Resource Requirements Planning: MRP and CRPsite.iugaza.edu.ps/aschokry/files/2015/02/OM-Chap-15-… · · 2015-03-01١ Islamic University of Gaza - Palestine Chapter 15 Resource

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Islamic University of Gaza - Palestine

Chapter 15

Resource Requirements Planning:MRP and CRP


Chapter 15: Learning Outcomes

When you complete this chapter you should be ableto:

1. Develop a product structure2. Build a gross requirements plan3. Build a net requirements plan4. Determine lot sizes for lot-for-lot, Economic Order

Quantity (EOQ), and Periodic Order Quantity (POQ)5. Capacity Requirements Planning

٢


Contributors to MRP and theme of MRP

• Joseph Orlicky• George Plossl• Oliver Wight• American Production and Inventory Control SocietyThe theme of MRP is ”Getting the right amount of the right

materials to the right place at the right time”


What is MRP?

• Computerized Inventory Control system• Production Planning System• Management Information System• Manufacturing Control System

٣


When to use MRP

• Job Shop Production (Other name is what?)• Complex Products• Assemble-to-Order Environments• Discrete and Dependent Demand Items


What can MRP do?

• Reduce Inventory Levels• Reduce Component

Shortages• Improve Shipping

Performance• Improve Customer Service• Improve Productivity• Simplified and Accurate

Scheduling

• Reduce Purchasing Cost• Improve Production

Schedules• Reduce Manufacturing

Cost• Reduce Lead Times• Less Scrap and Rework• Higher Production Quality

٤


• Improve Communication• Improve Plant Efficiency• Reduce Freight (cargo)

Cost• Reduction in Excess

(extra) Inventory

• Reduce Overtime• Improve Supply

Schedules• Improve Calculation of

Material Requirements• Improve Competitive

Position

What can MRP do? (cont.)


Three Basic Steps of MRP

• Identifying Requirements• Running MRP – Creating the Suggestions• Firming the Suggestions

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Step 1: Identifying the Requirements

• Quantity on Hand• Quantity on Open Purchase Order• Quantity in/or Planned for Manufacturing• Quantity Committed to Existing Orders• Quantity Forecasted


Step 1: Important Information

MRP is…..• Company Sensitive• Location Sensitive• Date Sensitive

٦


Step 2: Running MRP – Creating the Suggestions

• Critical Items• Expedite Items (make the delivery of an items faster)• Delay Items


Step 3: Firming the Suggestions

• Manufacturing Orders• Purchasing Orders• Various Reports

٧


Overview of the MRP System

Product StructureFile

Master ProductionSchedule

Inventory MasterFile

Material RequirementsPlanning

Manufacturing Orders Purchase Orders Various Reports


MRP Inputs

• Product Structure File• Master Production Schedule• Inventory Master File

٨


Product Structure File

• Bill of Materials (This is the sequence of everything thatgoes into the final product).

• Other names are: Product structure tree, a schematic, aflow diagram


Master Production Schedule

• Schedule of Finished Products• Represents Production, not Demand• Combination of Customer Orders and Demand Forecasts• What Needs to be Produced

٩


Inventory Master File

• On-Hand Quantities• On-Order Quantities• Lot Sizes• Safety Stock• Lead Time• Past-Usage Figures


Resource Requirements Planning

Master ProductionScheduling (MPS)Master ProductionScheduling (MPS)

Material RequirementsPlanning (MRP)

Material RequirementsPlanning (MRP)

Capacity RequirementsPlanning (CRP)

Capacity RequirementsPlanning (CRP)

AggregatePlanning

AggregatePlanning

ResourceRequirements

Planning

Chapter 13

Chapter 15

١٠


Material Requirements Planning (MRP)


LocoMopeds is a manufacturer of off-road mopeds.The following product structure diagram represents thebill of materials for its dual-carburetor Model 442 moped.

MOPEDMOPED

ENGINEASSEMBLY

ENGINEASSEMBLY

MOTORMOTOR CARBURETOR(2)

CARBURETOR(2)

GASTANKGASTANK

WHEELASSEMBLY

(2)

WHEELASSEMBLY

(2)

HUBASSEMBLY

HUBASSEMBLY TIRETIRE

FRAMEFRAME

Level 0

Level 1

Level 2

Example: MRP Schedule

١١


• Bill of MaterialParent Component Level Compon.Code Code Code Description Req’d

442 0 #442 Moped442 EA 1 Engine Assem. 1

GT 1 Gas Tank 1WA 1 Wheel Assem. 2F 1 Frame 1

EA M 2 Motor 1C 2 Carburetor 2

WA HA 2 Hub Assem. 1T 2 Tire 1



• Inventory Status ReportItemCode

On-Hand

SafetyStock

LotSize

LeadTime

Sched. ReceiptsQnty. Week

442 500 200 LFL 1 -- --EA 300 100 500 1 1000 10GT 600 200 LFL 2 900 10

WA 500 400 500 1 2000 10F 600 0 2000 3 2000 10M 250 0 LFL 1 -- --C 150 100 2000+ 2 -- --

HA 100 0 LFL 1 2400 11T 500 500 1000 3 3000,2000 11,12


١٢


The company is currently planning production forweeks 10 through 16. Based on existing orders anddemand forecasts, the master production schedule is asfollows:

Master Production Schedule: #442 Moped

Determine the MRP schedule required to support themaster production schedule for the Model 442 moped inweeks 10-16.

11

1300 800 1200 1400

10 1615141312

0 1000 0

WEEK

QUANTITY



• MRP Schedule for #442 Mopeds for Weeks 10 - 16,considering that:– Gross Requirements come from the moped MPS– There is an On-Hand balance of 500 mopeds at the end of

week 9– There are no Scheduled Receipts for mopeds– A lot-for-lot rule is used for ordering mopeds– Safety stock of 200 mopeds is desired– Lead time for mopeds is one week


١٣


• MRP Schedule for #442 Mopeds . . . Initially

GROSS REQUIREMENTS

SCHEDULED RECEIPTS

AVAILABLE (ON-HAND = 500)

NET REQUIREMENTS

PLANNED ORDER RECEIPTS

PLANNED ORDER RELEASES

ITEM: 442 MOPED LT: 1LOT SIZE: LFL SS: 200

0

10

1000 0

11 12 13

1300 800

1514

14001200

16

WEEK



• MRP Schedule for #442 Mopeds . . . Completed

GROSS REQUIREMENTS

SCHEDULED RECEIPTS


NET REQUIREMENTS



ITEM: 442 MOPED LT: 1LOT SIZE: LFL SS: 200

0

300

1000

10

1000

1000

300

1300

1300

0

0

11 12 13

1300

1200800

1200800

14001200

1300

1300

800

000 0

1400

800

15

1400

14

14001200

16

WEEK


١٤


• MRP Schedule for Gas Tanks for Weeks 10 - 16,considering that:– Gross Requirements come from moped Planned-Order-

Releases– There is an On-Hand balance of 600 gas tanks at the end of

week 9– There is a Scheduled Receipt for 900 tanks in week 10– A lot-for-lot rule is used for ordering gas tanks– Safety stock of 200 gas tanks is desired– Lead time for gas tanks is two weeks



• MRP Schedule for Gas Tanks . . . Initially

GROSS REQUIREMENTS

SCHEDULED RECEIPTS


NET REQUIREMENTS



ITEM: GAS TANK LT: 2LOT SIZE: LFL SS: 200

1000

900

10

0 1300

11 12 13

800 1200

1514

01400

16

WEEK


١٥


• MRP Schedule for Gas Tanks . . . Completed

GROSS REQUIREMENTS

SCHEDULED RECEIPTS


NET REQUIREMENTS



ITEM: GAS TANK LT: 2LOT SIZE: LFL SS: 200

1000

900

1300

1000

10

800

0

1200

300

1300

11 12 13

800

1200

1400

1200

1514

01400

16

WEEK

300 000

1000

1000 800

800

1400

14001200

0



• MRP Schedule for Frames for Weeks 10 - 16, consideringthat:– Gross Requirements come from moped Planned-Order-

Releases– There is an On-Hand balance of 600 frames at the end of

week 9– There is a Scheduled Receipt for 2000 frames in week 10– The firm uses a Lot Size (multiple) of 2000 for ordering

frames– No safety stock of frames is desired– Lead time for frames is 3 weeks


١٦


• MRP Schedule for Frames . . . Initially

GROSS REQUIREMENTS

SCHEDULED RECEIPTS

AVAILABLE

NET REQUIREMENTS



ITEM: FRAME LT: 3LOT SIZE: 2000 SS: 0

1000

2000

10

0 1300

11 12 13

800 1200

1514

01400

16

WEEK

600



• MRP Schedule for Frames . . . Completed

GROSS REQUIREMENTS

SCHEDULED RECEIPTS


NET REQUIREMENTS



ITEM: FRAME LT: 3LOT SIZE: 2000 SS: 0

1000

2000

2600

0

2000

10

1600

0

2000

1600

1300

11 12 13

800

2000

500

2000

300300 900

0

1200

1514

01400

16

WEEK

0 0

1500

0 1100


١٧


• MRP Schedule for Engine Assemblies for Weeks 10 - 16,considering that:– Gross Requirements come from moped Planned-Order-

Releases– There is an On-Hand balance of 300 engine assemblies at

the end of week 9– There is a Scheduled Receipt for 1000 engine assemblies in

week 10– The firm uses a Lot Size (multiple) of 500 for ordering

engine assemblies– Safety Stock of 100 engine assemblies is desired– Lead time for engine assemblies is 1 week



• MRP Schedule for Engine Assemblies . . . Initially

GROSS REQUIREMENTS

SCHEDULED RECEIPTS


NET REQUIREMENTS



ITEM: ENGINE ASSEM. LT: 1LOT SIZE: 500 SS: 100

1000

1000

10

0 1300

11 12 13

800 1200

1514

01400

16

WEEK


١٨


• MRP Schedule for Engine Assemblies . . . Completed

GROSS REQUIREMENTS

SCHEDULED RECEIPTS


NET REQUIREMENTS



ITEM: ENGINE ASSEM. LT: 1LOT SIZE: 500 SS: 100

1000

1000

1200

10

1500

200

0

500

1500

1100

200

1300

11 12 13

800

10001100

10001500

1000

400

500

1500

400100400 0

1200

1514

01400

16

WEEK



• MRP Schedule for Motors for Weeks 10 - 16, consideringthat:– Gross Requirements come from engine assembly Planned-

Order-Releases– There is an On-Hand balance of 250 motors at the end of

week 9– There are no Scheduled Receipts for motors– A lot-for-lot rule is used for ordering motors– No Safety Stock of motors is desired– Lead time for motors is 1 week


١٩


• MRP Schedule for Motors . . . Initially

GROSS REQUIREMENTS

SCHEDULED RECEIPTS


NET REQUIREMENTS



ITEM: MOTOR LT: 1LOT SIZE: LFL SS: 0 10

1500 500

11 12 13

1500 1000

1514 16

WEEK



• MRP Schedule for Motors . . . Completed

GROSS REQUIREMENTS

SCHEDULED RECEIPTS


NET REQUIREMENTS



ITEM: MOTOR LT: 1LOT SIZE: LFL SS: 0

250

1250

10

1250

500

1250

250

1500

1500

500

500

0

500

11 12 13

1500

1000

1000

1500

1500

1000

000 0

1000

1514 16

WEEK


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• MRP Schedule for Carburetors for Weeks 10 - 16,considering that:– Gross Requirements come from engine assembly Planned-

Order-Releases (times 2)– There is an On-Hand balance of 150 carburetors at the end

of week 9– There are no Scheduled Receipts for carburetors– A Lot Size of 200+ is used for ordering carburetors– Safety Stock of 100 carburetors is desired– Lead time for carburetors is 2 weeks



• MRP Schedule for Carburetors . . . Initially

GROSS REQUIREMENTS

SCHEDULED RECEIPTS


NET REQUIREMENTS



ITEM: CARBURETOR LT: 2LOT SIZE: 2000+ SS: 100 10

3000 1000

11 12 13

3000 2000

1514 16

WEEK


٢١


• MRP Schedule for Carburetors . . . Completed

GROSS REQUIREMENTS

SCHEDULED RECEIPTS


NET REQUIREMENTS



ITEM: CARBURETOR LT: 2LOT SIZE: 2500+ SS: 100

50

2500

10

2500

3050

3000

3000

2500

2500

950

50

1000

11 12 13

3000

950

2500

1450

2500

155010501550 1550

2000

1514 16

WEEK



• MRP Schedule for Wheel Assemblies for Weeks 10 - 16,considering that:– Gross Requirements come from moped Planned-Order-

Releases (times 2)– There is an On-Hand balance of 500 wheel assemblies at the

end of week 9– There is a Scheduled Receipt for 2000 wheel assemblies in

week 10– A Lot Size (multiple) of 500 is used for ordering wheel

assemblies– Safety Stock of 400 wheel assemblies is desired– Lead time for wheel assemblies is 1 week


٢٢


• MRP Schedule for Wheel Assemblies . . . Initially

GROSS REQUIREMENTS

SCHEDULED RECEIPTS


NET REQUIREMENTS



ITEM: WHEEL ASSEM. LT: 1LOT SIZE: 500 SS: 400

2000

2000

10

0 2600

11 12 13

1600 2400

1514

02800

16

WEEK



• MRP Schedule for Wheel Assemblies . . . Completed

GROSS REQUIREMENTS

SCHEDULED RECEIPTS


NET REQUIREMENTS



ITEM: WHEEL ASSEM. LT: 1LOT SIZE: 500 SS: 400

2000

2000

2100

10

2500

100

0

2000

2500

2500

100

2600

11 12 13

1600

28002000

30002000

3000

1600

2000

2000

04000 200

2400

1514

02800

16

WEEK


٢٣


• MRP Schedule for Hub Assemblies for Weeks 10 - 16,considering that:– Gross Requirements come from wheel assembly Planned-

Order-Releases– There is an On-Hand balance of 100 hub assemblies at the

end of week 9– There is a Scheduled Receipt of 2400 hub assemblies in week

11– A lot-for-lot rule is used for ordering hub assemblies– No Safety Stock of hub assemblies is desired– Lead time for hub assemblies is 1 week



• MRP Schedule for Hub Assemblies . . . Initially

GROSS REQUIREMENTS

SCHEDULED RECEIPTS


NET REQUIREMENTS



ITEM: HUB ASSEM. LT: 1LOT SIZE: LFL SS: 0

0

10

2400

2500 2000

11 12 13

2000 3000

1514

00

16

WEEK


٢٤



• MRP Schedule for Hub Assemblies . . . Completed

GROSS REQUIREMENTS

SCHEDULED RECEIPTS


NET REQUIREMENTS



ITEM: HUB ASSEM. LT: 1LOT SIZE: LFL SS: 0

0

100

10

2000

2500

2400

2500

2000

2000

2000

0

2000

11 12 13

2000

3000

3000

2000

2000

3000

000 0

3000

1514

00

16

WEEK



• MRP Schedule for Tires for Weeks 10 - 16, consideringthat:– Gross Requirements come from wheel assembly Planned-

Order-Releases– There is an On-Hand balance of 500 tires at the end of week

9– There are Scheduled Receipts for 3000 and 2000 tires weeks

11 and 12, respectively– A Lot Size (multiple) of 1000 is used for ordering tires– Safety Stock of 500 tires is desired– Lead time for tires is 3 weeks

٢٥



• MRP Schedule for Tires . . . Initially

GROSS REQUIREMENTS

SCHEDULED RECEIPTS


NET REQUIREMENTS



ITEM: TIRE LT: 3LOT SIZE: 1000 SS: 500

0

10

3000

2500 2000

2000

11 12 13

2000 3000

1514

00

16

WEEK



• MRP Schedule for Tires . . . Completed

GROSS REQUIREMENTS

SCHEDULED RECEIPTS


NET REQUIREMENTS



ITEM: TIRE LT: 3LOT SIZE: 1000 SS: 500

0

0

2000

10

3000

3000

3000

2500

2500

2000

2000

11 12 13

2000

2500

3000

1500

2000

500500500 500

3000

1514

00

16

WEEK

٢٦


• Lot-size is the quantity ordered/produced at one time• Large lots are preferred because:

– Changeovers cost less and capacity greater– Annual cost of purchase orders less– Price breaks and transportation breaks can be utilized

• Small lots are preferred because:– Lower inventory carrying cost– Reduced risk of obsolescence– Shorter cycle time to produce customer order

Lot-Sizing IN MRP


The best method, resulting in least cost,depends on cost and demand patterns.

Lot-Sizing Methods

• Economic Order Quantity (EOQ)– does not consider quantity discounts– does not always provide the most economical approach

with lumpy demand• Lot-for-Lot (LFL)

– accommodates lumpy demand• Period Order Quantity (POQ)

٢٧


Example: Lot-Sizing DecisionThe net requirements for a material from an MRP

schedule are:

It costs $400 to change over the machines for this materialin the affected work center. It costs $0.40 per unit whenone unit of this material must be carried in inventory fromone week to the next.

Identify the lot-sizing method that results in the leastcarrying and changeover costs for the 8-week schedule.

NET REQUIREMENTS 1000

1

0 1300

2 3 4

800 1200

65

01300

7

WEEK

800

8


Example: Lot-Sizing Decision

• Lot-for-Lot Method

Carrying Cost = 0($.40) = $0Changeover Cost = 6($400) = $2,400

Total = $2,400

NET REQUIREMENTS

BEGINNING INVENTORY

PRODUCTION LOTS

ENDING INVENTORY

1000

0

1000

0

1

0

0

0

0

0

1300

1300

0

2 3 4

800

000

00

13001200800 0

0

1200

65

01300

00

7

WEEK

800

0

800

0

8

٢٨



• Economic Order Quantity (EOQ) Method

S = $400.00D = [(Net Req. for 8 wks)/8 weeks)](50 weeks/year)

= (6400/8)(50) = 40,000C = ($0.40 per week)(50 weeks/year)

= $20.00

2DS 2(40,000)(400)EOQ = = = 1265C 20

2DS 2(40,000)(400)EOQ = = = 1265C 20



• Economic Order Quantity (EOQ) Method

Carrying Cost = 4855($.40) = $1,942Changeover Cost = 6($400) = $2,400

Total = $4,342

NET REQUIREMENTS

BEGINNING INVENTORY

PRODUCTION LOTS

ENDING INVENTORY

1000

0

1265

265

1

265

0

265

0

230

1265

1300

265

2 3 4

800

725760695

695230

126512651265 0

725

1200

65

01300

725760

7

WEEK

1265

1190

800

725

8

٢٩



• Period Order Quantity (POQ) Method

POQ = (# Weeks/year)/(# Orders/year)= 50/(D/EOQ)= 50/(40,000/1,265)= 1.58 or 2 weeks



• Period Order Quantity (POQ) Method

Carrying Cost = 2900($.40) = $1,160Changeover Cost = 4($400) = $1,600

Total = $2,760

NET REQUIREMENTS

BEGINNING INVENTORY

PRODUCTION LOTS

ENDING INVENTORY

1000

0

1000

0

1

0

0

0

0

800

2100

1300

0

2 3 4

800

013000

0800

025000 800

800

1200

65

01300

01300

7

WEEK

0

0

800

800

8

٣٠



• SummaryCarrying Chg.Ovr. Total

Method Cost Cost CostLFL 0 2,400 2,400EOQ 1,942 2,400 4,342POQ 1,160 1,600 2,760


Issues in MRP

• Lot-Sizing– Useful at lower levels but may drive excess inventory when

applied at higher levels• Net Change versus Regenerative MRP

– Net change may generate too many action notices– Regenerative more costly to run but appears to be easier to

manage• . . . more

٣١


Issues in MRP

• Safety Stock– Use depends on uncertainty of demand..... more uncertain

the greater the need for safety stock• Assemble-to-Order Firms

– MPS and MRP treated separately from Final AssemblySchedule(FAS)

– Use Modular Bill of Material


MRP I to MRP II

• MRP I simply exploded demand (MPS) into requiredmaterials

• MRP II became Manufacturing Resource Planning whichprovides a closed-loop business management system– Financial management– Shop floor control– Operations management– Simulation capability

٣٢


Evaluation of MRP

• Most beneficial to process-focused systems that havelong processing times and complex multistageproduction steps

• Lead times must be reliable• Must freeze MPS for some time before actual

production... certain demand• Difficult to implement


Capacity Requirements Planning (CRP)

• Tests MPS for feasibility• Utilizes routings to determine labor/machine loads• If schedule feasible, recommends freezing• If schedule overloads resources, points out processes

that are overscheduled

٣٣


Load Schedules

• Compares actual labor and machine hours againstavailable hours

• Offsets schedules between successive stages ofproduction by lead times

• Provides feasible MPS and economically loaded workcenters

• Promotes system operating efficiency ... lowers costs!


Wrap-Up: World-Class Practice

• Lead times respond to conditions• Product development as levels of product structure tree• Lead times that adjust to load• MRP reports shared with customers and suppliers• All of the above results in bias towards smaller batches

and shorter lead times

٣٤


End of Chapter 15End of Chapter 15

Resource Requirements Planning: MRP and CRPsite.iugaza.edu.ps/aschokry/files/2015/02/OM-Chap-15-… · · 2015-03-01١ Islamic University of Gaza - Palestine Chapter 15 Resource

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