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MaterialRequirementsPlanning
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M&DCPurchasing&SupplyChain:MaterialManagement
IntroductiontoMaterialManagement
MasterScheduling
Contents
MaterialRequirementsPlanning
CapacityManagement
1.
Introduction
ProductionActivityControl
2.
BillsOfMaterial
Purchasing
3.
MaterialRequirementsPlanningProcess
4.
UsingTheMaterialRequirementsPlan
Forecasting
InventoryFundamentals
OrderQuantities
1.Introduction
IndependentDemandOrderingSystems
Chapter3describedtheroleofthemasterproductionscheduleinshowingtheenditems,or
majorcomponents,thatmanufacturingintendstobuild.Theseitemsaremadeorassembled
PhysicalInventoryandWarehouseManagement fromcomponentsthatmustbeavailableintherightquantitiesandattherighttimetomeetthe
masterproductionschedule(MPS)requirements.Ifanycomponentismissing,theproduct
cannotbebuiltandshippedontime.Materialrequirementsplanning(MRP)isthesystemused
PhysicalDistribution
toavoidmissingparts.Itestablishesaschedule(priorityplan)showingthecomponents
requiredateachleveloftheassemblyand,basedonleadtimes,calculatesthetimewhen
thesecomponentswillbeneeded.
Thischapterwilldescribebillsofmaterial(themajorbuildingblockofmaterialrequirements
planning),detailtheMRPprocess,andexplainhowthematerialrequirementsplanisused.But
first,somedetailsabouttheenvironmentinwhichMRPoperates.
NatureofDemand
Therearetwotypesofdemand:independentanddependent.Independentdemandis
notrelatedtothedemandforanyotherproduct.Forexample,ifacompanymakes
woodentables,thedemandforthetablesisindependent.Masterproductionschedule
itemsareindependentdemanditems.
Thedemandforthesides,ends,legs,andtopsdependsonthedemandforthetables,
andthesearedependentdemanditems.
Figure4.1isaproducttreethatshowstherelationshipbetweenindependentand
dependentdemanditems.Thefiguresinparenthesesshowtherequiredquantitiesof
eachcomponent.
Sinceindependentdemandisnotrelatedtothedemandforanyotherassembliesor
products,itmustbeforecast.However,sincedependentdemandisdirectlyrelatedto
thedemandforhigherlevelassembliesorproducts,itcanbecalculated.Material
requirementsplanningisdesignedtodothiscalculation.\
Anitemcanhavebothadependentandanindependentdemand.Aserviceor
replacementparthasboth.Themanufacturerofvacuumcleanersusesflexiblehosein
theassemblyoftheunits.Intheassemblyofthevacuums,thehoseisadependent
demanditem.However,thehosehasanastyhabitofbreaking,andthemanufacturer
musthavereplacementhosesavailable.Demandforreplacementhosesis
independentsincedemandforthemdoesnotdependdirectlyuponthenumberof
vacuumsmanufactured.
Dependencycanbehorizontalorvertical.Thedependencyofacomponentonits
parentisvertical.However,componentsalsodependoneachother(horizontal
dependency).Ifonecomponentisgoingtobeaweeklatethenthefinalassemblyisa
weeklate.Theothercomponentsarenotneededuntillater.Thisisalsoadependency,
andiscalledhorizontaldependency.Plannersareconcernedwithhorizontal
dependencywhenapartisdelayedorthereisashortage,forthenotherpartswillhave
toberescheduled.
ObjectivesofMRP
Materialrequirementsplanninghastwomajorobjectives:determinerequirementsand
keepprioritiescurrent.
Determinerequirements.
Themainobjectiveofanymanufacturingplanningandcontrolsystemistohavethe
rightmaterialsintherightquantitiesavailableattherighttimetomeetthedemandfor
thefirmsproducts.Thematerialrequirementsplansobjectiveistodeterminewhat
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componentsareneededtomeetthemasterproduction
scheduleand,basedonleadtime,tocalculatetheperiodswhenthecomponentsmustbe
available.Itmustdeterminethefollowing:
Whattoorder.
Howmuchtoorder.
Whentoorder.
Whentoscheduledelivery.
Keepprioritiescurrent.
Thedemandfor,andsupplyof,componentschangesdaily.Customersenterorchange
orders.Componentsgetusedup,suppliersarelatewithdelivery,scrapoccurs,orders
arecompleted,andmachinesbreakdown.Inthiseverchangingworld,amaterial
requirementsplanmustbeabletoreorganizeprioritiestokeepplanscurrent.Itmust
beabletoaddanddelete,expedite,delay,andchangeorders.
LinkagestoOtherMPCFunctions
Themasterproductionscheduledrivesthematerialrequirementsplan.TheMRPisa
priorityplanforthecomponentsneededtomaketheproductsintheMPS.Theplanis
validonlyifcapacityisavailablewhenneededtomakethecomponents,andtheplan
mustbecheckedagainstavailablecapacity.Theprocessofdoingsoiscalled
capacityrequirementsplanningandisdiscussedinthenextchapter.
Materialrequirementsplanningdrives,orisinputto,productionactivitycontrol(PAC)
andpurchasing.MRPplansthereleaseandreceiptdatesfororders.PACand
purchasingmustplanandcontroltheperformanceoftheorderstomeettheduedates.
Figure4.2showsadiagramoftheproductionplanningandcontrolsystemwithits
inputsandoutputs.
TheComputer
Ifacompanymakesafewsimpleproducts,itmightbepossibletoperformmaterial
requirementsplanningmanually.However,mostcompaniesneedtokeeptrackof
thousandsofcomponentsinaworldofchangingdemand,supply,andcapacity.
Inthedaysbeforecomputers,itwasnecessarytomaintainextensivemanualsystems
andtohavelargeinventoriesandlongleadtimes.Thesewereneededasacushion
duetothelackofaccurate,uptodateinformationandtheinabilitytoperformthe
necessarycalculationsquickly.Somehow,someoneintheorganizationfiguredout
whatwasrequiredsooner,orveryoften,laterthanneeded.Getitearlyandgetlotsof
itwasagoodrulethen.
Computersareincrediblyfast,accurate,andideallysuitedforthejobathand.With
theirabilitytostoreandmanipulatedataandproduceinformationrapidly,
manufacturingnowhasatooltousemodernmanufacturingplanningandcontrol
systemsproperly.Therearemanyapplicationprogramsavailablethatwillperformthe
calculationsneededinMRPsystems.Thecomputersoftwareprogramthat
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organizesandmaintainsthebillsofmaterialstructuresandtheirlinkagesiscalleda
billofmaterialprocessor.
InputstotheMaterialRequirementsPlanningSystem
Masterproduction
schedule.Themasterproductionscheduleisastatementofwhich
enditemsaretobeproduced,thequantityofeach,andthedates
theyaretobecompleted.ItdrivestheMRPsystembyprovidingthe
initialinputfortheitemsneeded.
Inventoryrecords.
AmajorinputtotheMRPsystemisinventory.Whenacalculationis
madetofindouthowmanyareneeded,thequantitiesavailablemust
beconsidered.
Therearetwokindsofinformationneeded.Thefirstiscalledplanning
factorsandincludesinformationsuchasorderquantities,leadtimes,
safetystock,andscrap.Thisinformationdoesnotchangeoften
however,itisneededtoplanwhatquantitiestoorderandwhento
orderfortimelydeliveries.
Thesecondkindofinformationnecessaryisonthestatusofeach
item.TheMRPsystemneedstoknowhowmuchisavailable,how
muchisallocated,andhow
muchisavailableforfuturedemand.Thistypeofinformationis
dynamicandchangeswitheverytransactionthattakesplace.
Thesedataaremaintainedinaninventoryrecordfile,alsocalleda
partmasterfileoritemmasterfile.Eachitemhasarecordandallthe
recordstogetherformthefile.
Billsofmaterial.
Thebillofmaterialisoneofthemostimportantdocumentsina
manufacturingcompany.Itwillbediscussednext.
2.BillsOfMaterial
Beforewecanmakesomething,wemustknowwhatcomponentsareneededtomakeit.Tobakea
cake,weneedarecipe.Tomixchemicalstogether,weneedaformula.Toassembleawheelbarrow,
weneedapartslist.Eventhoughthenamesaredifferent,recipes,formulas,andpartsliststellus
whatisneededtomaketheendproduct.Allofthesearebillsofmaterial.
TheAmericanProductionandInventoryControlSociety(APICS)definesabillofmaterialasalisting
ofallthesubassemblies,intermediates,parts,andrawmaterialsthatgointomakingtheparent
assemblyshowingthequantitiesofeachrequiredtomakeanassembly.Figure4.3showsa
simplifiedbillofmaterial.Therearethreeimportantpoints:
a.
b.
Thebillofmaterialshowsallthepartsrequiredtomakeoneoftheitem.
Eachpartoritemhasonlyonepartnumber.Aspecificnumberisuniquetoonepartandisnot
assignedtoanyotherpart.Thus,ifaparticularnumberappearsontwodifferentbillsofmaterial,the
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partsoidentifiedisthesame.
c.
Apartisdefinedbyitsform,fit,orfunction.Ifanyofthesechange,thenitisnotthesamepartandit
musthaveadifferentpartnumber.Forexample,apartwhenpaintedbecomesadifferentpartand
musthaveadifferentnumber.Ifthepartcouldbepaintedinthreedifferentcolors,theneachmustbe
identifiedwithitsuniquenumber.
Part
Description
Number
QuantityRequired
203
WoodenLeg
411
WoodenEnds
622
WoodenSides
23
TableTop
722
HardwareKit
Thebillofmaterialshowsthecomponentsthatgointomakingtheparent.Itdoesnotshowthesteps
orprocessusedtomaketheparentorthecomponents.Thatinformationisrecordedinaroutingfile.
ThisfilewillbediscussedinChapters5and6.
BillsofMaterialStructure
Billsofmaterialstructurereferstotheoveralldesignforthearrangementofbillsof
materialfiles.Differentdepartmentsinacompanyusebillsofmaterialforavarietyof
purposes.Althougheachuserhasindividualpreferencesforthewaythebillshouldbe
structured,theremustbeonlyonestructure,anditshouldbedesignedtosatisfymost
needs.However,therecanbeseveralformats,orways,topresentthebill.Following
aresomeimportantformatsforbills.
Producttree.
Figure4.4showsaproducttreeforthebillofmaterialshowninFigure4.3.Theproduct
treeisaconvenientwaytothinkaboutbillsofmaterial,butitisseldomusedexcept
forteachingandtesting.Inthistext,itisusedforthatpurpose.
Parentcomponentrelationship.
TheproducttreeandthebillofmaterialshowninFigures4.1and4.3arecalledsingle
levelstructures.Anassemblyisconsideredaparent,andtheitemsthatcompriseit
arecalleditscomponentitems.Figure4.4showstheparentcomponentrelationship
ofthetable(P/N100).Uniquepartnumbershavealsobeenassignedtoeachpart.
Thismakesidentificationofthepartabsolute.
Multilevelbill.
Figure4.5showsthesameproductasthesinglelevelbillshowninFigures4.3and
4.4.However,thesinglelevelcomponentshavebeenexpandedintotheircomponents.
Multilevelbillsareformedaslogicalgroupingsofpartsintosubassembliesbasedon
thewaytheproductisassembled.Forexample,aframe,chassis,doors,windows,
andenginearerequiredtoconstructanautomobile.Eachoftheseformsalogical
groupofcomponentsandpartsand,inturn,hasitsownbillofmaterial.
Itistheresponsibilityofmanufacturingengineeringtodecidehowtheproductistobe
made:theoperationstobeperformed,theirsequence,andtheirgrouping.The
subassembliescreatedaretheresultofthis.Manufacturinghasdecidedtoassemble
thesides,ends,andlegsupports(partofthehardwarekit)ofthetable(P/N100)in
Figure4.4intoaframe(P/N300).Thelegs,legbolts,andframe
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subassemblyaretobeassembledintothebase(P/N200).Thetop(P/N023)istobe
madefromthreeboardsgluedtogether.Notethattheoriginalpartsareallthere,but
theyhavebeengroupedintosubassembliesandeachsubassemblyhasitsownpart
number.
Oneconventionusedwithmultilevelbillsofmaterialisthatthelastitemsonthetree
(legs,legbolts,ends,sides,glue,andboards)areallpurchaseditems.Generally,abill
ofmaterialisnotcompleteuntilallbranchesoftheproductstructuretreeendina
purchasedpart.
Eachlevelinthebillofmaterialisassignedanumberstartingfromthetopandworking
down.Thetoplevel,orendproductlevel,islevelzero,anditscomponentsareatlevel
one.
Multiplebill.
Amultiplebillisusedwhencompaniesusuallymakemorethanoneproduct,andthe
samecomponentsareoftenusedinseveralproducts.Thisisparticularlytruewith
familiesofproducts.Usingourexampleofatable,thiscompanymakestwomodels.
Theyaresimilarexceptthetopsaredifferent.Figure4.6showsthetwobillsof
material.Becausetheboardsusedinthetoparedifferent,eachtophasadifferentpart
number.Thebalanceofthecomponentsarecommontobothtables.
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method,theinformationhastobestoredonlyonce.Forexample,theframe(P/N300)
mightbeusedonothertableswithdifferentlegsortops.
Thereareseveraladvantagestousingsinglelevelbillsincludingthefollowing:
Duplicationofrecordsisavoided.Forinstance,base200isusedinbothtable
100andtable150.Ratherthanhavetworecordsofbase200oneinthebillfor
table100andoneinthebillfortable150onlyonerecordneedbekept.
Thenumberofrecordsand,incomputersystems,thefilesizeisreducedby
avoidingduplicationofrecords.
Maintainingbillsofmaterialissimplified.Forexample,ifthereisachangein
base200,thechangeneedbemadeinonlyoneplace.
Singlelevelbill.
Asinglelevelbillofmaterialcontainsonlytheparentanditsimmediate
components,whichiswhyitiscalledasinglelevelbill.ThetablesshowninFigure4.6
havesixsinglelevelbills,andtheseareshowninFigure4.7.Notethatmany
componentsarecommontobothtables.
Thecomputerstoresinformationdescribingtheproductstructureasasinglelevelbill.
Aseriesofsinglelevelbillsisneededtocompletelydefineaproduct.Forexample,the
tableneedsfoursinglelevelbills,oneeachforthetable,base,top,andframe.These
canbechainedtogethertoformamultilevel,orindented,bill.Usingthis
EXAMPLEPROBLEM
Usingthefollowingproducttree,constructtheappropriatesingleleveltrees.Howmany
Ksareneededtomake100Xsand50Ys?
Answer
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Indentedbill.
Amultilevelbillofmaterialcanalsobeshownasanindentedbillofmaterial.Thisbill
usesindentationsasawayofidentifyingparentsfromcomponents.Figure4.8shows
anindentedbillforthetableinFigure4.5.
Thecomponentsoftheparenttablearelistedflushleftandtheircomponentsare
indented.Thecomponentsofthebase(legs,legbolts,andframe)areindented
immediatelybelowtheirparent.Thecomponentsoftheframearefurtherindented
immediatelybelowtheirparent.Thus,thecomponentsoftheframearefurtherindented
immediatelybelowtheirparent.Thus,thecomponentsarelinkedtotheirparentsby
indentingthemassubentriesandbylistingthemimmediatelybelowtheparent.
Summarizedpartslist.
ThebillofmaterialshowninFigure4.3iscalledasummarizedpartslist.Itlistsallthe
partsneededtomakeonecompleteassembly.
PartNumber
Description
QuantityRequired
200
Base
203
Legs
220
LegBolts
300
Frame
622
Sides
411
Ends
533
LegSupports
66
Glue
23
Tq
30
Boards
66
Glue
Thepartslistisproducedbytheproductdesignengineeranddoesnotcontainany
informationaboutthewaytheproductismadeorassembled.
Planningbill.
Amajoruseofbillsofmaterialistoplanproduction.Planningbillsareanartificial
groupingofcomponentsforplanningpurposes.Theyareusedtosimplifyforecasting,
masterproductionscheduling,andmaterialrequirementsplanning.Theydonot
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representbuildableproductsbutanaverageproduct.Usingthetableexample,suppose
thecompanymanufacturedtableswiththreedifferentlegstyles,threedifferentsides
andends,andthreedifferenttops.Intotal,theyaremaking3x3x3=27different
tables,eachwithitsownbillofmaterial.Forplanningpurposes,the27billscanbe
simplifiedbyshowingthepercentagesplitforeachtypeofcomponentononebill.
Figure4.9showshowtheproductstructurewouldlook.Thepercentageusageof
componentsisobtainedfromaforecastorpastusage.Notethepercentageforeach
categoryofcomponentaddsupto100%.
WhereUsedandPegging
Whereusedreport.
Whereusedreportsgivethesameinformationasabillofmaterial,but
thewhereusedreportgivestheparentsforacomponentwhereasthe
billgivesthecomponentsforaparent.Acomponentmaybeusedin
makingseveralparents.Wheelsonanautomobileforexamplemight
beusedonseveralmodelsofcars,Alistingofalltheparentsinwhich
acomponentisusediscalledawhereusedreportThishasseveral
uses,suchasinimplementinganengineeringchange,orwhenmate
rialsarescarce,orincostingaproduct.
Peggingreport.
Apeggingreportissimilartoawhereusedreport.However,th
peggingreportshowsonlythoseparentsforwhichthereisanexisting
requirement
whereasthewhereusedreportshowsallparentsforacomponent.The
peggingreportshowstheparentscreatingthedemandforthe
components,thequantitiesneeded,andwhentheyareneeded.
Peggingkeepstrackoftheoriginofthedemand.Figure4.10showsan
exampleofaproducttreeinwhichpartCisusedtwiceandapegging
report.
UsesforBillsofMaterial
Thebillofmaterialisoneofthemostwidelyuseddocumentsinamanufacturing
company.Somemajorusesareasfollows:
Productdefinition.Thebillspecifiesthecomponentsneededtomakethe
product.
Engineeringchangecontrol.Productdesignengineerssometimeschangethe
designofaproductandthecomponentsused.Thesechangesmustbe
recordedandcontrolled.Thebillprovidesthemethodfordoingso.
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PeggedRequirements
Item
Number
C
Week
1
50
125
25
50
150
SourceofRequirements
A
50
25
25
50
50
100
100
Serviceparts.Replacementpartsneededtorepairabrokencomponent
aredeterminedfromthebillofmaterial.
Planning.Billsofmaterialdefinewhatmaterialshavetobescheduled
tomaketheendproduct.Theydefinewhatcomponentshavetobe
purchasedormadetosatisfythemasterproductionschedule.
Orderentry.Whenaproducthasaverylargenumberofoptions(e.g.,
cars),theorderentrysystemveryoftenconfigurestheendproductbill
ofmaterials.Thebillcanalsobeusedtopricetheproduct.
Manufacturing.Thebillprovidesalistofthepartsneededtomakeor
assembleaproduct.
Costing.Productcostisusuallybrokendownintodirectmaterial,direct
labor,andoverhead.Thebillprovidesnotonlyamethodofdetermining
directmaterialbutalsoastructureforrecordingdirectlaborand
distributingoverhead.
Thislistisnotcomplete,butitshowstheextensiveusemadeofthebillofmaterialin
manufacturing.Thereisscarcelyadepartmentofthecompanythatwillnotusethe
billatsometime.Maintainingbillsofmaterialandtheiraccuracyisextremely
important.Again,thecomputerisanexcellenttoolforcentrallymaintainingbillsand
forupdatingthem.
3.MaterialRequirementsPlanningProcess
Eachcomponentshownonthebillofmaterialisplannedforbythematerialrequirementsplanning
system.Forconvenience,itisassumedthateachcomponentwillgointoinventoryandbeaccounted
for.Whetherthecomponentsactuallygointoaphysicalinventoryornotisnotimportant.However,it
isimportanttorealizethatplanningandcontroltakeplaceforeachcomponentonthebill.Raw
materialmaygothroughseveraloperationsbeforeitisprocessedandreadyforassembly,orthere
maybeseveralassemblyoperationsbetweencomponentsandparent.Theseoperationsareplanned
andcontrolledbyproductionactivitycontrol,notmaterialrequirementsplanning.
Thepurposeofmaterialrequirementsplanningistodeterminethecomponentsneeded,quantities,and
duedatessoitemsinthemasterproductionschedulearemadeontime.Thissectionstudiesthe
basicMRPtechniquesfordoingso.Thesetechniqueswillbediscussedunderthefollowingheadings:
Explodingandoffsetting
Grossandnetrequirements
Releasingorders
Lowlevelcodingandnetting
ExplodingandOffsetting
ConsidertheproducttreeshowninFigure4.11.Itissimilartotheonesusedbeforebut
containsanothernecessarypieceofinformation:leadtimes(LT).
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Leadtime.
Leadtimeisthespanoftimeneededtoperformaprocess.Inmanufacturingit
includestimefororderpreparation,queuing,processing,moving,receivingand
inspecting,andanyexpecteddelays.Inthisexample,ifBandCareavailable,itwill
takeoneweektoassembleA.Thus,theleadtimeforAisoneweek.Similarly,ifD
andEareavailable,thetimerequiredtomanufactureBistwoweeks.Thepurchase
leadtimesforD,E,andCarealloneweek.
Inthisparticularproducttree,theusagequantitiesthequantityofcomponents
neededtomakeoneofaparentareallone.TomakeanArequiresoneBandoneC,
andtomakeaBrequiresoneDandoneE.
Explodingtherequirements.Exploding
istheprocessofmultiplyingtherequirementsbytheusagequantityandrecordingthe
appropriaterequirementsthroughouttheproducttree.
Offsetting
Offsettingistheprocessofplacingtheexplodedrequirementsintheirproperperiods
basedonleadtime.Forexample,if50unitsofAarerequiredinweek5,theorderto
assembletheAsmustbereleasedinweek4,and50Bsand50Csmustbeavailable
inweek4.
Thus,thereshouldbeaplannedorderreceiptfor50inweek5andaplannedorder
releaseforthatnumberinweek4.Ifanorderfor50Asistobereleasedinweek4,50
Bsand50Csmustbeavailableinthatweek.Thus,theremustbeplannedorder
receiptsforthosecomponentsinweek4.SincetheleadtimetoassembleaBistwo
weeks,theremustbeaplannedorderreleasefortheBsinweek2.Sincetheleadtime
tomakeaCisoneweek,theremustbeaplannedorderreleasefor50inweek3.The
plannedorderreceiptsandplannedorderreleasesfortheDsandEsaredeterminedin
thesamemanner.Figure4.12showswhenordersmustbereleasedandreceivedso
thedeliverydatecanbemet.
ExampleProblem
UsingtheproducttreeandleadtimesshowninFigure4.11,completethefollowing
tabletodeterminetheplannedorderreceiptsandreleases.Thereare50Asrequiredin
week5and100inweek6.
Answer
GrossandNetRequirements
TheprevioussectionassumedthatnoinventorywasavailablefortheAsoranyofthe
components.Ofteninventoryisavailableandmustbeincludedwhencalculating
quantitiestobeproduced.If,forinstance,thereare20Asinstock,only30needtobe
made.Therequirementsforcomponentpartswouldbereducedaccordingly.The
calculationisasfollows:
Grossrequirement=50
Inventoryavailable=20
Netrequirements=grossrequirementsavailableinventory
Netrequirements=5020=30units
Sinceonly30Asneedtobemade,thegrossrequirementforBsandCsisonly
30.
Theplannedorderreleaseoftheparentbecomesthegross
requirementofthecomponent.
ThetimephasedinventoryrecordshowninFigure4.12cannowbemodifiedtc
consideranyinventoryavailable.Forexample,supposethereare10Bsavailablea~
wellasthe20As.TherequirementsforthecomponentsDandEwouldchangeFigure
4.13showsthechangeintheMRPrecord.
PartNumber
GrossRequirements
ProjectedAvailable20
NetRequirements
Week
1
5
50
20
20
20
20
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PlannedOrderRelease
GrossRequirements
10
10
PlannedOrderReceipt
ProjectedAvailable10
NetRequirements
PlannedOrderReceipt
PlannedOrderRelease
C
GrossRequirements
NetRequirements
10
20
20
20
ProjectedAvailable
NetRequirements
PlannedOrderReceipt
PlannedOrderRelease
20
GrossRequirements
NetRequirements
PlannedOrderRelease
20
30
30
30
20
20
20
PlannedOrderReceipt
ProjectedAvailable
30
30
20
GrossRequirements
30
PlannedOrderReceipt
PlannedOrderRelease
D
30
ProjectedAvailable
20
20
Figure4.13Grossandnetrequirements.
ExampleProblem
Completethefollowingtable.Leadtimeforthepartistwoweeks.Theorderquantity
(lotsize)is100units.
Week1
GrossRequirements
50
45
20
ProjectedAvailable75
NetRequirements
PlannedOrderReceipt
PlannedOrderRelease
Answer
Week
Gross
Requirements
Projected
Available75
75
50
45
20
25
80
60
Net
Requirements
20
PlannedOrder
Receipt
100
PlannedOrder
Release
100
ReleasedOrders
Sofarwehavelookedattheprocessofplanningwhenordersshouldbereleasedso
workisdoneintimetomeetgrossrequirements.Inmanycases,requirementschange
daily.Acomputerbasedmaterialrequirementsplanningsystemautomatically
recalculatestherequirementsforsubassembliesandcomponentsandrecreates
plannedorderreleasestomeettheshiftsindemand.
Plannedorderreleasesarejustplannedtheyhavenotbeenreleased.Itisthe
responsibilityofthematerialplannertoreleaseplannedorders,notthecomputer.
SincetheobjectiveoftheMRPistohavematerialavailablewhenitisneededandnot
before,ordersformaterialshouldnotbereleaseduntiltheplannedorderreleasedate
arrives.Thus,anorderisnotnormallyreleaseduntiltheplannedorderisinthecurrent
week(week1).
Releasinganordermeansthatauthorizationisgiventopurchasingtobuythe
necessarymaterialortomanufacturingtomakethecomponent.
Beforeamanufacturingorderisreleased,componentavailabilitymustbechecked.
Thecomputerprogramchecksthecomponentinventoryrecordstobesurethatenough
materialisavailableand,ifso,toallocatethenecessaryquantitytothatworkorder.If
thematerialisnotavailable,thecomputerprogramwilladvisetheplannerofthe
shortage.
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Whentheauthorizationtopurchaseormanufactureisreleased,theplannedorder
receiptiscanceled,andascheduledreceiptiscreatedinitsplace.Fortheexample
showninFigure4.13,partsDandEhaveplannedorderreleasesof20scheduledfor
week1.Theseorderswillbereleasedbytheplanner,andthentheMRPrecordsfor
partsDandEwillappearasshowninFigure4.14.Noticethatscheduledreceiptshave
beencreated,replacingtheplannedorderreleases.
Whenamanufacturingorderisreleasedthecomputerwillallocatetherequired
quantitiesofaparentscomponentstothatorder.Thisdoesnotmeanthecomponents
arewithdrawnfrominventorybutthattheprojectedavailablequantityisreduced.The
allocatedquantityofcomponentsisstillininventorybuttheyarenotavailableforother
orders.Theywillstayininventoryuntilwithdrawnforuse.
Scheduledreceipts.
Scheduledreceiptsareordersplacedonmanufacturingoronavendorandrepresenta
commitmenttomakeorbuy.Foranorderinafactory,necessarymaterialsare
committed,andworkcentercapacityallocatedtothatorder.Forpurchasedparts,
similarcommitmentsaremadetothevendor.Thescheduledreceiptsrowshowsthe
quantitiesorderedandwhentheyareexpectedtobecompletedandavailable.
Openorders.
ScheduledreceiptsontheMRPrecordareopenordersonthefactoryoravendorand
aretheresponsibilityofpurchasingandofproductionactivitycontrol.Whenthegoods
arereceivedintoinventoryandavailableforuse,theorderisclosedout,andthe
scheduledreceiptdisappearstobecomepartoftheonhandinventory.
Part
Number
Week
Gross
Requirements
ScheduledReceipts
ProjectedAvailable
NetRequirements
PlannedOrder
Receipt
PlannedOrder
Release
Gross
Requirements
20
ProjectedAvailable
NetRequirements
PlannedOrder
Receipt
20
PlannedOrder
Release
20
20
ScheduledReceipts
Figure4.14Scheduledreceipts.
Netrequirements.
Thecalculationfornetrequirementscannowbemodifiedtoincludescheduled
receipts.
Netrequirements=grossrequirementsscheduledreceiptsavailableinventory
ExampleProblem
Completethefollowingtable.Leadtimefortheitemistwoweeks,andtheorder
quantityis200.Whatactionshouldbetaken?
Week
GrossRequirements
50
250
100
50
ScheduledReceipts
ProjectedAvailable
150
NetRequirements
PlannedOrder
Receipt
PlannedOrder
200
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Release
Week
GrossRequirements
50
250
100
ScheduledReceipts
100
200
150
ProjectedAvailable
150
200
50
50
4
50
100
NetRequirements
PlannedOrder
Receipt
200
PlannedOrder
Release
Theorderfor200unitsshouldbereleased.
BasicMRPRecord
Figure4.15showsabasicMRPrecord.Thereareseveralpointsthatareimportant:
a.
b.
Thecurrenttimeisthebeginningofthefirstperiod.
Thetoprowshowsperiods,calledtimebuckets.Theseareoftenaweek
butcabeanylengthoftimeconvenienttothecompany.Some
companiesaremovingtodailytimebuckets.
Part
Number
Gross
Requirements
Scheduled
Receipts
Projected
Available10
NetRequirements
PlannedOrder
Receipt
PlannedOrder
Release
Week
1
10
10
10
20
35
30
Figure4.15BasicMRPrecord.
c.
Thenumberofperiodsintherecordiscalledtheplanninghorizon,which
showsthenumberoffutureperiodsforwhichplansarebeingmade.It
shouldbeatleastaslongasthecumulativeproductleadtime.
Otherwise,theMRPsystemisnotabletoreleaseplannedordersof
itemsatthelowerlevelatthecorrecttime.
d.
Anitemisconsideredavailableatthebeginningofthetimebucketin
whichitisrequired.
e.
Thequantityshownintheprojectedonhandrowistheprojectedonhand
balanceattheendoftheperiod.
f.
Theimmediateormostcurrentperiodiscalledtheactionbucket.A
quantityintheactionbucketmeans
CapacityRequirementsPlanning
Asoccurredinthepreviousplanninglevels,theMRPpriorityplanmustbechecked
againstavailablecapacity.AttheMRPplanninglevel,theprocessiscalledcapacity
requirementsplanning(CRP).Thenextchapterexaminesthisprobleminsomede.tail.
Ifthecapacityisavailable,theplancanproceed.Ifnot,eithercapacityhastobe
madeavailableorthepriorityplanschanged.
LowLevelCodingandNetting
Acomponentmayresideonmorethanonelevelinabillofmaterial.Ifthisisthecase
itisnecessarytomakesurethatallgrossrequirementsforthatcomponenthavebeer
recordedbeforenettingtakesplace.ConsidertheproductshowninFigure4.16
ComponentCoccurstwiceintheproducttreeandatdifferentlevels.Itwouldbe
mistaketonettherequirementsfortheCsbeforecalculatingthegrossrequirement~
forthoserequiredforparentB.
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Theprocessofcollectingthegrossrequirementsandnettingcanbesimplified~by
usinglowlevelcodes.Thelowlevelcodeisthelowestlevelonwhichapartresides
inallbillsofmaterial.Everyparthasonlyonelowlevelcode.Thelowlevelcodesfor
thepartsintheproducttreeshowninFigure4.16are:
Part
LowLevelCode
Lowlevelcodesaredeterminedbystartingatthelowestlevelofabillofmaterialand,
workingup,recordingthelevelagainstthepart.Ifapartoccursonahigherlevel,its
existenceonthelowerlevelhasalreadybeenrecorded.
Oncethelowlevelcodesareobtained,thenetrequirementsforeachpartcanbe
calculatedusingthefollowingprocedure.Forthepurposeofthisexercise,thereisa
grossrequirementforpartAof50inweek5,allleadtimesareoneweek,andthe
followingamountsareininventory:A,20unitsB,10unitsandC,10units.
Procedure
a.
Startingatlevelzeroofthetree,determineifanyofthepartsonthat
levelhavealowlevelcodeofzero.Ifso,thosepartsoccuratno
lowerlevel,andallthegrossrequirementshavebeenrecorded.These
partscan,therefore,benettedandexplodeddowntothenextlevel,
thatis,intotheircomponents.Ifthelowlevelcodeisgreaterthan
zero,therearemoregrossrequirements,andthepartisnotnetted.In
thisexample,Ahasalowlevelcodeofzerosothereisnofurther
requirementforAsitcanbenettedandexplodedintoits
components.Figure4.17showstheresults.
b.
Thenextstepistomovedowntolevel1ontheproducttreeandto
repeattheroutinefollowedinstep1.SinceBhasalowlevelcodeof
one,all
Low Part
Level Number
Code
Gross
Requirements
Scheduled
Receipts
Projected
Available20
Week
1
50
20
20
20
20
Net
Requirements
30
Planned
OrderReceipt
30
Planned
Order
Release
30
Gross
Requirements
30
Scheduled
Receipts
Projected
Available10
Net
Requirements
Planned
OrderReceipt
Planned
Order
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Release
2
Gross
Requirements
30
Scheduled
Receipts
Projected
Available10
Net
Requirements
Planned
OrderReceipt
Planned
Order
Release
Figure4.17Nettingandexplodingzerolevelparts.
requirementsforBarerecorded,anditcanbenettedand
exploded.ThebillofmaterialforBshowsthatitismadefroma
CandaD.Figure4.18showstheresultofnettingandexploding
theBs.PartChasalowlevelcodeoftwo,whichtellsusthere
arefurtherrequirementsforCsandatthisstagetheyarenot
netted.
c.
Movingdowntolevel2ontheproducttree,wefindthatpartChasa
lowlevelcodeoftwo.ThistellsusthatallgrossrequirementsforCs
areaccountedforandthatwecanproceedanddetermineitsnet
requirements.Noticethereisarequirementfor30Csinweek4tobe
usedontheAsandarequirementof20Csinweek3tobeusedonthe
Bs.Lookingatitsbillofmaterial,weseethatitisapurchasedpartand
noexplosionisneeded.
Figure4.19showsthecompletedmaterialrequirementsplan.Theprocessof
levelbylevelnettingisnowcompletedusingthelowlevelcodesofeachpart.
Thelowlevelcodesareusedtodeterminewhenapartiseligiblefornetting
andexploding.
Low Part
Level Number
Code
Week
1
10
10
Gross
Requirements
Scheduled
Receipts
Projected
Available10
Net
Requirements
Planned
OrderReceipt
Planned
Order
Release
Gross
Requirements
30
10
20
20
20
20
30
Scheduled
Receipts
Projected
Available10
Net
Requirements
Planned
OrderReceipt
Planned
Order
Release
Gross
Requirements
20
Scheduled
Receipts
Projected
Available
Net
Requirements
Planned
OrderReceipt
Planned
Order
Release
Figure4.18Nettingandexplodingfirstlevelparts.
Inthisway,eachpartisnettedandexplodedonlyonce.Thereisnotime
consumingrenettingandreexplodingeachtimeanewrequirementismet.
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MultipleBillsofMaterial
Mostcompaniesmakemorethanoneproductandoftenusethesamecomponentsin
manyoftheirproducts.Thematerialrequirementsplanningsystemgathersthe
plannedorderreleasesfromalltheparentsandcreatesascheduleofgross
requirementsforthecomponents.Figure4.20illustrateswhathappens.PartFisa
componentofbothCandB.
Thesameprocedureusedforasinglebillofmaterialcanbeusedwhenmultiple
productsarebeingmanufactured.Allbillsmustbenettedandexplodedlevelbylevel
aswasdoneforasinglebill.
Figure4.21showstheproducttreesfortwoproducts.Botharemadefromseveral
components,but,forsimplicity,onlythosecomponentscontaininganFareshown
Low
Level
Code
Part
Number
Week
1
20
20
20
20
50
Gross
Requirements
Scheduled
Receipts
30
Projected
Available20
30
Net
Requirements
30
PlannedOrder
Receipt
PlannedOrder
Release
Gross
Requirements
10
10
10
30
Scheduled
Receipts
Projected
Available10
Net
Requirements
20
PlannedOrder
Receipt
PlannedOrder
Release
20
20
Gross
Requirements
10
10
20
30
Scheduled
Receipts
Projected
Available10
30
Net
Requirements
10
30
PlannedOrder
Receipt
PlannedOrder
Release
10
10
30
Gross
Requirements
20
Scheduled
Receipts
Projected
Available
Net
Requirements
20
PlannedOrder
Receipt
PlannedOrder
Release
20
20
Figure4.19Completedmaterialrequirementsplan.
intheproducttree.NotebothhaveFasacomponentbutatdifferentlevelsintheir
producttree.Allleadtimesareoneweek.Thequantitiesrequiredareshownin
parenthesesthatis,twoCsarerequiredtomakeanA,oneFisrequiredtomakeaC,
andtwoFsareneededtomakeaB.Figure4.22showsthecompletedmaterial
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requirementsplanthatwouldresultif50Aswererequiredinweek5and30Bsinweek
3.
Scrapisusuallystatedasascrapallowance.Forexample,aprocessmaygenerate
15%scrap.Thenetrequirementmightbefor300units.Withascrapallowanceof15%
theprocesswouldberequiredtomake330(1.0.15)353units.
4.UsingTheMaterialRequirementsPlan
Thepeoplewhomanagethematerialrequirementsplanningsystemareplanners.Theyareresponsible
formakingdetaileddecisionsthatkeeptheflowofmaterialmovinginto,through,andoutofthe
factory.Inmanycompanieswheretherearethousandsofpartstomanage,plannersareusually
organizedintologicalgroupingsbasedonthesimilarityofpartsorsupply.
Thebasicresponsibilitiesofaplannerareto:
a.
Launch(release)orderstopurchasingormanufacturing.
b.
c.
d.
Rescheduleduedatesofopen(existing)ordersasrequired.
e.
Coordinatewithotherplanners,masterproductionschedulers,productionactivitycontrol,and
purchasingtoresolveproblems.
Reconcileerrorsandtrytofindtheircause.
Solvecriticalmaterialshortagesbyexpeditingorreplanning.
Low
Level
Code
Part
Number
Week
1
Gross
Requirements
50
Scheduled
Receipts
Projected
Available20
20
20
20
20
Net
Requirements
30
PlannedOrder
Receipt
30
PlannedOrder
Release
30
Gross
Requirements
30
Scheduled
Receipts
Projected
Available10
10
10
Net
20
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Requirements
PlannedOrder
Receipt
20
PlannedOrder
Release
20
Gross
Requirements
60
Scheduled
Receipts
Projected
Available10
10
10
10
Net
Requirements
50
PlannedOrder
Receipt
50
PlannedOrder
Release
50
Gross
Requirements
40
50
Scheduled
Receipts
Projected
Available
Net
Requirements
40
50
PlannedOrder
Receipt
40
50
PlannedOrder
Release
40
50
Figure4.22Partialmaterialrequirementsplan.
Thematerialplannerworkswiththreetypesoforders:planned,released,and
Plannedorders
Plannedordersareautomaticallyscheduledandcontrolledbythecomputer.Asgross
requirements,projectedavailableinventory,andscheduledreceiptschange,the
computerrecalculatesthetimingandquantitiesofplannedorderreleases.TheMRP
programrecommendstotheplannerthereleaseofanorderwhentheorderentersthe
actionbucketbutdoesnotreleasetheorder.
Releasedorders.
Releasing,orlaunching,aplannedorderistheresponsibilityoftheplanner.When
released,theorderbecomesanopenordertothefactoryortopurchasingandappears
ontheMRPrecordasascheduledreceipt.Itisthenunderthecontroloftheplanner,
whomayexpedite,delay,orevencanceltheorder.
Firmplannedorders.
ThecomputerbasedMRPsystemautomaticallyrecalculatesplannedordersasthe
grossrequirementschange.Attimes,theplannermayprefertoholdaplannedorder
firmagainstchangesinquantityandtimedespitewhatthecomputercalculates.This
mightbenecessarybecauseoffutureavailabilityofmaterialorcapacityorspecial
demandsonthesystem.Theplannercantellthecomputerthattheorderisnottobe
changedunlesstheplanneradvisesthecomputertodoso.Theorderisfirmedor
frozenagainstthelogicofthecomputer.
TheMRPsoftwarenets,offsets,andexplodesrequirementsandcreatesplannedorder
releases.Itkeepsprioritiescurrentforallplannedordersaccordingtochangesingross
requirementsforthepart.Butitdoesnotissuepurchaseormanufacturingordersor
rescheduleopenorders.However,itdoesprintactionorexceptionmessages
suggestingthattheplannershouldactandwhatkindofactionmightbeappropriate.
Exceptionmessages.
Ifthemanufacturingprocessisundercontrolandthematerialrequirementsplanning
systemisworkingproperly,thesystemwillworkaccordingtoplan.However,
sometimesthereareproblemsthatneedtheattentionofthe
planner.AgoodMRPsystemgeneratesexceptionmessagestoadvisetheplanner
whensomeeventneedsattention.Followingaresomeexamplesofsituationsthatwill
generateexceptionmessages.
Componentsforwhichplannedordersareintheactionbucketandwhich
shouldbeconsideredforrelease.
Openordersforwhichthetimingorquantityofscheduledreceiptsdoes
notsatisfytheplan.Perhapsascheduledreceiptistimedtoarrivetoo
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earlyorlate,anditsduedateshouldberevised.
Situationsinwhichthestandardleadtimeswillresultinlatedeliveryofa
zerolevelpart.Thissituationmightcallforexpeditingtoreducethe
standardleadtimes.
Transactionmessages.
TransactionmessagesmeanthattheplannermusttelltheMRPsoftwareofall
actionstakenthatwillinfluencetheMRPrecords.Forexample,whentheplanner
releasesanorder,orascheduledreceiptisreceived,orwhenanychangetothedata
occurs,theMRPprogrammustbetold.Otherwise,therecordswillbeinaccurate,and
theplanwillbecomeunworkable.
Materialrequirementsplannersmustmanagethepartsforwhichtheyareresponsible.
Thismeansnotonlyreleasingorderstopurchasingandthefactory,reschedulingdue
datesofopenorders,andreconcilingdifferencesandinconsistencies,butalsofinding
waystoimprovethesystemandremovingthecausesofpotentialerror.Iftheright
componentsaretobeintherightplaceattherighttime,theplannermustmanagethe
process.
ManagingtheMaterialRequirementsPlan
Theplannerreceivesfeedbackfrommanysourcessuchas:
Suppliersactionsthroughpurchasing.
Changestoopenordersinthefactorysuchasearlyorlatecompletionsor
differingquantities.
Managementactionsuchaschangingthemasterproductionschedule.
Theplannermustevaluatethisfeedbackandtakecorrectiveactionifnecessary.The
plannermustconsiderthreeimportantfactorsinmanagingthematerialrequirements
plan.
Priority.
Priorityreferstomaintainingthecorrectduedatesbyconstantlyevaluatingthetrue
duedateneedforreleasedordersand,ifnecessary,expeditingordcexpediting.
ConsiderthefollowingMRPrecord.Theorderquantityis300unitsandtheleadtimeis
threeweeks
Week
Gross
Requirements
ScheduledReceipts
100
50
100
150
200
ProjectedAvailable
150
50
NetRequirements
PlannedOrder
Receipt
PlannedOrder
Release
300
0
300
200
50
150
150
300
Whatwillhappenifthegrossrequirementsinweek2arechangedfrom50unitsto
150?TheMRPrecordwilllooklikethefollowing.
Week
Gross
Requirements
100
150
100
150
200
ScheduledReceipts
50
300
250
50
ProjectedAvailable
150
300
100
100
50
NetRequirements
300
PlannedOrder
Receipt
PlannedOrder
Release
Notethatthereisashortageof100unitsinweek2andthattheplannedorderrelease
originallyinweek2isnowinweek1.Whatcantheplannerdo?Onesolutionisto
expeditethescheduledreceiptof300unitsfromweek3toweek2.Ifthisisnot
possible,theextra100unitswantedinweek2mustberescheduledintoweek3.Also,
thereisnowaplannedorderreleaseinweek1,andthisordershouldbereleased.
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Bottomupreplanning.
Actiontocorrectforchangedconditionsshouldoccuraslowintheproductstructure
aspossible.Supposethepartinthepreviousexampleisacomponentofanotherpart.
Thefirstalternativeistoexpeditethescheduledreceiptof300intoweek2.Ifthiscan
bedone,thereisnoneedtomakeanychangestotheparent.Ifthe300unitscannot
beexpedited,theplannedorderreleaseandnetrequirementoftheparentmustbe
changed.
Reducingsystemnervousness.
Sometimesrequirementschangerapidlyandbysmallamounts,causingthematerial
requirementsplantochangebackandforth.Theplannermustjudgewhetherthe
changesareimportantenoughtoreacttoandwhetheranordershouldbereleased.
Onemethodofreducingsystemnervousnessisfirmplannedorders.
ExampleProblem
AstheMRPplanner,youarriveatworkMondaymorningandlookattheMRPrecord
forpart2876asshownbelow.
Orderquantity=30units
Leadtime=2weeks
Week
GrossRequirements
35
10
15
30
15
20
ScheduledReceipts
30
ProjectedAvailable
20
15
20
20
15
NetRequirements
10
10
15
PlannedOrder
Receipt
30
30
30
PlannedOrder
Release
30
30
30
Thecomputerdrawsattentiontotheneedtoreleasetheplannedorderfor30inweek
1.Eitheryoureleasethisorder,ortherewillbeashortageinweek3.Duringthefirst
week,thefollowingtransactionstakeplace:
a.
Only25unitsofthescheduledreceiptarereceivedintoinventory.The
balancei5scrapped.
b.
c.
Thegrossrequirementforweek3ischangedto10.
d.
e.
Therequirementforweek7is15.
f.
The35grossrequirementforweek1isissuedfrominventory.
g.
Theplannedorderreleasefor30inweek1isreleasedandbecomesa
scheduledreceiptinweek3.
Thegrossrequirementforweek4isincreasedto50.
Aninventorycountrevealstherearetenmoreininventorythanthe
recordshows
Asthesetransactionsoccurduringthefirstweek,youmustenterthesechangesinthe
computerrecord.Atthebeginningofthenextweek,theMRPrecordappearsas
follows:
Orderquantity=30units
Leadtime=2weeks
Week
GrossRequirements
10
10
50
15
20
15
ScheduledReceipts
10
30
ProjectedAvailable20
30
10
25
20
NetRequirements
20
10
PlannedOrderReceipt
30
30
30
PlannedOrderRelease
30
30
30
Theopeningonhandbalanceforweek2is20(20+25+1035=20).Theplannec
orderreleaseoriginallysetinweek4hasshiftedtoweek3.Anotherplannedorderha~
beencreatedforreleaseinweek5.Moreimportantly,thescheduledreceiptinwee~3
willnotbeneededuntilweek4.Youshouldreschedulethistoweek4.Theplannec
orderinweek2shouldbereleasedandbecomeascheduledreceiptinweek4.
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