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Chapter 16
Materials Requirements Planning
McGraw-Hill/Irwin
©The McGraw-Hill Companies, Inc., 2004

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OBJECTIVES
 Material

Requirements Planning

(MRP)  MRP Logic and Product Structure Trees  Time Fences  MRP Example  MRP II and Lot Sizing

McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

components. . parts. and components should be ordered or produced  Dependent demand drives MRP  MRP is a software system  McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies. Inc.. and materials needed to produce a product  MRP provides time scheduling information specifying when each of the materials. All Rights Reserved.3 Material Requirements Planning Materials requirements planning (MRP) is a means for determining the number of parts.

provide a materials requirements plan that defines the number of units of each component and when they will be needed Product Structure Tree for Assembly A Lead Times A 1 day B 2 days C 1 day D 3 days E 4 days F 1 day 4 A B(4) D(2) McGraw-Hill/Irwin C(2) E(1) D(3) F(2) Total Unit Demand Day 10 50 A Day 8 20 B (Spares) Day 6 15 D (Spares) © 2006 The McGraw-Hill Companies. All Rights Reserved. Inc..Example of MRP Logic and Product Structure Tree Given the product structure tree for “A” and the lead time and demand information below. .

we have to place an order for 50 units of “A” on the 9th day to receive them on day 10. the number of units of “A” are scheduled backwards to allow for their lead time. Day: A Required Order Placem ent 1 2 3 4 5 6 7 8 9 50 10 50 LT = 1 day McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies.. Inc.5 First. . So. All Rights Reserved. in the materials requirement plan below.

we back the schedule up for the necessary 2 days of lead time. that means 200 B’s. Day: A B R e q u ire d O rd e r P la c e m e n t R e q u ire d O rd e r P la c e m e n t 20 200 20 50 200 1 2 3 4 5 6 7 8 9 10 50 LT = 2 A B(4) D(2) McGraw-Hill/Irwin Spares 4x50=200 C(2) E(1) D(3) F(2) © 2006 The McGraw-Hill Companies. we need to start scheduling the components that make up “A”. Inc. All Rights Reserved. Since we need 50 A’s. In the case of component “B” we need 4 B’s for each A. .. And again.6 Next.

7 Finally. Inc. repeating the process for all components. we have the final materials requirements plan: Day: A LT=1 B LT=2 C LT=1 D LT=3 E LT=4 F LT=1 Required Order Placement Required Order Placement Required Order Placement Required Order Placement Required Order Placement Required Order Placement 1 2 3 4 5 6 7 8 9 50 200 100 55 55 20 200 200 200 400 300 20 200 400 100 300 10 50 20 20 200 A Part D: Day 6 B(4) D(2) E(1) D(3) C(2) F(2) 40 + 15 spares ©The McGraw-Hill Companies. 2006 ..

All Rights Reserved. Inc.. .8 Master Production Schedule (MPS)  Time-phased plan specifying how many and when the firm plans to build each end item Aggregate Plan (Product Groups) MPS (Specific End Items) McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies.

9 Types of Time Fences Frozen – No schedule changes allowed within this window  Moderately Firm – Specific changes allowed within product groups as long as parts are available  Flexible – Significant variation allowed as long as overall capacity requirements remain at the same levels  McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies. Inc.. . All Rights Reserved.

Inc. All Rights Reserved.10 Example of Time Fences Frozen Capacity Firm Customer Orders Moderately Firm Exhibit 15.. .5 Flexible Forecast and available capacity 8 15 Weeks 26 McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies.

.11 Material Requirements Planning System  Based on a master production schedule. Inc. 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 McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies. All Rights Reserved.

6 Bill of material file Material planning (MRP computer program) Inventory record file Secondary reports Primary reports Planned order schedule for inventory and production control Exception reports Planning reports Reports for performance control ©The McGraw-Hill Companies. 2004 .12 Firm orders from known customers Aggregate product plan Forecasts of demand from random customers Engineering design changes Master production Schedule (MPS) Inventory transactions From Exhibit 15. Inc..

. .13 A Complete Product Description  Materials  Parts  Components  Production Bill of Materials (BOM) File sequence  Modular BOM – Subassemblies  Super BOM – McGraw-Hill/Irwin Fractional options © 2006 The McGraw-Hill Companies. All Rights Reserved. Inc.

14 Inventory Records File  Each inventory item carried as a separate file – Status according to “time buckets”  Pegging – Identify each parent item that created demand © 2006 The McGraw-Hill Companies. Inc. McGraw-Hill/Irwin . All Rights Reserved..

. All Rights Reserved.15 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  McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies. . Inc.

. . Inc. All Rights Reserved. such as late or overdue orders McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies. 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.16 Secondary MRP Reports  Planning reports. for example.

 Planned  Planned McGraw-Hill/Irwin .17 Additional MRP Scheduling Terminology  Gross Requirements  Scheduled  Projected  Net receipts available balance requirements order receipt order release © 2006 The McGraw-Hill Companies. All Rights Reserved. Inc..

Inc.18 MRP Example X A(2) C(3) C(2) B(1) D(5) Item X A B C D On-Hand Lead Time (Weeks) 50 2 75 3 25 1 10 2 20 2 Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10 McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies.. . All Rights Reserved.

avail. .19 Day: Gross requirements Scheduled receipts Proj. Inc. All Rights Reserved.. balance Net requirements Planned order receipt Planner order release 1 2 3 4 5 6 7 8 9 10 95 50 45 45 X X LT=2 Onhand 50 A LT=3 Onhand 75 B LT=1 Onhand 25 C LT=2 Onhand 10 D LT=2 Onhand 20 50 50 50 50 50 50 50 50 50 A(2) 45 90 75 75 75 75 75 75 75 75 15 15 45 25 25 25 25 25 25 25 25 20 20 15 It takes 2 A’s for each X 45 10 10 10 10 10 35 35 40 20 40 40 40 100 35 20 20 20 20 20 20 20 80 80 80 McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies. avail. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj.

balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. Inc. balance Net requirements Planned order receipt Planner order release 1 2 3 4 5 6 7 8 9 10 95 50 45 45 X X LT=2 Onhand 50 A LT=3 Onhand 75 B LT=1 Onhand 25 C LT=2 Onhand 10 D LT=2 Onhand 20 50 50 50 50 50 50 50 50 50 A(2) B(1) 45 90 75 75 75 75 75 75 75 75 15 15 45 25 25 25 25 25 25 25 25 20 20 15 It takes 1 B for each X 45 10 10 10 10 10 35 35 40 20 40 40 40 100 35 20 20 20 20 20 20 20 80 80 80 McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies.20 Day: Gross requirements Scheduled receipts Proj. avail.. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. All Rights Reserved. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. . avail. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail.

avail.. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. All Rights Reserved. . avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. balance Net requirements Planned order receipt Planner order release 1 2 3 4 5 6 7 8 9 10 95 50 45 45 X X LT=2 Onhand 50 A LT=3 Onhand 75 B LT=1 Onhand 25 C LT=2 Onhand 10 D LT=2 Onhand 20 50 50 50 50 50 50 50 50 50 A(2) B(1) 45 90 75 75 75 75 75 75 75 75 15 15 45 25 25 25 25 25 25 25 25 20 20 15 C(3) It takes 3 C’s for each A 45 10 10 10 10 10 35 35 40 20 40 40 40 100 35 20 20 20 20 20 20 20 80 80 80 McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies.21 Day: Gross requirements Scheduled receipts Proj. Inc. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail.

balance Net requirements Planned order receipt Planner order release 1 2 3 4 5 6 7 8 9 10 95 50 45 45 X X LT=2 Onhand 50 A LT=3 Onhand 75 B LT=1 Onhand 25 C LT=2 Onhand 10 D LT=2 Onhand 20 50 50 50 50 50 50 50 50 50 A(2) B(1) 45 90 75 75 75 75 75 75 75 75 15 15 45 25 25 25 25 25 25 25 25 20 20 15 C(3) C(2) It takes 2 C’s for each B 45 10 10 10 10 10 35 35 40 20 40 40 40 100 35 20 20 20 20 20 20 20 80 80 80 McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. . Inc.22 Day: Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj.. All Rights Reserved. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj.

23 Day: Gross requirements Scheduled receipts Proj. avail. . balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. balance Net requirements Planned order receipt Planner order release 1 2 3 4 5 6 7 8 9 10 95 50 45 45 X X LT=2 Onhand 50 A LT=3 Onhand 75 B LT=1 Onhand 25 C LT=2 Onhand 10 D LT=2 Onhand 20 50 50 50 50 50 50 50 50 50 A(2) B(1) 45 90 75 75 75 75 75 75 75 75 15 15 45 25 25 25 25 25 25 25 25 20 20 15 C(3) C(2) D(5) It takes 5 D’s for each B 45 10 10 10 10 10 35 35 40 20 40 40 40 100 35 20 20 20 20 20 20 20 80 80 80 McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies. avail. All Rights Reserved. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj. balance Net requirements Planned order receipt Planner order release Gross requirements Scheduled receipts Proj.. avail. avail. Inc.

. All Rights Reserved. . Inc.24 Closed Loop MRP Production Planning Master Production Scheduling Material Requirements Planning Capacity Requirements Planning No Feedback Realistic? Feedback Yes Execute: Capacity Plans Material Plans McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies.

.25 Manufacturing Resource Planning (MRP II)  Goal: Plan and monitor all resources of a manufacturing firm (closed loop): – – – – manufacturing marketing finance engineering  Simulate the manufacturing system McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies. Inc.. All Rights Reserved.

. .26 Lot Sizing in MRP Programs  Lot-for-lot (L4L)  Economic order quantity (EOQ)  Least total cost (LTC)  Least unit cost (LUC)  Which one to use? – The one that is least costly! McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies. Inc. All Rights Reserved.