Advance MR P

Chapter 15
Resource Planning
To Accompany Ritzman & Krajewski Foundations of Operations Management, 2003 Prentice Hall, Inc. All rights reserved.
Material Requirements Planning

Materials requirements 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 It is most valuable in industries where a number of products are made in batches using the same productive equipment. The theme of MRP is getting the right materials to the right place at the right time.
Demand Patterns
2000
2000 1500 Bicycles 1500
1000
Rims
1000
500
500
| 1
| | 5 Day
| 10 (b)
| 1
| | 5 Day
| 10
(a) Figure 15.2
Demand Patterns
2000
2000 1500 Bicycles 1500
1000
Rims Reorder point | | | | | | | | 5 10 Day
1000
500
500
| 1
0
(b)
| 1
| | 5 Day
| 10
(a) Figure 15.2
Demand Patterns
2000
2000 1500 Bicycles Order 1000 on day 3 Rims Reorder point | | | | | | | | 5 10 Day (b)
1500
1000
1000
500
500
0 (a)
| 1
| 1
| | 5 Day
| 10
Demand Patterns
2000
2000 1500 Bicycles Order 1000 on day 3 Rims Reorder point | | | | | | | | 5 10 Day (b)
1500
1000
1000
500
500
0 (a)
| 1
| 1
| | 5 Day
| 10
Demand Patterns
2000
2000 1500 Bicycles Order 1000 on day 3
Order 1000 on day 8

Rims
1500
1000
1000
500
Reorder point | | | | | | | | 5 10 Day
500
0 (a)
| 1
0
(b)
| 1
| | 5 Day
| 10
Demand Patterns
2000
Order 1000 on day 8

Rims
1500
1000
1000
500
500
0 (a)
| 1
0
(b)
| 1
| | 5 Day
| 10
Demand Patterns
2000
Order 1000 on day 8

Rims
1500
1000
1000
500
500
0 (a)
| 1
0
(b)
| 1
| | 5 Day
| 10
Material Requirements Plan Inputs
Bills of materials
Engineering and process designs
Figure 15.4

Authorized master production schedule
Other sources of demand
Bills of materials

Inventory transactions
Inventory records
Bills of materials
Material Requirements Plan Explosion

Inventory records
MRP explosion
Bills of materials
Material Requirements Plan Output

Inventory records
MRP explosion
Bills of materials
Material requirements plan
Bill of Materials (BOM)

Indicates all the raw materials, components, subassemblies, and assemblies required to produce an item A structured list of all components, parts, and materials of an item Shows way a finished product or parent item is put together from individual components
Bill of Materials
Back slats Seat cushion
Leg supports
Seat-frame boards
Back legs
Front legs
A Ladder-back chair
Figure 15.5
Bill of Materials
A Ladder-back chair
B (1) Ladder-back subassembly
C (1) Seat subassembly
Back slats
D (2) Front legs
Seat cushion
E (4) Leg supports
Leg supports
F (2) Back legs G (4) Back slats H (1) Seat frame I (1) Seat cushion
Seat-frame boards
Back legs
Front legs
J (4) Seat-frame boards
A Ladder-back chair
Figure 15.5
Master Production Schedule

Based on actual customer orders and predicted demand Indicates when each ordered item will be produced Time-phased plan specifying how many and when the firm plans to build each end item
Master Production Schedule

April
1 2 3 4 5 6 150 120 200 200 200 120 200
May
7 8
Ladder-back chair
Kitchen chair Desk chair Aggregate production plan for chair family
150
670
670
Figure 15.6
Inventory Record
Detailed information regarding the quantity of each item, on hand, on order committed to use in various time periods MRP system using inventory master file to determine the quantity available for use in a given period If sufficient items are not available, the system includes the item on the planned order release report
Inventory Record
Item: C Description: Seat subassembly Week 1 Gross requirements Scheduled receipts Projected on-hand inventory Planned receipts Planned order releases 150 2 0 3 0 4 120 5 0 6 150 7 120
Figure 15.11
Lot Size: 230 units Lead Time: 2 weeks
8 0
230
37
Inventory Record
Item: C Description: Seat subassembly Week 1 Gross requirements Scheduled receipts Projected on-hand inventory Planned receipts Planned order releases 150 2 0 3 0 4 120 5 0 6 150 7 120 8 0 Lot Size: 230 units Lead Time: 2 weeks
230
37
Explanation: Gross requirements are the total demand for the two chairs. Projected on-hand inventory in week 1 is 37 + 230 150
Inventory Record
230
37
117
Explanation: Gross requirements are the total demand for the two chairs. Projected on-hand inventory in week 1 is 37 + 230 150 = 117 units.
Inventory Record
230
37
117
Inventory Record
Item: C Description: Seat subassembly Week 1 Gross requirements Scheduled receipts Projected on-hand inventory Planned receipts 150 2 0 3 0 4 120 5 0 6 150 7 120 8 0 Lot Size: 230 units Lead Time: 2 weeks
230
37
117
Projected on-hand inventory balance Planned order releases at end of week t
Inventory on hand at end of week t - 1
Scheduled or planned receipts in week t
Gross requirements in week t
Inventory Record
Item: C Description: Seat subassembly Week 1 Gross requirements Scheduled receipts Projected on-hand inventory Planned receipts 150 2 0 3 0 4 120 5 0 6 150 7 120 8 0 Lot Size: 230 units Lead Time: 2 weeks
230
37
117
117
117
153
273
273
Projected on-hand inventory balance Planned order releases at end of week t
Inventory on hand at end of week t - 1
Scheduled or planned receipts in week t
Gross requirements in week t
Planned Orders
Explanation: Item: C Description: Seat subassembly Without a new order in week 4, there will be a shortage of three units: 117 + 0 + 0 120 = 3 units. 1 2
Gross requirements Scheduled receipts Projected on-hand inventory Planned receipts Planned order releases 150 0 Lot Size: 230 units Lead Time: 2 weeks Week 3 0 4 120 5 0 6 150 7 120 8 0
230
37
117
117
117
153
273
273
Planned Orders
230
37
117
117
117
Planned Orders
Explanation: Item: C Description: Seat subassembly Adding the planned receipt brings the balance to 117 + 0 + 230 120 = 227 units.
1 Gross requirements Scheduled receipts Projected on-hand inventory Planned receipts Planned order releases 150 2 0 3 0 4 120 Lot Size: 230 units Lead Time: 2 weeks Week 5 0 6 150 7 120 8 0
230
37
117
117
117
227
230
Planned Orders
Explanation: Item: C Description: Seat subassembly Adding the planned receipt brings the balance to 117 + 0 + 230 120 = 227 units.
1 Gross requirements Scheduled receipts Projected on-hand inventory Planned receipts Planned order releases 150 2 0 3 0 4 120 Lot Size: 230 units Lead Time: 2 weeks Week 5 0 6 150 7 120 8 0
230
37
117
117
117
227
230
Planned Orders
Explanation: Item: C Description: subassembly Offsetting for Seat a two-week lead time puts the corresponding planned order release back to week 2.
1 Gross requirements Scheduled receipts Projected on-hand inventory Planned receipts Planned order releases 230 150 2 0 3 0 4 120 Lot Size: 230 units Lead Time: 2 weeks Week 5 0 6 150 7 120 8 0
230
37
117
117
117
227
230
Planned Orders
Explanation: Item: C Description: subassembly Offsetting for Seat a two-week lead time puts the corresponding planned order release back to week 2.
230
37
117
117
117
227
230
Planned Orders
Explanation: Item: C Seat order subassembly TheDescription: first planned lasts until week 7, when projected inventory would drop to 43.
230
37
117
117
117
227
227
77
43
230
Planned Orders
Explanation: Item: C Description: Seat subassembly Adding the second planned receipt brings the balance to 77 + 0 + 230 120 = 187.
230
37
117
117
117
227
227
77
230
230
Planned Orders
Explanation: Item: C Description: Seat subassembly Adding the second planned receipt brings the balance to 77 + 0 + 230 120 = 187.
230
37
117
117
117
227
227
77
187
230
230
Planned Orders
Explanation: Item: C Seat subassembly TheDescription: corresponding planned order release is for week 5.
230
37
117
117
117
227
227
77
187
230
230
230
Planned Orders
Item: C Description: Seat subassembly Week 1 Gross requirements Scheduled receipts Projected on-hand inventory Planned receipts Planned order releases 230 150 2 0 3 0 4 120 5 0 6 150 7 120 8 0 Lot Size: 230 units Lead Time: 2 weeks
230
37
117
117
117
227
227
77
187
187
230
230
230
Additional MRP Scheduling Terminology

Gross Requirements-total requirements for a component or end product Scheduled receipts-when a purchase or product order that has already been placed will be available Planned order release-how many and when to produce to meet gross requirements
Lot Sizing in MRP Programs

Lot-for-lot (L4L) (producing as much as required) Fixed order quantity (ordering same quantity each time an order is issued) Periodic order quantity (allows a different order quantity for each order issued, but tends to issue the order at predetermined time intervals such as every two weeks) Economic order quantity (EOQ)
Lot-Sizing Rule Comparison

The FOQ rule generates high average inventory because it creates remnants. The POQ rule reduces average on-hand inventory because it does a better job of matching order quantity to requirements.
The L4L rule minimizes inventory investment but maximizes the number of orders placed.
MRP Outputs
MRP explosion
Figure 15.16
MRP Outputs
MRP explosion

Action notices Releasing new orders Adjusting due dates Priority reports Dispatch lists Supplier schedules Capacity reports Capacity requirements planning Finite capacity scheduling Input-output control
MRP Outputs
MRP explosion

Action notices Releasing new orders Adjusting due dates
Routings and time standards
Priority reports Dispatch lists Supplier schedules
Capacity reports Capacity requirements planning Finite capacity scheduling Input-output control
MRP Outputs
MRP explosion

Manufacturing resources plan

Performance reports
MRP Outputs
MRP explosion

Manufacturing resources plan

Performance reports Cost and price data
MRP Explosion
Item: Seat subassembly Lot size: 230 units Week Lead time: 2 weeks Gross requirements Scheduled receipts Projected on-hand inventory Planned receipts Planned order releases 230 1 150 2 0 3 0 4 120 5 0 6 150 7 120 8 0
230
37
117
117
117
227
227
77
187
187
230
230
230
Figure 15.18
MRP Explosion
Item: Seat subassembly Lot size: 230 units Week Lead time: 2 weeks 1 150 2 0 3 0 4 120 5 0 6 150 7 120 8 0
Gross requirements
Planned receipts Planned order releases
230
230
230
230
MRP Explosion
Gross requirements
230
230
230
230
Item: Seat frames Lot size: 300 units Week Lead time: 1 week Gross requirements Scheduled receipts Projected on-hand 40 inventory Planned receipts Planned order releases 1 2 3 4 5 6 7 8
Item: Seat cushion Lot size: L4L Week Lead time: 1 week Gross requirements Scheduled receipts Projected on-hand inventory Planned receipts Planned order releases 1 2 3 4 5 6 7 8
300
MRP Explosion
Gross requirements
230
230
230
230
Usage quantity: 1
Item: Seat frames Lot size: 300 units Week Lead time: 1 week Gross requirements Scheduled receipts Projected on-hand 40 inventory Planned receipts Planned order releases 1 0 2 230 3 4 5 6 7 8 Lead time: 1 week Gross requirements Scheduled receipts Projected on-hand inventory Planned receipts Planned order releases 1 0 2 230 3 Item: Seat cushion Lot size: L4L
Usage quantity: 1
Week 4 5 6 7 8
300
MRP Explosion
Gross requirements
230
230
230
230
Usage quantity: 1
Item: Seat frames Lot size: 300 units Week Lead time: 1 week Gross requirements Scheduled receipts Projected on-hand 40 inventory Planned receipts Planned order releases 1 0 2 230 3 0 4 0 5 230 6 7 8 Lead time: 1 week Gross requirements Scheduled receipts Projected on-hand inventory Planned receipts Planned order releases 1 0 2 230 3 0 Item: Seat cushion Lot size: L4L
Usage quantity: 1
Week 4 0 5 230 6 7 8
300
MRP Explosion
Gross requirements
230
230
230
230
Item: Seat frames Lot size: 300 units Week Lead time: 1 week Gross requirements Scheduled receipts Projected on-hand 40 inventory Planned receipts Planned order releases 300 1 0 2 230 3 0 4 0 5 230 6 0 7 0 8 0
Item: Seat cushion Lot size: L4L Week Lead time: 1 week Gross requirements Scheduled receipts Projected on-hand inventory Planned receipts Planned order releases 230 1 0 2 230 3 0 4 0 5 230 6 0 7 0 8 0
300
40
110
110
110
180
180
180
180
300
230
230
230
MRP Explosion
Item: Seat frames Lot size: 300 units Week Lead time: 1 week Gross requirements Planned receipts Planned order releases 300 1 0 2 230 3 0 4 0 5 230 6 0 7 0 8 0 300
Item: Seat cushion Lot size: L4L Week Lead time: 1 week Gross requirements Planned receipts Planned order releases 230 1 0 2 230 3 0 4 0 5 230 6 0 7 0 8 0
230
230
230
MRP Explosion
230
230
230
Item: Seat-frame boards Lot size: 1500 units Week Lead time: 1 week Gross requirements Scheduled receipts Projected on-hand 200 inventory Planned receipts Planned order releases 1 2 3 4 5 6 7 8
MRP Explosion
230
230
230
Usage quantity: 4
Item: Seat-frame boards Lot size: 1500 units Week Lead time: 1 week Gross requirements Scheduled receipts Projected on-hand 200 inventory Planned receipts Planned order releases 1 0 2 0 3 0 4 1200 5 0 6 0 7 0 8 0
MRP Explosion
230
230
230
Item: Seat-frame boards Lot size: 1500 units Week Lead time: 1 week Gross requirements Scheduled receipts Projected on-hand 200 inventory Planned receipts Planned order releases 1500 1 0 2 0 3 0 4 1200 5 0 6 0 7 0 8 0
200
200
200
500
500
500
500
500
1500
Solved Problem 1
A LT = 1 B (3) LT = 2 D (1) LT = 3 E (2) LT = 6 F (1) LT = 1 G (1)
Figure 15.21
C (1) LT = 3 D (1) LT = 3
LT = 3
Solved Problem 2
B (1)
Table 12.1
A LT = 2 C (2) LT = 2 D (1)
D FOQ = 500 units 3 weeks None 425
LT = 1
Inventory Record Data
DATA CATEGORY Lot-sizing rule Lead time Scheduled receipts Beginning (on-hand) inventory
B POQ (P=3) 1 week None 20
ITEM C
L4L 2 weeks 200 (week 1) 0
LT = 3
Figure 15.22
Solved Problem 2
Item: B Description: Week 1 Gross requirements Scheduled receipts Projected on-hand 20 inventory Planned receipts Planned order releases 280 2 100 3 4 200 5 6 120 7 180 8 60 9 10 Lot size: POQ (P = 3) Lead time: 1 week
20
200
200
240
60
280
360
360
Solved Problem 2
Item: C Description: Week 1 Gross requirements Scheduled receipts Projected on-hand 0 inventory Planned receipts Planned order releases 400 2 200 3 4 400 5 6 240 7 360 8 120 9 10 Lot size: L4L Lead time: 2 weeks
200
200
400
240
360
120
240
360
120
Solved Problem 2
Item: D Description: Week 1 Gross requirements Scheduled receipts Projected on-hand 425 inventory Planned receipts Planned order releases 500 500 2 400 3 4 240 5 360 6 120 7 8 9 10 Lot size: FOQ = 500 units Lead time: 3 weeks
425
25
25
285
425
305
305
305
360
305
500
500

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Chapter 15

Material Requirements Planning

(a) Figure 15.2

Rims Reorder point | | | | | | | | 5 10 Day

(a) Figure 15.2

Order 1000 on day 8

Order 1000 on day 8

Order 1000 on day 8

Material Requirements Plan Inputs

Engineering and process designs

Material Requirements Plan Inputs

Engineering and process designs

Material Requirements Plan Inputs

Engineering and process designs

Material Requirements Plan Explosion

Engineering and process designs

Material Requirements Plan Output

Engineering and process designs

Material requirements plan

Bill of Materials (BOM)

B (1) Ladder-back subassembly

C (1) Seat subassembly

D (2) Front legs

E (4) Leg supports

Master Production Schedule

Master Production Schedule

Projected on-hand inventory balance Planned order releases at end of week t

Inventory on hand at end of week t - 1

Scheduled or planned receipts in week t

Gross requirements in week t

Projected on-hand inventory balance Planned order releases at end of week t

Inventory on hand at end of week t - 1

Scheduled or planned receipts in week t

Gross requirements in week t

Additional MRP Scheduling Terminology

Lot Sizing in MRP Programs

Lot-Sizing Rule Comparison

Material requirements plan

Material requirements plan

Priority reports Dispatch lists Supplier schedules

Material requirements plan

Priority reports Dispatch lists Supplier schedules

Manufacturing resources plan

Material requirements plan

Priority reports Dispatch lists Supplier schedules

Manufacturing resources plan

B POQ (P=3) 1 week None 20

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