Chapter 18. Materials Requirements Planning

1. Chapter 18. Materials Requirements Planning Outline: • Material Requirements Planning (MRP) • Master Production Schedule (MPS) • Bill of Materials (BOM) • Time Fences • MRP Logic and Product Structure Trees • MRP Examples • MRP and Lot Sizing • MRP & Capacity Requirements Planning (CRP)

2. Materials Requirements Planning • Materials requirements planning (MRP) is a means for determining the number of parts, components, and materials needed to produce a product (end item) • Dependent vs. independent demand • MRP provides time scheduling information specifying when each of the subassemblies, parts, and components should be ordered or produced • What, when, how many? • Dependent demand drives MRP • MRP is an information system

3. Materials Requirements Planning • Critical input and data requirements: • Master Production Schedule (MPS) • Bill of Materials (BOM) • Inventory database • Many outputs – primary ones are: • 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. Planned order releases

4. MPS (Specific End Items) Master Production Schedule (MPS) • MPS: One of three primary inputs in MRP • Time-phased plan specifying how many and when the firm plans to build each end item • Developed by disaggregating the “aggregate plan” Aggregate Plan (Product Groups) Week

5. Bill of Materials (BOM) • BOM: a listing of all of the raw materials, parts, subassemblies, and assemblies needed to produce one unit of a product. • Product structure tree: Visual depiction of the requirements in a bill of materials, where all components are listed by levels. • A simple question: For 100 “M”s how many…

6. BOM - tree format and low level coding Low-level coding requires that when an identical item occur on multiple levels, then it should be “lowered” to its lowest level for computational reasons. The software will complete all level 0 items first, then all level 1 items, etc. In the original diagram (a) since N appears on levels 1 & 2 In the final diagram (b) (after re-classification) it is lowered to level 2. Also, note that S under P was on level 3, which needed to be lowered to level 4

7. 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

8. MRP – The System

9. MRP Example • Solved problem 1. • MPS: 100 units of X for week 10 • Lead times are on the Excel sheet (given in the book) • Excel time!

10. Lot Sizing in MRP Programs • The default order size is Lot-for-lot (L4L) • However, for purchased items or for technical reasons, there may be minimum or maximum order sizes • Purchased items/subassemblies may require multiples of predetermined amounts (e.g., multiples of 50) • An example: Problem 5. Excel time. • Common lot-sizing methods are: • Economic order quantity (EOQ) • Least total cost (LTC) • Least unit cost (LUC) • Which one to use? • The one that is least costly!

11. MRP, Capacity Requirements Planning, and MRP II • Consider the expanded logic flow of MRP II. • When utilized cleverly: • It can be used to lower levels of in-process inventories (Lot-sizing?) • Ability to track material requirements • Ability to evaluate capacity requirements • The basic functions of the capacity requirements planning (CRP) system are: • To calculate the capacity needs based on the planned orders from MRP schedules • To compare the capacity required to the capacity available • Routing charts show the specific departments that each part goes through as well as setup and process times in those departments • Means of allocating production time • Ability to Simulate the manufacturing system

12. A B(2) C(4) C(2) D(5) Capacity Requirements Planning (CRP) • A small scale CRP example. • MPS for item A is: • 30, 24, 37 units for weeks 7, 8, and 10 • Lead times for A, …, D are: • 1, 2, 3, and 1 week, respectively. • Routing chart for item A is: • Dept 4 (only) • Setup time is 2.0 hours • Processing time is 0.25 hours/unit. • The complete routing chart is available on the Excel file. • Group exercise: Complete the MRP schedules and compute work center load profiles • Excel time!