Material Requirements Planning

• Dependent Inventory Model.

• For in-house inventory planning.
 Requirements of MRP
• Master production schedule (what to made,
when)
• Specifications, or Bill of Material (how to
make the product)
• Inventory availability
• Purchase orders outstanding (what is on
order)
• Lead times (how long it takes to get various
components)
 Master Production Schedule
• Tells us what is required to satisfy demand
and meet the production plan.
• Statement of what is to be produced, NOT a
forecast of demand.
Gross requirements per day
4 5 6 7 8
100 150 100 180
Specifications, or Bill of Material
• A list of quantities of components,
ingredients, or materials to make a final
product.
• Provides the product structure.
EX: A “Blast ‘em, dude” audio kit (A) is made of 2 small
tweeter boxes (B) and 3 large woofer boxes (C). Each
tweeter is made of two speakers (D) and two shipping
boxes (E). Each woofer consists of two boosters (F) and
two shipping boxes (E). Each booster is made of a circuit
board (G) and a speaker (D).
EX: A “Blast ‘em, dude” audio kit (A) is made of 2 small
tweeter boxes (B) and 3 large woofer boxes (C). Each
tweeter is made of two speakers (D) and two shipping
boxes (E). Each woofer consists of two boosters (F) and
two shipping boxes (E). Each booster is made of a circuit
board (G) and a speaker (D).

2B 3C
EX: A “Blast ‘em, dude” audio kit (A) is made of 2 small
tweeter boxes (B) and 3 large woofer boxes (C). Each
tweeter is made of two speakers (D) and two shipping
boxes (E). Each woofer consists of two boosters (F) and
two shipping boxes (E). Each booster is made of a circuit
board (G) and a speaker (D).

2B 3C

2D 2E
EX: A “Blast ‘em, dude” audio kit (A) is made of 2 small
tweeter boxes (B) and 3 large woofer boxes (C). Each
tweeter is made of two speakers (D) and two shipping
boxes (E). Each woofer consists of two boosters (F) and
two shipping boxes (E). Each booster is made of a circuit
board (G) and a speaker (D).

2B 3C

2D 2E 2F 2E
EX: A “Blast ‘em, dude” audio kit (A) is made of 2 small
tweeter boxes (B) and 3 large woofer boxes (C). Each
tweeter is made of two speakers (D) and two shipping
boxes (E). Each woofer consists of two boosters (F) and
two shipping boxes (E). Each booster is made of one
circuit board (G) and one speaker (D).

2B 3C

2D 2E 2F 2E

G D
EX: A “Blast ‘em, dude” audio kit (A) is made of 2 small
tweeter boxes (B) and 3 large woofer boxes (C). Each
tweeter is made of two speakers (D) and two shipping
boxes (E). Each woofer consists of two boosters (F) and
two shipping boxes (E). Each booster is made of one circuit
board (G) and one speaker (D). Note that the numbers
here are only relevant
A to the level above them!
2B 3C

2D 2E 2F 2E

G D
 Called an “exploded” product structure.

Items above a level are PARENTS;

items below a level are COMPONENTS or CHILDREN.

2B 3C

2D 2E 2F 2E

G D
 4 levels here.

Level 0 A

level 1 2B 3C

level 2 2D 2E 2F 2E

level 3 G D
 Low-level coding
• Necessary for identical items existing at
diff. levels in the BOM.
• An item is coded at the lowest level at
which it is used.
Level 0 A

level 1 2B 3C

level 2 2D 2E 2F 2E

level 3 G D
 Low-level coding
• Useful in calculating quantities of
components needed.

Level 0 A

level 1 2B 3C

level 2 2E 2F 2E

level 3 2D G D
 Lead times
• Time required to acquire (purchase, produce,
or assemble) an item.
• Manufactured part: lead time made of move,
setup, and assembly or run times for each
component.
• Purchased part: lead time made of difference
between when part is ordered and when it is
received.
Time-phased product structure. Lead times
Rotate BOM below and reflect lead A 1 wk.
times with time as the X axis. B 2
C 1
D 1
E 2
A F 3
G 2
2B 3C

2E 2F 2E

2D G D
Time-phased product structure.
Rotate BOM below
and reflect lead 8 7 6 5 4 3 2 1 0
times with time as
2D
the X axis.
2B
Lead times
A 1 wk. 2E
B 2 G A
C 1
2F
D 1
E 2 D 3C
F 3
G 2 2E
 Gross Material Requirements
Assume we need 50 “Blast ‘em, dude” speaker kits in
eight weeks.

We need to calculate when and how many of each

component we need to start making.

(go to Excel).
 Lot sizing
• lot-for-lot (L4L): order exactly the amount
you want.
• Lot req. sized: order in certain amounts
(ex. a dozen eggs).
 Scheduled Receipts
• Units (of any component) that you have
already scheduled to come in at a particular
time.
 On-Hand Inventory
• Units (of any component) that you already
have in stock (at the beginning).
 Gross Req. vs. Net Req.
• Gross required is the total amount of a
component you need.
• Net required is (Gross)
• - (On-hand inventory)
• - (Scheduled receipts)
 Planned Order Receipts
• What you PLAN to RECEIVE what you
ORDERED.

Planned Order Releases

• What you PLAN to RELEASE in an
ORDER.