One page review of chapter
Beemo S
mrp_-_r.pdf
SCM 304
Supply Chain Management
Material Requirements
Planning (MRP)
12-2
MRP
•Material requirements planning (MRP):
– A computer-based information system that
translates master schedule requirements for
end items into time-phased requirements for
subassemblies, components, and raw
materials.
– The MRP is designed to answer three
questions:
1. What is needed?
2. How much is needed?
3. When is it needed?
MRP Objectives
• Improve customer service
• Reduce inventory
investment
• Improve coordinating
production and thus, plant
operating efficiency
3
MRP Inputs MRP Processing MRP Output
Master
Production
Schedule
Bill-of-
Materials
File
Inventory
Records
File
MRP
Computer
Programs
Changes
Order Release
Planned-Order
Schedules
Exception
Reports
Planning Reports
Performance
Control Reports
Inventory
Transactions
Order
Forecast
Design
Changes
Receipts
Withdrawal
P ri
m a ry
R e p
o rt
S
e c o
n d
a ry
R e p
o rt
Overview of MRP
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 tested using the MRP program.
5
Electronic Industry (10,000 Items)
Product Group
TV (19”, 32”, …, 72”) 1000
Computer 5000
Cell Phone 2000
Others 2000
Total 10,000
6
This is an example of an electronic industry produces 10000 items. We can break them into 4 group of products in creating aggregate plan.
12-7
Master Schedule
TV WK1 WK2 WK3 WK4 WK5 WK6 WK7 WK8
19” 10 30 80 0 10 10 0 20
32” 30 10 0 50 5 0 80 40
72” … …. … … … … … …
Other
Sizes
… … … … … … … …
Total = 1000 This slide displays one of the groups in our agregate plan (TV) in demand for individual items during 8 weeks and it is called Master Schedule. It showes what to produce, when to make them, and how much.
12-8
Disaggregating the Aggregate
Plan
• Master schedule:
– The result of disaggregating an aggregate
plan
– Shows quantity and timing of specific end
items for a scheduled horizon
From Aggregate plan to
MPS • 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)
9
From Aggregate plan to MPS
10
Week
Aggregate plan shows
overall quantities to
produce – without
specifying type.
MPS shows quantities of
each type, with
information about the
production time frame.
12-11
MRP: Development
• The MRP is based on the product structure tree diagram
• Requirements are determined level by level, beginning
with the end item and working down the tree
– The timing and quantity of each “parent” becomes the basis for
determining the timing and quantity of the “children” items directly
below it.
– The “children” items then become the “parent” items for the next
level, and so on
3 – Drawer
File Cabinet
Case
(1)
Lock
(1)
Drawers
(3)
Drawer
Slide
(6)
Formed
Case
(1)
Formed
Drawer
(1)
Handle
(1)
Support
Rollers
(2)
Sheet
Steel
Sheet
Steel
Level 0
Level 1
Level 2
Level 3
Product Structure File
X
C (1)
B (2)
F (2)
E (2)
E (1)
D (2)
E (4)
0
1
2
3
Product Structure File
X
C (1)
B (2)
F (2)
E (2)
E (1)
D (2)
E (4)
0
1
2
3
Product Structure File
W
F L G
I H M P
G J
0
1
2
3
Product Structure File
12-16
Example MRP
Shutter
Frames (2) Wood
sections (4)
Example MRP
MRP Record
18
Week Number 1 2 3 4 5 6
MRP Responds to Net Requirements, and creating 2 plans: “Planned Order Receipt” and “Planned Order Release”
MRP Record
19
Week Number 1 2 3 4 5 6
MRP Responds to Net Requirements, and creating 2 plans: “Planned Order Receipt” and “Planned Order Release”
MPR Record
• Gross requirements – Total expected demand
• Scheduled receipts – Open orders scheduled to arrive
• Projected on hand – Expected inventory on hand at the beginning
of each time period
• Net requirements – Actual amount needed in each time period
• Planned-order receipts – Quantity expected to be received at
the beginning of a period Offset by
lead time
• Planned-order releases – Planned amount to order in each
time period
20
Calculating Net Requirements
• Adjusts gross requirements to account for
the quantity already on hand and on order.
-
Available Inventory
Net Gross On Hand Scheduled
Requirements Requirements Inventory Receipts
21
MRP Primary 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.
22
MRP Secondary Reports
• Performance-control reports – Evaluation of system operation, including deviations from plans and cost information
– e.g., missed deliveries and stockouts
• Planning reports – Data useful for assessing future material requirements
– e.g., purchase commitments
• Exception reports – Data on any major discrepancies encountered
– E.g., late and overdue orders, excessive scrap rates,
requirements for nonexistent parts
23
• Enables managers to easily
– determine the quantities of each component for a given order size
– To know when to release orders for each component
– To be alerted when items need attention
• Additional benefits
– Low levels of in-process inventories
– The ability to track material requirements
– The ability to evaluate capacity requirements
– A means of allocating production time
– The ability to easily determine inventory usage via backflushing
– Exploding an end item’s BOM to determine the quantities of the
components that were used to make the item
MRP Benefits
• Consequence of Inaccurate Data
– Missing parts
– Ordering incorrect numbers of items
– Inability to stay on schedule
• Other problems
– Assumptions of constant lead times
– Products being produced differently from the BOM
– Failure to alter a BOM when customizing a product
– Inaccurate forecasts
MRP Difficulties
Develop a tentative
MPS
Use MRP to
simulate material
requirements
Convert material
requirements to
resource requirements
Firm up a portion
of the MPS
Is shop
capacity
adequate?
Can capacity be
changed to meet
requirements
Revise tentative
master production
schedule
Change
capacity
Yes
No
Yes
No
Time Fence
Capacity Requirement
Procedure
MRP in Services
• Food catering service
–End item catered food
–Dependent demand ingredients for each recipe, i.e. bill of materials
• Hotel renovation
–Activities and materials “exploded” into component parts for cost estimation and scheduling
27
MRP II
Expanded MRP with emphasis placed on integration involving other areas of the firm in the planning process and enabling capacity requirements planning
–Financial planning
–Marketing
–Engineering
–Purchasing
–Manufacturing 28
MRP II Market Demand Manufacturing
Others
Finance
Marketing
MRP II Market Demand
Production Plan
Manufacturing
Others
Finance
Marketing
Rough-cut Capacity
Planning
Problems
?
Yes, Then Adjust Production
Plan
No
MRP II Market Demand
Production Plan
Manufacturing
Others
Finance
Marketin
g Rough-cut Capacity
Planning
Problems
?
Yes, Then Adjust Production
Plan
No MPS
MRP
Capacity
Requirements
Planning
Problems?
Yes No
Requirements Schedule Adjust MPS
