CHAPTER

13

Material Requirements Planning (MRP)

Introduction to Operations Management

1

Material Requirements
Planning
Master Production Schedule
Time-phased plan specifying timing and quantity of production for each
end item.
Material Requirement Planning Process

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Introduction to Operations Management

2

Demand

Demand

Dependent vs Independent Demand

Stable demand

Safety stock

Time
Amount on hand

Amount on hand

Time

Lumpy demand

Time
Introduction to Operations Management

Time
3

Objectives of MRP

MRP answers the following production

decision of a firm
What is needed?
How much is needed?
When is it needed?

Introduction to Operations Management

4

Material decision

Decision on
Quantity (how much)
Time (when)
Type (what)

The first two are same as in inventory

management. The last one is needed
because it involves more than one type
of parts or components.
Introduction to Operations Management
5

MRP Overview
MRP Inputs

MRP Processing

MRP Outputs
Changes
Order releases

Master
schedule

Planned-order
schedules
Primary
reports

Bill of
materials
file

Inventory
records
file

MRP computer
programs

Secondary
reports

Exception reports
Planning reports
Performancecontrol
reports
Inventory
transaction

Introduction to Operations Management

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Output from an MRP system

Generate a feasible schedule of

requirements for
subassemblies
component parts
raw materials required

to produce the quantity of items required

in the given time frame
Introduction to Operations Management
7

Planning Horizon

Assembly
Subassembly
Fabrication
Procurement
1

10

Introduction to Operations Management

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Master Schedule
Master schedule: One of three primary inputs in MRP;
states which end items are to be produced, when these
are needed, and in what quantities.

Cumulative lead time: The sum of the lead times that

sequential phases of a process require, from ordering of
parts or raw materials to completion of final assembly.

Time fences: Series of time intervals during which order

changes are allowed or restricted.

Introduction to Operations Management

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Bill-of-Materials
Bill of materials: One of the three primary
inputs of MRP; a listing of all of the raw
materials, parts, subassemblies, and assemblies
needed to produce one unit of a product.

Product structure tree: Visual depiction of

the requirements in a bill of materials, where all
components are listed by levels.

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BOM

Accuracy is important since errors

may multiply many times

Introduction to Operations Management

11

Product Structure Tree

Level
0
1

Chair
Leg
Assembly

2 Legs (2)

Cross
bar

Back
Assembly

Seat

Side
Cross
Rails (2)
bar

Back
Supports (3)

Introduction to Operations Management

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Low Level Coding

Level
0

Y
A

Introduction to Operations Management

13

MRP Processing
Gross requirements
Scheduled receipts(orders scheduled to arrive from suppliers at the
beginning of the period)
Projected on hand
Net requirements
Planned-order receipts
Planned-order releases

Introduction to Operations Management

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MRP Processing
Net
Requirement
in period t

Gross
Requirement
in period t

Projected on
hand inventory
in period t

Safety
Allowance
+
stock
for waste

Introduction to Operations Management

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Assembly Time Chart

Procurement of
raw material D

Fabrication
of part E
Subassembly A

Procurement of
raw material F

Final assembly
and inspection

Procurement of
part C
Procurement of
part H
Fabrication
of part G

Procurement of
raw material I

Subassembly B

10

11

Introduction to Operations Management

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MRP Outputs
Planned orders - schedule indicating the
amount and timing of future orders.
Order releases - Authorization for the
execution of planned orders.
Changes - revisions of due dates or order
quantities, or cancellations of orders.

Introduction to Operations Management

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Example (p.632)

A firm that produces wood shutters and bookcases has received two
orders for shutters: One for 100 to be due for delivery at the start of
week 4 and the other 150 units to be due for delivery at the start of
week 8 of the current schedule. Each shutter consists of four slatted
wood sections and two frames. The wood sections are made by the
firm, and fabrication takes one week. The frames are ordered, and lead
time is two weeks. Assembly of the shutters requires one week. There
is a scheduled receipt of 70 wood sections at the beginning of week 1.
Determine the size and timing of planned-order releases necessary to
meet delivery requirements under each of theses conditions:
(1). Lot-for-lot ordering (order size equal to net requirement)
(2). Lot-size ordering with a lot size of 320 units for frames and 70 units
for wood sections.
Introduction to Operations Management
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Solution to example
Develop a master schedule and a product structure tree

Wk number

Quantity

100

8
150

Shutter

Frames (2)

Wood
sections (4)

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Solution to example(lot-for-lot)
1

Shutters:
LT is
one
week

Gross
requirements
Scheduled
receipts
Projected on
hand
Net
requirements
Planned-order
receipts
Planned-order
releases

100

100
100
100

150

Introduction to Operations Management

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Solution to example
(lot-for-lot)
times 2
1

Frames:
LT is
two
weeks

Gross
requirements
Scheduled
receipts
Projected on
hand
Net
requirements
Planned-order
receipts
Planned-order
releases

200

300

200

300

200

300

200

300

Introduction to Operations Management

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Solution to example (lot-for-lot)

times 4

Wood
sections:
LT is
one
week

Gross
requirements
Scheduled
receipts
Projected on
hand
Net
requirements
Planned-order
receipts
Planned-order
releases

400

7
600

70
70

70

70
330

600

330

600

330

600

Introduction to Operations Management

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Solution to example (fixed lot-size)

times 2

Frames:
LT is
two
weeks

Gross
requirements
Scheduled
receipts
Projected on
hand
Net
requirements
Planned-order
receipts
Planned-order
releases

200

7
300

120

120

120

120

200

180

320

320

320

320

Introduction to Operations Management

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Solution to example (fixed lot-size)

times 4

Wood
sections:
LT is
one
week

Gross
requirements
Scheduled
receipts
Projected on
hand
Net
requirements
Planned-order
receipts
Planned-order
releases

400

7
600

70
70

70

70

20

20

20

20

330

580

350

630

350

630

Introduction to Operations Management

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MRP Secondary Reports

Performance-control reports
Planning reports
Exception reports

Introduction to Operations Management

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Other Considerations

Safety Stock
Lot sizing

Lot-for-lot ordering
Economic order quantity
Fixed-period ordering
Part-period model

Yield rates

Introduction to Operations Management

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MRP Capacity requirement Planning

Capacity requirements planning: The

process of determining short-range capacity
requirements.

Load reports: Department or work center

reports that compare known and expected
future capacity requirements with projected
capacity availability.

Introduction to Operations Management

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MRP Capacity Requirement Planning

Develop a tentative
master production
schedule

Use MRP to
simulate material
requirements
Revise tentative
master production
schedule

Convert material
requirements to
resource requirements

No

Is shop
capacity
adequate?
Yes
Firm up a portion
of the MPS

No

Can
capacity be
changed to meet
requirements

Yes
Change
capacity

Introduction to Operations Management

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Benefits of MRP
Low levels of in-process inventories
Ability to track material requirements
Ability to evaluate capacity requirements
Means of allocating production time

Introduction to Operations Management

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Requirements of MRP
Computer and necessary software
Accurate and up-to-date

Master schedules
Bills of materials
Inventory records

Integrity of data

Introduction to Operations Management

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MRP II

Expanded MRP with and emphasis

placed on integration
Financial planning
Marketing
Engineering
Purchasing
Manufacturing
Introduction to Operations Management
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Overview of MRP II
Manufacturing

Master
production schedule

Marketing
Production
plan

MRP

Rough-cut
capacity planning

Capacity
planning

Adjust
production plan
Yes

Problems?

No Requirements
schedules

No

Problems?

Adjust master schedule

Market
Demand

Finance

Yes

Introduction to Operations Management

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