Lecture 9 Materials Requirements Planning Books Introduction to Materials Management, Sixth Edition, J. R. Tony Arnold, P.E., CFPIM, CIRM, Fleming College,

Lecture 9

Materials Requirements Planning

Books• Introduction to Materials Management, Sixth Edition, J. R. Tony Arnold, P.E., CFPIM, CIRM, Fleming

College, Emeritus, Stephen N. Chapman, Ph.D., CFPIM, North Carolina State University, Lloyd M. Clive, P.E., CFPIM, Fleming College

• Operations Management for Competitive Advantage, 11th Edition, by Chase, Jacobs, and Aquilano, 2005, N.Y.: McGraw-Hill/Irwin.

• Operations Management, 11/E, Jay Heizer, Texas Lutheran University, Barry Render, Graduate School of Business, Rollins College, Prentice Hall

Objectives

• Material Requirement Planning• Nature of Demand• Inputs to MRP• Bill of Material• Planned Orders

• Material Requirements Planning is a system to calculate requirements for dependent demand items

• It establishes a schedule (priority plan) showing the components required at each level of the assembly and, based on lead times, calculates the time when these components will be needed

• It is a system to avoid missing parts for the end item

Material Requirements Planning

Material Requirements Planning Process

• We need to determine– What to order– How much to order– When to order

• This will involve– Lead times– Bills of material– Inventory Status– Planning data

Nature of Demand

• Two Types of Demand– Independent

• Is not related to the demand for any other product and must be forecast

• Master production schedule (MPS) items are independent demand items

– Dependent• Is directly related to other items or end items• Such demand should be calculated and need not and should

not be forecast

Nature of Demand

Independent Demand(Forecast)

Dependent Demand(Calculated)

Table

Legs(4)

Ends(2)

Sides(2)

Top(1)

HardwareKit (1)

Item #206

Item #433

Item #711

Item #025

Item #822

If you have an order for 23 Tables, what components would you need to produce them?

• Two Major Objectives– Determine Requirements

• What to order• How much to order• When to order• When to schedule delivery

– Keep Priorities Current• It must be able to add and delete, expedite, delay, and

change orders based upon present priorities

Objectives of MRP

Linkages with Other Manufacturing Planning and Control Functions

BusinessPlan

ProductionPlan

MPS

PC and Purchasing

MRP

Planning

Execution

• The MRP is driven by the MPS; it is concerned with the components needed to make the end items. • The MRP in turn drives, or is input to, productioncontrol (PC) and purchasing

• Four Major Inputs:– Master Production

Schedule– Inventory Records– Planning Data– Bills of Material

Inputs to the MRP System

MRP

MPS

PlanningData

Bill ofMaterial

InventoryStatus

• Master Production Schedule (MPS)– The MPS provides information on planned and scheduled

orders for end items (how much is wanted and when)

• Inventory Status– Inventory status provides information on what is already

available. Inventory records include the status of each item, including amounts on order and on hand and the location


• Bills of Material– Bills of material describe components and the quantity of each needed to

make one unit

• Planning Data– Planning data include lot size, lead time, scrap factors, yield factors, and

safety stock

• The Computer– Computers are needed because they are fast , accurate, and have the

ability to store and manipulate data and produce information rapidly


Bill of Material“a listing of all the subassemblies, intermediates, parts, and raw

materials that go into making the parent assembly showing the quantities of each required to make an assembly”

APICS Dictionary, 8th edition, 1995

• The bill of material shows all the parts required to make one of the item

• Each part or item has only one part number

Bills of Material

• Parent–Component Relationship– An assembly is considered a parent, and the items that comprise it are

called its component items.

Bills of Material

Table

Legs(4)

Ends(2)

Sides(2)

Top(1)

HardwareKit (1)

Item #206

Item #433

Item #711

Item #025

Item #822

Parent

Component

• The multilevel bill is made up of subassemblies. The subassemblies reflect the way manufacturing plans to build the product.

• The lowest items on the bill are usually purchased parts.• All parts and subassemblies have unique numbers.• By convention, the final assembly is considered level zero.

Levels down the bill are numbered consecutively.

Bills of Material

• The multilevel bill is a collection of single-level bills. Each single-level bill shows the parts to make one parent.

• To reduce storage space and to make maintenance easier, the computer stores single-level bills only.

• Items can be both parents of components and components of other parents.

Bills of Material

Bills of Material

• Low-Level Coding and Netting - A component may reside on more than one level in a bill of material– The low-level code is the lowest level on which a part resides in all bills

of material. Every part has only one low-level code.– Low-level are determined by starting at the lowest level of a bill of

material and, working up, recording the level against the part. If a part occurs on a higher level, its existence on the lower level has already been recorded.

– Once the low-level codes are obtained, the net requirements for each part can be calculated.

• Uses for Bills of Material– Product Definition– Engineering Change Control– Service Parts– Planning– Order Entry– Manufacturing– Costing– Etc.

• Maintaining bills of material and their accuracy is extremely important

Bills of Material

Bills of Material

List of components, ingredients, and materials needed to make product

Provides product structure Items above given level are called

parents Items below given level are called

children

BOM Example

B(2) Std. 12” Speaker kit C(3)

Std. 12” Speaker kit w/ amp-booster1

E(2)E(2) F(2)

Packing box and installation kit of wire, bolts, and screws

Std. 12” Speaker booster assembly

2

D(2)

12” Speaker

D(2)

12” Speaker

G(1)

Amp-booster

3

Product structure for “Awesome” (A)

A

Level

0

BOM Example

B(2) Std. 12” Speaker kit C(3)

Std. 12” Speaker kit w/ amp-booster1

E(2)E(2) F(2)

Packing box and installation kit of wire, bolts, and screws

Std. 12” Speaker booster assembly

2

D(2)

12” Speaker

D(2)

12” Speaker

G(1)

Amp-booster

3

Product structure for “Awesome” (A)

A

Level

0

Part B: 2 x number of As = (2)(50) = 100Part C: 3 x number of As = (3)(50) = 150Part D: 2 x number of Bs

+ 2 x number of Fs = (2)(100) + (2)(300) = 800Part E: 2 x number of Bs

+ 2 x number of Cs = (2)(100) + (2)(150) = 500Part F: 2 x number of Cs = (2)(150) = 300Part G: 1 x number of Fs = (1)(300) = 300

Bills of Material

Modular BillsModules are not final products but

components that can be assembled into multiple end items

Can significantly simplify planning and scheduling

Bills of Material

Planning Bills (Pseudo Bills)Created to assign an artificial parent to

the BOMUsed to group subassemblies to

reduce the number of items planned and scheduled

Used to create standard “kits” for production

Bills of Material

Phantom BillsDescribe subassemblies that exist only

temporarilyAre part of another assembly and never

go into inventory

Low-Level Coding Item is coded at the lowest level at which it

occurs BOMs are processed one level at a time

Lead Times, Exploding, and Offsetting

• Lead time: The time from when an order is placed until the part is ready for use.

• Exploding: Multiplying the parent requirements by the usage quantity through the product tree

• Offsetting: Placing the requirements in their proper time periods based on lead times

A

B C

D E

LT: 1 wk

LT: 2 wk LT: 1 wk

LT: 1 wk LT: 1 wk

Planned Orders

• Planned Order Receipt– That quantity planned to be received at a future date as a

result of a planned order release.• Planned Order Release

– Planned order releases are just planned; they have not been released. Orders for material should not be released until the planned order release date arrives.

• The planned order release of the parent becomes the gross requirement of the component.

Releasing Planned Orders

• Releasing Planned Orders– Check availability of components– Create shop packet or purchase requisition– Allocate components to that order– Release planned order, creating a scheduled receipt

MGMT 3750 27

Basic MRP Record

• The current time is the beginning of the first period.• The top row shows time periods, called time buckets.• The number of periods in the record is called the planning

horizon.• An item is considered available at the beginning of the time

bucket in which it is required.

Basic MRP Record

• The quantity shown in the projected available row is the projected available balance at the end of the period; all other quantities are for the beginning of the period.

• The immediate or most current period is called the action bucket.

Example from Pg. 88 (85 3rd. Ed.)

Week 1 2 3 4

Gross ReqtsProj Avail (75)Net ReqtsPlan Order RcptPlan Order Rls

50 45 20

Example from Pg. 88

Week 1 2 3 4

Gross ReqtsProj Avail (75)Net ReqtsPlan OrderRcptPlan Order Rls

755025

45-2020

20

Example from Pg. 88

Week 1 2 3 4


755025

458020100

20

Example from Pg. 88

Week 1 2 3 4


75

100

5025

458020100

2060

Example from Pg. 90 (87 3rd Ed.)

Week 1 2 3 4

Gross ReqtsSched ReceiptsProj Avail (150)Net ReqtsPlan Order RcptPlan Order Rls

50 250200

100 50

Example from Pg. 90

Week 1 2 3 4


50

100

25020050

100

50200

50

Example from Pg. 90

Week 1 2 3 4


50

100

25020050

100

15050200

50

100

Example from Pg. 90

Week 1 2 3 4


50

100

200

25020050

100

15050200

50

100

Release the order for 200 units.

Using the Material Requirements Plan

• The computer can perform all calculations and create planned order releases, but it does not (usually) issue purchase or manufacturing orders or reschedule open orders. Computer software can create exception messages and suggest types of action.

Using the Material Requirements Plan

• On the basis of action and exception messages, the planner can release planned orders, reschedule existing orders in or out, or change quantities. In addition, the planner works with other planners, master production schedulers, production activity control, and purchasing to solve problems as they arise.

The Basic Responsibilities of a Planner

– Launch (release) orders to purchasing or manufacturing– Reschedule due dates of open (existing) orders as

required– Reconcile errors and try to find their cause

The Basic Responsibilities of a Planner

– Address critical material shortages by expediting or re-planning

– Coordinate with other planners, master production schedulers, production activity control, and purchasing to resolve problems

Material Planner’s 3 Types of Orders

– Planned orders - calculated and controlled by the software

– Released orders - scheduled receipts; releasing is the responsibility of the planner

Material Planner’s 3 Types of Orders

– Firm planned orders - the planner tells the computer that the order is not to be changed; the planner uses firm planned orders to override the software in terms of quantity, time, or both. When re-planning, the software will not change the planner’s decision.

Managing the Material Requirements Plan

The planner must consider three important factors when managing the MRP:– Priority - refers to maintaining the correct due dates by

constantly evaluating the true due-date need for released orders and, if necessary, expediting or de-expediting.

– Bottom-up Re-planning - Action to correct for changed conditions should occur as low in the product structure as possible

Managing the Material Requirements Plan

The planner must consider three important factors when managing the MRP:– Reducing System Nervousness - Requirements can change

rapidly and by small amounts. The planner must judge whether the changes are important enough to react to and whether an order should be released.

End of Lecture 9

Documents

Lecture 9 Materials Requirements Planning Books Introduction to Materials Management, Sixth Edition, J. R. Tony Arnold, P.E., CFPIM, CIRM, Fleming College,