Aggregate Planning, MRP Ch-3

Chaper-3
Aggregate Production
and Resource
Requirement Planning
Resource Requirement Planning
 Aggregate Production Planning

 Material Requirement Planning
 Capacity Planning
Planning
 (Aggregate) planning is
concerned with determining
the quantity and timing of
production for the
intermediate future, often
from three to 18 months
ahead.
 The goal of aggregate
planning is to effectively
 Cake ---- 5/cake--X  2000gm---flour
 Pastry.----2/pastry—Y  200/cake
 100/pastry
 Max Profit = 5X +2Y
 Sub to constraints
 200X +100Y <= 2000
Aggregate Planning Goals
 The goal of aggregate planning is to achieve a

production plan that will effectively utilize the
organization’s resources to satisfy expected demand
 Meet demand
 Use capacity efficiently
 Meet inventory policy
 Minimize cost
 Labor
 Inventory
 Plant & equipment
 Subcontract
Planning
 Based on the planning horizon, We can
divide plans into 3 general categories:
Planning
Planning
 The heart of the medium range planning is
the aggregate production plan.
 In aggregate planning, given the demand
forecast, production capacity, inventory
levels, size of work force, and other
inputs
 The planner has to select the rate of output
for the next 3 to 18 months.
An Example Aggregate
Plan
 A company produces four models of
TV
Plan
Plan
 Here, operations manager makes decisions
about intermediate range capacity
without getting into details of specific
products, parts, or people.
 Later, he/she deals with financial data,
personnel, capacity, and availability of raw
material as well.
The Concept of Aggregation
Aggregate planning is a “big picture”
approach that does not focus on individual
products or services. Instead, the focus is on
groups of similar products of an entire
product line.
Examples:
 Total number of bikes produced
 Total number of customers served
Relationships Of
Aggregate Plan
Aggregate Planning Process
13-14
Strategies In Aggregate
Planning
There are several ways for improving the

effectiveness in the aggregate planning
process:
Aggregate Scheduling
Strategies
 Level scheduling strategy
 Produce same amount every day
 Keep work force level constant
 Vary non-work force capacity or demand
 Often results in lowest production costs
 Chase strategy
 Hire / Fire workers to make production
capacity meet necessary production
Aggregate Scheduling
Strategies
 Mixed strategy
 Combines 2 or more aggregate scheduling
options
Overtime Price
Mixed
Strategy
Sub-
Inventor
contract
y
Planning
1. Changing inventory levels
 This is to increase inventory during periods
of low demand to meet high demand in

future periods.
 However, by doing this, costs of storage
and handling increases.

Planning
2. Varying work force size by hiring or
layoffs
 This is to hire or lay off workers to meet
production rates.
 In this option, often new employees need
to be trained.
Planning
3. Varying production rates through
overtime or idle time :
 There is always a limit for overtime.
Costs also increase.
Planning
4. Subcontracting
 Costly, opens doors to competitors, hard
to find perfect subcontractor.
5. Using part time workers
 e.g., Fast food restaurants
Planning
6. . Back ordering at high demand
periods :
 Back ordering means that a firm promises
to deliver a product in a later date. Many

auto dealers purposely back order.
Planning
 Although each of these strategies might
produce A cost effective aggregate plan,
 A combination of them often works best.
 But the optimal plan is not always possible.
Methods For Aggregate
Planning
 1. Graphical And Charting Methods
 2. Mathematical Approaches
A) Linear Programming
B) Linear Decision Rules
C) Management Coefficient Model
D) Simulation
E) Search Decision Rules
DisAggregation
 A manufacturer firm needs more
information to operate.
 We must know what quantities will be
produced for each type of product and what
time.
 The process of breaking the aggregate plan
down into greater detail is called
disaggregation.
DisAggregation
 Later, Disaggregation results in Master Production
Schedule (MPS). This schedule specifies:
1) The sizing and timing of specific item production

quantities,
2) The sizing and timing of manufactured or purchased
components,
3) The sequence of individual orders or jobs, and
4) The short-term allocation of resources to individual
operations.
Aggregate Plan to Master
Schedule Jan Feb Mar.
Aggregate
Planning Aggregate
200 300 400
plan
Type Jan. Feb. Mar

Disaggregation
21 100 100 100
inch
Master 26 75 150 200
schedule inch
29 25 50 100
Master inch
Schedule total 200 300 400
Master Scheduling Process
Inputs Outputs
Beginning inventory Projected inventory
Master
Forecast Scheduling Master production
schedule
Customer orders
Master Production
Schedule
 MPS specifies what is to be made AND when.
 MPS is a STATEMENT OF PRODUCTION, It is Not a
Forecast.
 A Master Production Schedule or MPS is the plan that a
company has developed for production, inventory,
staffing, etc.
 It sets the quantity of each end item to be
completed in each week of a short-range planning
horizon.
 A Master Production Schedule is the master of all
schedules. It is a plan for future production of end items.
MPS INPUTS:
 MPS OUTPUT
 Forecast Demand
(production plan):
 Amounts to be
 Production Costs
Produced
 Inventory Costs
 Staffing Levels
 Customer Orders
 Quantity Available to
 Inventory Levels
Promise
 Supply Lot Size
 Projected Available
 Production
Balance
 Lead Time
 Capacity
Material Requirement Planning (MRP)
 Once, management can make a forecast of the

demand for the final product (e.g., car), Quantities
required for all components (tire,radiator) can be
computed exactly.
 When such Dependent Computing Techniques are
used in a Production Environment, They are
called Material Requirements Planning (MRP).
31
Key Outputs of MRP
 Calculate demand for component items

 Determine requirements for
subassemblies, components, and raw
material
 Determine when they are needed
 Generate work orders and purchase order
 Consider lead time
Demand Characteristics
Demand Characteristics for Finished Products and Their Components
Independent demand Dependent demand
100 x 1 =
100 tabletops
100 tables
100 x 4 = 400 table legs
33
MRP Input & Output
MPS
Material Inventory
BOM Requirements
Planning
Records
File
(MRP)
Work Purchase Rescheduling

orders orders notices 34
Specification of Bills-of-
Material
 A bill-of-material (BOM) is a List of
Quantities of Components and Materials
required to Make a Product.
 For each component, There is a Drawing that
specifies its Sub-Components.
Example of BOM
Clipboard
Top clip (1) Bottom clip (1)
Pivot (1) Spring (1)
Rivets (2)
Finished clipboard Pressboard (1)
Major Inputs to MRP Process:
Bill of Material
 Product structure file

 Determines which component items need to be scheduled
Product Structure Record Clipboard
Level 0
Clipboard
Top clip (1) Bottom clip (1)
Pivot (1) Spring (1)
Pressboa Clip Rivet Rivets (2)

rd (1) Assembly s (2) Level 1 Finished clipboard Pressboard (1)
(1)
Top Bottom Piv Sprin

Clip (1) Clip (1) ot g (1) Level 2
(1)
37
Example
 Assume that, this week’s Demand for product
A is 50 units.
 Each unit of A requires two units of B and
three units of C.
 Each unit of B requires two units of D and
three units of E.
 Each unit of C requires one unit of E and two
units of F.
 Each F requires one unit G and two units of
D.
Example : To produce 50 units of A,
calculate the required quantity for each of
the component
Example
 Therefore, Demand for B,C,D,E,F,G is
completely dependent on the demand for
A.
 Once we develop product structure, We
can get the Number of units Required to
Satisfy demand for product A.
Example
 For example: For part B: 2 x 50 = 100
units of B is required.
 Similarly, For part C: 3x50 = 150 units
of C is required.
Example
 For part E: 3(B) + 1(C) = 3(100) + 150 =
450 units of E is required.
 For part F: 2(C) = 2(150) = 300 units of F is
required.
 For part D: 2(B) + 2(F) = 2(100) + 2(300) =
200 + 600 = 800 units of D is required.
 For part G: 1(F) = 300 units of G is required.
2. Master Production Schedule (MPS)
 Drives MRP process with a schedule of finished

products
 Quantities represent production not demand
 Quantities may consist of a combination of
customer orders & demand forecasts
 Quantities represent what needs to be produced,
not what can be produced
 Example PERIOD
MPS ITEM 1 2 3 4 5
Clipboard 85 95 120 100 100
Lapdesk 0 50 0 50 0
Lapboard 75 120 47 20 17
Pencil Case 125 125 125 125 125
43
Product Structure Tree
Level Chair
0
1 Leg Back
Assembly Seat Assembly
Cross Side Cross Back

2 Legs (4)
Bar(2) Rails (2) bar Supports (3)
44
Explosion Example
 How many leg assemblies are needed for 1
chair?
 How many Cross bars are needed for 5 chairs?
 Computing how many parts are required per a

final product is called BOM explosion.
 MRP answers these questions by taking

production lead times into account: Not only it
tells how many, but also when.
45
3. Inventory Record
 _________________________________________________
 Contains an extensive amount of information on every
item that is produced, ordered, or inventoried in the
system
 _____________________________________________
DESCRIPTION INVENTORY POLICY
Item
____ Pressboard Lead time 1
Item no. 734 Annual demand 5000
Item type Purch Holding cost 1
Product/sales class Comp Ordering/setup cost 50
Value class B Safety stock 0
Buyer/planner RSR Reorder point 39
Vendor/drawing 07142 EOQ 316
Phantom code N Minimum order qty 100
Unit price/cost 1.25 Maximum order qty 500
Pegging Y Multiple order qty
LLC 1 Policy code 3 46
MRP Processes – 4 Basic
Steps
1. Exploding the bill of material
 ___________________________________
2. Netting out inventory
 ___________________________________
 ___________________________________
3. Lot sizing rule – How many units
 ___________________________________
 ___________________________________
 ___________________________________
4. Time-phasing requirements
 ___________________________________
47
MRP Matrix
Gross Requirement
 Derived from planned order releases of the parent
 Actual / estimated demand, in case of final product
Schedule Receipts
 Items on order
 Scheduled to arrive in the future time period
Projected on hand
 Current inventory, or anticipated inventory at the end of period
Projectedon-hand
on-hand Inventoryon-
Inventory on- Scheduled//
Scheduled Gross
Gross
Projected
Inventoryat atend
end handat
hand atend
endof
of planned
planned requirements
requirements
Inventory
ofperiod
of periodtt = periodtt--11
period + receiptsin
receipts in - inperiod
in periodtt
periodtt
period
48
MRP Matrix
Net requirements
 Actual quantity to produce based on projected on hand and on-
order quantity
Planned Order Receipts
 Quantity, when orders need to be received
 Consider lot sizing rule:
Planned Order Release
 When order need to be placed to receive on time
 Consider lead time
49
MRP Outputs
Planned orders - schedule indicating the
amount and timing of future orders.
 Order releases - Authorization for the
execution of planned orders.
 Changes - revisions of due dates or order
quantities, or cancellations of orders.
 Performance-control reports
 Planning reports
 Exception reports
50
MRP in Services
 Food catering service

 End items are the catered food
 Dependent demands are ingredients for
each recipe, i.e. bill of materials
 Taco Bell menu items
 Hotel renovation
 Activities and materials “exploded” into
component parts
51
Benefits of MRP
 Low levels of in-process inventories

 Ability to track material requirements
 Ability to evaluate capacity requirements
 Means of allocating production time
Eventually it is a database with limited decision

making capability
52
Requirements of MRP
Computer system and necessary software
Mainly discrete products
Stable lead times
Accurate and up-to-date
Master schedules
Bills of materials
Inventory status records
Integrity of data
Requirements of MRP
 Computer and necessary software

 Accurate and up-to-date inputs:
 Master schedules
 Bills of materials
 Inventory records
 Integrity of data
54
MRP Matrix
15-55
MRP: Example
Master Production Schedule
1 2 3 4 5
Clipboard 85 95 120 100 100
Lapdesk 0 60 0 60 0
Item Master File

CLIPBOARD LAPDESK PRESSBOARD
On hand 25 20 150
On order 175 (Period 1) 0 0
(sch receipt)
Lot size L4L Mult 50 Min 100
Lead time 1 1 1
15-56
MRP: Example (cont.)
Product Structure Record
Clipboard Level 0
Pressboard Clip Ass’y Rivets

(1) (1) (2) Level 1
Lapdesk Level 0
Pressboard Trim Beanbag Glue

(2) (3’) (1) (4 oz) Level 1
15-57
ITEM: CLIPBOARD PERIOD

LOT SIZE: L4L LT: 1 1 2 3 4 5
Gross Requirements 85 95 120 100 100
Scheduled Receipts 175
Projected on Hand 25
Net Requirements
Planned Order Releases
15-58
ITEM: CLIPBOARD LLC: 0 PERIOD
LOT SIZE: L4L LT: 1 1 2 3 4 5
Projected on Hand 25 115
Net Requirements 0
(25 + 175) = 200 units available

(200 - 85) = 115 on hand at the end of Period 1
15-59

LOT SIZE: L4L LT: 1 1 2 3 4 5
Projected on Hand 25 115 20
Net Requirements 0 0
115 units available

(115 - 85) = 20 on hand at the end of Period 2
15-60

LOT SIZE: L4L LT: 1 1 2 3 4 5
Projected on Hand 25 115 20 0
Net Requirements 0 0 100
Planned Order Receipts 100
Planned Order Releases 100
20 units available
(20 - 120) = -100 — 100 additional Clipboards are required
Order must be placed in Period 2 to be received in Period 3
15-61

LOT SIZE: L4L LT: 1 1 2 3 4 5
Projected on Hand 25 115 20 0 0 0
Net Requirements 0 0 100 100 100
Planned Order Receipts 100 100 100
Planned Order Releases 100 100 100
Following the same logic Gross Requirements in Periods 4

and 5 develop Net Requirements, Planned Order Receipts,
and Planned Order Releases
15-62
ITEM: LAPDESK PERIOD

LOT SIZE: MULT 50 LT: 1 1 2 3 4 5
Scheduled Receipts
Net Requirements
15-63
ITEM: LAPDESK LLC: 0 PERIOD

LOT SIZE: MULT 50 LT: 1 1 2 3 4 5
Scheduled Receipts
Planned Order Receipts 50 50
Planned Order Releases 50 50
Following the same logic, the Lapdesk MRP matrix

is completed as shown
15-64
LOT SIZE: L4L LT: 1 1 2 3 4 5
LOT SIZE: MULT 50 LT: 1 1 2 3 4 5
ITEM: PRESSBOARD LLC: 0 PERIOD
LOT SIZE: MIN 100 LT: 1 1 2 3 4 5
Gross Requirements
Scheduled Receipts
Net Requirements
15-65
LOT SIZE: L4L LT: 1 1 2 3 4 5
ITEM: LAPDESK LLC: 0 x1 PERIOD x1 x1
LOT SIZE: MULT 50 LT: 1 1 2 3 4 5
ITEM: PRESSBOARD LLC: 0 x2 x2 PERIOD
LOT SIZE: MIN 100 LT: 1 1 2 3 4 5
Scheduled Receipts
Net Requirements
15-66
LOT SIZE: L4L LT: 1 1 2 3 4 5
LOT SIZE: MULT 50 LT: 1 1 2 3 4 5
ITEM: PRESSBOARD LLC: 0 PERIOD
LOT SIZE: MIN 100 LT: 1 1 2 3 4 5
Scheduled Receipts
Planned Order Receipts 100 150 100
15-67
Planned Order Report

PERIOD
ITEM 1 2 3 4 5
Clipboard 100 100 100
Lapdesk 50 50
Pressboard 100 150 100
15-68
Overview of the MRP System
Product Master
Inventory
Structure Production
Master File
File Schedule
Material
Requirements
Planning
Manufacturing Purchase Various

Orders Orders
Reports
13
MRP Matrix
(You can download the template from our class webpage)
ITEM NAME OR NO. PERIOD

LOT SIZE LT 1 2 3 4 5
Gross Requirements Derived from MPS or planned order
releases of the parent
Scheduled Receipts On order and scheduled to be received
Projected on Hand Beg Inv Anticipated quantity on hand at the end

of the period
Net Requirements Gross requirements net of inventory and

scheduled receipts
Planned Order Receipts When orders need to be received
Planned Order Releases When orders need to be placed to be

received on time
70
Example MRP Matrix

LOT SIZE: L4L LT: 1 1 2 3 4 5
Net Requirements
71
MRP Example 1
Given the following information, determine when orders
should be released for A, C, and D and the size of those A
orders
LT=3
C(3) D(2)
LT=4 LT=2
Parts On hand Scheduled Demand

Receipts
A 10 0 100, period 8
C 140 0
D 200 250, period 2
72
Parts On hand Scheduled Demand
Receipts
A 10 0 100, period 8
C 140 0
D 200 250, period
1 22 3 4 5 6 7 8
A Gross Req 100
LT=3 Scheduled
Receipt
Proj available 10 10 10 10 10 10 10 0
Balance (10)
Net 90
Requirement
Planned Order 90
Receipt
Planned Order 90
Release
1 2 3 4 5 6 7 8
Gross Req 180
D
LT=2 Scheduled 250
Receipt
Proj available 200 450 450 450 270 270 270
Balance (200)
Net
Requirement
Planned Order
Receipt
Planned Order
11 22 3 3 4 4 55 6 6 7 7 88 99 10
10
XA Gross
Gross Req
Req 90
95
Scheduled
Scheduled
Receipt
Receipt
Proj
Proj available
available 75 75 75 75 75 75 75
Balance
Balance (75)
(50)
50 5 5 50 50 5 50 50 50 0
Net 0 0 0 15
Requirement
Net
Requirement
45
Planned 15
Planned Order
Order Receipt
Receipt
45
Planned 15
Planned Order
Order Release
Release
45
B Gross Req 45
Scheduled
Receipt
Proj available 25 25 25 25 25 25 25
Balance (25)
Net 20
Requirement
Planned 20
Order Receipt
Planned 20
Order Release
1 2 3 4 5 6 7 8 9 10
C Gross Req 45 40
Scheduled
Receipt
Proj available 10 10 10 10
Balance (10)
Net 35 40
Requirement
Planned 35 40
Order Receipt
Planned 35 40
Order Release
1 2 3 4 5 6 7 8 9 10
D Gross Req 100
Scheduled
Receipt
Proj available 20 20 20 20 20 20
Balance (20)
Net 80
Requirement
Planned 80
Order Receipt
Planned 80
Order Release
MRP Processing:
Example 2
Item On-Hand Lead Time (Weeks)
X X 50 2
A 75 3
B 25 1
A(2) B(1) C 10 2
D 20 2
C(3) C(2) D(5)
Requirements
Requirementsinclude
include95
95units
units(80
(80firm
firmorders
ordersand
and15
15forecast)
forecast)
of
ofXXin
inweek
week10
10
Day: 1 2 3 4 5 6 7 8 9 10
X Gross requirements 95
X LT=2 Scheduled receipts
Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45
hand Planned order receipt 45
50 Planner order release 45
A Gross requirements 90
A(2) LT=3 Scheduled receipts
Proj. avail. balance 75 75 75 75 75 75 75 75
B Gross requirements 45
ItIttakes
takes
LT=1 Scheduled receipts
22A’s
A’sfor
for On-
hand
Net requirements
Planned order receipt
20
20
each
eachXX 25
C
Planner order release
Gross requirements 45
20
40
Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40
hand Planned order receipt 35 40
10 Planner order release 35 40
D Gross requirements 100
Proj. avail. balance 20 20 20 20 20 20 20
Day: 1 2 3 4 5 6 7 8 9 10
A(2) B(1) LT=3 Scheduled receipts
B Gross requirements 45
ItIttakes
takes Proj. avail. balance 25 25 25 25 25 25 25 25
11BBforfor hand Planned order receipt 20
each
eachXX
25
C
Planner order release
Gross requirements 45
20
40
Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40
hand Planned order receipt 35 40
10 Planner order release 35 40
Day: 1 2 3 4 5 6 7 8 9 10
C(3) B Gross requirements 45
ItIttakes
takes33
C
LT=2
Gross requirements
Scheduled receipts
45 40
C’s
C’sforfor On-
Proj. avail. balance
Net requirements
10 10 10 10 10
35 40
each
eachAA
hand
10
Planner order release 35
35
40
40

Day: 1 2 3 4 5 6 7 8 9 10
C(3) C(2) B Gross requirements 45
ItIttakes
takes22
C
LT=2
Gross requirements
Scheduled receipts
45 40
C’s
C’sforfor On-
Net requirements
10 10 10 10 10
35 40
each
eachBB
hand
10
35
40
40

Day: 1 2 3 4 5 6 7 8 9 10
C(3) C(2) D(5) B Gross requirements 45
ItIttakes
takes55
C
LT=2
Gross requirements
Scheduled receipts
45 40
D’s
D’sforforeach
each On-
Net requirements
10 10 10 10 10
35 40
BB hand
10
35
40
40

Other Considerations
 Safety Stock
 Not much for items with dependent demand
 Lot sizing
 Lot-for-lot ordering
 Economic order quantity
 Fixed-period ordering
 Part-period model
82
MRP Outputs
 Manufacturing Orders
 Purchasing Orders
 Various Reports
8
3
Hubbell Lighting Case
Manufactures Industrial Lighting Products

 Good-Quality Products
 Po o r at Meeting Due Dates
 Wo r k is Specialized for Each Customer
 Job Shop Environment
 Complex Products
8
4
Hubbell Lighting Case
Before MRP After MRP
Implementation Implementation
Less than 75% of

orders 97% of orders completed
completed on time on time
2%of orders completed
with 1 to 2 days after due
date
8
5
Capacity Requirement
planning (CRP)
 Capacity is the maximum output rate of a facility
 Capacity planning is the process of establishing the
output rate that can be achieved at a facility:
 Capacity is usually purchased in “chunks”
 Strategic issues: how much and when to spend
capital for additional facility & equipment

 Tactical issues: workforce & inventory levels, &
day-to-day use of equipment
86
Measuring Capacity Examples
 There is no one best way to measure capacity
 Output measures like kegs per day are easier to understand
 With multiple products, inputs measures work better
Input Measures of Output Measures

Type of Business
Capacity of Capacity
Car manufacturer Labor hours Cars per shift
Hospital Available beds Patients per month
Pizza parlor Labor hours Pizzas per day
Floor space in
Retail store Revenue per foot
square feet
87
Capacity Planning
 Capacity of a plant is the ability to meet the
demand in terms of products or services
offered by the plant.
 Time horizon in capacity Planning:
 Long Term : Establishes a firm’s overall level of
resources.Eg. Buildings, Equipments,etc.
 Intermediate Range: Hiring or laying off
labour,etc.
 Short Range: overtime, production routing, etc.
Capacity Planning
 Capacity is the upper limit or ceiling
on the load that an operating unit can
handle.
 The basic questions in capacity handling
are:
 What kind of capacity is needed?
 How much is needed?
 When to increase?
Importance of Capacity
Decisions
 Impacts ability to meet future demands
 Affects operating costs
 Major determinant of initial costs
 Involves long-term commitment
 Affects competitiveness
 Affects ease of management
CRP
MRP planned
order
releases
Capacity Open
Routing
requirements orders
file
planning file
Load profile for

each process
15-91
Measuring Available Capacity
 Design capacity:
 Maximum output rate under ideal conditions
 A bakery can make 30 custom cakes per day
when pushed at holiday time
 Effective capacity:
 Maximum output rate under normal (realistic)
conditions
 On the average this bakery can make 20
custom cakes per day
 Actual output
 rate of output actually achieved--
cannot exceed effective capacity. 93

Measuring Effectiveness of
Capacity Use
 Measures how much of the available
capacity is actually being used:
actual output rate
Utilizatio n   100%
capacity
 Measures effectiveness
 Use either effective or design capacity in
denominator
94
Example of Computing Capacity Utilization: A bakery’s
design capacity is 30 custom cakes per day. Currently the bakery is
producing 28 cakes per day. What is the bakery’s capacity
utilization relative to both design and effective capacity?
actual output 28
Utilizatio n effective  (100%)  (100%)  140%
effective capacity 20
actual output 28
Utilizatio n design  (100%)  (100%)  93%
design capacity 30
 The current utilization is only slightly below its design

capacity and considerably above its effective capacity
 The bakery can only operate at this level for a short period
of time
95
Making Capacity Planning
Decisions
The three-step procedure for making

capacity planning decisions is as
follows:
1. Identify Capacity Requirements
2. Develop Capacity Alternatives
3. Evaluate Capacity Alternatives
96
CRP
Michel makes bow ties. His company is called Michel's Bows. It has
grown over the years and has customers all over the world. It's not just Michel
making the bow ties now. He has several employees that also sew the
bow ties. Each month, Michel performs
capacity requirements planning, or CRP.
Capacity requirements planning tells you whether you have enough

capacity to produce the amount of products you need.
For Michel, it tells him whether he and his team are able to sew the required
number of bow ties that sell each day. He performs this planning once a week so
that he can continue to meet the bow tie demands of his customers.
CRP is part of MRP, or materials requirements planning.
Companies perform MRP so they can see what materials are needed, in what
quantity, and when they are needed to successfully fill all their orders.
The MRP tells companies when to order the materials so they can make the
products to fulfill demand. CRP tells companies how many products they can
make per employee, per workstation, etc. per hour, per day, per month.
For Michel, his MRP tells him when he needs to order his
fabrics and in what quantity to make the bow ties that his
customers have ordered.
His CRP tells him how many bow ties each of his employees
and himself can make per hour, per day, etc.
Michel looks at his CRP and determines whether he has the

capacity to fulfill all his orders or not. He also uses his CRP to
make adjustments in the workloads so that everybody has an
even workload and all the orders get fulfilled.
Inputs
To perform a CRP, certain pieces of information are needed.
To calculate the amount of available work hours you have,
you need to know information such as how many employees
you have, how many hours each employee can work, how
many machines you have, and how efficient they are, etc.
For Michel, to calculate the amount of available work hours,

he needs to know the number of workers he has and the
number of hours each worker is available. Since Michel
works full time and so do his other employees, his
calculation becomes number of workers times 40 hours per
week. If the employees had different working hours per
week, Michel would need to add the working hours per
week for each employee. Michel has 3 other employees,
making a total of 4 workers including himself. Multiplying 4
times 40 gives 160 working hours per week.
To calculate the time needed to fulfill orders, you need
to know information
such as the number of products that need to be made,

the time it takes to make each product, set-up time per
employee and workstation, etc. To do this calculation,
Michel needs to know the number of bow ties that need
to be made, the time it takes to make each bow tie, and
then the time it takes to set-up.
Michel wants to calculate this time per week, so he looks at the
orders he needs to fulfill for the week.
Right now, he has 300 bow ties that need to be made for the week.
It takes 30 minutes to make one bow tie. It takes 10 minutes to set
up each morning.
The total set-up time for the week is 10 * 5 = 50 minutes. Before

Michel makes his calculation, he changes his minutes into
decimals. He gets 30 / 60 = 0.5 and 50 / 60 = 0.83.
To calculate the total time needed, he multiplies the number of

bow ties that need to be made by the time it takes to make each
bow tie, and then,
he adds the set-up time for the week. Billy gets ( 300 * 0.5 ) + 0.83
= 150.83 work hours needed per week to fulfill 300 bow ties per
week.
Manufacturing Resources Planning- MRP II
Expanded MRP with emphasis placed on integration of:
Financial planning
Marketing
Engineering
Purchasing
Manufacturing
Human resources
Manufacturing Resources Planning
(MRP II)
Goal: Plan and monitor all resources of a
manufacturing firm (closed loop):
manufacturing
marketing
finance
engineering
Simulate the manufacturing system
MRP II : Manufacturing
Resource Requirement
Planning
 MRP- II is defined as a method for the
effective planning of all resources of a
manufacturing company. Ideally, it addresses
operational planning in units, financial
planning, and has a simulation capability to
answer "what-if" questions and extension of
closed-loop MRP
104
MRP II
Market Master
Finance Manufacturing production schedule
Demand
Adjust master schedule

Marketing
Production
plan MRP
Rough-cut Capacity
capacity planning planning
Adjust
production plan
Yes No Requirements No Yes
Problems? schedules Problems?
105
Difference Between MRP &
MRP-II
 MRPII is concerned with
 MRP is concerned the coordination of the
primarily with entire manufacturing
manufacturing production, including
materials materials, finance, and
human relations
 The goal of MRPII is to
provide consistent data to
all players in the
manufacturing process as
the product moves through
the production line.
 MRP allows for the  MRPII systems begin
input of sales forecasts with MRP, material
from sales and requirements planning.
marketing. These
forecasts determine
the raw materials
demand.
• MRP systems draw on a master production schedule, the
breakdown of specific plans for each product on a line.
• While MRP II allows for the coordination of raw materials
purchasing, MRPII facilitates the development of a detailed
production schedule that accounts for machine and labor
capacity, scheduling the production runs according to the arrival
of materials.
• An MRPII output is a final labor and machine schedule. Data

about the cost of production, including machine time, labor time
and materials used, as well as final production numbers, is
provided from the MRPII system to accounting and finance
(Monk and Wagner).

Aggregate Planning, MRP Ch-3

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Aggregate Planning, MRP Ch-3

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Chaper-3

 Aggregate Production Planning

 The goal of aggregate planning is to achieve a

 Plant & equipment

There are several ways for improving the

of low demand to meet high demand in

and handling increases.

to deliver a product in a later date. Many

1) The sizing and timing of specific item production

Type Jan. Feb. Mar

Beginning inventory Projected inventory

 Once, management can make a forecast of the

 Calculate demand for component items

Independent demand Dependent demand

100 x 4 = 400 table legs

Work Purchase Rescheduling

Top clip (1) Bottom clip (1)

Pivot (1) Spring (1)

 Product structure file

Product Structure Record Clipboard

Pivot (1) Spring (1)

Pressboa Clip Rivet Rivets (2)

Top Bottom Piv Sprin

 Drives MRP process with a schedule of finished

Cross Side Cross Back

 Computing how many parts are required per a

 MRP answers these questions by taking

 Food catering service

 Low levels of in-process inventories

Eventually it is a database with limited decision

 Computer and necessary software

Item Master File

Pressboard Clip Ass’y Rivets

Pressboard Trim Beanbag Glue

ITEM: CLIPBOARD PERIOD

(25 + 175) = 200 units available

ITEM: CLIPBOARD LLC: 0 PERIOD

115 units available

ITEM: CLIPBOARD LLC: 0 PERIOD

ITEM: CLIPBOARD LLC: 0 PERIOD

Following the same logic Gross Requirements in Periods 4

ITEM: LAPDESK PERIOD

ITEM: LAPDESK LLC: 0 PERIOD

Following the same logic, the Lapdesk MRP matrix

Planned Order Report

Manufacturing Purchase Various

ITEM NAME OR NO. PERIOD

Scheduled Receipts On order and scheduled to be received

Projected on Hand Beg Inv Anticipated quantity on hand at the end

Net Requirements Gross requirements net of inventory and

Planned Order Receipts When orders need to be received

Planned Order Releases When orders need to be placed to be

ITEM: CLIPBOARD LLC: 0 PERIOD

Parts On hand Scheduled Demand

C(3) C(2) D(5)

D Gross requirements 100

D Gross requirements 100

D Gross requirements 100

Manufactures Industrial Lighting Products

Less than 75% of

 Strategic issues: how much and when to spend

capital for additional facility & equipment

day-to-day use of equipment