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MRP and Dependent Inventory Models
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Inventory
Process stage
Demand Type
Number & Value Other
Raw Material WIP
Finished Goods
Independent Dependent
A Items B Items C Items
Maintenance Dependent Operating
Inventory Classifications
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Item Materials WithIndependent Demand
Materials WithDependent Demand
DemandSource Company Customers Parent Items
MaterialType Finished Goods WIP & Raw Materials
Method ofEstimatingDemand
Forecast & BookedCustomer Orders
Calculated
PlanningMethod EOQ & ROP MRP
Dependent versus Independent Demand
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Inputs to the Production Plan
ProductionPlan
MarketingCustomerDemand
EngineeringDesign
Completion
ManagementReturn onInvestment
Capital
HumanResourcesManpowerPlanning
ProcurementSupplier
Performance
FinanceCash Flow
ProductionCapacityInventory
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Bicycle(1)P/N 1000
Handle Bars (1)P/N 1001
Frame Assy (1)P/N 1002
Wheels (2)P/N 1003
Frame (1)P/N 1004
Bill-of-Material Product Structure Tree
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Time-Phased Product Structure
1 2 3 4 5 6 7 8
D
GF
E
C
E
D
B
A
2 weeks
1 week
3 weeks
2 weeks
1 week
1 week
2 weeks
1 week 2 weeks to produce
Start production of D
Must have D and E completed here so production can begin on B
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• Mainly discrete products
• Accurate bill-of-material
• Accurate inventory status– 99% inventory accuracy
• Stable lead times
MRP Requirements
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Structure of the MRP System
MRP by period report
MRP by date report
Planned orders report
Purchase requirements
Exception reports
MRPPrograms
Master ProductionSchedule
BOM
Lead Times
(Item Master File)
(Bill-of-Material)
Inventory Data
Purchasing data
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MRP and JIT
• MRP - a planning and scheduling technique with fixed lead times
• JIT - a way to move material expeditiously
• Integrating the two:– Small bucket approach and back flushing– balanced flow approach
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Lot-Sizing Techniques
• Lot-for-lot
• Economic Order Quantity
• Part Period Balancing
• Wagner-Whitin Algorithm
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Extensions of MRP
• Closed loop MRP
• MRP II - Material Resource Planning
• Enterprise Resource Planning
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MRP in Services
• Can be used when demand for service or service items is directly related to or derived from demand for other services– restaurant - rolls required for each meal– hospitals - implements for surgery– etc.
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The MRP Woorksheet
• Usually computerized
• Understanding provides for problem solution
• Relationship to cycle counts
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DefinitionsTerm MeansGross Requirements The total expected demand for the time
period (bucket). Comes from the masterproduction schedule for the finalproduct.
Scheduled Receipts Number expected from previous orders.These are purchased products.
Projected Available Balance Units available at the beginning of thetime period (bucket). Equals previousinventory (ending) plus scheduledreceipts.
Net Requirements What is needed beyond what is on hand(or projected to be on hand).
Planned Order Receipts Scheduled deliveries at the beginning ofthe period.
Planned Order Releases Scheduled orders for the beginning ofthe period. Matches planned receipts(net requirements) for this period plusthe lead-time.