Material Requirement Planning

Objectives and Functions

 MRP – The bridge between master planning and production in the factory

 Relies on planning application software

 Business process for the day-to-day management of the priority plan for end items and
their components

 What – Products and components

 How much – quantities

 When – due dates for planned order receipts and releases

 Input to capacity planning and production activity control

 The MRP Model
MPS

Schedule of Planned production

order releases

Inventory
Data

Action Messages such as

Material
expedite released orders,
Requirement
Plancancel orders etc

BOM

Schedule of Planned purchase

order releases

Planning
Factors
Summary of Inputs
 Planning factors
 Lot size
 Lead time
 Safety Stock
 Scrap and Yield
 Inventory status data
 On-hand balance
 Allocations
 Scheduled receipts
 Bills of material (BOM)
 Master Production Schedule (MPS)
Demand Types in MRP
 Dependent–component or sub-assembly demand driven by net requirements from
the next higher level (e.g. scoop demand caused by net requirements for scoop
assemblies)
 Independent–demand driven by requirements from outside the firm (e.g. customer
orders)
Replanning Frequency
 How often should planners “run MRP”?
 Regeneration versus net change MRP
 Tradeoffs in frequency of running MRP
 Too often  System nervousness
 Not often enough  MRP is out-of-date and inaccurate
Performance characteristics of MRP
 Manufacturing orders released on time
 Purchase orders released on time
 Downtime due to shortages
 Excess inventory
 Number of changes to purchase orders
 Orders released to manufacturing without material shortages
 Due dates of orders met
 Action messages trends.
Bill of Material
Product A [LT = 2 wks]
Level 0

B {Qty per 1} C {Qty per 2} D {Qty per 2}

[LT = 1 wk] [LT = 2 wks] [LT = 1 wk]

Level 1

C {Qty E {Qty
per 2} per 3}
[LT = [LT =
2 wks] 1 wk]

Level 2
Bill of Material
Product F [LT = 1 wk]
Level 0

B {Qty per D {Qty per

E {Qty per 1}
1} [LT = 1 2} [LT = 1
[LT = 1 wk]
wk] wk]
Level 1

C {Qty E {Qty
per 2} per 3}
[LT = [LT =
2 wks] 1 wk]

Level 2
 MRP Calculation of Gross and Net
Requirements

Based on net requirements

Calculate gross and net
Starts at level 0 and explodes for each item, creates
requirements for end items
down to the lowest level planned order receipts and
and their components
releases

• MPS will be the source of requirement for items A and F

• Gross requirements are the quantities that must be issued to support a parent item’s planned
order release
Sources of Gross Requirements
Item A 1 2 3 4 5 6 7 8
Gross requirement 10 100 10
Scheduled receipts
Projected Available From the MPS
Net requirements

Planned order receipts

Planned order releases

Item F 1 2 3 4 5 6 7 8
Gross requirement 20 20 10
Scheduled receipts
Projected Available
Net requirements From the MPS
Planned order receipts

Planned order releases

Independent
Item C 1 2 3 4 5 6 7 8
demand for
Service Part 10 10 10 10 10 10 10 10 service part
 Net Requirements and planned orders for item
A
Item A 1 2 3 4 5 6 7 8
Gross requirement 10 100 10
Scheduled receipts
Projected Available
Net requirements 10 100 10

Planned order receipts 10 100 10

Planned order releases 10 100 10

Moving to Level 1
Gross requirements for Item B
Item A 1 2 3 4 5 6 7 8
Gross requirement 10 100 10
Scheduled receipts
Projected Available
Net requirements 10 100 10
Planned order receipts 10 100 10
Planned order releases 10 100 10

Item F 1 2 3 4 5 6 7 8
Gross requirement 20 20 10
Scheduled receipts
Projected Available
Net requirements 20 20 10
Planned order receipts 20 20 10
Planned order releases 20 20 10

Item B requirement 1 2 3 4 5 6 7 8

From Item A P/O releases at 1 per 10 100 10

From Item F P/O releases at 1 per 20 20 10

Gross requirement for Item B 10 120 20 10 10
Net Requirements and Planned Order Releases
for Item B
Item B 1 2 3 4 5 6 7 8

Gross requirement 0 10 0 120 20 10 10 0

Scheduled receipts

Projected Available 100 100 90 90 0 0 0 0 0

Net requirements 30 20 10 10 0

Planned order receipts 30 20 10 10 0

Planned order releases 30 20 10 10

 Level 1
Gross requirements for Item D
Item A 1 2 3 4 5 6 7 8
Gross requirement 10 100 10
Scheduled receipts
Projected Available
Net requirements 10 100 10
Planned order receipts 10 100 10
Planned order releases 10 100 10

Item F 1 2 3 4 5 6 7 8
Gross requirement 20 20 10
Scheduled receipts
Projected Available
Net requirements 20 20 10
Planned order receipts 20 20 10
Planned order releases 20 20 10

Item D requirement 1 2 3 4 5 6 7 8

From Item A P/O releases at 2 per 20 200 20

From Item F P/O releases at 1 per 20 20 10

Gross requirement for Item D 20 220 20 20 10
Net Requirements and Planned Order Releases
for Item D
Lot Size 160
Allocation 120

Item D 1 2 3 4 5 6 7 8

Gross requirement 20 220 20 20 10

Scheduled receipts 160

Projected Available 170 210 190 190 130 110 90 80 80

Net requirements 30

Planned order receipts 160

Planned order releases 160

Level 2
Gross requirement for Item C
Item A 1 2 3 4 5 6 7 8
Gross requirement 10 100 10
Scheduled receipts
Projected Available
Net requirements 10 100 10
Planned order receipts 10 100 10
Planned order releases 10 100 10

Item B 1 2 3 4 5 6 7 8
Gross requirement 0 10 0 120 20 10 10 0
Scheduled receipts
Projected Available 100 100 90 90 0 0 0 0 0
Net requirements 30 20 10 10 0
Planned order receipts 30 20 10 10 0
Planned order releases 30 20 10 10

Item C 1 2 3 4 5 6 7 8
Service Part 10 10 10 10 10 10 10 10

Item C requirements 1 2 3 4 5 6 7 8

From item A P/O release at 2 per 20 200 20

From item B P/O release at 2 per 60 40 20 20

From item C ind. demand at 1 per 10 10 10 10 10 10 10 10

Gross requirement for item C 10 30 70 250 30 50 10 10
Net requirement and Planned orders for Item C

Lot Size 150

Safety Stock 15

Item C 1 2 3 4 5 6 7 8

Gross requirement 10 30 70 250 30 50 10 10

Scheduled receipts

Projected Available 120 110 80 160 60 30 130 120 110

Net requirements 5 105 35

Planned order receipts 150 150 150

Planned order releases 150 150 150

Level 2
Gross requirement for Item E
Item B 1 2 3 4 5 6 7 8
Gross requirement 0 10 0 120 20 10 10 0
Scheduled receipts
Projected Available 100 100 90 90 0 0 0 0 0
Net requirements 30 20 10 10 0
Planned order receipts 30 20 10 10 0
Planned order releases 30 20 10 10

Item F 1 2 3 4 5 6 7 8
Gross requirement 20 20 10
Scheduled receipts
Projected Available
Net requirements 20 20 10
Planned order receipts 20 20 10
Planned order releases 20 20 10

Item E requirements 1 2 3 4 5 6 7 8

From item B P/O release at 3 per 90 60 30 30

From item F P/O release at 1 per 0 20 20 0 10

Gross requirement for item E 90 80 50 30 10 0
 Net Requirement and Planned orders for Item
E
Lot Size 140

Item E 1 2 3 4 5 6 7 8
Gross requirement 90 80 50 30 10
Scheduled receipts
Projected Available 120 120 120 30 90 40 10 0 0
Net requirements 50

Planned order receipts 140

Planned order releases 140

Thank You