Powerpoint Presentation - Operations and Supply Chain

McGraw-Hill/Irwin

Copyright © 2011 The McGraw-Hill Companies, All Rights Reserved

Chapter 18

Material Requirements Planning

18-*

Learning Objectives

Describe what MRP is and where it is best applied.

Understand the source of the information used by the system.

Demonstrate how to do an MRP “explosion.”

Explain how order quantities are calculated in MRP systems.

18-*

Enterprise Resource Planning and Material Requirements Planning

• Enterprise resource planning (ERP): a computer system that integrates application programs in accounting, sales, manufacturing, and the other functions in a firm
• Materials requirements planning (MRP): 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

LO 1

18-*

Master Production Scheduling

• The master 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 run through the MRP program

LO 1

18-*

Demand for Products

Customers who have placed specific orders

Generated by sales personnel

Orders carry promised delivery dates

No forecasting of these orders

Forecasted demand

Normal independent-demand sales

Demand for parts and components

Spares and repair

LO 2

18-*

Bill of Materials

• Bill of materials (BOM): contains the complete product description, listing the materials, parts, and components along with the sequence in which the product is created

One of the three main inputs to the MRP program

• Often called the product structure file or product tree because it shows how a product is put together

LO 2

18-*

MRP Computer Program

• MRP program uses information from:

Inventory records

Master schedule

Bill of materials

• Process of calculating exact requirements for each item is referred to as the explosion process

Work from top level down in BoM

Consider on-hand balances and scheduled orders

LO 2

18-*

MRP Explosion Process

The requirements for end items are retrieved from the master schedule

These are referred to as “gross requirements” by the MRP program

Uses on-hand balance with schedule of orders to calculate the “net requirements”

Using net requirements, it calculates when orders should be received to meet these requirements

LO 3

18-*

MRP Explosion Process Continued

Find a schedule for when orders are actually released

To account for lead time

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

LO 3

18-*

Economic Order Quantity

• Calculate reorder quantity based on EOQ
• EOQ was not designed for a system with discrete time periods such as MRP
• The lot sizes generated by EOQ do not always cover the entire number of periods

LO 4

18-*

Least Total Cost

• Least total cost method (LTC): a dynamic lot-sizing technique that calculates the order quantity by comparing the carrying cost and the setup costs for various lot sizes and then selects the lot in which these are most nearly equal
• Influenced by the length of the planning horizon

LO 4

18-*

Least Unit Cost

• Least unit cost method: a dynamic lot-sizing technique that adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost

LO 4