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Apr 1, 2017
 Independent vs. Dependent Demand
Independent Demand (Demand for the final end-
product or demand not related to other items)

Finished
product
Dependent
Demand
(Derived demand
items for
component parts,
E(1) subassemblies,
raw materials, etc)

Component parts
Material Requirements Planning (MRP)
A computer-based information system that translates the
finished product requirements of the master schedule into time-
phased requirements for subassemblies, component parts and
raw materials, working backward from the due date using lead
times.

Assembly

Subassembly

Fabrication
Procurement

1 2 3 4 5 6 7 8 9 10
Time period (weeks)
MRP is designed to answer questions:

WHEN
HOW IT
MUCH
WHAT
OVERVIEW OF MRP
Aggregate Forecasts
Firm orders
product of demand
from known
plan from random
customers
customers

Engineering Master production

Schedule (MPS) Inventory
design
transactions
changes
Material
Planning
(MRP
Bill of computer Inventory
material program) record file
file
Secondary reports
Primary reports
Exception reports
Planned order schedule for Planning reports
inventory and production Reports for performance
control control
 Go back to OVERVIEW OF MRP

MRP INPUTS
The Master Schedule
Period Beg. Inv 1 2 3

Referred
Quantity to as the master production schedule
States which end items
Component Beg. Inv are to be
1 produced,
2 when
3 they
Gross are needed, and in what quantities
Requirements
These quantities come from different sources:
Scheduled Receipts
-Customer orders
Projected on hand
-Forecasts
Net Requirements
-Order from warehouses
Planned-order receipts

Planned-order releases
 Go back to OVERVIEW OF MRP

The Bill of Materials

Contains a listing of all ofWthe assemblies,

subassemblies, parts and raw materials that are
needed A to produce oneBunit(2) of a finishedCproduct
(4)
Listing is hierarchical
D (2) E E (2) F D (3) G (2)

D
BOM: Product Structure Tree
BOM: Indented BOM
Level 0
Level 1
Level 2
Chair
Leg Assembly
Legs (2)
Cross bar
Seat
Back Assembly
Side Rails (2)
Cross bar
Back supports (3)
Inventory Records
Stored information on the status of each item by
time period called time buckets
Gross requirements
Scheduled receipts

Expected amount on hand

Supplier

Lead time

Lot size policy

 MRP Processing
Terms in spreadsheet
Period Beg. Inventory 1 2 3 4

Quantity

Component LT Beg. Inventory 1 2 3 4

Gross Requirements Total expected demand for an item or raw material in a time period

Scheduled Receipts Open orders scheduled to arrive from vendors or elsewhere in the pipeline
Expected amount of inventory that will be on hand at the beginning of
Projected on hand each period
Net Requirements Actual amount needed in each time period
Quantity expected to be received by the beginning of the period which
Planned-order receipts it is shown indicates timing of receipts of quantities

Planned amount to order in each time period; planned-order

Planned-order releases receipts offset by lead time
MRP OUTPUTS
1. Planned orders
Schedule indicating the amount and timing of future
orders
2. Order releases
Authorization for the execution of planned orders
3. Changes
Revisionsof due dates or order quantities of
cancellations of orders
Other Considerations
Safety Stock
Lot Sizing - Choosing of a lot size for ordering or production
Lot-for-lot Ordering
Lot size (EOQ) Ordering
Fixed-Period Ordering
BENEFITS AND REQUIREMENTS OF MRP
REQUIREMENTS
BENEFITS
Computer
1. Low and software
work-in-process inventories.
2. Provides
Accurateaand better picture of material requirements.
current
3. Provides
- MasteraProduction
better handle on needed capacities at all
Schedule
process
- Billscenters.
of Materials
4. Provides a better
- Inventory means of allocating production
records
time.
3. Data Integrity
5. Ability to easily determine inventory usage
Example 1
Product X is made of two units of Y and three of Z. Y is
made of one unit of A and two units of B. Z is made of two units
of A and four units of C.
Lead time for X is one week; Y, two weeks; Z, three
weeks; A, two weeks; B, one week; and C, three weeks.

a. Draw the bill of materials (product structure tree)

b. If 100 units of X are needed in week 10, develop a planning
schedule showing when each item should be ordered and in
what quantity.
Solution:

a.
X

Y (2) Z (3)

A (1) B (2) A (2) C (4)

Solution:

b.
3 4 5 6 7 8 9 10

X LT = 1 100 100

Y LT = 2 200 200

Z LT = 3 300 300

A LT = 2 600 200 600 200

B LT = 1 400 400

C LT = 3 1200 1200
Example 2

Item On-Hand Lead Time (Weeks)

X X 50 2
A 75 3
B 25 1
A(2) B(1) C 10 2
D 20 2

C(3) C(2) D(5)

Requirements include 95 units (80 firm orders and 15 forecast) of X

in week 10
 Day: 1 2 3 4 5 6 7 8 9 10
X Gross requirements 95
X LT=2 Scheduled receipts
Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45
hand Planned order receipt 45
50 Planner order release 45
A Gross requirements 90
A(2) LT=3 Scheduled receipts
Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15
hand Planned order receipt 15
75 Planner order release 15
B Gross requirements 45
It takes 2 As LT=1 Scheduled receipts
for each X Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20
hand Planned order receipt 20
25 Planner order release 20
C Gross requirements 45 40
LT=2 Scheduled receipts
Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40
hand Planned order receipt 35 40
10 Planner order release 35 40
D Gross requirements 100
LT=2 Scheduled receipts
Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80
hand Planned order receipt 80
20 Planner order release 80
 Day: 1 2 3 4 5 6 7 8 9 10
X Gross requirements 95
X LT=2 Scheduled receipts
Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45
hand Planned order receipt 45
50 Planner order release 45
A Gross requirements 90
A(2) B(1) LT=3 Scheduled receipts
Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15
hand Planned order receipt 15
75 Planner order release 15
B Gross requirements 45
It takes 1 B LT=1 Scheduled receipts
Proj. avail. balance 25 25 25 25 25 25 25 25
for each X On- Net requirements 20
hand Planned order receipt 20
25 Planner order release 20
C Gross requirements 45 40
LT=2 Scheduled receipts
Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40
hand Planned order receipt 35 40
10 Planner order release 35 40
D Gross requirements 100
LT=2 Scheduled receipts
Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80
hand Planned order receipt 80
20 Planner order release 80
 Day: 1 2 3 4 5 6 7 8 9 10
X Gross requirements 95
X LT=2 Scheduled receipts
Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45
hand Planned order receipt 45
50 Planner order release 45
A Gross requirements 90
A(2) B(1) LT=3 Scheduled receipts
Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15
hand Planned order receipt 15
75 Planner order release 15
C(3) B Gross requirements 45
LT=1 Scheduled receipts
Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20
hand Planned order receipt 20
25 Planner order release 20
It takes 3 Cs for C Gross requirements 45 40
LT=2 Scheduled receipts
each A Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40
hand Planned order receipt 35 40
10 Planner order release 35 40
D Gross requirements 100
LT=2 Scheduled receipts
Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80
hand Planned order receipt 80
20 Planner order release 80
 Day: 1 2 3 4 5 6 7 8 9 10
X Gross requirements 95
X LT=2 Scheduled receipts
Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45
hand Planned order receipt 45
50 Planner order release 45
A Gross requirements 90
A(2) B(1) LT=3 Scheduled receipts
Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15
hand Planned order receipt 15
75 Planner order release 15
C(3) C(2) B Gross requirements 45
LT=1 Scheduled receipts
Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20
hand Planned order receipt 20
25 Planner order release 20
It takes 2 Cs C Gross requirements 45 40
LT=2 Scheduled receipts
for each B Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40
hand Planned order receipt 35 40
10 Planner order release 35 40
D Gross requirements 100
LT=2 Scheduled receipts
Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80
hand Planned order receipt 80
20 Planner order release 80
 Day: 1 2 3 4 5 6 7 8 9 10
X Gross requirements 95
X LT=2 Scheduled receipts
Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45
hand Planned order receipt 45
50 Planner order release 45
A Gross requirements 90
A(2) B(1) LT=3 Scheduled receipts
Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15
hand Planned order receipt 15
75 Planner order release 15
C(3) C(2) D(5) B Gross requirements 45
LT=1 Scheduled receipts
Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20
hand Planned order receipt 20
25 Planner order release 20
It takes 5 Ds for C Gross requirements 45 40
LT=2 Scheduled receipts
each B Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40
hand Planned order receipt 35 40
10 Planner order release 35 40
D Gross requirements 100
LT=2 Scheduled receipts
Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80
hand Planned order receipt 80
20 Planner order release 80
Exercise #7
Kindly answer the following problems from the OM
book of Stevenson and Chuong
pp.683-685
Draw the product structure tree and provide the
planned order releases using Excel OM for the
following MRP problems: #6,#9,#10 and #12

Answer the exercise during your comp lab hours.

Write your answers in one (1) whole sheet of yellow
paper and submit it to your Comp Lab professor
afterwards.