Material Requirements Planning

1. Material Requirements Planning Chapter 2

2. MRP in MPC

3. MRP and in MPC • An MRP system translates the MPS’s into the detailed individual steps necessary to accomplish those plans. It also provides information to develop capacity plans. • An MRP II system has a “what if” capability and involves other functions (e.g., sales, finance, human resources, accounting, etc.)

4. MRP Record Processing

5. MRP Terms • Time bucket: period, e.g., 1 week. • Planning horizon: number of periods. • Lead time offset: offsets a planned order release from a required replenishment. • Net requirement: difference between the gross requirements and the available inventory (including scheduled receipts).

6. Gross to Net Explosion and Lead Time Offsetting • Explosion: process of translating an item’s requirements into component requirements, taking existing inventories and scheduled receipts into account. Basis for the concept of dependent demand. • Precedent relationships: [from the BOM] indicate the order in which assembly must be done. • MRP achieves the benefits of the backward scheduling and performs the gross to net explosion

7. Technical Issues • Processing frequency – cost versus timeliness and accuracy • Regeneration • Net change • Bucketless systems • Lot sizing – setup cost versus carrying cost, cascading effect • Safety stock, safety lead time • Low-level coding

8. Technical Issues • Pegging • Firm planned orders • Service parts • Planning horizon • Cumulative lead time • Scheduled receipts vs. planned order releases

9. Using the MRP System • MRP Planner- Primary actions [see list, p. 36] • Order launching - process of releasing orders to the shop or to vendors; done when planned order release is in the action bucket. • Allocation and availability checking - step prior to order launching that involves an availability check for the necessary component(s). • Exception codes • Bottom-up replanning - using pegging data to solve material shortage problems.

10. System Dynamics • Transactions during a period. • Rescheduling. • Complex transaction processing. • Procedural inadequacies – data auditing and reconciliation.

11. MRP Data Base • Item master file - individual part data that is static. • Subordinate item master file - information on part status. • Bill of materials file - usually set up on a single-level basis; i.e., part number is linked only to part numbers of immediate components required to produce it.

12. MRP Data Base • Location file - physical storage locations. • Calendar file. • Open order file - files of scheduled receipts (purchase orders and shop orders). • Other file linkages: forecasting, capacity planning, production scheduling, cost accounting, budgeting, order entry, shop-floor control, distribution, invoicing, payroll, job standards, and engineering.

13. Concluding Principles • Effective use of an MRP system allows development of a forward-looking (planning) approach to managing material flows. • The MRP system permits decentralized decision making on individual part numbers. • All decisions made to solve problems must be done within the system, and transactions must be processed to reflect the changes.

14. Concluding Principles • Effective use of exception messages allows focusing attention on the “vital few,” not the “trivial many.” • System records must be accurate and reflect the factory’s physical reality. • Procedural inaccuracies in processing MRP transactions must be identified and corrected to ensure that material plans are accurate.

15. Homework Assignments • Problems 2.6 and 2.14 • Due Thursday, October 3 • Use spreadsheets for the assignments