©the Mcgraw-Hill Companies, Inc.

1
The McGraw-Hill Companies, Inc.,
Chapter 15
Materials Requirements
Planning
OBJECTIVES
Material Requirements Planning (MRP)

MRP Logic and Product Structure Trees
Time Fences
MRP Example
MRP II and Lot Sizing
Material Requirements Planning

Defined
Materials requirements planning (MRP) is a
means 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
Example of MRP Logic and Product

Structure Tree
Given
Giventhe
theproduct
productstructure
structuretree
treefor
forA
Aand
andthe
thelead
leadtime
timeand
and
demand
demandinformation
informationbelow,
below,provide
provideaamaterials
materialsrequirements
requirements
plan
planthat
thatdefines
definesthe
thenumber
numberof
ofunits
unitsof
ofeach
eachcomponent
componentand
and
when
whenthey
theywill
willbe
beneeded
needed
Product Structure Tree for Assembly A
A
B(4)
D(2)
C(2)
E(1)
D(3)
F(2)
Lead Times
A
1 day
B
2 days
C
1 day
D
3 days
E
4 days
F
1 day
Total Unit Demand
Day 10 50 A
Day 8
20 B (Spares)
Day 6
15 D (Spares)
First,
First, the
the number
numberof
of units
units of
of A
A are
arescheduled
scheduled
backwards
backwards to
to allow
allowfor
fortheir
theirlead
lead time.
time. So,
So, in
in the
the
materials
materials requirement
requirement plan
plan below,
below,we
wehave
haveto
toplace
place
th
an
an order
orderfor
for50
50 units
units of
of A
A on
on the
the 99th day
day to
to receive
receive
them
them on
on day
day 10.
10.
Day:
A Required
Order Placement
10
50
50
LT = 1 day
Next,
Next,we
weneed
needto
tostart
startscheduling
schedulingthe
thecomponents
componentsthat
thatmake
makeup
up
A.
A. In
Inthe
thecase
caseof
ofcomponent
componentB
Bwe
weneed
need44Bs
Bsfor
foreach
eachA.
A.
Since
Sincewe
weneed
need50
50As,
As,that
thatmeans
means200
200Bs.
Bs. And
Andagain,
again,we
weback
back
the
theschedule
scheduleup
upfor
forthe
thenecessary
necessary22days
daysof
oflead
leadtime.
time.
Day:
A Required
Order Placement
B Required
Order Placement
20
LT = 2
A
B(4)
D(2)
20
50
200
10
50
200
Spares
4x50=200
C(2)
E(1)
D(3)
F(2)
Finally,
Finally,repeating
repeatingthe
theprocess
processfor
forall
allcomponents,
components,we
wehave
havethe
the
final
finalmaterials
materialsrequirements
requirementsplan:
plan:
Day:
A
LT=1
B
LT=2
C
LT=1
D
LT=3
E
LT=4
F
LT=1
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
20
20
50
200
10
50
200
100
55
20
400
55
400
20
200
100
300
300
200
200
200
A
Part D: Day 6
B(4)
D(2)
C(2)
E(1)
D(3)
40 + 15 spares
F(2)
The McGraw-Hill Companies, Inc.
Master Production Schedule (MPS)

Time-phased plan specifying how many and
when the firm plans to build each end item
Aggregate
Aggregate Plan
Plan
(Product
(Product Groups)
Groups)
MPS
(Specific End Items)
10
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
11
Exhibit
Exhibit15.5
15.5
Example of Time Fences

Moderately
Firm
Frozen
Flexible
Capacity
Forecast and available

capacity
Firm Customer Orders
15
26
Weeks
12
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
13
Aggregate
product
plan
Firm orders
from known
customers
Engineering
design
changes
Forecasts
of demand
from random
customers
Master production
Schedule (MPS)
Bill of
material
file
Primary reports
Planned order schedule for
inventory and production
control
Material
planning
(MRP
computer
program)
Inventory
transactions
From
FromExhibit
Exhibit15.6
15.6
Inventory
record file
Secondary reports
Exception reports
Planning reports
Reports for performance
control
14
Bill of Materials (BOM) File

A Complete Product Description
Materials
Parts
Components
Production sequence
Modular BOM
Subassemblies
Super BOM
Fractional options
15
Inventory Records File

Each inventory item carried as a separate file
Status according to time buckets
Pegging
Identify each parent item that created demand
16
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
17
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
18
Additional MRP Scheduling Terminology

Gross Requirements
Scheduled receipts
Projected available balance
Net requirements
Planned order receipt
Planned order release
19
MRP Example
Item
X
A
B
C
D
X
A(2)
C(3)
B(1)
C(2)
On-Hand Lead Time (Weeks)

50
2
75
3
25
1
10
2
20
2
D(5)
Requirements
Requirementsinclude
include95
95units
units(80
(80firm
firmorders
ordersand
and15
15forecast)
forecast)of
ofXX
in
inweek
week10
10
20
Day:
A(2)
ItIttakes
takes
22As
Asfor
for
each
eachXX
X
LT=2
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planner order release
Gross requirements
Scheduled receipts
Net requirements
Gross requirements
Scheduled receipts
Net requirements
Gross requirements
Scheduled receipts
Net requirements
Gross requirements
Scheduled receipts
Net requirements
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
10
10
35
25
20
20
20
40
45
10 10
25
10
35
35
40
40
40
100
20 20
20
20
20
20
20
80
80
80
21
Day:
X
LT=2
A(2)
B(1)
ItIttakes
takes
11BBfor
for
each
eachXX
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
Gross requirements
Scheduled receipts
Net requirements
Gross requirements
Scheduled receipts
Net requirements
Gross requirements
Scheduled receipts
Net requirements
Gross requirements
Scheduled receipts
Net requirements
Gross requirements
Scheduled receipts
Net requirements
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
10
10
35
25
20
20
20
40
45
10 10
25
10
35
35
40
40
40
100
20 20
20
20
20
20
20
80
80
80
22
Day:
X
LT=2
A(2)
C(3)
ItIttakes
takes33
Cs
Csfor
for
each
eachAA
B(1)
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
Gross requirements
Scheduled receipts
Net requirements
Gross requirements
Scheduled receipts
Net requirements
Gross requirements
Scheduled receipts
Net requirements
Gross requirements
Scheduled receipts
Net requirements
Gross requirements
Scheduled receipts
Net requirements
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
10
10
35
25
20
20
20
40
45
10 10
25
10
35
35
40
40
40
100
20 20
20
20
20
20
20
80
80
80
23
Day:
X
LT=2
A(2)
C(3)
B(1)
C(2)
ItIttakes
takes22
Cs
Csfor
for
each
eachBB
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
Gross requirements
Scheduled receipts
Net requirements
Gross requirements
Scheduled receipts
Net requirements
Gross requirements
Scheduled receipts
Net requirements
Gross requirements
Scheduled receipts
Net requirements
Gross requirements
Scheduled receipts
Net requirements
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
10
10
35
25
20
20
20
40
45
10 10
25
10
35
35
40
40
40
100
20 20
20
20
20
20
20
80
80
80
24
Day:
X
LT=2
A(2)
C(3)
B(1)
C(2)
D(5)
ItIttakes
takes55
Ds
Dsfor
foreach
each
BB
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
Gross requirements
Scheduled receipts
Net requirements
Gross requirements
Scheduled receipts
Net requirements
Gross requirements
Scheduled receipts
Net requirements
Gross requirements
Scheduled receipts
Net requirements
Gross requirements
Scheduled receipts
Net requirements
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
10
10
35
25
20
20
20
40
45
10 10
25
10
35
35
40
40
40
100
20 20
20
20
20
20
20
80
80
80
25
Closed Loop MRP

Production Planning
Master Production Scheduling
Material Requirements Planning
Capacity Requirements Planning
No
Feedback
Realistic?
Feedback
Yes
Execute:
Capacity Plans
Material Plans
26
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
27
Lot Sizing in MRP Programs
Lot-for-lot (L4L)
Economic order quantity (EOQ)
Least total cost (LTC)
Least unit cost (LUC)
Which one to use?
The one that is least costly!
28
End of Chapter 15

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1

The McGraw-Hill Companies, Inc.,

Material Requirements Planning (MRP)

The McGraw-Hill Companies, Inc.,

Material Requirements Planning

Example of MRP Logic and Product

The McGraw-Hill Companies, Inc.,

The McGraw-Hill Companies, Inc.

Master Production Schedule (MPS)

The McGraw-Hill Companies, Inc.,

Types of Time Fences

The McGraw-Hill Companies, Inc.,

Example of Time Fences

Forecast and available

The McGraw-Hill Companies, Inc.,

Material Requirements Planning System

Determines exact unit numbers needed

Determines the dates when orders for those

The McGraw-Hill Companies, Inc.,

Bill of Materials (BOM) File

Inventory Records File

Status according to time buckets

Identify each parent item that created demand

The McGraw-Hill Companies, Inc.,

Primary MRP Reports

Secondary MRP Reports

The McGraw-Hill Companies, Inc.,

Additional MRP Scheduling Terminology

On-Hand Lead Time (Weeks)

The McGraw-Hill Companies, Inc.,

Closed Loop MRP

The McGraw-Hill Companies, Inc.,

Manufacturing Resource Planning

Simulate the manufacturing system

The McGraw-Hill Companies, Inc.,

Lot Sizing in MRP Programs

The McGraw-Hill Companies, Inc.,

The McGraw-Hill Companies, Inc.,

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