SECTION G: MATERIAL

REQUIREMENTS PLANNING
Section G Introduction

Section G Learning Objectives

▪ MRP translates independent demand into time-phased
dependent demand for components (priority plans)
▪ Inputs: bill of material (BOM), inventory status, planning
data
▪ Capacity requirements planning checks
▪ Single- and multilevel BOMs, planning bills, where-used,
and pegging
▪ Parent-child relationships, explosions, and offsetting
▪ MRP grid, gross and net requirements, planned order
releases and receipts, scheduled receipts
▪ Expediting, de-expediting, changes

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Section G Introduction

Manufacturing Planning and Control

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Topic 1: The MRP Environment

Objectives of MRP

Planning Control

▪ Precise material ▪ Adapt to changing priorities

requirements ▪ Demand changes, supply
▪ What, how much, and when issues, errors
▪ What to get from inventory ▪ Update multiple details
▪ What to order, when to ▪ Planners able to expedite,
order, when to schedule de-expedite, add, cancel, or
delivery change planned orders

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 Topic 1: The MRP Environment

Inputs, Process, and Outputs

Input Description Source
MPS Quantities, due dates as planned and Master schedule
scheduled orders
Bills of material Quantity of each uniquely identified part Product structure file
(BOMs) to make one item
Planning factors Static inventory data: Inventory records: item
• Lot size master file
• Lead time
• Yield/scrap factors
• Safety stock level
Inventory status Dynamic inventory data for Inventory records:
components/items (on hand, allocated, inventory record file
on order with due date)

Process: time-phased priority plan with proposed release and receipt dates.
Outputs: purchase orders to suppliers (via purchasing) and CRP-validated
manufacturing orders to shop floor.
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Topic 2: Bills of Material

Bill of Material Concepts

Single unit: All parts to
Unique ID: All parts get unique part make exactly one unit of
number. (If form, fit, or function Part Number 100.
changes, part gets new number.)

Scope: If it isn’t listed, it isn’t used (but some Quantities

MRO supplies might be used but not listed). Unit of
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 Topic 2: Bills of Material

Independent vs. Dependent and Parent-Child

Since Part Number 100 is a unit for individual sale...

*Also called parent-component relationship

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Topic 2: Bills of Material

How BOMs Are Used in Organizations

▪ Engineering
– Part of specifications for new or improved products
– For example, chemical formula BOMs
– Engineering change control and start/stop dates for new
BOMs or components
▪ Customer service and service parts
– Right replacement part
– Customer options (ATO): custom BOM maybe with costs
▪ Finance
– Direct materials costing, direct labor estimates, overhead
allocation

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Topic 2: Bills of Material

Single-Level BOMs
▪ Data in only one place, available for multiple products.
▪ Each part can have its own single-level BOM.
(Part 202 is a child of Part 100.)

Children (components) of Part 202

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Topic 2: Bills of Material

Multilevel BOMs: Indented and Summarized Bills

Can expand

Can’t expand
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Topic 2: Bills of Material

Multilevel BOMs: Indented and Summarized Bills

Series of single-
level bills
▪ All final children
(no levels below)
are purchased.
▪ Shows logical
order of assembly
from bottom up.

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Topic 2: Bills of Material

Planning Bills of Material

▪ Simplify planning: Can’t know what to ATO
▪ Historical average of demand for options

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Topic 2: Bills of Material

Where-Used and Pegging Data

▪ Where-used: Full list of parents using that child
– Impact of engineering change
▪ Pegging: Just parents with gross requirements
– Due dates and quantities of parent MPS orders
– Supply chain issues, material prices

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 Topic 3: MRP Logic

MRP Logic Available at

beginning of Time bucket
period shown
On item master record:
• Lead time: 2 weeks Week
Part Number 202
• Lot size: 100 units
From MPS (before inventory)
Released orders (committed)
Inventory balance into future
After inventory and receipts
Due date (still just plans)
When to order or make
Lead time offset

Production is scheduled only when there is demand.

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Topic 3: MRP Logic

MRP Record (Exercise)

Lead time: 1 week
Pegging (week 2): 30 for product X
40 for product Y
Lot size: as required
Week
Part A
1 2 3 4
Gross requirements 70 60 50
Scheduled receipts 50
Projected available 20
Net requirement
Planned order receipt
Planned order release
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Topic 3: MRP Logic

Bill-of-Material Explosion (Exploding)

Parent A B D F
Child B (2) E (2) F (2) C (1)
Child C (4) G (3) E (2)
Child D (2) H (1) G (4)

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 Topic 3: MRP Logic

Bill of Material Product Tree Exercise

Parent A B C E
Component B (2) E (2) G (2) G (4)
C (4) F (1) F (3)
D (3) H (2)

Given the parents and components, construct a product

tree. Figures in brackets show the quantities per item.

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Topic 3: MRP Logic

Lead-Time Offset (Offsetting)

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Topic 3: MRP Logic

Offsetting Planned Order Releases from Receipts

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 Topic 3: MRP Logic

POR Exercise 1
Quantity per parent What is the cumulative
in all cases = 1 lead time for item B?

Item Week
number Planned order 1 2 3 4 5
Receipt 50
B Release 50
Receipt
C Release
Receipt 50
D Release 50
Receipt
E Release
Receipt
F Release
Wk = Week; LT = lead time
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 Topic 3: MRP Logic

POR Exercise 2
Quantity per parent
in all cases = 1

Item Week
number Planned order 1 2 3 4 5
Receipt 200
X Release
Receipt
Y Release
Receipt
Z Release
Receipt
W Release
Receipt
V Release
Wk = Week; LT = lead time
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Topic 3: MRP Logic

Projected Available
Projected Available = Prior Projected
Available + Scheduled Receipts + Planned
Order Receipts − Gross Requirements

Part C,
Week 3:
7+0+0
−4=3

Part E,
Week 2:
4+5+0
−0=9

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Topic 3: MRP Logic
Gross to Net Requirements

Net Requirements =
Gross Requirements − Scheduled Receipts − Prior Projected
Available

Part C, Week 5:
4−0−3=1

Part G, Week 3:
16 − 0 − 13 = 3

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 Topic 3: MRP Logic

Completed MRP
Lot size rule =
5 units

Part E, Week 4,
projected available:
1+0+5−4=2

Part G, Week 4, net

requirements:
6−0−2=4

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Topic 3: MRP Logic

Bucketless MRP and CRP

Bucketless MRP Capacity requirements
planning
▪ List actual dates for actions ▪ Detailed capacity check at
and omit periods of no activity MRP level
▪ More common in practice

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Topic 3: MRP Logic

MRP in Lean
▪ MRP is inherently push; lean is pull, uses kanban.
▪ Lean may have push components and use MRP for items
with longer lead times than customer lead times.
▪ Daily (sometimes weekly) time buckets.
▪ Very low or zero inventory.
▪ Lot-for-lot: very low lot sizes.
▪ Gross requirement and production may be in same period.
▪ Simplify and flatten BOMs (e.g., since cellular effectively
creates one big work center).

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Topic 4: Using and Managing the Priority Plan

MRP Planning Software

Automated Planner prompts (usually)

▪ Exploding, offsetting, and ▪ Action messages

gross to net – Planned order releases in
action bucket
▪ Checking on hand, on order,
– Autorelease risk (“computer
allocated inventory did it” not valid excuse)
▪ Generating scheduled receipts ▪ Exception messages
and allocating components – Release, add, cancel
▪ Replanning (planner initiates, – Insufficient quantity or
system recalculates due receipt date: expediting
dates) – Slack time: de-expediting
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Topic 4: Using and Managing the Priority Plan

Order Control
▪ Releasing is decision point: commit money or time.
▪ Release in action bucket: deletes planned order/receipt, replaces with
scheduled receipt.
▪ Firm planned order to reduce system nervousness.

Released (open) order

Planned order Firm planned order

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Topic 4: Using and Managing the Priority Plan

Maintaining Priorities and Replanning

▪ Maintaining priorities
▪ Internal events
(expediting/de-expediting)
is first option, replanning
(new due dates) is fallback.
▪ External events
– Customer order changes
– Supplier shortages
– Wrong quantities or
damage
– Late deliveries
– Lower yield or scrap
factors
– Early or late completions
(standard vs. actual time)
– Capacity or resource
constraints
– Inventory record errors

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