irwin/mcgraw-hill © the mcgraw-hill companies, inc., 1998 material requirements planning (mrp)...

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1998

Material Requirements Planning (MRP)

Chapter 15

11/7/05

Overview• Position of MRP in Operation Management• Definitions (MPS, BOM, etc)• MRP example• MRP II• Lot Sizing in MRP


Master Production Schedule (MPS)

Material Requirements Planning (MRP)

Order schedulingWeekly workforce andcustomer scheduling

Daily workforce and customer scheduling

Process planning

Strategic capacity planning

Sales and operations (aggregate) planning

Longrange

Intermediaterange

Shortrange

ManufacturingServices

Exhibit 13.1Exhibit 13.1

Sales plan Aggregate operations plan

Forecasting & demand management


6

E(1)

Independent vs. Dependent Demand

Independent Demand(Demand not related to other items)

Dependent Demand(Derived)

Drives MRP


3

Material Requirements Planning

• How much of an item is needed?

• When is an item needed to complete• Specified number of units at• Specified period of time?

• Where MRP is most beneficial?


4

Introductory Example - Dependent Demand

B(4)

E(1)D(2)

C(2)

F(2)D(3)

A

Product Structure Tree for Assembly A Lead Times

A 1 dayB 2 daysC 1 dayD 3 daysE 4 daysF 1 day

Demand

Day 10 50 ADay 8 20 B (Spares)Day 6 15 D (Spares)

Create a schedule to satisfy demand.

LT = 1 day

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

Order Placement 50

5© The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

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” in the 9 th week to receive them in the 10th week.

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

Order Placement 50B Required 20 200

Order Placement 20 200

SparesLT = 2

B(4)

E(1)D(2)

C(2)

F(2)D(3)

A

6© The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

4x50=200

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 10A Required 50

LT=1 Order Placement 50B Required 20 200

LT=2 Order Placement 20 200C Required 100

LT=1 Order Placement 100D Required 55 400 300

LT=3 Order Placement 55 400 300E Required 20 200

LT=4 Order Placement 20 200F Required 200

LT=1 Order Placement 200

B(4)

E(1)D(2)

C(2)

F(2)D(3)

A

40 + 15 spares

Part D: Day 6

Finally, repeating the process for all components, we have the final materials requirements plan:

©The McGraw-Hill Companies, Inc., 2001

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)Exhibit 15.4

Firm orders from knowncustomers

Forecastsof demand

from randomcustomers

Aggregateproduct

plan

Masterproductionschedule

(MPS)

Materialplanning(MRP)

Engineeringdesign

changes

Bill ofmaterial

file

Inventorytransactions

Inventoryrecord

file

ReportsTypes?From Exhibit 15.6From Exhibit 15.6

10



11

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 numbers needed

– Determines the dates when orders for those materials should be released, based on lead times


13

Bill of Materials (BOM) FileA Complete Product Description

• Materials• Parts• Components• Production sequence • Planning BOM

– Modular BOM » Subassemblies

– Super BOM» Fractional options


Parts List & Low Level Coding

B(4)

E(1)D(2)

C(2)

F(2)D(3)

A Indented

A

B(4)

D(2)

E(1)

C(2)

D(3)

F(2)

Single Level

A

B(4)

C(2)

B

D(2)

E(1)

C

D(3)

F(2)

Level Parent

Low Level Coding - (Exhibit 15.9)


14

Inventory Status Record ( Exhibit 15.10)

• Each inventory item carried as a separate file – Status “Periods - time buckets”

• Information (records)– Gross Requirements– On-hand– Scheduled receipt (to be received in the future-it is already paid

for)– Planned order release (to be released at a future time)– Planned order receipt (to be received in the future based on the

planned order release)

• Pegging– Identify each parent item that created demand

Firm orders from knowncustomers

Forecastsof demand

from randomcustomers

Aggregateproduct

plan


(MPS)


Engineeringdesign

changes

Bill ofmaterial

file

Inventorytransactions

Inventoryrecord

file

ReportsTypes?From Exhibit 15.6From Exhibit 15.6

15



MRP program


(MPS)


Bill ofmaterial

file

Inventoryrecord

file

Method of calculation (explosion) - (p586)

When calculations are updated (net change)

Read Example (p595)


• Revise schedules because of limited capacity

•Work center used to make different components (Fig 15.18)

• If scheduled work exceeds available capacity, what should be done?

• Available Capacity = #machines x #shifts x # hrs/shift

= 2 x 2 x 10 = 40 hrs/work center

• Take into account utilization and efficiency

Work Center Load


Closed Loop MRP (Exhibit 15.19)

Production PlanningMaster Production SchedulingMaterial Requirements PlanningCapacity Requirements Planning

Realistic?No

Feedback

Execute:Capacity PlansMaterial Plans

Yes

Feedback


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


Time Fences in MPS

8 15 26

Weeks

FrozenModerately

Firm Flexible

Firm Customer Orders

Forecast and availablecapacity

Capacity

Exhibit 15.5Exhibit 15.5


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.


MRP Example

A(2) B(1)

D(5)C(2)

X

C(3)

Item On-Hand Lead Time (Weeks)X 50 2A 75 3B 25 1C 10 2D 20 2

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

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

A(2)

X

Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95

LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50

On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90

LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75

On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45


On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40

LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10

On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100

LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20

On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80

It takes 2 A’s for each X

It takes 2 A’s for each X












B(1)A(2)

X

It takes 1 B for each X

It takes 1 B for each X

A(2) B(1)

X

C(3)












It takes 3 C’s for each A

It takes 3 C’s for each A

A(2) B(1)

C(2)

X

C(3)












It takes 2 C’s for each B

It takes 2 C’s for each B

A(2) B(1)

D(5)C(2)

X

C(3)












It takes 5 D’s for each B

It takes 5 D’s for each B


Lot Sizing in MRP Programs

• Lot sizes are the part quantities issued in the planned order receipt (or release) in MRP

• It increases complexity of MRP• Several techniques are available

• Lot-for-lot (L4L)• Economic order quantity (EOQ)• Least total cost (LTC)• Least unit cost (LUC)


15

Lot for Lot

• Set planned order to match net requirement• Produces whatever is needed each week w/o

carrying over to future period• Does not take into account setup costs (high) or

capacity limitations• Minimize carrying cost


15

EOQ for MRP

• Same formula for inventory• EOQ = batch size • Setup cost = order cost

• Holding costs are charged at ending inventory of each period (different from regular EOQ?)

Home Work #8Due Date 11/14/05

You may work in groups of TWO

•Solve problems 12, 14, and 17 (from the problems at the end of this Chapter 15 - pp 610)

irwin/mcgraw-hill © the mcgraw-hill companies, inc., 1998 material requirements planning (mrp)...

Documents

scheduled receiptsproj

xgross requirements95lt