MRP

Material Requirements Planning
Material Requirements Planning Defined

Materials requirements planning (MRP) is a means for determining the number of parts, components, and materials needed to produce a product MRP provides time scheduling information specifying when each of the materials, parts, and components should be ordered or produced Dependent demand drives MRP
Dependent Demand
The demand for one item is related to the demand for another item Given a quantity for the end item, the demand for all parts and components can be calculated
In general, used whenever a schedule can be established for an item MRP is the common technique
Benefits of MRP
1. Better response to customer orders 2. Faster response to market changes
3. Improved utilization of facilities and labor

4. Reduced inventory levels
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
Firm orders from known customers
Aggregate product plan
Forecasts of demand from random customers
Engineering design changes
Master production Schedule (MPS)
Inventory transactions
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, Inc., 2004
Elemen MRP
Effective use of dependent demand inventory models requires the following
1. 2. 3. 4. 5. Master production schedule Specifications or bill of material Inventory availability Purchase orders outstanding Lead times
Master Production Schedule (MPS)

Specifies what is to be made and when Must be in accordance with the aggregate production plan Aggregate production plan sets the overall level of output in broad terms 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
Master Production Schedule (MPS)

Can be expressed in any of the following terms:
A customer order in a job shop (maketo-order) company Modules in a repetitive (assemble-tostock) company
An end item in a continuous (make-tostock) company
Bill of Materials (BOM) File A Complete Product Description

Materials Parts Components Production sequence Modular BOM
Subassemblies
BOM (Table Example)

Top
Short Rail
Leg
Long Rail
BOM (Product Structure)

Table (End Item)
Leg Assembly (1)
Top (1)
Short Rails (2)
Long Rails (2)
Legs (4)
Code
Level Code 0 1 2 2 2 1 Component Table (end-item) Leg assembly (1) Short rails (2) Long rails (2) Legs (4) Top(1)
MRP versus Order-Point Systems

Attribute Demand Order philosophy Forecast Control concept Objectives Lot sizing MRP Dependent Requirements Based on master schedule Control all items Meet manufacturing needs Discrete Order Point Independent Replenishment Based on past demand ABC Meet customer needs EOQ
Types of inventory
Work in process and raw materials
Finished goods and spare parts
Elements of Success in MRP

Implementation planning Adequate computer support Accurate data Management support User knowledge
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
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
A B(4) D(2) E(1) D(3) C(2) F(2)
Total Unit Demand Day 10 50 A
First, the number of units of A are scheduled backwards to allow for their lead time. So, in the materials requirement plan below, we have to place an order for 50 units of A on the 9th day to receive them on day 10.
Day: A Required Order Placem ent 1 2 3 4 5 6 7 8 9 50 10 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 Bs for each A. Since we need 50 As, that means 200 Bs. And again, we back the schedule up for the necessary 2 days of lead time.
Day: A Required Order Placement B Required Order Placement 1 2 3 4 5 6 7 8 9 50 200 200 10 50
LT = 2 A B(4) D(2) E(1) D(3) C(2) F(2)
Spares
4x50=200
20
Finally, 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 50 200 200 100 400 400 200 200 200 300 200 100 300 10 50
A B(4) D(2) E(1) D(3) C(2) F(2)
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
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
A(2)
It takes 2 As for each X
Day: Gross requirements Scheduled receipts Proj. 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 Gross requirements Scheduled receipts Proj. 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 Gross requirements Scheduled receipts Proj. avail. balance Net requirements Planned order receipt Planner order release
10 95 50 45 45
50 50
50
50
50
50
50
50
50
45 90 75 75 75 75 75 75 75 75 15 15 45 25 25 25 25 25 25 25 25 20 20
15
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
A(2)
B(1)
It takes 1 B for each X
10 95 50 45 45
50 50
50
50
50
50
50
50
50
45 90 75 75 75 75 75 75 75 75 15 15 45 25 25 25 25 25 25 25 25 20 20
15
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
A(2)
B(1)
C(3)
It takes 3 Cs for each A
10 95 50 45 45
50 50
50
50
50
50
50
50
50
45 90 75 75 75 75 75 75 75 75 15 15 45 25 25 25 25 25 25 25 25 20 20
15
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
A(2)
B(1)
C(3)
C(2)
It takes 2 Cs for each B
10 95 50 45 45
50 50
50
50
50
50
50
50
50
45 90 75 75 75 75 75 75 75 75 15 15 45 25 25 25 25 25 25 25 25 20 20
15
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
A(2)
B(1)
C(3)
C(2)
D(5)
It takes 5 Ds for each B
10 95 50 45 45
50 50
50
50
50
50
50
50
50
45 90 75 75 75 75 75 75 75 75 15 15 45 25 25 25 25 25 25 25 25 20 20
15
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
Closed Loop MRP

Production Planning Master Production Scheduling Material Requirements Planning Capacity Requirements Planning
No Feedback Realistic?
Feedback
Yes
Execute: Capacity Plans Material Plans

MRP

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MRP

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Material Requirements Planning

Material Requirements Planning Defined

3. Improved utilization of facilities and labor

Material Requirements Planning System

Firm orders from known customers

Aggregate product plan

Forecasts of demand from random customers

Engineering design changes

Master production Schedule (MPS)

Bill of material file

Material planning (MRP computer program)

Inventory record file

Master Production Schedule (MPS)

Master Production Schedule (MPS)

An end item in a continuous (make-tostock) company

Bill of Materials (BOM) File A Complete Product Description

BOM (Table Example)

BOM (Product Structure)

Leg Assembly (1)

Short Rails (2)

Long Rails (2)

MRP versus Order-Point Systems

Work in process and raw materials

Finished goods and spare parts

Elements of Success in MRP

Example of MRP Logic and Product Structure Tree

A B(4) D(2) E(1) D(3) C(2) F(2)

Total Unit Demand Day 10 50 A

LT = 2 A B(4) D(2) E(1) D(3) C(2) F(2)

A B(4) D(2) E(1) D(3) C(2) F(2)

Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10

It takes 2 As for each X

It takes 1 B for each X

It takes 3 Cs for each A

It takes 2 Cs for each B

It takes 5 Ds for each B

Closed Loop MRP

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