(2) Material Requirement Planning (Mrp)
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8/6/2019 (2) Material Requirement Planning (Mrp)
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MRP Material requirements planning (MRP):
Computer-based information systemthattranslatesmasterschedulerequirements
forend items intotime-phasedrequirements forsubassemblies,components,andrawmaterials.
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Independent and Dependent DemandIndependent Demand
A
B(4) C(2)
D(2) E(1) D(3) F(2)
Dependent Demand
Independent demand is uncertain.
Dependent demand is certain.
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DependentDemand Dependent demand:Demand for itemsthat
aresubassembliesorcomponentpartsto
beused in production of finished goods.
Oncethe independentdemand is known,
thedependentdemandcan bedetermined.
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Objectivesof MRP Improvecustomerservice
Reduce inventory investment
Improveplantoperating efficiency
Reduction in production anddeliverylead
times
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Material Requirements Planning
System Threemajorcomponentsof MRP system:
Master Production Schedule (MPS)
Billsof Materials (BOM)
Inventory Status File
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Firm orders
from known
customers
Forecasts
of demand
from random
customers
Aggregate
product
plan
Bill of
material
file
Engineering
design
changes
Inventory
record file
Inventory
transactions
Master production
Schedule (MPS)
Material
planning
(MRP
computer
program)
Order Release
Requirements
Order Rescheduling
Planned Orders
(future)
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Master Production Schedule (MPS) Basedon amasterproduction schedule,a
materialrequirementsplanning system:
Createsschedules identifying thespecific
partsandmaterialsrequiredtoproduceend items
Determinesexactunit numbers needed
Determinesthedateswhen orders forthosematerialsshouldbereleased,basedon leadtimes
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Billsof Materials (BOM) Itprovidescompleteproductdescription.
Materials
Parts
Components
Production sequence
Subassemblies
Fractionaloptions
Providesproductstructure (tree)
Visualdepiction oftherequirements in abillof
materials,whereallcomponentsarelistedbylevels.
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Inventory Status File Containsan extensiveamountof
information on every itemthat isproduced,ordered,or inventoried in thesystemlike
Identification number
Quantityon hand
Safetystock level
Quantitydisbursed
Procurementleadtimeofevery item
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MRP MatrixGross 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
Projectedon hand
Current inventory, or anticipated inventory at the end ofperiod
Projected on-handInventory at endof period t
Inventory on-hand at endof period t- 1= + -
Grossrequirementsin period t
Scheduled /plannedreceipts in
period t
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MRP MatrixNetrequirements
Actual quantity to produce based on projected on handand on-order quantity
PlannedOrder Receipts
Quantity, when orders need to be received
Consider lotsizing rule:
PlannedOrder Release
When order need to be placed to receive on time
Consider lead time
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Lot-Sizing in MRP Lot-size isthequantityordered/produced
atonetime
Largelotsarepreferredbecause:
Changeoverscostlessandcapacity greater
Annualcostofpurchaseordersless
Pricebreaksandtransportation breakscan beutilized
Smalllotsarepreferredbecause: Lower inventorycarrying cost
Reducedrisk ofobsolescence
Shortercycletimetoproducecustomerorder
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EXAMPLE 1
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MRP Example
A(2) B(1)
D(5)C(2)
X
C(3)
Item On-Hand Lead Time (Days)
X 50 2
A 75 3
B 25 1
C 10 2D 20 2
Requirements include 95 units (80 firm orders and 15 forecast) of X
on 10th day.
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A(2)
X
Day: 1 2 3 4 5 6 7 8 9 10
X Gro requ remen 95
LT=2 Schedu ed rece p
roj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Ne requiremen 45
hand lanned order receip 45
50 Plannerorder release 45
A Gr oss requiremen s 90
LT=3 Scheduled receip s
Proj. avail.balance 75 75 75 75 75 75 75 75
On- Ne requiremen s 15
hand Plannedorder receip 15
75 Plannerorder release 15
B Gross requiremen s 45LT=1 Scheduled receip s
Proj. avail.balance 25 25 25 25 25 25 25 25
On- Ne requiremen s 20
hand Plannedorder receip 20
25 Plannerorder release 20
C Gross requiremen s 45 40
LT=2 Scheduled receip s
Proj. avail.balance 10 10 10 10 10
On- Ne requiremen s 35 40hand Plannedorder receip 35 40
10 Plannerorder release 35 40
D Gross requiremen s 100
LT=2 Scheduled receip s
Proj. avail.balance 20 20 20 20 20 20 20
On- Ne requiremen s 80
hand Plannedorder receip 80
20 Plannerorder release 80
It takes
2 As for
each X
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Day: 1 2 3 4 5 6 7 8 9 10
X Gross requiremen s 95
LT=2 Scheduled receip s
Proj. avail.balance 50 50 50 50 50 50 50 50 50 50
On- Ne requiremen s 45
hand Plannedorder receip 45
50 Plannerorder release 45
A Gr oss requiremen s 90
LT=3 Scheduled receip s
Proj. avail.balance 75 75 75 75 75 75 75 75
On- Ne requiremen s 15
hand Plannedorder receip 15
75 Plannerorder release 15
B Gross requiremen s 45LT=1 Scheduled receip s
Proj. avail.balance 25 25 25 25 25 25 25 25
On- Ne requiremen s 20
hand Plannedorder receip 20
25 Plannerorder release 20
C Gross requiremen s 45 40
LT=2 Scheduled receip s
Proj. avail.balance 10 10 10 10 10
On- Ne requiremen s 35 40hand Plannedorder receip 35 40
10 Plannerorder release 35 40
D Gross requiremen s 100
LT=2 Scheduled receip s
Proj. avail.balance 20 20 20 20 20 20 20
On- Ne requiremen s 80
hand Plannedorder receip 80
20 Plannerorder release 80
B(1)A(2)
X
It takes
1 B for
each X
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A(2) B(1)
X
C(3)
Day: 1 2 3 4 5 6 7 8 9 10
X Gross requiremen s 95
LT=2 Scheduled receip s
Proj. avail.balance 50 50 50 50 50 50 50 50 50 50
On- Ne requiremen s 45
hand Plannedorder receip 45
50 Plannerorder release 45
A Gr oss requiremen s 90
LT=3 Scheduled receip s
Proj. avail.balance 75 75 75 75 75 75 75 75
On- Ne requiremen s 15
hand Plannedorder receip 15
75 Plannerorder release 15
B Gross requiremen s 45LT=1 Scheduled receip s
Proj. avail.balance 25 25 25 25 25 25 25 25
On- Ne requiremen s 20
hand Plannedorder receip 20
25 Plannerorder release 20
C Gross requiremen s 45 40
LT=2 Scheduled receip s
Proj. avail.balance 10 10 10 10 10
On- Ne requiremen s 35 40hand Plannedorder receip 35 40
10 Plannerorder release 35 40
D Gross requiremen s 100
LT=2 Scheduled receip s
Proj. avail.balance 20 20 20 20 20 20 20
On- Ne requiremen s 80
hand Plannedorder receip 80
20 Plannerorder release 80
It takes 3
Cs foreach A
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A(2) B(1)
C(2)
X
C(3)
Day: 1 2 3 4 5 6 7 8 9 10
X Gross requiremen s 95
LT=2 Scheduled receip s
Proj. avail.balance 50 50 50 50 50 50 50 50 50 50
On- Ne requiremen s 45
hand Plannedorder receip 45
50 Plannerorder release 45
A Gr oss requiremen s 90
LT=3 Scheduled receip s
Proj. avail.balance 75 75 75 75 75 75 75 75
On- Ne requiremen s 15
hand Plannedorder receip 15
75 Plannerorder release 15
B Gross requiremen s 45LT=1 Scheduled receip s
Proj. avail.balance 25 25 25 25 25 25 25 25
On- Ne requiremen s 20
hand Plannedorder receip 20
25 Plannerorder release 20
C Gross requiremen s 45 40
LT=2 Scheduled receip s
Proj. avail.balance 10 10 10 10 10
On- Ne requiremen s 35 40hand Plannedorder receip 35 40
10 Plannerorder release 35 40
D Gross requiremen s 100
LT=2 Scheduled receip s
Proj. avail.balance 20 20 20 20 20 20 20
On- Ne requiremen s 80
hand Plannedorder receip 80
20 Plannerorder release 80
It takes 2
Cs for
each B
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A(2) B(1)
D(5)C(2)
X
C(3)
Day: 1 2 3 4 5 6 7 8 9 10
X Gross requiremen s 95
LT=2 Scheduled receip s
Proj. avail.balance 50 50 50 50 50 50 50 50 50 50
On- Ne requiremen s 45
hand Plannedorder receip 45
50 Plannerorder release 45
A Gr oss requiremen s 90
LT=3 Scheduled receip s
Proj. avail.balance 75 75 75 75 75 75 75 75
On- Ne requiremen s 15
hand Plannedorder receip 15
75 Plannerorder release 15
B Gross requiremen s 45LT=1 Scheduled receip s
Proj. avail.balance 25 25 25 25 25 25 25 25
On- Ne requiremen s 20
hand Plannedorder receip 20
25 Plannerorder release 20
C Gross requiremen s 45 40
LT=2 Scheduled receip s
Proj. avail.balance 10 10 10 10 10
On- Ne requiremen s 35 40hand Plannedorder receip 35 40
10 Plannerorder release 35 40
D Gross requiremen s 100
LT=2 Scheduled receip s
Proj. avail.balance 20 20 20 20 20 20 20
On- Ne requiremen s 80
hand Plannedorder receip 80
20 Plannerorder release 80
It takes 5
Ds for each
B
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EXAMPLE 2
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Product Structure forClipboard
Product Structure RecordProduct Structure Record
ClipboardLevelLevel 00
Level 1Level 1
Level 2Level 2Spring (1)
BottomClip (1)
TopClip (1)
Pivot(1)
Rivets (2)
ClipAssembly
(1)
Pressboard (1)
Top lip ( ) ottom lip ( )
i ot ( ) pri ( )
Ri t (2)
Fi i lipboar r boar ( )
Clipboar
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EXAMPLE 3
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Product Structure for Bicycle
Bi l ( )/N
andl Bar ( )
/N
Frame A ( )
/N 2
eel (2)
/N 3
Frame ( )
/N 4
Bi le( )/N
andleBar ( )
/N
Frame A ( )
/N 2
eel (2)
/N 3
Frame ( )
/N 4
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EXAMPLE 4
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Material Requirements Planning To produce an end item A component B/unit of end item is
needed.
It takes two weeks to produce a batch of component B. Stock in hand 170 units
50 uniteswillbecompletedatthebeginning ofweek 2
Average Weekly Demand 100 units
Set-up Cost $90
Inventory Holding Cost 20%/unit/week
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Material Requirements PlanningWeek
1 2 3 4 5 6 7 8 9 10 11 12
GrossRequirement
150 50 70 100 0 150 200 100 0 80 20 160
On-handinventory
170 20 20
Scheduledreceipts
50
Netrequirements
50 100 0 150 200 100 0 80 20 160
Plannedproduction
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LOT-FOR-LOT MethodWeek
1 2 3 4 5 6 7 8 9 10 11 12
GrossRequirement
150 50 70 100 0 150 200 100 0 80 20 160
On-handinventory
170 20 20 0 0 0 0 0 0 0 0 0 0
Scheduledreceipts
50 50 100 150 200 100 80 20 160
Netrequirements
50 100 0 150 200 100 0 80 20 160
Plannedproduction
50 100 0 150 200 100 0 80 20 160 0 0
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LOT-FOR-LOT Method Set-up cost
= 8 set-ups * $90 perset-up
= $720
Holding cost= 20 units in week 1 * 0.2 + 20 units in week 2 * 0.2
= $8
Total cost for the 12-week period= $720 + $8
= $728
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Economic Order Quantity (EOQ) Average Weekly Demand (R) 100 units
Set-up Cost (cp) $90
Inventory Holding Cost (ch) 20%/unit/week
EOQ = 2Rcp = 20*100*90
ch 0.2
= 300 units
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Economic Order Quantity (EOQ)Week
1 2 3 4 5 6 7 8 9 10 11 12
GrossRequirement
150 50 70 100 0 150 200 100 0 80 20 160
On-handinventory
170 20 20 250 150 150 0 100 0 0 220 200 40
Scheduledreceipts
50 300 300 300
Netrequirements
50 100 0 150 200 100 0 80 20 160
Plannedproduction
300 0 0 0 300 0 0 300 0 0 0 0
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Economic Order Quantity (EOQ)
Set-up cost= 3 * $90
= $270
Holding cost= 1150 * $0.2
= $230
Total incremental cost= $270 + $230
= $500
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EXAMPLE 5
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(C) Gear (1)(B) Gear Box (1)(A) Transmission(1) (D) Forging Blank (5)
Product structure for making a truck
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(X) Truck (1)
(A)
Transmission (1)
(B) Gear
Box (1) (C) Gear (1)
(D) Forging
Blank (5)
Item On-Hand Lead Time
(Weeks)
Truck 10 1
Transmission 20 2Gear Box 24 1
Gear 18 1
Forging Blank 40 2
Suppose we are to produce 40 trucks. What are the net requirements for each
component?
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Gross Requirements
Scheduled Receipts
Projected on Hand
Net Requirement
Planned Order Receipts
Planned Order Releases
Gross Requirements
Scheduled Receipts
Projected on Hand
Net Requirement
Planned Order Receipts
Planned Order Releases
WEEK 2 3 4 5 6 7 81
ItemLowLead
TimeWeeks
On
hand
Level
CodeIdentif.
10 10 10 10 10 1010 10 10
101 0 T 50
40
40
40
2 20 1 A
20 20 20 20 20 202020
20
20
40
20
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Gross Requirements
Scheduled Receipts
Projected on Hand
Net Requirement
Planned Order Receipts
Planned Order Releases
Gross Requirements
Scheduled Receipts
Projected on Hand
Net Requirement
Planned Order Receipts
Planned Order Releases
WEEK 2 3 4 5 6 7 81
ItemLowLead
TimeWeeks
On
hand
Level
Code Identif.
21 24 B
242424242424
16
16
16
40
1 18 3 C
18181818 18
22
40
22
22
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Gross Requirements
Scheduled Receipts
Projected on Hand
Net Requirement
Planned Order Receipts
Planned Order Releases
WEEK 2 3 4 5 6 7 81
ItemLowLead
TimeWeeks
On
hand
Level
Code Identif.
440 D2
40404016040
160
160
200
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EOQ example
Setup cost, S = $100
Unit price, C = $50
Holding costs, HR= .24 per annum
HP = .02 per period
Annual demand, D = 200
Q = (2DS / CHR)1/2 = 58
Period 1 2 3 4 5 6 7 8 9 10
Net rqmts. 35 10 40 20 5 10 30
Planned orders 58 58 58
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MRP Example:-
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MRP Example:-
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Speaker Kits,Inc.,packages
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Level Product structure for Awesome(A)
A0
1
2
3
B(2) Std. 12 Speaker Kit C(3) Std. 12Speaker kit
w/ amp-booster
E(2)
D(2)
E(2) F(2) Std. 12 Speaker
booster assembly
G(1) D(2)
12 Speaker 12 Speaker
Packing box and
installation kit of
wire, bolts and
screws Amp-booster
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2 weeks to
produce
2 weeks
2 weeks
3 weeks
2 weeks
1 week
1 week
1 week
1 week
Start production of DMust have D and E
completed her so
production can begin
on B
1 4 5 6 72 3 8
Time in weeks
G
A
D
E
C
B
F
D
E
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Item Inventory on handA 10B 15
C 20D 10E 10
F 5G 0
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Gross Requirement 80Scheduled Receips
Projected on Hand 15 15 15 15 15 15 15 15
Net Requirement 65
Planned Order Receipts 65
Planned Order Releases 65
2 15 1 B
Gross Requirement 50
Scheduled ReceipsProjected on Hand 10 10 10 10 10 10 10 10 10
Net Requirement 40
Planned Order Receipts 40
Planned Order Releases 40
1 10 0 A
LeadTime
(weeks)
On
Hand
Low-Level
Code
ItemIdenti-
fication Week 1 2 3 4 5 6 7 8
A
Net Material Requirement Plan for Product A
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Gross Requirement 120
Scheduled Receips
Projected on Hand 20 20 20 20 20 20 20 20
Net Requirement 100Planned Order Receipts 100
Planned Order Releases 100
1 20 1 C A
Gross Requirement 130 200
Scheduled Receips
Projected on Hand 10 10 10 10 10 10
Net Requirement 120 200
Planned Order Receipts 120 200
Planned Order Releases 120 200
2 10 2 E B
Lead
Time
(weeks)
On
Han
d
Low-
Level
Code
Item
Identi-
fication Week 1 2 3 4 5 6 7 8
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Gross Requirement 195
Scheduled Receips
Projected on Hand 0
Net Requirement 195
Planned Order Receipts 195
Planned Order Releases 195
2 0 3 G F
Lead
Time
(weeks)
On
Han
d
Leve
l
Cod
Identi-
ficatio
n Week 1 2 3 4 5 6 7 8
Gross Requirement 390 130
Scheduled Receips
Projected on Hand 10 10 10 10
Net Requirement 380 130
Planned Order Receipts 380 130
Planned Order Releases 380 130
1 10 3 D BF
Gross Requirement 200
Sc heduled Receips
Projected on Hand 5 5 5 5 5 5 5
Net Requirement 195
Planned Order Receipts 195
Planned Order Releases 195
3 5 2 F C
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Exampleof MRP LogicandProduct Structure Tree
B(4)
E(1)D(2)
C(2)
F(2)D(3)
A
Product Structure Tree for Assembly ALead Times
A 1 day
B 2 days
C 1 day
D 3 days
E 4 days
F 1 day
Demand
Day 10 50 A
Day 8 20 B (Spares)
Day 6 15D (Spares)
Given theproduct structure tree for and the lead time and
demand information below, provide a materials requirements
plan that defines the number of units of each component and
when they will be needed.
Thi i h t t t d l th fi l t i l50
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Day: 1 2 3 4 5 6 7 8 9 10
A Required 50
LT=1 Order Placement 50
B Required 20 200
LT=2 Order Placement 20 200
C Required 100
LT=1 Order Placement 100
D Required 55 400 300
LT=3 Order Placement 55 400 300
E Required 20 200
LT=4 Order Placement 20 200
F Required 200
LT=1 Order Placement 200
B(4)
E(1)D(2)
C(2)
F(2)D(3)
A
40 + 15 spares
Part D: Day 6
This is what we want to develop, the final materials
requirements plan. Lets see how we got to this
The McGraw-Hill Companies, Inc., 2001
50
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LT = 1 day
Day: 1 2 3 4 5 6 7 8 9 10
A Required 50
Order Placement 50
First, the number of units of A are scheduled
backwards to allow for their lead time So, in the
materials requirement plan below, we have toplace an order for50 units of A on the 9th day to
receive them in the 10th day
Next we need to start scheduling the components that make up
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Next, we need to start scheduling the components that make up .
Day : 1 2 3 4 5 6 7 8 1
ir 5
r r lac e m e n t 5
e q u i re d 2 2
rd e r lac e m e n t 2 2
LT = 2
B(4)
E(1)D(2)
C(2)
F(2)D(3)
A 4x50=200
In the case of component B we need Bs for each .
Since we need 50 s, that means 00 Bs.
nd again, we back the schedule up for the necessary days of lead time.
Next we need to start scheduling the components that make up
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Next, we need to start scheduling the components that make up .
Day : 1 2 3 4 5 6 7 8 1
e q u i re d 5
rd e r lac e m e n t 5
e q u i re d 2 2
rd e r lac e m e n t 2 2
SparesLT = 2
B(4)
E(1)D(2)
C(2)
F(2)D(3)
A 4x50=200
In the case of component B we need Bs for each .
Since we need 50 s, that means 00 Bs.
nd again, we back the schedule up for the necessary days of lead time.
Finally repeating the process for all components we have54
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Day: 1 2 3 4 5 6 7 8 9 10
A Required 50
LT=1 Order Placement 50B Required 20 200
LT=2 Order Placement 20 200
C Required 100
LT=1 Order Placement 100
D Required 55 400 300
LT=3 Order Placement 55 400 300
E Required 20 200LT=4 Order Placement 20 200
F Required 200
LT=1 Order Placement 200
B(4)
E(1)D(2)
C(2)
F(2)D(3)
A
40 + 15 spares
Part D: Day 6
Finally, repeating the process for all components, we have
the final materials requirements plan:
The McGraw-Hill Companies, Inc., 2001
2x50=100LT = 1
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THANKS
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