MRP

• A Logic and Product Structure Trees

• MRP Example
• Lot Sizing in MRP Programs
 Contents
• What is (MRP)
• Simple MRP Example
• MRP Logic and Product Structure Trees
• Lot Sizing in MRP Programs
 ? What is MRP
MRP synchronizes the flow of materials, components, and parts in a
phased order system, considering the production schedule. It also
combines and tracks hundreds of variables, including:
• Purchase orders
• Sales orders
• Shortage of materials
• Expedited orders
• Due dates
• Forecasts
• Marketplace demand
• Material
• Inventory
• Data
• Bill of material
Simple MRP Example
 Material Requirements Planning Steps and Processes

MRP consists of three basic steps

• Identifying the Quantity Requirements.
• Running the MRP Calculations:
• Complete the Orders: .
 Master Production Schedule (MPS)
 Specifies what is to be made and when
 Must be in accordance with the aggregate production plan
 Inputs from financial plans, customer demand, engineering, supplier
performance
 As the process moves from planning to execution, each step must be
tested for feasibility
 The MPS is the result of the production planning process
 MPS is established in terms of specific products
 Schedule must be followed for a reasonable length of time
 The MPS is quite often fixed or frozen in the near term part of the plan
 The MPS is a rolling schedule
 The MPS is a statement of what is to be produced, not a forecast of
demand
Master Production Schedule (MPS)
.Cont
It can be also expressed in any of the following
terms:
 A customer order in a job shop (make-to-order) company
 Modules in a repetitive (assemble-to-order or forecast)
company
 An end item in a continuous (stock-to-forecast) company
MRP I/o interface
 Example of MRP Logic and Product Structure Tree
Given the product structure tree for “A” and the lead time and demand
information below, provide a materials requirements plan that defines
the number of units of each component and when they will be needed.

Lead Times
Product Structure Tree for Assembly A A 1 day
B 2 days
A C 1 day
D 3 days
E 4 days
F 1 day
B(4) C(2)
Demand
Day 10 50 A
D(2) E(1) D(3) F(2) Day 8
Day 6
20 B (Spares)
15 D (Spares)
their lead time. So, in the materials requirement plan below,
weFirst, the number of units of “A” are scheduled backwards to
allow for have to place an order for 50 units of “A” in the 9 th
week to receive them in the 10th week.

Day: 1 2 3 4 5 6 7 8 9 10
A Required 50
Order Placement 50

LT = 1 day
Next, we need to start scheduling the components that make up “A”. In
the case of component “B” we need 4 B’s for each A. Since we need 50
A’s, that means 200 B’s. And again, we back the schedule up for the
necessary 2 days of lead time.
Day: 1 2 3 4 5 6 7 8 9 10
A Required 50
Order Placement 50
B Required 20 200
Order Placement 20 200

LT = 2
Spares
A 4x50=200

B(4) C(2)

D(2) E(1) D(3) F(2)

Finally, repeating the process for all components, we have the final materials 13
requirements plan:
Day: 1 2 3 4 5 6 7 8 9 10
A Required 50
LT=1 Order Placement 50
B Required 20 200
LT=2 Order Placement 20 200
C Required 100
LT=1 Order Placement 100
D Required 55 400 300
LT=3 Order Placement 55 400 300
E Required 20 200
LT=4 Order Placement 20 200
F Required 200
LT=1 Order Placement 200

A
Part D: Day 6
40 + 15 spares
B(4) C(2)

D(2) E(1) D(3) F(2)

 Bill of Materials (BOM) File
A Complete Product Description
• Materials
• Parts
• Components
• Production sequence
• Modular BOM
– Component or Subassemblies BOM
• Planning BOM or kits
– create an artificial parent to the BOM used for inexpensive items like
washers or pins to group.
• Explosion: revealing the requirements for each component.
 Father and Son Principle
A Father of B and C
B Father of D and E
C Father of E and F
F Father of G and D
Material Requirements Planning System

• Based on a master production schedule, a

material requirements planning system:
– Creates schedules identifying the specific parts
and materials required to produce end items.
– Determines exact unit numbers needed.
– Determines the dates when orders for those
materials should be released, based on lead
times.
 17

Firm orders Aggregate Forecasts

from known product of demand
customers plan from estimates

Master
Engineering
production Inventory
design
schedule transactions
changes
(MPS)

Bill of Material Inventory

material planning record
file (MRP) file

Reports
 Bill of Materials (BOM) File
A Complete Product Description
• Materials
• Parts
• Components
• Production sequence
• Modular BOM
– Component or Subassemblies BOM
• Planning BOM or kits
– create an artificial parent to the BOM used for inexpensive items like
washers or pins to group.
• Explosion: revealing the requirements for each component.
 Classification and Coding
• If identical items exist at
various levels in the
BOM:
– Item is coded at lowest
level at which it occurs
– This number identifies the
part at the lowest level of
usage.

– D (Level 2 or Level 3)
 Inventory Records File
• Buckets= time units in MRP system
– Week bucket vs. day bucket
• Each inventory item carried as a separate file
– Status according to “time buckets”.
• Pegging
– Identify each parent item that created demand.
• Parent vs. child
– Parent= Items above the current level
– Child = Items below the current level
 Primary MRP Reports

• Planned orders to be released at a future time.

• Order release notices to execute the planned orders.
• Changes in due dates of open orders due to
rescheduling.
• Cancellations or suspensions of open orders due to
cancellation or suspension of orders on the master
production schedule.
• Inventory status data.
 Secondary MRP Reports
• Planning reports, for example, forecasting
inventory requirements over a period of time.
• Performance reports used to determine
agreement between actual and programmed
usage and costs.
• Exception reports used to point out serious
discrepancies, such as late or overdue orders.
Additional MRP Scheduling Terminology
• Gross Requirements: needed during each period.
• Scheduled Receipts: Existing orders that arrive at beginning of period.
• On-hand or available balance:
– (depending on software convention, could be at the beginning of each period or
end):
– Book: Inventory balance at end of each period.
• Net requirements: What is need to meet requirements and safety stock.
• Planned order receipt: arrives at beginning of period.
• Planned order release: Addresses lead time.
 Lot Sizing in MRP Programs
• Lot-for-lot (L4L)
• Economic order quantity (EOQ)
• Least total cost (LTC)
• Least unit cost (LUC)
• Part Period Balancing-changing lot sizes to
reflect requirements in the future (how many
periods should be combined to reduce cost)
 Closed Loop MRP
Production Planning
Master Production Scheduling
Material Requirements Planning
Capacity Requirements Planning

No
Realistic? Feedback
Feedback
Yes
Execute:
Capacity Plans
Material Plans
MRP SComputerized System tructure
Data Files Output Reports

MRP by period
BOM Master report
production schedule
MRP by date
report

Lead times
(Item master file) Planned order
report

Inventory data
Purchase advice
Material
requirement
planning programs
(computer and
software) Exception reports
Purchasing data
Order early or late or
not needed

Order quantity too

small or too large
 MRP Game
• Different types of lot sizes
• Different kites
Free Discussion
END