Material Requirements Planning

Materials Requirements Planning

Material Requirements Planning (MRP) MRP Logic and Product Structure Trees MRP Example Lot Sizing in MRP Programs

Material Requirements Planning

Materials requirements planning (MRP) is the logic 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. MRP is a software system.

Independent Demand Inventory Systems

Demand for an item carried in inventory is independent of the demand for any other item in inventory Finished goods inventory is an example Demands are estimated from forecasts and/or customer orders

Dependent Demand Inventory Systems

Items whose demand depends on the demands for other items For example, the demand for raw materials and components can be calculated from the demand for finished goods The systems used to manage these inventories are different from those used to manage independent demand items

Independent vs. Dependent Demand

Independent Demand
(finished goods and spare parts)

Dependent Demand
(components)

B(4)
D(2) E(1) D(3)

C(2)

F(2)

Objectives of MRP
Improve customer service Reduce inventory cost Enhancing operating efficiency

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

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

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.

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Firm orders from known customers

Aggregate product plan

Forecasts of demand from estimates

Engineering design changes

Master production schedule (MPS)

Inventory transactions

Bill of material file

Material planning (MRP)

Inventory status file

Bill of Materials (BOM) File A Complete Product Description

Materials Parts Components Production sequence Modular BOM

Planning BOM or kits

Component or Subassemblies BOM create an artificial parent to the BOM used for inexpensive items like washers or pins to group.

Coding

If identical items exist at various levels in the BOM:

Item is coded at lowest level at which it occurs D (Level 2 or Level 3) This number identifies the part at the lowest level of usage.

Inventory Records File

Buckets= time units in MRP system

Each inventory item carried as a separate file

Week bucket vs. day bucket

Pegging

Status according to time buckets.

Parent vs. child

Identify each parent item that created demand. Parent= Items above the current level Child = Items below the current level

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.

Secondary MRP Reports

Planning reports, for example, 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, such as late or overdue orders.

Additional MRP Scheduling Terminology

Gross Requirements: needed during each period. Scheduled Receipts: Existing orders that arrive at beginning of period. On-hand or available balance:

(depending on software convention, could be at the beginning of each period or end):

Book: Inventory balance at end of each period.

Net requirements: What is need to meet requirements and safety stock. Planned order receipt: arrives at beginning of period. Planned order release: Addresses lead time.

MRP Examples

Closed Loop MRP

Production Planning Master Production Scheduling Material Requirements Planning Capacity Requirements Planning

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