Material Requirement

Planning
19/11/19
Material Requirement Planning
Demand item : dependent and independent demand item
Demand Finished good, Independent
400 units demand item
A

800 units 400 units 800 units

Sub-assemblies
B(2) C(1) D(2)

800 units 1600 units

E(2)
F(2) Components

2400 units

G(3)
Material Requirement Planning
1. Primary purpose of material requirements planning is to plan the
requirements for dependent demand items.
2. By coordinating the requirements for dependent demand items, MRP enables
an organization to develop realistic plans for meeting delivery schedules of
independent demand items. It does so through the proper timing of order
placement and thus also known as “time-phased requirement planning”.
MRP Inputs
Forecast Customer order

Inventory transactions Engineering changes

Master Production Schedule

Product Structure Records

Inventory Status Record (contains BOM and shows how product is
(contains on hand-balances, open order, produce)
lot sizes, lead times and safety stock)

Material Requirement Planning

(explodes BOM per MPS requirement, nets out inventory level, offsets
lead times and issues reports on
1. What to order and how many
2. When to order
3. What order to expedite, de-expedite or cancel.)
MPS
• MPS outlines the production plan for all end items, expresses how much of each
item is planned and when it is wanted.
• The end item demand is estimated from the customer orders and forecasts.
• MPS is developed from the end item forecasts but t is not same to the forecast;
the two may differ because
• The forecast may exceed the plant capacity
• It may be desirable to increase or decrease the inventory level
• The firm may decided to operate uniformly, using inventory as a buffer against the demand
fluctuation.
Product structure record
• Product structure record also know as bill of materials (BOM) records
contains all the information on all materials, components or sub-assemblies
required to produce the each end items (master scheduled item).
• BOM file must be updated as products are redesigned, new product added
and product sequencing or assembly is changed.
Inventory status record
• The inventory status records contains the on-hand and on-order
status of each inventory.
• Inventory status records are checked to determine what inventory will
be available to meet the production schedule.
• If the available inventory projected to be less than requirements, MRP
will recommend the item be ordered.
MRP outputs
Material Requirement Planning

Planned order released

Purchase order (PO) Work order (WO) Reschedule notices(RN)

Basic purpose of planned order

• To generate material requirements at the next lower level
• To project capacity requirements
MRP computations
• Gross requirement(G(t)): the total anticipated production, use or withdrawals
during each time period. For end item this quantity is obtained from MPS, for
independent items (components) it is derived from planned order release.
• Schedule receipt(S(t)): Material that is already ordered(order release) and
expected to arrive.
• Projected-on-hand(H(t)): Expected quantity in inventory at the end of period to
be available for demand in subsequent period.
• Net requirements(N(t)): net number of items that must be provided to satisfy
the parent or master schedule requirement.
• Planned order receipt (P(t)): order that has not been placed yet in period which
it is needed. This appear in same period as the net requirement.
• Planned order release: when the order should be placed so that the items are
available when needed by the parent.
MRP Process
• MRP process
• Typical MRP matrix
Calculation of order size in MRP
• Lot-for-lot method
• EOQ method
• Example (lot-for-lot ordering policy, lot size=1)
• Example fixed quantity method
Type of MRP
There are two type of MRP system
Regenerative MRP system
In the case of regenerative MRP systems, the entire MRP (full explosions) is
recalculated periodically (usually once a week) based on the latest Master
Production Schedule requirements.
Advantages:
Efficient use of data processing system
Fewer data errors are compounded over time
Net change MRP system
In case of Net change MRP systems, the entire requirements for every component
are not recalculated periodically.
• Closed-loop MRP system
• MRP-II : called manufacturing resource planning
An EOQ-MRP Comparison
Fixed order size
system(EOQ/EPQ)
Part oriented (every item )
Replenish supply
Independent demand
Continuous item demand
Continuous lead time demand
Reorder point ordering signal
Historical demand based
Forecast all items
Quantity-based system
Safety stock for all items
MRP System
Product/component oriented
Actual requirements
Dependent demand
Discrete (lumpy) item demand
No lead time demand
Time-phased ordering signal
Future production base
Forecast master schedule
items
Quantity and time-based
system
Safety stocks for end items