OPMG 402

Logistics and Materials Management

Lec_3: Material Requirement Planning (MRP)

A s s i s . P ro f. M o h a m m e d A b d e l g ha ny
A s s i s t a n t P ro fe s s o r, I n d u s t r i a l E n g i n e e r i n g ,
Mechanical Engineering Department
E - m a i l / M A b d e l g h a ny @ n u . e d u . e g
Te l . / + 2 0 1 1 4 4 8 7 6 7 0 2
Previous Lecture Review
• Aggerate planning
• Demand and supply strategies.
• Basic aggregate planning strategies.
• Trail & error technique.

• Master scheduling
• Major three inputs and outputs.
• Time fences.

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 Material
Master
Requirements
Schedule
Plan
Overview of MRP
▪ Material requirements planning (MRP) is a methodology used for planning the
production of assembled products (smartphones, automobiles, kitchen tables …
etc.).

▪ MRP is a planning and scheduling technique used for batch production of assembled
items.

▪ It translates master schedule requirements for end items (assembled/final products)

into time-phased requirements for subassemblies, components, and raw materials.

▪ MRP is designed to answer three questions: What is needed? How much is needed?
and When is it needed?

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Overview of
MRP

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DR/ M. ABDELGHANY Management 4
MRP Inputs
Master Schedule

Bill of Materials (BOM)

Inventory records

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MRP Inputs
Master Schedule

Bill of Materials (BOM)

Inventory records

• It states which end items are to be produced, when they

are needed, and in what quantities.

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MRP Inputs
Master Schedule

Bill of Materials (BOM)

Inventory records

• Refer to stored information on the status of each item by

time period (time buckets).
• This includes quantities on hand and quantities ordered.
• It also includes details for each item, such as supplier, lead
time, and lot size policy.
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MRP Inputs
Master Schedule

Bill of Materials (BOM)

Inventory records

• BOM contains a listing of all of the raw materials, parts,

subassemblies, and assemblies needed to produce one unit
of a finished product.
• The listing in the bill of materials is hierarchical.

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Bill of Materials

▪ Product structure tree: provides a visual depiction of the subassemblies and

components needed to assemble a product.

Assembly diagram for a chair

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Bill of Materials Product structure tree
Level 0

Level 1

Level 2

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Bill of Materials

▪ Product structure tree: illustrates how the bill of materials is used to

determine the quantities of each of the ingredients (requirements) needed to
obtain a desired number of end items.

▪ Items at the lowest levels of a tree often are raw materials or purchased
parts.

▪ Items at higher levels are typically assemblies or subassemblies.

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Example: Determining How much of each component will be needed for
Assembly
Consider the shown product structure tree for End item X;
a) Determine the quantities of B, C, D, E, and F
needed to assemble one X.

a) Determine the quantities of these components

that will be required to assemble 10 Xs, taking
into account the quantities on hand (i.e., in
inventory) of various components.

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Example: Determining How much of each component will be needed for
Assembly
a) Quantities of each component:

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Example: Determining How much of each component will be needed for
Assembly
b) Quantities of components required to assemble 10
Xs, considering quantities on hand:

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BOM using CAD/CAM software
▪ CAD/CAM software can be used not only for design specification but also to
prepare parts lists.

This screen shows a parts list for a bass

drum pedal along with a three-
dimensional view of the product
subassemblies.

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MRP Processing
▪ Requirements in a master production schedule are translated into material
requirements for lower-level items.

▪ MRP processing combines the time phasing and “explosion” into a sequence
of spreadsheet sections, where each section has the format shown in next
slide.

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MRP Processing Sheet

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Lead times for components
▪ Lead time is the time required to purchase, produce, or assemble an item.

▪ For production; the sum of the move, setup, and assembly or run times.

▪ For purchased items; the time between the recognition of a need and

when it’s available for production.

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Ordering Policies
▪ Lot-for-lot ordering:
▪ A lot sizing technique, where order size is the exact amount needed.

▪ Order size is equal to the net requirements for that period

▪ Lot-size ordering:
▪ A lot sizing technique, where the order size is the same or multiples of a
specified quantity.

▪ Order size may differ than the net requirements.

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MRP Processing Sheet

The total expected demand for an item or

raw material during each time period
without regard to the amount on hand.
Quantities that are generated by exploding
the bill of materials.

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MRP Processing Sheet

orders that have been placed and are

scheduled to arrive from vendors by the
beginning of a period.

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MRP Processing Sheet

The expected amount of inventory that will be

on hand at the beginning of each time period.
= Scheduled receipts for current period +
Planned receipts for previous period − Net
requirements for previous period

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MRP Processing Sheet

The actual amount needed in each time

period.
= Gross requirements for current period –
Projected on-hand inventory for current
period

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MRP Processing Sheet

The quantity expected to be received by the

beginning of the period in which it is shown.
• Under lot-for-lot ordering, this quantity will
equal net requirements.
• Under lot-size ordering, this quantity may
exceed net requirements.

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MRP Processing Sheet

Indicates a planned amount to order in each

time period; equals planned-order receipts
offset by lead time.
When an order is executed, it is removed from
“planned-order releases” and entered under
“planned-order receipts.”

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MRP Development
▪ MRP is based on the product structure tree diagram.

▪ Requirements are determined level by level, beginning with the end item (the top of
the tree) and working down the tree.

▪ The timing and quantity of each “parent” item become the basis for determining the
timing and quantities of the “children” items directly below it.

▪ The children items then become the parent items for the next level, and so on.

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MRP Development Master Schedule
MRP provides plans for the end
item and each of its subassemblies
and components

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Example: MRP Development
A firm that produces wood shutters and bookcases has received two orders for shutters: one for
100 shutters and one for 150 shutters. The 100-unit order is due for delivery at the start of week
4 of the current schedule, and the 150-unit order is due for delivery at the start of week 8. Each
shutter consists of two frames and four slatted wood sections. The wood sections are made by
the firm, and fabrication takes one week. The frames are ordered, and lead time is two weeks.
Assembly of the shutters requires one week. There is a scheduled receipt of 70 wood sections in
(i.e., at the beginning of) week 1. Determine the size and timing of planned-order releases
necessary to meet delivery requirements under Lot-for-lot ordering policy (i.e., planned-order
release equal to net requirements).

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Example: MRP Development
a) Develop a master schedule:

b) Develop a product structure tree:

c) Develop MRP – using lot-for-lot ordering.

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 Example: MRP Development
MRP Development – using lot-for-lot ordering

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 Example: MRP Development

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 Example: MRP Development

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 Example: MRP Development
MRP Development – using lot size of 320 units for
frames and 70 units for wood sections

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 Example: MRP Development

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 Example: MRP Development

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Importance of Computer in MRP
Development
▪ Consider two product structure trees have “X’” as a component, and we want
to develop a material requirements plan for “X’”.
▪ Suppose more multiple products are involved.
▪ We want to determine which product(s) will be affected if orders/deliveries of
“X’” are late … the process is more complex.
▪ Consider a firm that have many end items for which it needs to develop
material requirements plans. Inventories on hand, schedules, order releases,
etc. must all be updated as changes and rescheduling occur.
▪ Without the aid of a computer, the task would be almost hopeless.

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MRP Outputs
Primary reports:
▪ Planned orders, a schedule indicating the amount and timing of future orders.

▪ Order releases, authorizing the execution of planned orders.

▪ Changes to planned orders, including revisions of due dates or order

quantities and cancellations of orders.

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MRP Outputs
Secondary reports:
▪ Performance-control reports, evaluation of system operation, including
deviations from plans and cost information.

▪ Planning reports, data useful in forecasting future inventory requirements.

▪ Exception reports, data on major discrepancies (late orders, excessive scrap

rates, and reporting errors).

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