Material Requirement Planning (MRP)

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Material Requirement Planning (MRP)

• Chapter 16
• Feb 9, 2006

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Material Requirement Planning (MRP)

• ______________________________________
• ______________________________________
• Key Outputs of MRP
• Calculate demand for component items
• Determine requirements for subassemblies,
  components, and raw material
• Determine when they are needed
• Generate work orders and purchase order
• Consider lead time

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When to use MRP

• ___________________________________
• ___________________________________
• ___________________________________
• ___________________________________

Dependent / Independent Demand?
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Demand Characteristics
Demand Characteristics for Finished Products and
Their Components
Dependent demand
Independent demand
100 x 1 100 tabletops
100 tables
100 x 4 400 table legs
400 300 200 100
Discrete demand
Continuous demand
400 300 200 100
No. of tables
No. of tables
1 2 3 4 5 Week
M T W Th F M T W Th F
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MRP Input Output
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Major Inputs to MRP Process1. Bill of Material

• Product structure file
• Determines which component items need to be
  scheduled

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Major Inputs to MRP Process2. Master Production
Schedule (MPS)

• Drives MRP process with a schedule of finished
  products
• Quantities represent production not demand
• Quantities may consist of a combination of
  customer orders demand forecasts
• Quantities represent what needs to be produced,
  not what can be produced
• Example

PERIOD MPS ITEM 1 2 3 4 5 Clipboard 85 95 1
20 100 100 Lapdesk 0 50 0 50 0 Lapboard 75 120 4
7 20 17 Pencil Case 125 125 125 125 125
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Major Inputs to MRP Process3. Inventory Record

• _________________________________________________
• Contains an extensive amount of information on
  every item that is produced, ordered, or
  inventoried in the system
• _________________________________________________

DESCRIPTION INVENTORY POLICY
Item Pressboard Lead time 1 Item no. 734 Annual
demand 5000 Item type Purch Holding
cost 1 Product/sales class Comp Ordering/setup
cost 50 Value class B Safety stock
0 Buyer/planner RSR Reorder point 39 Vendor/drawi
ng 07142 EOQ 316 Phantom code N Minimum order
qty 100 Unit price/cost 1.25 Maximum order
qty 500 Pegging Y Multiple order
qty LLC 1 Policy code 3
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MRP Processes 4 Basic Steps

• Exploding the bill of material
• ___________________________________
• Netting out inventory
• ___________________________________
• ___________________________________
• Lot sizing rule How many units
• ___________________________________
• ___________________________________
• ___________________________________
• Time-phasing requirements
• ___________________________________

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Lot Sizing Rule Comparison

• The FOQ rule ___________ _______________________
• The POQ rule ___________ _______________________
• _______________________
• _______________________
• The L4L rule ___________ _______________________
• _______________________
• _______________________

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MRP Matrix

• Gross Requirement
• Derived from planned order releases of the parent
• Actual / estimated demand, in case of final
  product
• Schedule Receipts
• Items on order
• Scheduled to arrive in the future time period
• Projected on hand
• Current inventory, or anticipated inventory at
  the end of period

Inventory on-hand at end of period t - 1
Scheduled / planned receipts in period t
Gross requirements in period t
Projected on-hand Inventory at end of period t


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MRP Matrix

• Net requirements
• Actual quantity to produce based on projected on
  hand and on-order quantity
• Planned Order Receipts
• Quantity, when orders need to be received
• Consider lot sizing rule
• Planned Order Release
• When order need to be placed to receive on time
• Consider lead time

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MRP Matrix (You can download the template from
our class webpage)
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Example MRP Matrix
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MRP Example 1

• Given the following information, determine when
  orders should be released for A, C, and D and the
  size of those orders

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MRP Example 2

• Given the following information, determine when
  orders should be released for A, B, C, and D and
  the size of those orders.

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Evolution of MRP

• MRP (material requirements planning) was the
  precursor to ERP
• Primarily a production planning and control
  system
• MRP evolved to MRP II (manufacturing resource
  planning)
• ERP (Enterprise Resource Planning) and ERP II
  continue to extend the links through all business
  processes

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Enterprise Resource Planning (ERP)An Overview

• Organizes and manages a companys business
  processes by sharing information across
  functional areas
• Connects with supply-chain and customer
  management applications
• ERP in the nutshell
• Client server software
• Integrates majority of business processes
• Processes majority of transactions
• Enterprise wide database
• Real time data access
• adapted from e-courseware, MIT Sloan

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ERP Modules Figure 12.1 Organizational Data
Flow
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ERP ModulesFigure 12.2 ERPs Central Database
ERP Data Repository
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ERP Implementation Process

• First step is to analyze business processes
• Which processes have the biggest impact on
  customer relations?
• Which process would benefit the most from
  integration?
• Which processes should be standardized?
• Use of Internet portals can aid implementation