Material Requirements Planning (MRP)

Operations Management II
Sachin Jayaswal Indian Institute of Management Ahmedabad

What do we do after APP?

Aggregate Production Plan (Determination of aggregate production and workforce levels for t period planning horizon)

Master Production Schedule (MPS) (Production level by item by time period)

Materials Requirement Planning (MRP) (Detailed timetable for production and assembly of components and subassemblies)
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Master Production Schedule (MPS)

The MPS translates the aggregate plan output in terms of specific production goals by product and time period.
For example, suppose that a firm produces three types of chairs: ladderback chair, kitchen chair and desk chair. The aggregate production considers an aggregate unit of chair and finds that the firm should produce 55 units of chairs in !pril. MPS then translates this output in terms of three product types and four "ork-"eeks in !pril. MPS suggests that the firm produce # units of desk chairs in $eek %, %5 units of ladder-back chair in $eek #, and # units of kitchen chairs in $eek &.
April 1 Ladder-back chair Kitchen chair Desk chair Aggregate production plan 200 550 2 150 200 120 200 790 200 3 3 4 5 6 150 120 May 7 8

MPS
April 1 Ladder-back chair Kitchen chair Desk chair Aggregate production plan 200 550 2 150 200 120 200 790 200 3 4 5 6 150 120 May 7 8

Coordinates marketing and production via order promising Process by which customer order re!uests receive shipment dates "PS is a statement of production and not necessarily a demand forecast "PS takes into account capacity limitations as well as desire to utilize capacity fully

Materials Requirement Planning (MRP)

#iven the "PS$ the ne%t level of decision is to determine the schedule for production and assembly (or procurement if outsourcing) of components and subassemblies

Back slats

Seat cushion

Leg supports Back legs "ront legs

Seat- rame !oards

Overview &PP is for family of products "PS is for individual products "'P translates the "PS into time(phased re!uirements for components$ subassemblies$ raw materials$ etc

End tem! Su"assem"lies! and #om$onents

Scissors

Bottom Blade Assembly

Screw

Top Blade Assembly

Straight Blade

Straight Plastic Grip

Bent Blade

Bent Plastic Grip

nde$endent and %e$endent %emand

A Independent Demand (end item) Dependent Demand (component parts) B(4) C(2)

D(2)

E(1)

D(3)

F(2)

Independent demand is uncertain. Dependent demand is certain.

#om$arison
Independent demand
Demand Demand

Dependent demand

Lumpy demand

Stable demand

Time

Time

Amount on hand

Safety stock Time

Amount on hand

Time

%e$endant vs& nde$endent %emand )nce the independent demand is known$ the dependent demand can be determined Dependent demand tends to be sporadic or *lumpy+, -arge !uantities are used at specific points in time with little or no usage at other times Dependent demand re!uires a different inventory management techni!ue from .)/(type models

Material requirements $lanning (MRP) "aterial re!uirements planning ("'P), Computer(based information system that translates "PS re!uirements for end items into time(phased re!uirements for subassemblies$ components$ and raw materials "'P works backward from the due date using lead times and other information to determine when and how much to order

MRP "'P begins with a schedule for finished goods that is converted into a schedule of re!uirements for subassemblies$ component parts and raw materials needed to produce the finished items in the specified time frame "'P designed to answer the following !uestions,
0 0 0

1hat is needed 2 3ow much is needed2 1hen is it needed 2

Overview of MRP

MPR n$uts %.'!'master'production'schedule'(MPS) #.'!'*ill'of'Materials'(*+M) &.'!n'in,entory'records'file

'& Master Schedule "aster (Production) Schedule ("PS), states which end items are to be produced$ when these are needed$ and in what !uantities
0

.%ample, & "aster Schedule for end item 4,

Come from: customer orders, forecasts and orders from warehouses to build up seasonal inventories

Master Schedule (#ont&) Cumulative -ead 5ime, 5he sum of the lead times that se!uential phases of a process re!uire$ from ordering of parts or raw materials to completion of final assembly 5he master schedule should cover the cumulative lead time

Planning (ori)on
The'planning'hori-on'for'MPS'should'co,er'the'cumulati,e' lead'time.

Assembly
Subassembly

Fabrication
Procurement

6 7 5 Time period (weeks)

Cumulative -ead 5ime 6 7 weeks

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*& +ill,of,Materials 8ill of "aterials (8)"), a listing of all of the raw materials$ parts$ subassemblies$ and assemblies needed to produce one unit of a product
.ach finished product has its own bill of materials

Product Structure 5ree, 9isual depiction of the re!uirements in a bill of materials$ where all components are listed by levels

Assem"l- %iagram . Product Structure /ree

E0am$le '

.sing the information abo,e to do the follo"ing:

a) /etermine the 0uantities of *, 1, /, 2, and F needed to assemble one 3.

Solution to E0am$le ' a). X X :1

B : 2 1 = 2 B(2)

C : 1 1 = 1

D : 3 2 = 6 D(3)
E : 4 6 = 24
E(4)

E : 1 2 = 2

E : 2 1 = 2 F : 2 1 = 2

E(2)

F(2)

Thus,'one'X "ill're0uire
4 4 4

*:'#''''''''''1:'% /:5'''''''''''F:'# 2:'#6'(7ote'that'2'occurs'in'three' places,'"ith'#8#8#9)

E0am$le ' (#ont&) .sing the information abo,e to do the follo"ing:

a) /etermine the 0uantities of *, 1, /, 2, and F needed to assemble one 3. b) /etermine the 0uantities of *, 1, /, 2, and F needed to assemble ten 3:s, if you ha,e the follo"ing in in,entory:
1omponent +n'hand * 9 1 % / 6 2 5

Solution to E0am$le ' (#ont&)

b).

X X : 10
4 B(2) 16

1omponent +n'hand * 9 1 % / 6 2 5

B : 2 10 = 20

C : 1 10 = 10

10 C 0

D : 316 = 48

8 D(3) 40

E : 1 16 = 16

E :0
E(2)

F :0
F(2)

E(4)

Thus,'gi,en'the'amounts'of'onhand'in,entory,'% 'Xs'"ill're0uire
4 4 4

E : 4 40 = 160
60 100

*:'%5'''''''''''1:' /:'9 ''''''''''F:' 2:'%%5'(;%58% )

Product Structure /ree and +OM 1evels

W099
L#$#L %

1heelbarrow
1011 1020 1030 1042

L#$#L &

8o% (:)

3andlebar &ssembly (:)

2025 2031

1heel &ssembly (:)

2032

Paint (:)

2022
L#$#L '

2035

8ars (;)

#rips (;)

&%le (:)

8earings (;)

1heel (:)
3026

L#$#L (

5ire (:)

+OM
Part no) *%++ *heel!arro,
Part no. 1011 1020 2022 2025 1030 2031 2032 2035 1042 Description Box: Deep size, aluminum Handlebar assembly Aluminum bars Grips: Neoprene Wheel assembly Axle Bearing: Normal duty Wheel 3026 Tire: Size A Paint: Blue Quantity 1 1 2 2 1 1 2 1 1 1 Units Each Each Each Each Each Each Each Each Each Each

Le-el %
Level 1 1 2 2 1 2 2 2 3 1

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2& nventor- Records 3ile <nventory records, includes information on the status of each item by time period,
0 0 0 0 0 0

#ross re!uirements Scheduled receipts .%pected amount on hand Supplier -ead time -ot size policy

Assem"l- /ime #hart

MRP Processing 1ogic

*ased on the master schedule, to determine the component schedules for successi,ely lo"er-le,el items throughout the product structure tree. <t calculates schedules for each of the time periods (usually "eekly) in the scheduling time hori-on
4 4 4 4 4 4

=ross re0uirements Scheduled receipts Pro>ected on hand 7et re0uirements Planned-order receipts Planned-order releases
3ow much is needed2 1hen is it needed2 1hen should it be ordered to make sure it is available e%actly when it is needed2

MRP Processing #ross re!uirements, 5otal e%pected demand for an item or raw material in a time period Scheduled receipts, )pen orders scheduled to arrive from the shop floor or from vendors by the beginning of a period Pro=ected on hand, .%pected amount of inventory that will be on hand at the beginning of each time period, Inventory carried forward + Scheduled receipts

MRP Processing >et re!uirements, 5he actual amount that we need to procure?produce in each time period,

.ross requirements - pro/ected on-hand (!eginning)

Planned(order receipts, 5he !uantity re!uired to be received (dictated by the net re!uirement) by the beginning of the period in which it is shown Planned(order releases, Planned amount to order in each time period@ e!uals planned(order receipts offset by lead time
5his amount generates #ross 'e!uirement at the ne%t level )rders once released become scheduled receipts after the lead time

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3ormat of MRP

$eek'7umber

&

<tem:
#ross re!uirements Scheduled receipts Pro=ected on hand >et re!uirements Planned(order receipts Planned(order releases

MRP E0am$le '

1onsider'the't"o'product'structure'trees'sho"n'belo": ! 1

/(#)

/e,elop an MRP for item /, gi,en that the master schedule calls for 6 units of ! in "eek 9 and 5 units of 1 in "eek 5. There is a beginning in,entory of %% units of / on hand, and all items ha,e lead times of % "eek.

Solution to MRP E0am$le ',, tem A

$eek'7umber

! * 9 6 / 5 5 5

&

MPS @uantity'of'!
@uantity'of'1 <tem: !''''''''''AT;%'"eek
=ross're0uirements Scheduled'receipts Pro>ected'on'hand 7et're0uirements Planned-order'receipts Planned-order'releases

6 6 6 times'%'for'item'/

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Solution to MRP E0am$le ',, tem #

/(#)
$eek'7umber @uantity'of'! @uantity'of'1 <tem: 1''''''''''AT;%'"eek
=ross're0uirements Scheduled'receipts Pro>ected'on'hand 7et're0uirements Planned-order'receipts Planned-order'releases

1 F 5 5 5

&

9 6

5 5 5 times'#'for'item'/

Solution to MRP E0am$le ',, tem %

6 <tem'! times'% /''''''''''AT;%'"eek
=ross're0uirements Scheduled'receipts Pro>ected'on'hand'B*eginC 7et're0uirements Planned-order'receipts Planned-order'releases

5 <tem'1 times'#

& 6 %

%%

%%

%%

%%

& ? ?

MRP E0am$le *
Shutter

Frames'(#)
Pro'uct()tem ,ea'+-ime+(.eeks) Sc*e'ule'+or'er+recei/ts S*utter !

$ood'sections'(9)
Frames 2 Woo'+Sections ! $ +(.eek !) ! 2 3 4 ! " # $ % !"

MPS

Week &uantity

Develop an "'P for Arames and 1ood Sections

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MRP E0am$le *
0

Shutter $ood' sections'(9)

Frames'(#)

MRP4 lot,for,lot
0

Shutter $ood' sections'(9)

Frames'(#)

1ot Si)ing -ot(for(-ot (-B-) ordering

5he order or run size is set e!ual to the demand for that period "inimizes investment in inventory <t results in variable order !uantities & new setup is re!uired for each run

Ai%ed )rder /uantity (e g $ .)/)

Can lead to minimum costs if usage of item is fairly uniform
5his may be the case for some lower(level items that are common to different CparentsD -ess appropriate for Clumpy demandD items

Ai%ed )rder Period (also called Period )rder /uantity) "inimum )rder /uantity

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MRP4 3i0ed lot

0

Shutter $ood' sections'(9)

Frames'(#)

MRP Out$uts ,, Primar- Re$orts

Planned order releases, ( Part >umber$ >o of units$ Due date Changes, 'evisions (.%pedite?Defer) of due dates or order !uantities

MRP Out$uts ,,Secondar- Re$orts Performance control reports, evaluate system operations (deviations from plans$ missed deliveries) Planning reports are useful in forecasting future inventory re!uirements . g purchase commitments .%ception reports call attention to ma=or discrepancies . g re!uirements for none%istent parts$ inventory count discrepancies

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MRP in Service Food catering ser,ice

2nd item catered food ingredients for each recipe, /ependent demand i.e., bill of materials

Dotel reno,ation
!cti,ities and materials EexplodedF into component parts for cost estimation and scheduling

MRP

(Manufacturing Resource Planning)

"anufacturing resources planning ("'P <<)

.%panded approach to production resource planning$ involving other areas of the firm in the planning process and enabling capacity re!uirements planning

MRP

Overview

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ERP (Enter$rise Resource Planning) .nterprise resource planning (.'P),

>e%t step in an evolution that began with "P' and evolved into "'P<< <ntegration of financial$ manufacturing$ and human resources on a single computer system 5ypically$ has an "'P core http,??www ;E;Esoftware com?default asp

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