Chapter 4 –

Independent versus Dependent Demand

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Independent versus Dependent Demand

• Independent Demand
– Not related to demand for other assemblies or
products, instead from outside sources
– Generally forecasted demand
• Dependent Demand
– Generally related to production of an end
product (as defined on the MPS)
– Can be calculated instead of forecasted

Dependent Demand Approach –

Materials Requirement Planning
(MRP)
• Major Objectives of MRP
– Determine Requirements – Calculated to meet
product requirements defined in the MPS
• What to order
• How much to order
• When to order
• When to schedule delivery
– Keep Priorities Current

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 Links To Other MPC Functions

Figure 4.2 Manufacturing planning and control systems

Major Inputs to MRP

• Master Production Schedule quantities and
times
• Inventory records of all items to be planned
– Planning factors such as lead times, order
quantities, and safety stock
– Current status of each item
• Bills of material for MPS items

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 Sample Bill of Materials

Figure 4.3 Simplified bill of material

Bill of Material Points

• The BOM shows all parts to make one of
the item
• Each part has one, and only one, part
number
• A part is defined by form, fit, and function –
any change requires a new part number

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 Sample Bill of Materials

Figure 4.3 Simplified bill of material

Sample Product Tree for the BOM

Figure 4.4 Product tree

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Breaking Down the BOM into More
Detail – the Multilevel Bill

Figure 4.5 Multilevel bill

Multiple Bill

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Single – level Bill

Example problem

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 Solve the problem!
Using the following product tree, construct the
appropriate single-level trees. How many Cs
are needed to make 50 Xs and 100 Ys?

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 Indented BOM – Use Indentation to
Show Parent-Component Relationships

Figure 4.8 Indented bill of material

Summarized Parts List

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 Solve the problem!
Given the following parents and components,
construct a product tree. Figures in parentheses
show the quantities per item. How many Gs are
needed to make one A?

Planning Bills of Material

• Artificial grouping of components for
Planning Purposes
• Used to simplify
– Forecasting
– Planning
– Master Scheduling
• Represent an average, not buildable product

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Sample Planning BOM

Figure 4.9 Planning bill

Pegging Report

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 Major Uses for Bills of Material

• Defines the product

• Provides method for design change control
• Planning – What is needed and when
• Order entry – order configuration and pricing
• Production – Parts needed to assemble a product
• Costing – material cost of goods sold

Material Requirements Planning

Process

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 Exploding and Offsetting
Lead time (LT)

Exploding and
Offsetting

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Example problem

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 Solve the problem!
Using the following product tree,
determine the planned order receipts and
planned order releases if 200 As are to be
produced in week 5. All lead times are 1
week except for component E, which has
a lead time of 2 weeks.

Gross and Net Requirements

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Gross requirements are the total quantity of a product or service
needed to meet customer demand. Understanding and calculating
‘gross requirements’ are essential for ensuring that your business has
the necessary inventory on hand to meet customer demand.

Net requirements are requirements for a product based on its gross

requirements minus on-hand stock and scheduled receipt.

Example Problem

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 Solve the problem!
Given the following parents and components,
construct a product tree. Figures in parentheses
show the quantities per item. How many Gs are
needed to make one A?

Releasing Orders

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Example

Schedule
receipts

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 Example Problem

Basic MRP Record

Figure 4.15 Basic MRP record

"...time bucket' essentially refers to a 'period' according to which you

may group planning results..."

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 Solve the problem!
Complete the following table. Lead time for the
part is 2 weeks, and the order quantity is 50.
What action should be taken?

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Low-Level Coding and Netting

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Netting and exploding first-level parts

Completed material requirements plan

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 Solve the problem 1!
Given the following product
tree, explode, offset, and
determine the gross and net
requirements. All lead times
are 1 week, and the quantities
required are shown in
parentheses. The master
production schedule calls for
100 As to be available in
week 5. There are 20 Bs
available. All other on-hand
balances = 0.

Solve the problem 2!

Complete the following table. Lead time for the part is 2
weeks. The lot size is 100. What is the projected available
at the end of week 3? When is it planned to release an
order?

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 Solve the problem 3!
Given the following partial
product tree, explode, offset,
and determine the gross and
net requirements for
components H, I, J, and K.
There are other components,
but they are not connected to
this problem. The quantities
required are shown in
parentheses. The master
production schedule calls for
the completion of 60 Hs in
week 3 and 80 in week 5.
There is a scheduled receipt of
120 Is in week 2. There are
400 Js and 400 Ks available.
All lot sizes are lot-for-lot.

Multiple Bills of Material

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25
Using the Material Requirements Plan

Material Planner
Three types of orders:
- Planned orders
- Released orders
- Firm planned orders

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Managing the Material Requirements Plan

Consider three important factors:

- Priority
- Bottom-up replanning
- Reducing system nervousness

Example problem

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 Example Problem

Example Problem

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 Some Key Terms
• Lead time – span of time for a process
• Exploding – process of multiplying requirements
by usage to get BOM requirements
• Offsetting – Placing requirements in the proper
period based on lead time
• Planned orders – Orders planned during the
explosion, but not yet released for processing
• Low-level code – lowest level on which a part
resides on the Bill of Materials

Some Key Terms, Continued

• Scheduled receipts – Open orders released for
processing (production or purchase) scheduled to
be received at a defined time.
• Gross Requirements – Total of a component
needed to meet requirements not taking any
existing inventory into account
• Net Requirements – Actual amount of a
component needed to meet requirement after
existing requirements taken into account

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 Sample Material Requirements Plan

Figure 4.19 Completed material requirements plan

Sample Multiproduct MRP Explosion

Figure 4.20 Multiproduct MRP explosion

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 Points About the MRP Record
• Current time – beginning of first period (often
called time buckets)
• Items considered available at beginning of
period
• Quantity in Projected Available row considered
at end of period
• Current period often called action bucket – action
should be taken to avoid a future problem

Planner Responsibilities for MRP

• Launch Orders – Production or Purchasing
• Reschedule orders as required
• Reconcile errors and search for causes
• Solve critical material shortages
– Replan
– Expedite
• Coordinate with other functions to resolve
problems

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 Other Key Terms
• Firm Planned orders – Orders not yet released,
but “frozen” in quantity and time to reduce system
“nervousness”
• Exception messages – messages generated by the
computer signaling planner action needed
• Bottom-up replanning – actions to correct for
changed conditions made as low as possible in the
product structure

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 Problem 1!
MPS parent X has
planned order releases of
30 in weeks 2 and 4.
Given the following
product tree, complete
the MRP records for parts
Y and Z. Quantities
required are
shown in brackets..

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 Problem 2!
Given the following product
tree, explode, offset, and
determine the gross and net
requirements. The quantities
required are shown in
parentheses. The master
production schedule calls for
the completion of 100 As in
week 5. There is a scheduled
receipt of 100 Bs in week 1.
There are 200 Fs available. All
order quantities are
lot-for-lot.

Problem 3!
Given the following product tree, complete the
MRP records for parts X, Y, W, and Z. Note
that parts X and Y have specified order
quantities.

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 Problem 4!
Given the following product
tree, develop a material
requirements plan for the
components. Quantities per
are shown in parentheses. The
following worksheet shows
the present active orders, the
available balances, and the
lead times.

Problem 5!
Given the following product
tree, determine the low-level
codes and the gross and
net quantities for each part.
There is a requirement for 100
As in week 4 and 50 Bs
in week 5. There is a
scheduled receipt of 100 Cs in
week 2. Quantities required of
each are also shown.

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