Material Requirements

Planning (MRP)
Material Requirements Planning
 Material requirements planning (MRP) is a means
for determining the number of parts,
components, and materials needed to produce
end products
 The logic that ties production functions together
from a material planning and control view
 MRP provides time scheduling information
specifying when each of the materials, parts, and
components should be ordered or produced
 Dependent demand drives MRP
 MRP is a software system
Enterprise Resource Planning (ERP) and
Material Requirements Planning (MRP)

ERP – a computer
MRP – a means for
system that integrates
determining the number
application programs in
of parts, components, and
accounting, sales,
materials needed to
manufacturing, and the
produce a product
other functions in a firm
Master Production Scheduling (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)
 Master Production Schedule (MPS)
 The master production schedule deals with end items and is
a major input to the MRP process.
 All production systems have limited capacity and limited
resources.
 The aggregate plan provides the general range of
operation; the master scheduler must specify exactly
what is to be produced.
 To determine an acceptable feasible schedule to be released
to the shop, trial master production schedules are prepared
and then tested using Rough-cut capacity planning.
 Master Production Scheduling

Aggregate plan shows

overall quantities to
produce – without
specifying type.

Week

MPS shows quantities

of each type, with
information about the
production time frame.
 MRP 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
 Aggregate
Firm orders
product Forecasts
from known
plan of demand
customers

Engineering Master production

Schedule (MPS) Inventory
design
transactions
changes

Material
planning
Bill of (MRP Inventory
material computer record file
file program)

MRP Reports
Planned order schedule for
inventory and production control
Adjustments in Released Orders
 MRP Reports

 Planned orders to be released at a future

time
 Order release notices to execute the
planned orders
 Changes in open orders
 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
 BOM Example –
Product Structure Tree
Product A – Product A
the end item consists of
2 B and 3 C

Product C consists of
Product B 2 F, 5 G, and
consists of 4H
1 D and 4 E
Alternate BOM Structure
BOM Hierarchy (Levels)
Level 0 refers to end
products.

Lower levels (higher

numbers) refer to
components and raw
materials.
 Inventory Status Records
Basic
information
describing
the item

Information
about part
availability

Additional
information
that may be
useful
Additional MRP Scheduling
Terminology
 Gross Requirements
 Scheduled receipts
 Projected available balance
 Net requirements
 Planned order receipt
 Planned order release
 MRP Computations

 Gross Requirements

 Netting → Net Requirements

 Lot Sizing

 Time Phasing

 BOM Explosion
 MRP Computations
The requirements for end items are retrieved from
the master schedule.
•These are referred to as “gross requirements” by the MRP program.

On-hand balance and schedule of orders are used to

calculate the “net requirement.”

Net requirements data are used to calculate when

orders should be received to meet these
requirements.

Planned order releases are generated by offsetting

to allow for lead time.
 MRP Computations (contd.)

Move to level 1 items.

Gross requirements for each level 1 item are

calculated from the planned-order release
schedule for the parents of each level 1 item.

Net requirements, planned-order receipts, and

planned-order releases are calculated as
described in steps 2–4.

Repeat for all items in bill of materials.

MRP Example
Lot Sizing in MRP Programs
 Lot-for-lot (L4L)
 Fixed Order Period (FOP)
 Fixed Order Quantity (e.g. 50)
 Minimum Order Quantity (e.g. 50+)
 Heuristics Based
 Which one to use?
 Needs to be specified
 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
Example of Time Fences