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Chapter 15

Chapter 15. Resource Requirements Planning: MRP and CRP. Overview. Resource Requirements Planning Material Requirements Planning (MRP) Capacity Requirements Planning (CRP) Wrap-Up: What World-Class Companies Do. Resource Requirements Planning. Aggregate Planning. Chapter 13.

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Chapter 15

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  1. Chapter 15 Resource Requirements Planning: MRP and CRP

  2. Overview • Resource Requirements Planning • Material Requirements Planning (MRP) • Capacity Requirements Planning (CRP) • Wrap-Up: What World-Class Companies Do

  3. Resource Requirements Planning Aggregate Planning Chapter 13 Master Production Scheduling (MPS) Resource Requirements Planning Material Requirements Planning (MRP) Chapter 15 Capacity Requirements Planning (CRP)

  4. Material Requirements Planning (MRP)

  5. Materials Requirements Planning (MRP) • Computer based system • Explodes Master Schedule (MPS) into required amounts of raw materials and subassemblies to support MPS • Nets against current orders and inventories to develop production and purchased material ordering schedules

  6. Objectives of MRP • Improve customer service • Reduce inventory investment • Improve plant operating efficiency

  7. Elements of MRP Inputs Outputs Service-Parts Orders and Forecasts Inventory Transaction Data Order Changes Order Inventory Status File Planned Order Schedule MRP System Master Production Schedule Planning Report Performance Exception Reports Bill of Materials File

  8. MRP Computer Program • Begins with number of end items needed • Add service parts not included in MPS • Explode MPS into gross requirements by consulting bill of materials file • Modify gross requirements to get net requirements: • Net Requirements = Gross Requirements + Allocated Inventory + Safety Stock - Inventory On Hand • Offset orders to allow for lead time

  9. Outputs of MRP • Planned order schedule - quantity of material to be ordered in each time period • Changes to planned orders - modifications to previous planned orders • Secondary outputs: • Exception reports • Performance reports • Planning reports

  10. Example: MRP Schedule LocoMopeds is a manufacturer of off-road mopeds. The following product structure diagram represents the bill of materials for its dual-carburetor Model 442 moped. MOPED Level 0 ENGINE ASSEMBLY GAS TANK WHEEL ASSEMBLY (2) FRAME Level 1 MOTOR CARBURETOR (2) HUB ASSEMBLY TIRE Level 2

  11. Example: MRP Schedule • Bill of Material Parent Component Level Compon. Code Code Code Description Req’d 442 0 #442 Moped 442 EA 1 Engine Assem. 1 GT 1 Gas Tank 1 WA 1 Wheel Assem. 2 F 1 Frame 1 EA M 2 Motor 1 C 2 Carburetor 2 WA HA 2 Hub Assem. 1 T 2 Tire 1

  12. Example: MRP Schedule • Inventory Status Report

  13. WEEK 10 11 12 13 14 15 16 QUANTITY 0 1300 0 1300 800 1200 1400 Example: MRP Schedule The company is currently planning production for weeks 10 through 16. Based on existing orders and demand forecasts, the master production schedule is as follows: Master Production Schedule: #442 Moped Determine the MRP schedule required to support the master production schedule for the Model 442 moped in weeks 10-16.

  14. Example: MRP Schedule • 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

  15. ITEM: 442 MOPED LT: 1 LOT SIZE: LFL SS: 200 WEEK 10 11 12 13 14 15 16 1300 800 GROSS REQUIREMENTS 0 0 1400 1300 1200 SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 500) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES Example: MRP Schedule • MRP Schedule for #442 Mopeds . . . Initially

  16. ITEM: 442 MOPED LT: 1 LOT SIZE: LFL SS: 200 WEEK 10 11 12 13 14 15 16 1300 800 GROSS REQUIREMENTS 0 0 1400 1300 1200 SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 500) 300 300 0 0 0 0 0 NET REQUIREMENTS 1000 1300 800 1200 1400 PLANNED ORDER RECEIPTS 1000 1300 800 1200 1400 PLANNED ORDER RELEASES 1000 1300 800 1200 1400 Example: MRP Schedule • MRP Schedule for #442 Mopeds . . . Completed

  17. Example: MRP Schedule • 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

  18. ITEM: GAS TANK LT: 2 LOT SIZE: LFL SS: 200 WEEK 10 11 12 13 14 15 16 0 1200 GROSS REQUIREMENTS 1000 1300 0 800 1400 SCHEDULED RECEIPTS 900 AVAILABLE (ON-HAND = 600) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES Example: MRP Schedule • MRP Schedule for Gas Tanks . . . Initially

  19. ITEM: GAS TANK LT: 2 LOT SIZE: LFL SS: 200 WEEK 10 11 12 13 14 15 16 GROSS REQUIREMENTS 1000 0 1300 800 1200 1400 0 SCHEDULED RECEIPTS 900 AVAILABLE (ON-HAND = 600) 1300 300 300 0 0 0 0 NET REQUIREMENTS 1000 800 1200 1400 PLANNED ORDER RECEIPTS 1000 800 1200 1400 PLANNED ORDER RELEASES 1000 800 1200 1400 Example: MRP Schedule • MRP Schedule for Gas Tanks . . . Completed

  20. Example: MRP Schedule • MRP Schedule for Frames for Weeks 10 - 16, considering that: • 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

  21. ITEM: FRAME LT: 3 LOT SIZE: 2000 SS: 0 WEEK 10 11 12 13 14 15 16 GROSS REQUIREMENTS 1000 0 1300 800 1200 1400 0 SCHEDULED RECEIPTS 2000 AVAILABLE 600 NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES Example: MRP Schedule • MRP Schedule for Frames . . . Initially

  22. ITEM: FRAME LT: 3 LOT SIZE: 2000 SS: 0 WEEK 10 11 12 13 14 15 16 GROSS REQUIREMENTS 1000 0 1300 800 1200 1400 0 SCHEDULED RECEIPTS 2000 AVAILABLE (ON-HAND = 600) 2600 1600 1600 300 1500 300 900 NET REQUIREMENTS 0 0 0 500 0 1100 0 PLANNED ORDER RECEIPTS 2000 2000 PLANNED ORDER RELEASES 2000 2000 Example: MRP Schedule • MRP Schedule for Frames . . . Completed

  23. Example: MRP Schedule • 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

  24. ITEM: ENGINE ASSEM. LT: 1 LOT SIZE: 500 SS: 100 WEEK 10 11 12 13 14 15 16 0 1200 GROSS REQUIREMENTS 1000 1300 0 800 1400 SCHEDULED RECEIPTS 1000 AVAILABLE (ON-HAND = 300) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES Example: MRP Schedule • MRP Schedule for Engine Assemblies . . . Initially

  25. ITEM: ENGINE ASSEM. LT: 1 LOT SIZE: 500 SS: 100 WEEK 10 11 12 13 14 15 16 0 1200 GROSS REQUIREMENTS 1000 1300 0 800 1400 SCHEDULED RECEIPTS 1000 AVAILABLE (ON-HAND = 300) 1200 200 200 400 100 400 0 NET REQUIREMENTS 1100 400 1100 1000 PLANNED ORDER RECEIPTS 1500 500 1500 1000 PLANNED ORDER RELEASES 1500 500 1500 1000 Example: MRP Schedule • MRP Schedule for Engine Assemblies . . . Completed

  26. Example: MRP Schedule • MRP Schedule for Motors for Weeks 10 - 16, considering that: • 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

  27. ITEM: MOTOR LT: 1 LOT SIZE: LFL SS: 0 WEEK 10 11 12 13 14 15 16 1500 1000 1500 GROSS REQUIREMENTS 500 SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 250) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES Example: MRP Schedule • MRP Schedule for Motors . . . Initially

  28. ITEM: MOTOR LT: 1 LOT SIZE: LFL SS: 0 WEEK 10 11 12 13 14 15 16 1500 1000 1500 GROSS REQUIREMENTS 500 SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 250) 250 250 0 0 0 0 0 NET REQUIREMENTS 1250 500 1500 1000 PLANNED ORDER RECEIPTS 1250 500 1500 1000 PLANNED ORDER RELEASES 1250 500 1500 1000 Example: MRP Schedule • MRP Schedule for Motors . . . Completed

  29. Example: MRP Schedule • 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 2500+ is used for ordering carburetors • Safety Stock of 100 carburetors is desired • Lead time for carburetors is 2 weeks

  30. ITEM: CARBURETOR LT: 2 LOT SIZE: 2500+ SS: 100 WEEK 10 11 12 13 14 15 16 3000 2000 3000 GROSS REQUIREMENTS 1000 SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 150) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES Example: MRP Schedule • MRP Schedule for Carburetors . . . Initially

  31. ITEM: CARBURETOR LT: 2 LOT SIZE: 2500+ SS: 100 WEEK 10 11 12 13 14 15 16 3000 2000 3000 GROSS REQUIREMENTS 1000 3000 SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 150) 50 3050 50 1550 1050 1550 1550 NET REQUIREMENTS 950 1450 950 PLANNED ORDER RECEIPTS 2500 2500 2500 PLANNED ORDER RELEASES 2500 2500 2500 Example: MRP Schedule • MRP Schedule for Carburetors . . . Completed

  32. Example: MRP Schedule • 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

  33. ITEM: WHEEL ASSEM. LT: 1 LOT SIZE: 500 SS: 400 WEEK 10 11 12 13 14 15 16 0 2400 GROSS REQUIREMENTS 2000 2600 0 1600 2800 SCHEDULED RECEIPTS 2000 AVAILABLE (ON-HAND = 500) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES Example: MRP Schedule • MRP Schedule for Wheel Assemblies . . . Initially

  34. ITEM: WHEEL ASSEM. LT: 1 LOT SIZE: 500 SS: 400 WEEK 10 11 12 13 14 15 16 0 2400 GROSS REQUIREMENTS 2000 2600 0 1600 2800 SCHEDULED RECEIPTS 2000 AVAILABLE (ON-HAND = 500) 2100 100 100 0 400 0 200 NET REQUIREMENTS 2500 1600 2000 2800 PLANNED ORDER RECEIPTS 2500 2000 2000 3000 PLANNED ORDER RELEASES 2500 2000 2000 3000 Example: MRP Schedule • MRP Schedule for Wheel Assemblies . . . Completed

  35. Example: MRP Schedule • 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

  36. ITEM: HUB ASSEM. LT: 1 LOT SIZE: LFL SS: 0 WEEK 10 11 12 13 14 15 16 2500 3000 GROSS REQUIREMENTS 0 2000 0 2000 0 2400 SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 100) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES Example: MRP Schedule • MRP Schedule for Hub Assemblies . . . Initially

  37. ITEM: HUB ASSEM. LT: 1 LOT SIZE: LFL SS: 0 WEEK 10 11 12 13 14 15 16 2500 3000 GROSS REQUIREMENTS 0 2000 0 2000 0 2400 SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 100) 100 2500 0 0 0 0 0 NET REQUIREMENTS 2000 2000 3000 PLANNED ORDER RECEIPTS 2000 2000 3000 PLANNED ORDER RELEASES 2000 2000 3000 Example: MRP Schedule • MRP Schedule for Hub Assemblies . . . Completed

  38. Example: MRP Schedule • MRP Schedule for Tires for Weeks 10 - 16, considering that: • 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

  39. ITEM: TIRE LT: 3 LOT SIZE: 1000 SS: 500 WEEK 10 11 12 13 14 15 16 2500 3000 GROSS REQUIREMENTS 0 2000 0 2000 0 3000 SCHEDULED RECEIPTS 2000 AVAILABLE (ON-HAND = 500) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES Example: MRP Schedule • MRP Schedule for Tires . . . Initially

  40. ITEM: TIRE LT: 3 LOT SIZE: 1000 SS: 500 WEEK 10 11 12 13 14 15 16 2500 3000 GROSS REQUIREMENTS 0 2000 0 2000 0 3000 SCHEDULED RECEIPTS 2000 AVAILABLE (ON-HAND = 500) 0 3000 2500 500 500 500 500 NET REQUIREMENTS 1500 2500 PLANNED ORDER RECEIPTS 2000 3000 PLANNED ORDER RELEASES 2000 3000 Example: MRP Schedule • MRP Schedule for Tires . . . Completed

  41. Lot-Sizing in MRP • 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

  42. Lot-Sizing Methods • Typical MRP methods • accommodates lumpy demand • Lot-for-Lot (LFL) • Period Order Quantity (POQ) • Comments on Economic Order Quantity (EOQ) • does not consider quantity discounts • does not always provide the most economical approach with lumpy demand

  43. WEEK 1 2 3 4 5 6 7 8 0 1200 NET REQUIREMENTS 1000 1300 0 800 800 1300 Example: Lot-Sizing Decision The net requirements for a material from an MRP schedule are: It costs $400 to change over the machines for this material in the affected work center. It costs $0.40 per unit when one unit of this material must be carried in inventory from one week to the next. Identify the lot-sizing method that results in the least carrying and changeover costs for the 8-week schedule.

  44. WEEK 1 2 3 4 5 6 7 8 0 1200 NET REQUIREMENTS 1000 1300 0 800 800 1300 0 0 0 0 BEGINNING INVENTORY 0 0 0 0 PRODUCTION LOTS 1000 0 1300 800 1200 1300 0 800 ENDING INVENTORY 0 0 0 0 0 0 0 0 Example: Lot-Sizing Decision • Lot-for-Lot Method Carrying Cost = 0($.40) = $0 Changeover Cost = 6($400) = $2,400 Total = $2,400

  45. Example: Lot-Sizing Decision • Economic Order Quantity (EOQ) Method S = $400.00 D = [(Net Req. for 8 wks)/8 weeks)](50 weeks/year) = (6400/8)(50) = 40,000 C = ($0.40 per week)(50 weeks/year) = $20.00

  46. WEEK 1 2 3 4 5 6 7 8 0 1200 NET REQUIREMENTS 1000 1300 0 800 800 1300 695 265 725 725 BEGINNING INVENTORY 0 265 230 760 PRODUCTION LOTS 1265 0 1265 1265 1265 1265 0 1265 ENDING INVENTORY 265 265 230 695 760 725 725 1190 Example: Lot-Sizing Decision • Economic Order Quantity (EOQ) Method Carrying Cost = 4855($.40) = $1,942 Changeover Cost = 6($400) = $2,400 Total = $4,342

  47. Example: Lot-Sizing Decision • Period Order Quantity (POQ) Method POQ = (# Weeks/year)/(# Orders/year) = 50/(D/EOQ) = 50/(40,000/1,265) = 1.58 or 2 weeks

  48. WEEK 1 2 3 4 5 6 7 8 0 1200 NET REQUIREMENTS 1000 1300 0 800 800 1300 0 0 0 800 BEGINNING INVENTORY 0 0 800 1300 PRODUCTION LOTS 1000 0 2100 0 2500 0 800 0 ENDING INVENTORY 0 0 800 0 1300 0 800 0 Example: Lot-Sizing Decision • Period Order Quantity (POQ) Method Carrying Cost = 2900($.40) = $1,160 Changeover Cost = 4($400) = $1,600 Total = $2,760

  49. Example: Lot-Sizing Decision • Summary Carrying Chg.Ovr. Total MethodCostCostCost LFL 0 2,400 2,400 EOQ 1,942 2,400 4,342 POQ 1,160 1,600 2,760

  50. 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

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