Chair

Seat

Legs (2)Cross

barSide

Rails (2)Cross

barBack

Supports (3)

LegAssembly

BackAssembly

Level 0

1

2

3

Product Structure Tree

Chair

Seat

Legs (2)Cross

barSide

Rails (2)Cross

barBack

Supports (3)

LegAssembly

BackAssembly

Level 0

1

2

3

100

Product Explosion(assume there is no inventory)

Chair

Seat

Legs (2)Cross

barSide

Rails (2)Cross

barBack

Supports (3)

LegAssembly

BackAssembly

Level 0

1

2

3

100

100 100 100

Product Explosion(assume there is no inventory)

Chair

Seat

Legs (2)Cross

barSide

Rails (2)Cross

barBack

Supports (3)

LegAssembly

BackAssembly

Level 0

1

2

3

100

100 100 100

200 200100 100 300

Product Explosion(assume there is no inventory)

The MPS is converted into the gross requirements for each component for each time period (time bucket) in the planning horizon using the bill of materials.

MRP Logic

1 2 3 4 5

Gross requirements

Scheduled receipts

Available inventory

Net requirements

Planned-order receipts

Planned-order releases

Item

10 15 20 12 5

The scheduled receipts are orders that have been placed and are on the way. It is assumed that receipts arrive and are available at the beginning of a time period.

1 2 3 4 5

Gross requirements

Scheduled receipts

Available inventory

Net requirements

Planned-order receipts

Planned-order releases

Item

10 15 20 12 5

7 9

The initial inventory is added to period 1’s scheduled receipts and placed in period 1 of the Available inventory line. In this case, assume that the initial inventory is 16. Add period 1’s scheduled receipt (7) and initial inventory (16) to obtain the projected on hand amount for period 1 (23).

1 2 3 4 5

Gross requirements

Scheduled receipts

Available inventory

Net requirements

Planned-order receipts

Planned-order releases

Item

10 15 20 12 5

7 9

23

Subtract the projected on hand amount for period 1 (23) from period 1’s gross requirement (10) to find the net requirement (-13).

1 2 3 4 5

Gross requirements

Scheduled receipts

Available inventory

Net requirements

Planned-order receipts

Planned-order releases

Item

10 15 20 12 5

7 9

23

-13

If the net requirement is negative or zero, that amount (13) is added to the period 2’s scheduled receipt (9) to find the period 2’s projected on hand amount (22).

1 2 3 4 5

Gross requirements

Scheduled receipts

Available inventory

Net requirements

Planned-order receipts

Planned-order releases

Item

10 15 20 12 5

7 9

23

-13

22

Subtract the projected on hand amount for period 2 (22) from period 2’s gross requirement (15) to find the net requirement (-7).

1 2 3 4 5

Gross requirements

Scheduled receipts

Available inventory

Net requirements

Planned-order receipts

Planned-order releases

Item

10 15 20 12 5

7 9

23

-13

22

-7

If the net requirement is negative or zero, that amount (7) is added to the period 3’s scheduled receipt (0) to find the period 3’s projected on hand amount (7).

1 2 3 4 5

Gross requirements

Scheduled receipts

Available inventory

Net requirements

Planned-order receipts

Planned-order releases

Item

10 15 20 12 5

7 9

23

-13

22

-7

7

Subtract the projected on hand amount for period 3 (7) from period 3’s gross requirement (20) to find the net requirement (13). If the net requirement is positive, an order receipt must be planned to cover that amount.

1 2 3 4 5

Gross requirements

Scheduled receipts

Available inventory

Net requirements

Planned-order receipts

Planned-order releases

Item

10 15 20 12 5

7 9

23

-13

22

-7

7

13

If lot-for-lot lot sizing is being used, the planned order receipt is equal to period 3’s net requirement.

1 2 3 4 5

Gross requirements

Scheduled receipts

Available inventory

Net requirements

Planned-order receipts

Planned-order releases

Item

10 15 20 12 5

7 9

23

-13

22

-7

7

13

13

The planned order receipt is then offset (moved forward in time) to allow for the lead time. This is the planned order release.

1 2 3 4 5

Gross requirements

Scheduled receipts

Available inventory

Net requirements

Planned-order receipts

Planned-order releases

Item

10 15 20 12 5

7 9

23

-13

22

-7

7

13

13

13

Repeat the steps for period 4.

1 2 3 4 5

Gross requirements

Scheduled receipts

Available inventory

Net requirements

Planned-order receipts

Planned-order releases

Item

10 15 20 12 5

7 9

23

-13

22

-7

7

13

13

13

12

12

12

Repeat the steps for period 5

1 2 3 4 5

Gross requirements

Scheduled receipts

Available inventory

Net requirements

Planned-order receipts

Planned-order releases

Item

10 15 20 12 5

7 9

23

-13

22

-7

7

13

13

13

12

12

12

5

5

5