Explanation of The Problem

Example: MRP Schedule
LocoMopeds is a manufacturer of off-road

mopeds. The following product structure diagram
represents the bill of materials for its dual-carburetor
Model 442 moped.
Level 0 MOPED
WHEEL
ENGINE GAS
Level 1 ASSEMBLY TANK
ASSEMBLY FRAME
(2)
CARBURETOR HUB
Level 2 MOTOR
(2) ASSEMBLY
TIRE
1

Bill of Material
Parent Component Level Compon.
Code Code Code Description Req’d
442 0 #442 Moped
442 EA 1 Engine Assem. 1
GT 1 Gas Tank 1
WA 1 Wheel Assem. 2
F 1 Frame 1
EA M 2 Motor 1
C 2 Carburetor 2
WA HA2 Hub Assem. 1
T 2 Tire 1
2

Inventory Status Report
Item On- Safety Lot Lead Sched. Receipts
Code Hand Stock Size Time Qnty. Week
442 500 200 LFL 1 -- --
EA 300 100 500 1 1000 10
GT 600 200 LFL 2 900 10
WA 500 400 500 1 2000 10
F 600 0 2000 3 2000 10
M 250 0 LFL 1 -- --
C 150 100 2000+ 2 -- --
HA 100 0 LFL 1 2400 11
T 500 500 1000 3 3000,2000 11,12
3
The company is currently planning production for

weeks 10 through 16. Based on existing orders and
demand forecasts, the master production schedule is
as follows:
Master Production Schedule: #442 Moped
WEEK 10 11 12 13 14 15 16
QUANTITY 0 1000 0 1300 800 1200 1400
Determine the MRP schedule required to support

the master production schedule for the Model 442
moped in weeks 10-16.
4

MRP Schedule for #442 Mopeds for Weeks 10 - 16,
considering that:

Gross Requirements come from the moped MPS

There is an On-Hand balance of 500 mopeds at the
end of week 9

There are no Scheduled Receipts for mopeds

A lot-for-lot rule is used for ordering mopeds

Safety stock of 200 mopeds is desired

Lead time for mopeds is one week
5

MRP Schedule for #442 Mopeds . . . Initially
ITEM: 442 MOPED LT: 1 WEEK

LOT SIZE: LFL SS:
10 20011 12 13 14 15 16
GROSS REQUIREMENTS 0 1000 0 1300 800 1200 1400
SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 500)
NET REQUIREMENTS
PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES
6

MRP Schedule for #442 Mopeds . . . Completed
ITEM: 442 MOPED LT: 1 WEEK

LOT SIZE: LFL SS: 10
200 11 12 13 14 15 16
SCHEDULED RECEIPTS
AVAILABLE (ON-HAND = 500) 300 300 0 0 0 0 0
NET REQUIREMENTS 1000 1300 800 1200 1400
PLANNED ORDER RECEIPTS 1000 1300 800 1200 1400
PLANNED ORDER RELEASES 1000 1300 800 1200 1400
7

MRP Schedule for Gas Tanks for Weeks 10 - 16,
considering that:

Gross Requirements come from moped Planned-
Order-Releases

There is an On-Hand balance of 600 gas tanks at
the end of week 9

There is a Scheduled Receipt for 900 tanks in
week 10

A lot-for-lot rule is used for ordering gas tanks

Safety stock of 200 gas tanks is desired

Lead time for gas tanks is two weeks
8

MRP Schedule for Gas Tanks . . . Initially
ITEM: GAS TANK LT: 2 WEEK

LOT SIZE: LFL SS:10 20011 12 13 14 15 16
SCHEDULED RECEIPTS 900
NET REQUIREMENTS
9

MRP Schedule for Gas Tanks . . . Completed
ITEM: GAS TANK LT: 2 WEEK
LOT SIZE: LFL SS:10 20011 12 13 14 15 16
NET REQUIREMENTS 1000 800 1200 1400
PLANNED ORDER RECEIPTS 1000 800 1200 1400
PLANNED ORDER RELEASES 1000 800 1200 1400
10

MRP Schedule for Frames for Weeks 10 - 16,
considering that:

Order-Releases

There is an On-Hand balance of 600 frames at the
end of week 9

There is a Scheduled Receipt for 2000 frames in
week 10

The firm uses a Lot Size (multiple) of 2000 for
ordering frames

No safety stock of frames is desired

Lead time for frames is 3 weeks
11

MRP Schedule for Frames . . . Initially
ITEM: FRAME LT: 3 WEEK
LOT SIZE: 2000 SS:
10 011 12 13 14 15 16
AVAILABLE 600
NET REQUIREMENTS
12

MRP Schedule for Frames . . . Completed
ITEM: FRAME LT: 3 WEEK

LOT SIZE: 2000 SS: 10
0 11 12 13 14 15 16
NET REQUIREMENTS 0 0 0 500 0 1100 0
PLANNED ORDER RECEIPTS 2000 2000
PLANNED ORDER RELEASES 2000 2000
13

MRP Schedule for Engine Assemblies for Weeks 10 -
16, considering that:

Order-Releases

There is an On-Hand balance of 300 engine
assemblies at the end of week 9

There is a Scheduled Receipt for 1000 engine
assemblies in week 10

The firm uses a Lot Size (multiple) of 500 for
ordering engine assemblies

Safety Stock of 100 engine assemblies is desired

Lead time for engine assemblies is 1 week
14

MRP Schedule for Engine Assemblies . . . Initially
ITEM: ENGINE ASSEM. LT: 1 WEEK

LOT SIZE: 500 SS: 10100 11 12 13 14 15 16
NET REQUIREMENTS
15

MRP Schedule for Engine Assemblies . . . Completed
ITEM: ENGINE ASSEM. LT: 1 WEEK

LOT SIZE: 500 SS: 10100 11 12 13 14 15 16
16

MRP Schedule for Motors for Weeks 10 - 16,
considering that:

Gross Requirements come from engine assembly
Planned-Order-Releases

There is an On-Hand balance of 250 motors at the
end of week 9

There are no Scheduled Receipts for motors

A lot-for-lot rule is used for ordering motors

No Safety Stock of motors is desired

Lead time for motors is 1 week
17

MRP Schedule for Motors . . . Initially
ITEM: MOTOR LT: 1 WEEK

LOT SIZE: LFL SS:
10 011 12 13 14 15 16
GROSS REQUIREMENTS 1500 500 1500 1000
SCHEDULED RECEIPTS
NET REQUIREMENTS
18

MRP Schedule for Motors . . . Completed
ITEM: MOTOR LT: 1 WEEK

LOT SIZE: LFL SS:
10 011 12 13 14 15 16
SCHEDULED RECEIPTS
19

MRP Schedule for Carburetors for Weeks 10 - 16,
considering that:

Gross Requirements come from engine assembly
Planned-Order-Releases (times 2)

There is an On-Hand balance of 150 carburetors at
the end of week 9

There are no Scheduled Receipts for carburetors

A Lot Size of 200+ is used for ordering carburetors

Safety Stock of 100 carburetors is desired

Lead time for carburetors is 2 weeks
20

MRP Schedule for Carburetors . . . Initially
ITEM: CARBURETOR LT: 2 WEEK

LOT SIZE: 2000+ SS:10 10011 12 13 14 15 16
SCHEDULED RECEIPTS
NET REQUIREMENTS
21

MRP Schedule for Carburetors . . . Completed
ITEM: CARBURETOR LT: 2 WEEK

LOT SIZE: 2500+ SS:10 10011 12 13 14 15 16
NET REQUIREMENTS 950 1450 950
PLANNED ORDER RECEIPTS 2500 2500 2500
PLANNED ORDER RELEASES 2500 2500 2500
22

MRP Schedule for Wheel Assemblies for Weeks 10 -
16, considering that:

Order-Releases (times 2)

There is an On-Hand balance of 500 wheel
assemblies at the end of week 9

There is a Scheduled Receipt for 2000 wheel

A Lot Size (multiple) of 500 is used for ordering
wheel assemblies

Safety Stock of 400 wheel assemblies is desired

Lead time for wheel assemblies is 1 week
23

MRP Schedule for Wheel Assemblies . . . Initially
ITEM: WHEEL ASSEM. LT: 1 WEEK

LOT SIZE: 500 SS: 10400 11 12 13 14 15 16
NET REQUIREMENTS
24

MRP Schedule for Wheel Assemblies . . . Completed
ITEM: WHEEL ASSEM. LT: 1 WEEK

LOT SIZE: 500 SS: 10400 11 12 13 14 15 16
25

MRP Schedule for Hub Assemblies for Weeks 10 - 16,
considering that:

Gross Requirements come from wheel assembly

There is an On-Hand balance of 100 hub assemblies
at the end of week 9

There is a Scheduled Receipt of 2400 hub

A lot-for-lot rule is used for ordering hub assemblies

No Safety Stock of hub assemblies is desired

Lead time for hub assemblies is 1 week
26

MRP Schedule for Hub Assemblies . . . Initially
ITEM: HUB ASSEM. LT: 1 WEEK

LOT SIZE: LFL SS:
10 0 11 12 13 14 15 16
NET REQUIREMENTS
27

MRP Schedule for Hub Assemblies . . . Completed
ITEM: HUB ASSEM. LT: 1 WEEK

LOT SIZE: LFL SS:
10 0 11 12 13 14 15 16
NET REQUIREMENTS 2000 2000 3000
PLANNED ORDER RECEIPTS 2000 2000 3000
PLANNED ORDER RELEASES 2000 2000 3000
28

MRP Schedule for Tires for Weeks 10 - 16,
considering that:

Gross Requirements come from wheel assembly

There is an On-Hand balance of 500 tires at the
end of week 9

There are Scheduled Receipts for 3000 and 2000
tires weeks 11 and 12, respectively

A Lot Size (multiple) of 1000 is used for ordering
tires

Safety Stock of 500 tires is desired

Lead time for tires is 3 weeks
29

MRP Schedule for Tires . . . Initially
ITEM: TIRE LT: 3 WEEK

LOT SIZE: 1000 SS: 10500 11 12 13 14 15 16
SCHEDULED RECEIPTS 3000 2000
NET REQUIREMENTS
30

MRP Schedule for Tires . . . Completed
ITEM: TIRE LT: 3 WEEK

LOT SIZE: 1000 SS: 10500 11 12 13 14 15 16
SCHEDULED RECEIPTS 3000 2000
NET REQUIREMENTS 1500 2500
PLANNED ORDER RECEIPTS 2000 3000
PLANNED ORDER RELEASES 2000 3000
31
Issues in MRP

Management Commitment

User involvement

Education and training

Selection of S/W packages

Data accuracy

Realistic MPS

Realistic lead times

Maintaining accurate BOM files
32
Lot-Sizing in MRP

Lot-size is the quantity ordered/produced at one time

Large lots are preferred because:

Changeovers cost less and capacity greater

Annual cost of purchase orders less

Price breaks and transportation breaks can be
utilized

Small lots are preferred because:

Lower inventory carrying cost

Reduced risk of obsolescence

Shorter cycle time to produce customer order
33
Lot-Sizing Methods in MRP

Economic Order Quantity (EOQ)

does not consider quantity discounts

does not always provide the most economical
approach with lumpy demands

Lot-for-Lot (LFL)

accommodates lumpy demand

Period Order Quantity (POQ)

Many others
34
Lot-Sizing Methods in MRP
The best lot-sizing method,

resulting in least cost,
depends on cost
and demand patterns
35
Lot-Sizing in MRP

Lot-size is the quantity ordered/produced at one time

Large lots are preferred because:

Changeovers cost less and capacity greater

Annual cost of purchase orders less

Price breaks and transportation breaks can be
utilized

Small lots are preferred because:

Lower inventory carrying cost

Reduced risk of obsolescence

Shorter cycle time to produce customer order
36
Lot-Sizing Methods

Economic Order Quantity (EOQ)

does not consider quantity discounts

does not always provide the most economical
approach with lumpy demand

Lot-for-Lot (LFL)

accommodates lumpy demand

Period Order Quantity (POQ)
The best method, resulting in least cost,
depends on cost and demand patterns.
37
Evaluation of MRP

Most beneficial to process-focused systems that have
long processing times and complex multistage
production steps

Lead times must be reliable

Must freeze MPS for some time before actual
production... certain demand

Difficult to implement
38
Closed Loop MRP
Production Planning
Master Production Scheduling
Material Requirements Planning
Capacity Requirements Planning
No
Feedback
Realistic?
Feedback
Yes
Execute:
Capacity Plans
Material Plans
39
Closed Loop MRP
Materials Management at Washburn Guitar, Inc.
40
Manufacturing Resource Planning (MRP II)

Goal: Plan and monitor all resources of a
manufacturing firm (closed loop):
Manufacturing
Marketing
Finance
Engineering
Shop-floor control

Simulation capability of the manufacturing system
41
Enterprise Resource Planning (ERP)

ERP systems available today integrate
manufacturing with other functional areas in an
organization

ERP systems make it easier for management to
obtain local information about performance of
specific processes, bottlenecks resources, and
products (or product groups), etc.

Class I ERP software packages (for large
companies) include BAAN, SAP, and Oracle
42
MRP II System
MRP II System
43
MRP I to MRP II

MRP I simply exploded demand (MPS) into required
materials

MRP II became Manufacturing Resource Planning
which provides a closed-loop business management
system

Financial management

Shop floor control

Operations management

Simulation capability
44
Capacity Requirements Planning (CRP)
45
Capacity Requirements Planning (CRP)

Tests MPS for feasibility

Utilizes routings to determine labor/machine loads

If schedule feasible, recommends freezing

If schedule overloads resources, points out processes
that are overscheduled
46
Load Schedules

Compares actual labor and machine hours against
available hours

Offsets schedules between successive stages of
production by lead times

Provides feasible MPS and economically loaded work
centers

Promotes system operating efficiency ... lowers costs!
47
World-Class Practice

Lead times respond to conditions

Product development as levels of product structure
tree

Lead times that adjust to load

MRP reports shared with customers and suppliers
48

Explanation of The Problem

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Explanation of The Problem

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Example: MRP Schedule

LocoMopeds is a manufacturer of off-road

The company is currently planning production for

Determine the MRP schedule required to support

ITEM: 442 MOPED LT: 1 WEEK

ITEM: 442 MOPED LT: 1 WEEK

ITEM: GAS TANK LT: 2 WEEK

ITEM: FRAME LT: 3 WEEK

ITEM: ENGINE ASSEM. LT: 1 WEEK

ITEM: ENGINE ASSEM. LT: 1 WEEK

ITEM: MOTOR LT: 1 WEEK

ITEM: MOTOR LT: 1 WEEK

ITEM: CARBURETOR LT: 2 WEEK

ITEM: CARBURETOR LT: 2 WEEK

ITEM: WHEEL ASSEM. LT: 1 WEEK

ITEM: WHEEL ASSEM. LT: 1 WEEK

ITEM: HUB ASSEM. LT: 1 WEEK

ITEM: HUB ASSEM. LT: 1 WEEK

ITEM: TIRE LT: 3 WEEK

ITEM: TIRE LT: 3 WEEK

The best lot-sizing method,

Materials Management at Washburn Guitar, Inc.

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