MRP Environment

Nature of Demand
o Two types of demand
Independent
Dependent

Links with Planning and other Functions

Master Scheduling
MPS establishes specific end-item due dates and quantities
MRP is the component planner
o Time-phased priority plan is calculated
Plans order release and receipt dates
Final assembly operation
Capacity Requirements Planning (CRP)
MRP vs capacity availability
Production activity control (PAC)
MRP is the input to PAC
Plans the release and receipt dates for orders
Purchasing and PAC personnel actually control the orders, not
MRP
Objectives of MRP

Determine Requirements
What components are required? (purchased, in inventory, WIP)
Quantity required?
When will orders be released/received?
o For both purchased and produced items
Keep Priorities
Expediting or de-expediting work orders
Changing work orders/purchase orders
Adding/cancelling work orders or purchase orders
MRP affected by
Unplanned events
o Changes in demand
o Shortages of production capacity
o Late arrival or completion of components
o Excessive scrap
MRP Inputs and Outputs
Inputs

o
Source
MPS

Product structure file

Data
Planned and scheduled
orders for end items
BOMs

Inventory record file

Inventory status

Item master file

Planning factors

Description
End item quantities
End item due dates
Components required
Quantity of each component
per parent
Component and end item
quantities on hand
Component and end item
quantities allocated
Component and end item
quantities on order
Lot size
Lead time
Yield and scrap factors
Safety stock

Outputs
o Release of POs to suppliers
o Release of manufacturing orders to the factory
Planning Software
o Companies rely on application software for MRP
o Examples
Exploding BOMs for FG, down to the raw material level
Checking inventory levels
Offsetting order release and receipt dates
Bill of Material

Bill of material a listing of subassemblies, intermediates, parts and

raw materials that go into a parent assembly showing the quantity of
each required to make an assembly
o BOM is one of the most important documents/building blocks in a
manufacturing company
o Summarized BOM
A list of all components in an assembly
o Indented BOM
Gives an indication of an assembly or end item product
structure
o Multi-Level BOM
Grouping of single level BOMs for the subassemblies that go
into it
Planning Bill
o Plans material requirements for a family of end products
Where Used
o An inversion of BOM information
o Lists all the items used to make a component/item, whether or not
they have any demand
Pegging
o Shows only those parents for where there is an existing demand
o

Creating a Priority Plan

Steps
o Manufacturing Lead time
o Offsetting
When a planned order is needed in advance of the planned order receipt
date of the item
o Exploding
Determining the total of each component needed for a parent
Gross and Net Requirements
o If you have items in inventory, the must be taken into account and subtracted
from the gross requirement to determine the net requirement
o Net Requirements = gross requirements available inventory
Component availability
o Gross requirements, net requirements and available inventory are available at
the beginning of the week in which they are displayed
o Projected available balance is available at the end of the period
Scheduled Receipts
o Definition planned orders that are already released or placed with suppliers
o Net requirements = gross requirements scheduled receipts- projected available

Managing the Priority Plan

MRP Software Tasks

o Gross to net, offset and explode calculations

o Create planned orders

o Keep priorities current
Priority Plan Order Types
o Planned order order created by planning software
o Firm Planned order order created by planner
o Released order