MECHANICAL ENGINEERING

DEPARTMENT Industrial Organization – MPD412

Lecture #5
Material Requirements Planning (MRP)

Prepared by : Dr. Sayed Ali Zayan 1st Term 2023/2024

Independent versus Dependent Demand
➢ Independent demand: demand for item is independent of
demand for any other item (Inventory models)
➢ Dependent demand: demand for item is dependent upon the
demand for some other item (Materials Requirement
planning)
Independent
Demand
A
Dependent
Demand
B(4) C(2)

D(2) E(1) D(3) F(2)

Independent demand is uncertain.

Dependent demand is certain.
Dependent Demand
Dependent demand
Demand for items that are subassemblies or
component parts to be used in the production
of finished goods.
Once the independent demand is known, the
dependent demand can be determined.
Dependent demand tends to be
sporadic‫ متقطع‬or “lumpy‫”متكتل‬
Large quantities are used at specific points
in time with little or no usage at other times
Independent versus Dependent Demand
Understanding Material Requirements Planning
Material requirements planning (MRP): A planning
process that translates the master production
schedule into planned orders for the actual parts
and components needed to produce the master
schedule items.
MRP: A computer-based information system that
translates master schedule requirements for end
items into time-phased requirements for
subassemblies, components, and raw materials.
MRP is based on dependent demand.
MRP is a software system.
Material Requirements Planning: Defined
▪ Materials requirements planning (MRP) 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: Computer-based information system for ordering
and scheduling of dependent demand inventories.
The MRP is designed to answer three questions:
▪ What is needed? Type
▪ How much is needed? Quantity
▪ When is it needed? Time
Purpose of an MRP System
Inventory
Order the right part.
Order the right quantity.
Order at the right time.
Priorities
Order with the right due date.
Keep the due date valid.
Capacity
Plan for a complete load.
Plan for an accurate load.
Plan for an adequate time to view future load.
Benefits of MRP
➢ Reduced inventories without reduced customer
service
➢ Ability to track material requirements
➢ Ability to evaluate capacity requirements
➢ Means of allocating production time
➢ Increased customer satisfaction due to meeting
delivery schedules
➢ Faster response to market changes
➢ Improved labor and equipment utilization.
➢ Better inventory planning and scheduling
MRP structure
MRP Inputs: Master Production Schedule
Master Production Schedule (MPS):
❑ One of three primary inputs in MRP; states which end items are to be
produced, when these are needed, and in what quantities.
❑ Master schedule: a timetable that specifies what is to be made and
when.
❑ Managers like to plan far enough into the future so they have
reasonable estimates of upcoming demands
MRP Inputs: Master Production Schedule
❑ The master schedule should cover a period that is at least equivalent
to the cumulative lead time
Cumulative lead time
➢ The sum of the lead times that sequential phases of a process
require, from ordering of parts or raw materials to completion of final
assembly.
 MRP Inputs: Bill of Materials
➢ Bill of Materials (BOM): A listing of all of the assemblies,
subassemblies, parts, and raw materials needed to produce one
unit of a product
➢ Bill of material (BOM): a listing of the components, their
description, and the quantity of each required to make one unit of
a product.

Example: BOM
MRP Inputs: Bill of Materials
Product structure tree: A visual depiction of the
requirements in a bill of materials, where all
components are listed by levels
Example: Product Structure Tree
MRP Inputs: Bill of Materials
Low-level coding
Restructuring the bill of material so that multiple occurrences
of a component all coincide with the lowest level at which the
component occurs.
Example: product structure tree diagram
An end item X is composed of two Bs and one C. moreover, each B
requires three Ds and one E, and each D requires four Es. Similarly,
each C is made up of two Es and two Fs. The items at each level are
components of the next level up and, as in a family tree, are parents of
their respective components. The available inventory on hand of each
items B, C, D, and E are 4, 10, 8, and 60 respectively. Note that the
quantities of each item in the product structure tree refer only to the
amounts needed to complete the assembly at the next higher level.
Use this information to do the following:
A. Draw the product tree diagram
B. Determine the quantities of B, C, D, E, and F needed to assemble
one unit of X
C. Determine the quantities of these components that will required to
assemble 10 Xs, taking into account the quantities on hand of
various components
Solution: tree diagram
X
a)

B(2) C

D(3) E E(2) F(2)

E(4) B: 2
b) C: 1
D: 2 ×3 = 6
E: 4 ×3 ×2 + 1 ×2 +2 ×1 = 28
F: 2
Solution: tree diagram
X

B: 2 ×10=20 - 4=16 C
B(2)
C: 1 ×10 =10 -10 = 0
D: 3 ×16 = 48 - 8 = 40

D(3) E E(2) F(2)

E: 1 × 16 = 16
B: 16
E(4) C: 0
E: 4 × 40 = 160 – 60 = 100 c) D: 40
E: 116
F: 0
Lead Times & Product Structure
Bicycle(1)
P/N 1000
Handle Bars Lead
2 wk. time
Handle Bars (1) Frame Assy (1)
P/N 1001 P/N 1002

1 wk.
Frame Wheels (2) Frame (1)
2 wk. P/N 1003 P/N 1004

1 wk. Bicycle
3 wk.
Frame
Wheels Assy

1 2 3 4 5 6 7 8
Time (weeks)
Time-Phased Product Structure
Must have D and E
completed here so
Start production of D production can
begin on B Lead time
1 week
D (2)
2 weeks to A 1 weeks
produce
B 2 weeks
B (2)
2 weeks C 1 weeks
E (2)
A D 1 weeks
2 weeks 1 week E 2 weeks
2 weeks
E (2)
1 week
F 3 weeks
G (1) C (3) G 2 weeks
3 weeks
F (2)
1 week
D (2)
| | | | | | | |
1 2 3 4 5 6 7 8
Time in weeks
 Introductory Example - Dependent Demand
Product Structure Tree for Assembly A Lead Times

A A 1 day
B 2 days
C 1 day
D 3 days
B(4) C(2) E 4 days
F 1 day
Demand
D(2) E(1) D(3) F(2)
Day 10 50 A
Day 8 20 B (Spares)
Day 6 15 D (Spares)

Create a schedule to satisfy demand.

 Day: 1 2 3 4 5 6 7 8 9 10
A Required 50
Order Placement 50

LT = 1 day
Day: 1 2 3 4 5 6 7 8 9 10
A R e q u ire d 50
O rd e r P la c e m e n t 50
B R e q u ire d 20 200
O rd e r P la c e m e n t 20 200

LT = 2
Spares
A

B(4) C(2)

D(2) E(1) D(3) F(2)

 Day: 1 2 3 4 5 6 7 8 9 10
A Required 50
LT=1 Order Placement 50
B Required 20 200
LT=2 Order Placement 20 200
C Required 100
LT=1 Order Placement 100
D Required 55 400 300
LT=3 Order Placement 55 400 300
E Required 20 200
LT=4 Order Placement 20 200
F Required 200
LT=1 Order Placement 200

A
Part D: Day 6
B(4) C(2) 40 + 15 spares

D(2) E(1) D(3) F(2)

MRP Inputs: Inventory Records
 Inventory records
 Includes information on the status of each item by time period, called
time buckets
 Information about
Gross requirements
Scheduled receipts
Expected amount on hand
 Other details for each item such as
Supplier
Lead time
Lot size policy
Changes due to stock receipts and withdrawals
Canceled orders and similar events
MRP Outputs: Primary
Primary Outputs:
Planned orders
A schedule indicating the amount and
timing of future orders
Order releases
Authorizing the execution of planned
orders
Changes
Revisions of the dates or quantities, or the
cancellation of orders
 MRP Outputs: Secondary
 Secondary Outputs
 Performance-control reports
 Evaluation of system operation, including deviations
from plans and cost information
e.g., missed deliveries and stockouts
 Planning reports
 Data useful for assessing future material requirements
e.g., purchase commitments
 Exception reports
 Data on any major discrepancies encountered
E.g., late and overdue orders, excessive scrap
rates, requirements for nonexistent parts
Example: Planned Order Report
Item #2740 Date 9-25-98
On hand 100 Lead Time 2 weeks
On order 200 Lot size 200
Allocated 50 Safety Stock 50

Date Order Gross Scheduled Projected

No. Reqs. Receipts On Hand Action

50
9-26 AL 4416 25 25
9-30 AL 4174 25 0
10-01 GR 6470 50 -50
10-08 SR 7542 200 150 Expedite SR 10-1
10-10 CO 4471 75 75
10-15 GR 6471 50 25
10-23 GR 6471 25 0
10-27 GR 6473 50 -50 Release PO 10-13
Key: AL = allocated CO = customer order
PO = purchase order WO = work order
SR = scheduled receipt GR = gross requirements
Example: MRP Action Report

Current date: 9-25-98

Item Date Order No. Qty. Action

#2740 10-08 7542 200 Expedite SR 10-1

#3616 10-09 Move forward PO 10-7
#2412 10-10 Move forward PO 10-5
#3427 10-15 Move backward PO 10-25
#2516 10-20 7648 100 De-expedite SR 10-30
#2740 10-27 200 Release PO 10-13
#3666 10-31 50 Release WO 10-24