedule Materials

Closed Schedule Materials

Loop Incorporate Feedback
MRP
Schedule & Purchase
MRP II Materials
Coordinate w/ Mfg
Resources

ERP
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ERP Systems

● Enterprise Resource Planning Systems is a computer system

that integrates application programs in accounting, sales,
manufacturing, and other functions in the firm
● This integration is accomplished through a database shared by
all the application programs

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Typical ERP System

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Enterprise Resource Planning
● What an ERP system does
◆ Integrating the firm’s functional areas
◆ Used by many different types of organizations

● How ERP systems are designed

◆ Single comprehensive database
◆ Managers to monitor all of the company’s products at all locations
and at all times
◆ Information is automatically updated in the all applications when
transactions occur
◆ Streamlines the data flows throughout the organization
◆ Requires a careful analysis of major processes
◆ Significant changes in ERP systems - interoperability

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Materials Requirements Planning (MRP I)

● MRP is a computerized information system to manage

dependent demand inventory and schedule orders

● Translates the master production schedule into requirements

for all subassemblies, components, and raw materials
through the MRP explosion

● Dependent demand
◆ Quantity required varies with the production plans of other
items
◆ Component
◆ Parent

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MRP Inputs

Authorized Other
master production sources
schedule of demand

Engineering
Inventory Inventory MRP Bills of
and process
transactions records explosion materials
designs

Material
requirements
plan

Figure 15.2 – Material Requirements Plan Inputs

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Bill of Materials

● A record of all components of an item

● Shows the parent-component relationship
● The usage quantities are derived from engineering and
process design
● Five common terms
◆ End items
◆ Intermediate items
◆ Subassemblies
◆ Purchased items

● Part commonality (sometimes called standardization of

parts or modularity)

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Bill of Materials (BOM)
A: End item or Final product D,E,G: Purchased items
B,C,F: Intermediate item/Subassemblies/Parent

LT = 1

B (3) C (1)

LT = 2 LT = 3

D (1) E (2) F (1) D (1)

LT = 3 LT = 6 LT = 1 LT = 3

G (1)

LT = 3
Figure 15.19 – BOM for Product A

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 Master Production Schedule (MPS)

● Details how many end items will be produced within

specified periods of time
◆ It breaks the sales and operations plan into specific product
schedules
◆ Create a prospective MPS and test whether it meets the schedule
with available resources
● Sums of quantities must equal sales and operational plan
● Production must be allocated efficiently over time
● Capacity limitations and bottlenecks may be determined

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Master Production Schedule (MPS)

April May

1 2 3 4 5 6 7 8

Ladder-back chair 150 150

Kitchen chair 120 120

Desk chair 200 200 200 200

Aggregate
production plans 670 670
for chair family

Figure 15.5 – MPS for a Family of Chairs

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Master Production Schedule (MPS)

Authorized Prospective master No

production production Are resources
plan schedule available?

Yes

Material Authorized master

requirements production
planning schedule

Figure 15.6 – Master Production Scheduling Process

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Application 15.1
SOLUTION
Item: Product A Order Policy: 50 units
Lead Time: 1 week

Quantity on Hand 5 1 2 3 4 5 6 7 8 9 10

Forecast 20 10 40 10 0 0 30 20 40 20

Customer orders
30 20 5 8 0 2 0 0 0 0
(booked)
Projected on-hand
inventory

MPS quantity

MPS start

Available-to-promis
e (ATP) inventory

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Application 15.1
SOLUTION
Item: Product A Order Policy: 50 units
Lead Time: 1 week

Quantity on Hand 5 1 2 3 4 5 6 7 8 9 10

Forecast 20 10 40 10 0 0 30 20 40 20

Customer orders
30 20 5 8 0 2 0 0 0 0
(booked)
Projected on-hand 25 5 15 5 5 3 23 3 13 43
inventory

MPS quantity 50 50 50 50 50

MPS start 50 50 50 50

Available-to-promis 5 35 50 50 50
e (ATP) inventory

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Master Production Schedule (MPS)

● Available-to-promise (ATP) inventory

◆ The quantity of an end item that marketing can promise to deliver on
specific dates
◆ It is the difference between customer orders already booked and the
quantity that operations is planning to produce

● Freezing the MPS

● Reconciling the MPS with sales and operations

plans

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Master Production Schedule (MPS)
Item: Ladder-back chair Order Policy: 150 units
Lead Time: 1 week

April May
Quantity
55 1 2 3 4 5 6 7 8
on Hand:

Forecast 30 30 30 30 35 35 35 35

Customer
38 27 24 8 0 0 0 0
orders booked

Projected
on-hand 17 137 107 77 42 7 122 87
inventory

MPS quantity 0 150 0 0 0 0 150 0

MPS start 150 0 0 0 0 150 0 0

Available-to-pro
mise (ATP) 17 91 150
inventory

Explanation: Explanation: Figure 15.9 –

The total of customer orders booked The total of customer orders MPS Record with
until the next MPS receipt is 38 units. booked until the next MPS receipt is an ATP Row
The ATP = 55 (on-hand) + 0 (MPS 27 + 24 + 8 = 59 units. The ATP =
quantity) – 38 = 17. 150 (MPS quantity) – 59 = 91 units..
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Solved Problem 1
Refer to the bill of materials for product A shown in Figure 15.19. If there
is no existing inventory and no scheduled receipts, how many units of items
G, E, and D must be purchased to produce 5 units of end item A?

LT = 1

B (3) C (1)

LT = 2 LT = 3

D (1) E (2) F (1) D (1)

LT = 3 LT = 6 LT = 1 LT = 3

G (1)
Figure 15.19 – BOM for Product A
LT = 3
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Solved Problem 1
SOLUTION
Five units of item G, 30 units of item E, and 20 units of item D must be
purchased to make 5 units of A. The usage quantities shown in Figure 15.21
indicate that 2 units of E are needed to make 1 unit of B and that 3 units of
B are needed to make 1 unit of A; therefore, 5 units of A require 30 units of
E(2 × 3 × 5 = 30). One unit of D is consumed to make 1 unit of B, and 3
units of B per unit of A result in 15 units of D(1 × 3 × 5 = 15); 1 unit of D
in each unit of C and 1 unit of C per unit of A result in another 5 units of
D(1 × 1 × 5 = 5). The total requirements to make 5 units of A are 20 units
of D(15 + 5). The calculation of requirements for G is simply 1 × 1 × 1 × 5
= 5 units.

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Solved Problem 3
The MPS start quantities for product A
calls for the assembly department to begin
final assembly according to the following A
schedule: 100 units in week 2; 200 units in
LT = 2
week 4; 120 units in week 6; 180 units in
week 7; and 60 units in week 8. Develop a
material requirements plan for the next 8 B (1) C (2)
weeks for items B, C, and D. The BOM
for A is shown in Figure 15.22, and data LT = 1 LT = 2
from the inventory records are shown in
Table 15.1.
D (1)

LT = 3

Figure 15.21 – BOM for Product A

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Application 3
The master schedule for Product A is given below.

Item: End Item A Lead Time: 2 wks

Week

1 2 3 4 5 6 7 8

MPS quantity

MPS start 100 200 120 180 60

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Solved Problem 3

TABLE 15.1 | INVENTORY RECORD DATA

Item
Data Category B C D
Lot-sizing rule POQ (P=3) L4L FOQ = 500 units
Lead time 1 week 2 weeks 3 weeks
Scheduled receipts None 200 (week 1) None
Beginning (on-hand) inventory 20 0 425

SOLUTION
We begin with items B and C and develop their inventory records, as
shown in Figure 15.23. The MPS for product A must be multiplied by 2 to
derive the gross requirements for item C because of the usage quantity.
Once the planned order releases for item C are found, the gross
requirements for item D can be calculated.

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Solved Problem 3
Item: B Lot Size: POQ (P = 3)
Lead Time: 1 week

Week

1 2 3 4 5 6 7 8 9 10

Gross
requirements 100 200 120 180 60

Scheduled
receipts

Projected 20
on-hand 20 200 200 0 0 240 60 0 0 0
inventory

Planned
receipts 280 360

Planned order
releases 280 360

Figure 15.23 – Inventory Records for Items B, C, and D

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Solved Problem 3
Item: C Lot Size: L4L
Lead Time: 2 weeks

Week

1 2 3 4 5 6 7 8 9 10

Gross
requirements 200 400 240 360 120

Scheduled
receipts 200

Projected 0
on-hand 200 0 0 0 0 0 0 0 0 0
inventory

Planned
receipts 400 240 360 120

Planned order
releases 400 240 360 120

Figure 15.23 – Inventory Records for Items B, C, and D

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Solved Problem 3
Item: D Lot Size: FOQ =500 units
Lead Time: 3 week

Week

1 2 3 4 5 6 7 8 9 10

Gross
requirements 400 240 360 120

Scheduled
receipts

Projected 425
on-hand 425 25 25 285 425 305 305 305 305 305
inventory

Planned
receipts 500 500

Planned order
releases 500 500

Figure 15.23 – Inventory Records for Items B, C, and D

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