Material Requirement

Planning
Bhupesh Kumar Lad
MRP
MRP is to translate the requirement of end products stated in MPS into
the requirement of components and materials.
Inputs to MRP
- MPS
- BOM
- Inventory Status
- Fundamental data in item master file
- Shop Calendar
MRP Inputs
MPS: MPS is the schedule for end items. It states the quantity and
timing of production of specific end items. Master production
scheduling is a procedure to determine the production schedules and
the available-to-promise (ATP) of the end products. Based on MPS,
MRP calculates the replenishment plans from the items in the level
below the end products down to the raw materials
MRP Inputs
BOM: BOM describes the structure of the products. It states, from level
to level, the components needed to make the parent items. By using
BOM, the requirements of end products are expanded to include the
requirements of the components, and hence the requirements of all
the lower level materials
MRP Input
Inventory Status: In expanding the lower level requirements, what we
obtain are gross requirements. Gross requirement is not the real
requirement. Net requirement is calculated by subtracting the
inventory from the gross requirement. Since MRP is time-phased, both
on-hand and on-order inventories are considered. On-hand inventory is
the present inventory; on-order inventory is the future inventory, and
has to be represented by both quantity and receiving date.
MRP inputs
Fundamental data: in item master file The attributes of all items
including raw materials, works-in-process, semi-finished goods, or
finished goods, are expressed in the item master file. Part number,
lead-time, safety stock, lot-sizing rule, low level code, etc. are required
by the MRP processor. Low level code is used to determine the
sequence of MRP calculation. Safety stock and lot-sizing rule are used
to decide the quantity of the material replenishments. Lead-time is
used to decide the time to replenish the required materials.
MRP inputs
Shop Calendar: MRP systems are time-phased. Time bucket is an
interval used to break time into discrete chunks. The length of a time
bucket is defined according to the characteristics of a business.
Commonly used time bucket includes week and day.
Planning horizon is the amount of time the master schedule and MRP
extend into the future. The planning horizon should cover at least the
cumulative lead-time to produce a product.
MRP Example 1 (BOM)
Example 1: Suppose you need to produce 100 units of product A eight week from now, where product A
requires one unit of product B and two units of product C, while product C requires one unit of product D and
two units of product E. How many units of each type do you need?
MRP Example 1 (BOM)
Example 1: Suppose you need to produce 100 units of product A eight week from now, where product A
requires one unit of product B and two units of product C, while product C requires one unit of product D and
two units of product E. How many units of each type do you need?

A (1)

C (2) B(1)

D(1) E(2)
MRP Example 1
Suppose further that the lead-times for the products are as follows: Product
A, four weeks, product B three weeks, product C two weeks, products D and
E one week each.
A (1)
When should each of the components be produced?
LT=4w

C (2) B(1)
LT=2w LT=3w

D(1) E(2)
LT=1w LT=1w
MRP Example 1
Suppose further that the lead-times for the products are as follows: Product
A, four weeks, product B three weeks, product C two weeks, products D and
E one week each.
A (100)
When should each of the components be produced?
LT=4w
0w 1w 2w 3w 4w 5w 6w 7w 8w
C (200) B(100)
LT=2w LT=3w
B C
A
D D(200) E(400)
LT=1w LT=1w
E
 MRP Example 2 (Level of items)
Example 2: Consider a system with two end items, item 1 and item 2.

Item 1 requires two units of item A and one unit of item C.

Item 2 requires one unit of item B, one unit of item D and three units of item E.

Item A requires one unit of item B and two units of item F.

Item B requires two units of item C and one unit of item E.

Item C requires one unit of item F and three units of item G.

Item D requires two units of item B and one unit of item C.

 Item 1
MRP Example 2 (Level of items)
A (2) C (1)

Example 2: Consider a system with two end items, item 1 and item B (1) F (2) F (1) G (3)
2.

Item 1 requires two units of item A and one unit of item C. C (2) E (1)

Item 2 requires one unit of item B, one unit of item D and three F (1) G (3)
units of item E.

Item A requires one unit of item B and two units of item F. Item 2

Item B requires two units of item C and one unit of item E. B (1) D (1) E(3)

Item C requires one unit of item F and three units of item G. C (2) E (1) B (2) C (1)

Item D requires two units of item B and one unit of item C. F (1) G (3) C (2) E (1) F (1) G (3)

F (1) G (3)
 Item 1
MRP Example 2 (Level of items)
A (2) C (1)

Example 2: Consider a system with two end items, item 1 and item B (1) F (2) F (1) G (3)
2.

Item 1 requires two units of item A and one unit of item C. C (2) E (1)

Item 2 requires one unit of item B, one unit of item D and three F (1) G (3)
units of item E.

Item A requires one unit of item B and two units of item F. Item 2

Item B requires two units of item C and one unit of item E. B (1) D (1) E(3)

Item C requires one unit of item F and three units of item G. C (2) E (1) B (2) C (1)

Item D requires two units of item B and one unit of item C. F (1) G (3) C (2) E (1) F (1) G (3)

Determine the levels of the items. F (1) G (3)

MRP Example 2 (Level of items)
Item 1
The levels of the items are:
A (2) C (1)
Level 0: Items 1 and 2.
B (1) F (2) F (1) G (3) Item 2
Level 1: Items A and D.
C (2) E (1) B (1) D (1) E(3)
Level 2: Item B.
C (2) E (1) B (2) C (1)
Level 3: Items C and E. F (1) G (3)

F (1) G (3) C (2) E (1) F (1) G (3)

Level 4: Items F and G.
F (1) G (3)

The item at any level should not be the dependent demand for
any of the next level item or same level item
MRP Procedure
MPS

Single level BOM explosion

Calculate gross requirement of the components with planned order

release in the corresponding periods

Calculate net requirement

Determine the planned order receipts according to lot sizing rules

Offset lead-time to determine the planned order releases

Obtain MRP report

MRP Example 3 (BOM)

A C
C

D
B
B (1) C(2) C
D

C(1) D(2) A: Sunglass set with two spare lens

MRP Example
Table 1: Item Master File of the Sunglasses Set
Part Part Name Level LT On-hand
A Sunglass set 0 1 5 C
C
B Sunglass 1 1 40
C Lens 1 and 2 0
D
2
B
D Arm 2 3 50
D
C

A: Sunglass set with two spare lens

MRP Example
Table 1: Item Master File of the Sunglasses Set

Part Part Name Level LT On-hand

A Sunglass set 0 1 5 C
C
B Sunglass 1 1 40
C Lens 1 and 2 0
2 D
B
D Arm 2 3 50
C
D
C

A: Sunglass set with two spare lens

MRP Example

C
C

D
B

D
C

A: Sunglass set with two spare lens

MRP Example

C
C

D
B

D
C

A: Sunglass set with two spare lens

MRP Example
C
C

D
B

D
C

A: Sunglass set with two spare lens

MRP Example

C
C

D
B

D
C

A: Sunglass set with two spare lens

MRP Example
C
C

D
B

D
C

A: Sunglass set with two spare lens

 MRP Vs EOQ approach
• EOQ model/s assume that a uniform (or a more or less uniform) pattern of
consumption of material.

• Based on the average consumption, the EOQ model answers the “How much”
and “When” questions for optimal cost considerations.

• Averaging of the consumption material in EOQ calculation makes it far away

for actual production requirements.

• Example: if we dealing with 5 different varieties of shampoos, five varieties of

soaps, five of cleaning powders, the requirements of raw materials over time
for these formulations does not fall in the smooth average consumption
pattern.
 MRP Vs EOQ approach

Quantity required

Jan Apr June July Aug

Time

Requirement of a raw material for different months: An illustration of the Drawback of EOQ Models