Materials Requirement Planning (MRP) : The Approach To Coordinated Scheduling For Dependent Demand Items

Materials Requirement Planning
(MRP)
The approach to coordinated
scheduling for dependent
demand items.
Introduction to lean 1
The Responsibility of Manufacturing
activities
1. Design requirements and specifications and standards.
2. Be manufactured economically and environmentally
friendly.
3. Build-in quality at each stage.
4. Production methods must be sufficiently flexible to
respond to changing market demands, types of
products, production rates, and production quantities and
to provide on-time delivery to the customer.
5. New developments in materials, production methods,
and computer integration of both technological and
managerial activities.
6. Safety.
Production Planning and Control
Planning and control of the flow of materials through the
manufacturing process
1. Production planning
Production must be able to meet the demand of the
marketplace
a). Forecasting
b). Master planning
c). Material requirements planning
d). Capacity planning
2. Implementation and control
3. Inventory management
Production Planning System
Material Requirements Plan (MRP)
 The quantities of each product group that must

be produced in each period.
 The desired inventory levels.
 The resources of equipment, labor, and

material needed in each period.
 Time
Example 1.
Amalgamated Fish Sinkers makes a product group of fresh
fish sinkers and wants to develop a production plan for
them. The expected opening inventory is 100 cases, and
they want to reduce that to 80 cases by the end of the
planning period. The number of working days is the same
for each period. There are no back orders. The expected
demand for the fish sinkers is as follows:
a). How much should be produced each period?

b). What is the ending inventory for each period?
c). If the cost of carrying inventory is $5 per case per period
based on ending inventory, what is the total cost of carrying
inventory?
d). What will be the total cost of the plan?
Period 1 2 3 4 5 Total
Forecast
(cases) 110 120 130 120 120 600
Production
Ending
100
Inventory
Answer
a). Total production required = 600 + 80 - 100 = 580 cases

Production each period = 580 / 5 = 116 cases
Forecast
(cases) 110 120 130 120 120 600
Production 116 116 116 116 116 580
Ending
100
Inventory
b). Ending inventory = opening inventory + production - demand
Ending inventory after the first period = 100 + 116 - 110 = 106 cases
+ - =
Forecast
(cases) 110 120 130 120 120 600
Production 116 116 116 116 116 580
Ending
Inventory
100 106
b). Ending inventory = opening inventory + production - demand
Ending inventory after the first period = 100 + 116 - 110 = 106 cases
+ - =
Forecast
(cases) 110 120 130 120 120 600
Production 116 116 116 116 116 580
Ending
Inventory
100 106
c). The total cost of carrying inventory would be:
(106 + 102 + 88 + 84 + 80)($5) = $2300
d). Since there were no stockouts and no changes in the level of
production, this would be the total cost of the plan.
Forecast
(cases) 110 120 130 120 120 600
Production 116 116 116 116 116 580
Ending
Inventory
100 106 102 88 84 80
Master Scheduling
 Production plan:
Families of products
 Master production schedule (MPS):
End items.
It breaks down the production plan into the requirements for
individual end items, in each family, by date and quantity.
The total of the items in the MPS should be equal to the total
shown on the production plan.
Master Scheduling 12
Master Scheduling
The information needed to develop an MPS :

 The production plan
 Forecasts for individual end items
 Actual orders received from customers and for
stock replenishment
 Inventory levels for individual end items
 Capacity restraints
Example 1.
The Hotshot Lightning Rod Company makes a
family of two lightning rods, Models H and I. It bases
its production planning on months. For the present
month, production is leveled at 1000 units. Opening
inventory is 500 units, and the plan is to reduce that
to 300 units by the end of the month. The MPS is
made using weekly periods. There are four weeks in
this month, and production is to be leveled at 250
units per week. The forecast and projected available
for the two lightning rods follows. Calculate an MPS
for each item.
Answer
Production Plan:
Period 1 2 3 4 Total
Forecast 300 350 300 250 1200
Projected
500 450 350 300 300
Available
Production Plan 250 250 250 250 1000
Forecasts for individual end items , Model H and I
Forecast 300 350 300 250 1200
Forecast for H 200 300 100 100 700
Forecast for I 100 50 200 150 500
Opening inventories are:

Model H 200
Model I 300
Master Schedule: Model H:
Forecast 200 300 100 100 700
Projected
200 250 200 100 100
Available
MPS 250 250 100
Master Schedule: Model I:

Forecast 100 50 200 150 500
Projected
300 200 150 200 200
Available
MPS 250 150
Master Schedule: Model H:
Forecast 200 300 100 100 700
Projected
200
Available
MPS
Master Schedule: Model I:

Forecast 100 50 200 150 500
Projected
300
Available
MPS
The objectives in developing an
MPS
 To maintain the desired level of customer service by

maintaining finished-goods inventory levels or by
scheduling to meet customer delivery requirements.
 To make the best use of material, labor, and
equipment .
 To maintain inventory investment at the required
levels.
MRP Process
 MRP Process uses four basic

techniques
 Exploding and offsetting
 Gross and net requirements
 Releasing orders
 Low-level coding and netting
 The most important thing to consider

before making any decisions is lead time
MRP 20
MRP Process
 Exploding requires a planner determine

actual material required by multiplying
usage by the quantity needed. Information
is collected from the product tree.
 Offsetting takes information from explosion
and plans production based upon lead-time
and relationship to parent.
MRP 21
MRP Process
 Planned order composes of two elements:

 Planned order receipt.
 Planned order release.
 Gross and Net requirements

Net = Gross requirements – Available inventory
MRP 22
Example 2:
Using the product tree and lead times shown in
figure below, determine the planned order receipts
and releases. There are 50 As required in week 5.
Suppose there are 10 Bs available as well as the 20
As.
MRP 23
Week
Part #
1 2 3 4 5
Gross Requirements 50
Projected Available 20 20 0
A Net requirements
Planned Order Receipt
30
30
Planned Order Release 30
Gross Requirements
Projected Available 10
B Net requirements
Planned Order Release
Gross Requirements
Projected Available
C Net requirements
Gross Requirements
Projected Available
D Net requirements
Gross Requirements
Projected Available
E Net requirements
MRP 24
Week
Part #
1 2 3 4 5
A Net requirements
30
30
B Net requirements
20
20
C Net requirements
30
30
Gross Requirements
Projected Available
D Net requirements
Gross Requirements
Projected Available
E Net requirements
MRP 25
Week
Part #
1 2 3 4 5
A Net requirements
30
30
B Net requirements
20
20
C Net requirements
30
30
D Net requirements
20
20
E Net requirements
20
20
MRP 26
MRP Process
 Scheduled Receipts:
 Promised materials
 Become available to use immediately
 Open Orders:
 Incomplete orders that have not been fully satisfied
 Example, we completed the production of markers but do
not have packaging
 Net Requirements (Modified) = gross requirements-
scheduled receipts – available inventory
MRP 27
Example 3:
Complete the following table. The lead time for the

item is two weeks, and the order quantity is 200.
What action should be taken?
Week 1 2 3 4
Gross Requirements 50 250 100 50
Scheduled Receipts 200
Net requirements
MRP 28
Answer
Week 1 2 3 4
Projected Available 150 100
Net requirements
Week 1 2 3 4
Net requirements
MRP 29
Answer Week 1 2 3 4
Net requirements 50
Planned Order Receipt 50?
X
Week 1 2 3 4
Projected Available 150 100 50 150
Net requirements 50
Planned Order Receipt 200
MRP 30
Example 1 of MRP
Given the following product tree, explode, offset, and determine

the gross and net ret requirements. All lead times are one week,
and the quantities required are shown in parentheses. The
master production schedule calls for the completion of 100 As in
week 5. There is scheduled receipt of 100 Bs in week 1. There
are also 200 Fs available.
Example 2 of MRP

week 4 and 50 in week 5. There are 300 Bs scheduled to be
received in week 1 and 200 Ds in week 3. There are also 20 As
available. The ordering quantity for all parts is lot-for lot.
Example 3 of MRP

week 4 and 50 in week 5. There are 100 Cs scheduled to be
received in week 2. Lot size for part E is 500. Other parts are all
lot-for lot.
References
 Dave Dixon (2004), The truce between lean

and IT, IE Industrial Engineer, 36(6), 42-45.
 Charles M. Parks (2003), The Bare
Necessities of Lean, IE Industrial Engineer,
35(8), 39-42.

Materials Requirement Planning (MRP) : The Approach To Coordinated Scheduling For Dependent Demand Items

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Materials Requirement Planning

 The quantities of each product group that must

 The resources of equipment, labor, and

a). How much should be produced each period?

The information needed to develop an MPS :

Forecast 300 350 300 250 1200

Production Plan 250 250 250 250 1000

Forecast 300 350 300 250 1200

Forecast for H 200 300 100 100 700

Forecast for I 100 50 200 150 500

Opening inventories are:

Master Schedule: Model I:

Master Schedule: Model I:

 To maintain the desired level of customer service by

 MRP Process uses four basic

 Low-level coding and netting

 The most important thing to consider

 Exploding requires a planner determine

 Planned order composes of two elements:

 Gross and Net requirements

Complete the following table. The lead time for the

Given the following product tree, explode, offset, and determine

Given the following product tree, explode, offset, and determine

Given the following product tree, explode, offset, and determine

 Dave Dixon (2004), The truce between lean

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