Ch16 mrp

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MATERIALS REQUIREMENTPLANNING

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Materials requirement Planning (MRP)

MRP Logic and Product Structure Trees

Time Fences

MRP Example

MRP II and Lot Sizing

OBJECTIVES

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MATERIALS REQUIREMENT PLANNING (MRP)

Fundamental Questions in Manufacturing are –

• What are we going to make?

• What does it take to make it?

• What do we have?

• What do we have to get?

4Materials Requirement Planning

• Materials requirement planning (MRP) is a means for determining the number of parts, components, and materials needed to produce a product

• MRP provides time scheduling information specifying when each of the materials, parts, and components should be ordered or produced

• Dependent demand drives MRP

• MRP is a software system

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Product Hierarchy

End Product

Assembly 1

Subassembly 1 Subassembly 2

Component A Component B

Assembly 2

Component E

Component C Component D

Raw Material X Raw material Y

Component F

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16-6

MRP Example of BOM

Top

Leg

Long Rail

Short Rail

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16-7

BOM (Product Structure)

Short Rails (2)1 week

Table (End Item)1 week

Long Rails (2)1 week

Legs (4)1 week

Top (1)2 weeks

Leg Assembly (1)1 week

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Example of MRP Logic and Product Structure Tree

B(4)

E(1)D(2)

C(2)

F(2)D(3)

A

Product Structure Tree for Assembly A Lead TimesA 1 dayB 2 daysC 1 dayD 3 daysE 4 daysF 1 day

Total Unit DemandDay 10 50 ADay 8 20 B (Spares)Day 6 15 D (Spares)

Given the product structure tree for “A” 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

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LT = 1 day

Day: 1 2 3 4 5 6 7 8 9 10A 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 to place an order for 50 units of “A” on the 9th day to receive them on day 10.

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Next, we need to start scheduling the components that make up “A”. In the case of component “B” we need 4 B’s for each A. Since we need 50 A’s, that means 200 B’s. And again, we back the schedule up for the necessary 2 days of lead time.

Day: 1 2 3 4 5 6 7 8 9 10A Required 50

Order Placement 50B Required 20 200

Order Placement 20 200

B(4)

E(1)D(2)

C(2)

F(2)D(3)

A

SparesLT = 2

4x50=200

Day: 1 2 3 4 5 6 7 8 9 10A Required 50

LT=1 Order Placement 50B Required 20 200

LT=2 Order Placement 20 200C Required 100

LT=1 Order Placement 100D Required 55 400 300

LT=3 Order Placement 55 400 300E Required 20 200

LT=4 Order Placement 20 200F 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

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Master Production Schedule (MPS)

Time-phased plan specifying how many and when the firm plans to build each end item

Aggregate Plan(Product Groups)

Aggregate Plan(Product Groups)

MPS(Specific End Items)

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Types of Time Fences

Frozen

– No schedule changes allowed within this

window

Moderately Firm

– Specific changes allowed within product

groups as long as parts are available

Flexible

– Significant variation allowed as long as overall

capacity requirements remain at the same

levels

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Example of Time Fences

8 15 26

Weeks

FrozenModerately

Firm Flexible

Firm Customer Orders

Forecast and availablecapacity

Capacity

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Materials Requirement Planning System

Based on a Master Production Schedule, a Materials Requirement Planning system:

• Creates schedules identifying the specific parts and materials required to produce End Items

• Determines exact unit numbers needed

• Determines the dates when orders for those materials should be released – based

on Leadtimes

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©The McGraw-Hill Companies, Inc., 2004

Firm orders from knowncustomers

Forecastsof demand

from randomcustomers

Aggregateproduct

plan

Bill ofmaterial

file

Engineeringdesign

changes

Inventoryrecord file

Inventorytransactions

Master productionSchedule (MPS)

Primary reportsSecondary reports

Planned order schedule for inventory and production control

Exception reportsPlanning reportsReports for performance control

MaterialsPlanning

(MRP computer program)

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Bill of Materials (BOM) FileA Complete Product Description

• Materials

• Parts

• Components

• Production sequence

• Modular BOM

• Subassemblies

• Super BOM

• Fractional options

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Inventory Records File

•Each inventory item carried as a separate file

•Status according to “time buckets”

•Pegging

• Identify each parent item that created demand

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Primary MRP Reports

• Planned orders to be released at a future time

• Order release notices to execute the planned

orders

• Changes in due dates of open orders due to

rescheduling

• Cancellations or suspensions of open orders

due to cancellation or suspension of orders on

the master production schedule

• Inventory status data

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Secondary MRP Reports

• Planning reports, for example, forecasting

inventory requirements over a period of

time

• Performance reports used to determine

agreement between actual and

programmed usage and costs

• Exception reports used to point out

serious discrepancies, such as late or

overdue orders

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Additional MRP Scheduling Terminology

• Gross Requirements

• Scheduled receipts

• Projected available balance

• Net requirements

• Planned order receipt

• Planned order release

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MRP Example

A(2) B(1)

D(5)C(2)

X

C(3)

Item On-Hand Lead Time (Weeks)X 50 2A 75 3B 25 1C 10 2D 20 2

Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10

Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10

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A(2)

X

Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95

LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50

On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90

LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75

On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45

LT=1 Scheduled receipts Proj. avail. balance 25 25 25 25 25 25 25 25

On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40

LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10

On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100

LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20

On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80

It takes 2 A’s for each X

It takes 2 A’s for each X

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Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95

LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50

On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90

LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75

On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45

LT=1 Scheduled receipts Proj. avail. balance 25 25 25 25 25 25 25 25

On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40

LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10

On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100

LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20

On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80

B(1)A(2)

X

It takes 1 B for each 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 10X Gross requirements 95

LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50

On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90

LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75

On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45

LT=1 Scheduled receipts Proj. avail. balance 25 25 25 25 25 25 25 25

On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40

LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10

On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100

LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20

On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80

It takes 3 C’s for each A

It takes 3 C’s for each A

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A(2) B(1)

C(2)

X

C(3)

Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95

LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50

On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90

LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75

On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45

LT=1 Scheduled receipts Proj. avail. balance 25 25 25 25 25 25 25 25

On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40

LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10

On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100

LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20

On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80

It takes 2 C’s for each B

It takes 2 C’s 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 10X Gross requirements 95

LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50

On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90

LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75

On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45

LT=1 Scheduled receipts Proj. avail. balance 25 25 25 25 25 25 25 25

On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40

LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10

On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100

LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20

On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80

It takes 5 D’s for each B

It takes 5 D’s for each B

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Closed Loop MRP

Production PlanningMaster Production SchedulingMaterial Requirements PlanningCapacity Requirements Planning

Realistic?No

Feedback

Execute:Capacity PlansMaterial Plans

Yes

Feedback

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EVOLUTION OF MRP - II

MRP - Materials Requirement Planning

MPS - Master Production Schedule

PPC - Production Planning and Control

IC - Inventory ControlENG - Engineering DataCC - Cost Control

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Manufacturing Resource Planning (MRP II)

Goal: Plan and monitor all resources of

a manufacturing firm (closed loop):

– manufacturing

– marketing

– finance

– engineering

Simulate the manufacturing system

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Question Bowl

Which type of industry has only “medium”

expected benefits from the use of MRP?

a. Assemble-to-stock

b. Fabricate-to-stock

c. Assemble-to-order

d. Fabricate-to-order

e. Process

Answer: e. Process

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Question BowlTo ensure good master scheduling, a master

scheduler must do which of the following?

a. Never lose sight of the aggregate plan

b. Identify and communicate all problems

c. Be involved with customer order promising

d. Be visible to all levels of management

e. All of the above

Answer: e. All of the above (Correct answer can also include objectively trade off manufacturing, marketing, and engineering conflicts and include all demands from product sales, warehouse replenishment, spares, and interplant requirements.)

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Question Bowl

The purpose of a “time fence” is which of the

following?

a. Make sure the cows don’t get out of the barn

b. Control flow through the production system

c. Maximize sales to retailers

d. All of the above

e. None of the above

Answer: b. Control flow through the production system

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Question Bowl

Which of the following is an objective under an

MRP system?

a. To improve customer service

b. Minimize inventory investment

c. Maximize production operating efficiency

d. All of the above

e. None of the above

Answer: d. All of the above

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Question Bowl

Which of the following is one of the three

main inputs into an MRP system?

a. BOM file

b. Exception report

c. Planning report

d. All of the above

e. None of the above

Answer: a. BOM file (Correct answer can also include Master Schedule and Inventory Records File.)

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Question Bowl

An MRP program accesses the status of a job

according to specific time periods called which

of the following?

a. Peg record

b. Time fence

c. Time bucket

d. Time clock

e. None of the above

Answer: c. Time bucket

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Question BowlIn MRP, workload per work center can be determined. When the work capacity is exceeded, which of the following options can be implemented to correct the imbalance of workload?

a. Work overtimeb. Renegotiate the due date and reschedulec. Subcontract to an outside shopd. All of the abovee. None of the aboveAnswer: d. All of the above (Correct answer can also include selecting an alternative work center and rescheduling the work at a different time.)

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Question Bowl

Which of the following are reasons why a Lot-For-

Lot (L4L) method of lot sizing can be used in an

MRP application?

a. Minimizes carrying costs

b. Sets planned orders to exactly match the net

requirements

c. Produces exactly what is needed

d. Does not carry any units over into future periods

e. All of the above

Answer: e. All of the above