Chapter13:MaterialRequirementsPlanning

Application1:CalculatinganMRPRecord
Item H10-A is a produced item (not purchased) with an order quantity of 80 units.
Complete the rest of its MRP record using the fixed order quantity (FOQ) rule.
Item:H10ALotSize:FOQ=80units
Description:ChairseatassemblyLeadTime:4weeks
Week
31

32

Grossrequirements

60

Scheduledreceipts

80

Projectedonhandinventory
Plannedreceipts
Plannedorderreleases
.

20

20

100

33

34

35

36

37

35

40

40

40

40
0

80

80

38

39

45

5
80

40
60

40

40
80

MaterialRequirementsPlanning
Application3:MRPRecordusingthelotforlot(L4L)Rule
Revise the H10-A record using the lot-for-lot (L4L) Rule.

Item:H10ALotSize:L4L
Description:ChairseatassemblyLeadTime:4weeks
Week
31

32

Grossrequirements

60

Scheduledreceipts

80

Projectedonhandinventory
Plannedreceipts
Plannedorderreleases

20

20

100

33

34

35

36

37

35

40

40

40

40
0

40

60

38

39

45

5
40

40
60

0
60

MaterialRequirementsPlanning
Application4:MaterialRequirementsPlanforSingleProductCase.
A firm makes a product (Item A) from three components (Items B, C, and D). The latest
MPS for product A calls for completion of a 250-unit order in week 8, and its lead time is
2 weeks. The master schedule and bill of material for Product A are given below.

Item: End Item A

Lead Time: 2 wks.

Week
5

MPS Quantity
MPS Start

a.

8
250

250

Develop a material requirements plan for items B, C, and D, given the following
inventory data. Blank MRP records are also provided.

ITEM
Data Category
Lot-sizing rule
Lead time
Scheduled receipts

B
L4L
2 weeks
None

C
FOQ=1000
1 week
1000(week 1)

D
L4L
3 weeks
None

Beginning inventory

200

Application Supplement
Item: End Item A

Lead Time: 2 wks.

Week
1

MPS Quantity
MPS Start

250

Item: B

Lot size:
L4L
1

Gross Requirements
Scheduled Receipts
Projected On-hand Inven.
Net Requirements
Planned Order Receipts
Planned Order Releases

Lead Time: 2

3
500
0
0
500
500

500

Item: C

Gross Requirements
Scheduled Receipts
Proj. On-hand Inv. 200
Net Requirements
Planned Order Receipts
Planned Order Releases

8
250

Week
5

6
250
0
0
250
250

250

Lot size:
FOQ = 1000
1
1000
1000
1200
0
0

200

200

Lead Time: 1
4
500
0
200
300
1000

Week
5

700

6
250
0
700
0

450

450

1000

Item: D

Lot size:
L4L
1

Gross Requirements
Scheduled Receipts
Proj. On-hand Inven.
Net Requirements
Planned Order Receipts
Planned Order Releases

Explanation of the Above Table

Lead Time: 3
3

500

Week
5

6
500
0
0
500
500

Your Question: What determines the order time in B and C of the forks that are not on
week 6? How come, for example, in B you are ordering 500 in week 3 for the right fork
when it only needs 250? and in C when 1000 is ordered in week one for the right fork
when it only needs 500?
Answer: You must follow the decisions down the BOM for each fork. They are color
coded, as above. Basically, you end up multiplying requirements for the level above, by
the number required at the next level. As a result, your requirements keep growing with
each level down the BOM that you go.
BLUE = decisions about materials required for the leftmost fork of the bill of materials
PURPLE = decisions about materials required for middle fork
GREEN = decisions about materials required for right fork

Here is a step-by-step explanation of the color-coded table:

RIGHT FORK
We'll start with the right fork first (GREEN NUMBERS). Luckily, no other fork requires
any D's, so we only have one thing to do, and then we're done with the table for D.
Assembling one A requires us to have 2 D's available in week 6, so for 250 A's, we'll need
to make sure we have 500 D's available in week 6. Because we have zero scheduled
receipts of D and zero projected on hand inventory for D, we have a net requirement of
500 D's. We are ordering Lot-for-Lot, meaning that we want to have 500 D's arrive in our
factory at the beginning of Week 6. In order to have this, we'll have to place an order for
materials (500 D's) at the beginning of Week 3 (3 weeks earlier, due to the 3 week Lead
Time).
Next, building each D requires one B. Thus for 500 D's to be started in week 3, we need
to make sure that 500 B's are available in Week 3. So, you must go up to the table for B,
and input a Gross Requirements for B during week 3 of 500 units. Since we're not
expecting any receipts and have no inventory, this leads to a Net Requirement of 500 B's,
and again we're using Lot-for-Lot, so we need 500 to arrive during week 3, and thus need
to place an order for 500 during week 1.
Finally, building a B requires 2 C's to be available. Since we'll need 500 B's in Week 1,
wee need to have 1000 C's available. Luckily, we have a scheduled receipt of 1000 C's in
week one plus 200 C's in inventory on-hand, so we are covered, and do not need to place
any additional orders for this fork.
LEFT FORK
Next, the left fork (BLUE NUMBERS). Assembling one A requires us to have one B
available in week 6 (meaning, for 250 A's we'll need to have 250 B's available at the start
of week 6). So, our Gross Requirements for B during Week 6 is 250. Since we're not
receiving any and not holding any in inventory, we'll place an order in Week 4 for 250
B's, due to the 2 week Lead Time.

Moving down the left fork, we need 2 C's to assemble each B, so our gross requirement
of C's will be 250 * 2 = 500 C's during Week 4. During Week 4, we will have 200 C's
projected to be onhand inventory, so we will only have a Net Requirement of 300 C's.
Since we are ordering fixed order quantities of 1000, we will plan to receive an order of
1000 C's during Week 4, and due to the one week Lead Time, we'll place the order for
1000 C's during Week 3.

MIDDLE FORK
Finally, the middle, and easiest/shortest, fork (PURPLE NUMBERS). For each A, we
need one C. Thus, for 250 A's during Week 6, we'll need to have 250 C's available. So,
our gross requirement will be 250 C's in Week 6. We will have 700 C's in on-hand
inventory left over from our order that we receive in week 4, so this will cover the need
for 250 C's in Week 6, leaving us with 450 C's in inventory for Weeks 7 and 8.

MORAL OF THE STORY

So, I think the moral of the story, when you have these longer forks with similar
components, it is easiest to start with the longest fork first, and work toward the shortest
one.
The longest fork will, in general, have the earliest due date for materials.
The shortest fork will, in general, have the latest due date for materials.
Thus, working from longest fork to shortest fork, will fill in the table from earliest due
dates to latest due dates, which should eliminate confusion about filling the tables in.