1

Materials Requirements Planning (MRP)

eg of MRP Logic & Product Structure Tree

Given the product structure tree for A and the lead time and demand information below, provide a materials requirements plan that defines the number of units of each component and when they will be needed Product Structure Tree for Assembly A
Lead Times A 1 day B 2 days C 1 day D 3 days E 4 days F 1 day Total Unit Demand Day 10 40 A Day 5 40 D (Spares) Day 4 20 F (Spares)

A B(4) D(2) E(1) D(3) C(2) F(2)

Finally, repeating the process for all components, we have the final materials requirements plan:
Day: A LT=1 B LT=2 C LT=1 D LT=3 E LT=4 F LT=1 Required Order Placement Required Order Placement Required Order Placement Required Order Placement Required Order Placement Required Order Placement 1 2 3 4 5 6 7 8 9 50 200 100 55 55 20 200 200 400 300 20 200 400 100 300 10 50

20 20 200

A C(2) E(1) D(3) F(2)

200

B(4) D(2)

Lead Times A 1 day B 2 days C 1 day D 3 days E 4 days F 1 day

Material Requirements Planning (MRP) Driven by dependent demand Used to determine the no. of parts, components & matls needed for a product Gives time scheduling information specifying when each of the mats, parts & components should be ordered or made It is a software system

Firm orders from known customers

Aggregate product plan

Forecasts of demand from random customers

Engineering design changes

Master production Schedule (MPS)

Inventory transactions

Bill of material file

Material planning (MRP computer program)

Inventory record file

Secondary reports
Primary reports Planned order schedule for inventory and production control Exception reports Planning reports Reports for performance control
The McGraw-Hill Companies, Inc., 2004

Master Production Schedule (MPS)

Time-phased plan specifying how many and when the firm plans to build each end item

Aggregate Plan (Product Groups)

MPS (Specific end items

Bill of Materials (BOM) File

( A Complete Product Description ) Gives details of

Materials Parts Components Production sequence

Inventory Records File

Contains complete information regarding Inventory of each item in product structure Upto date info on on-hand quantities, Gross requirements Scheduled receipts, Planned order releases Includes LOT sizes, lead times, Safety stock etc

Primary MRP Reports

Planned orders to be released at a future time Order release notices to execute the planned orders Changes in due dates of open orders due to
rescheduling

Inventory status data

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Secondary MRP Reports

Planning reports, eg :forecasting inventory requirements over a period of time Performance reports used to determine agreement between actual and programmed usage and costs Exception reports used to point out serious discrepancies, such as late or overdue orders

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MRP Terms
Gross Requirements Scheduled receipts Safety stock, LOT Size etc Net requirements Planned order receipt Planned order release

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eg : MRP Schedule
In a moped the following product structure diagram represents its bill of materials
MOPED

ENGINE ASSEMBLY

GAS TANK

WHEEL ASSEMBLY (2)

FRAME

MOTOR

CARBURETOR (2)

HUB ASSEMBLY

TYRE

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Parent Code

Bill of Material Component Description

Offtake

Moped

EA GT WA F M C HA T

Engine Assy. Gas Tank Wheel Assy Frame Motor Carburetor Hub Assy. Tyre

1 1 2 1 1 2 1 1

EA

WA

Inventory Status Report

Item OnHand 500 300 600 500 600 250 150 100 500 Safety Stock 200 100 200 400 0 0 100 0 500 Lot Size LFL 500 LFL 500 2000 LFL 2000+ LFL 1000 Lead Time 1 1 2 1 3 1 2 1 3 Scheduled. Receipts Qty. Week --1000 10 900 2000 2000 --2400
3000, 2000

14

Moped EA GT WA F M C HA T

10 10 10 --11 11,12

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The company is currently planning production for weeks 10 through 16. Based on existing orders and demand forecasts, the master production schedule is as follows: Master Production Schedule: Moped Determine the MRP schedule required to support the master production schedule for the moped in weeks 10-16 WEEK QUANTITY

10 0

11 1000

12 0

13 1300

14 800

15 1200

16 1400

Data from Inventory Status Report On-Hand balance : 500 mopeds OnNo Scheduled Receipts for mopeds Lot-for-lot (LFL) rule is used for ordering mopeds Lot-forSafety stock of 200 mopeds is desired Lead time for mopeds is one week

MRP Schedule for Mopeds ITEM: MOPED LOT SIZE: LFL LT: 1 SS: 200 WEEK

16

I n i t i a l

10 0

11 1000

12 0

13

14

15

16

GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 500) (ONNET REQUIREMENTS PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES

1300 800 1200 1400

ITEM: MOPED LOT SIZE: LFL GROSS REQUIREMENTS F i n a l SCHEDULED RECEIPTS AVAILABLE

LT: 1 SS: 200

WEEK

10 0

11 1000

12 0 0

13

14

15

16

1300 800 1200 1400 0 0 0 0

(ON-HAND = 500) 300 300 (ON700 700 700

NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES

1300 800 1200 1400 1300 800 1200 1400 1300 800 1200 1400

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MRP Schedule for Gas Tanks for Weeks 10 - 16, considering :

Gross Requirements come from moped Planned-Order-Releases There is an On-Hand balance of 600 gas tanks at the end of week 9 There is a Scheduled Receipt for 900 tanks in week 10 A lot-for-lot rule is used for ordering gas tanks Safety stock of 200 gas tanks is desired Lead time for gas tanks is two weeks

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I N I T I A l

WEEK ITEM: GAS TANK LT: 2 LOT SIZE: LFL SS: 200 10 11 12 13 14 15 16 GROSS REQUIREMENTS 1000 0 1300 800 1200 1400 0 SCHEDULED RECEIPTS 900 AVAILABLE (ON-HAND = 600) (ONNET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES

ITEM: GAS TANK LOT SIZE: LFL GROSS REQUIREMENTS F i n a l SCHEDULED RECEIPTS AVAILABLE
NET REQUIREMENTS

LT: 2 SS: 200 10 1000 900

WEEK

11

12

13

14

15

16

0 1300 800 1200 1400 0 0 0 0 0

(ON-HAND = 600)1300 300 300 (ON-

1000 800 1200 1400 1000 800 1200 1400 1000 800 1200 1400

PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES

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MRP Schedule for Frames for Weeks 10 - 16, considering

Gross Requirements come from moped Planned-Order-Releases There is an On-Hand balance of 600 frames at the end of week 9 There is a Scheduled Receipt for 2000 frames in week 10 The firm uses a Lot Size (multiple) of 2000 for ordering frames No safety stock of frames is desired Lead time for frames is 3 weeks

ITEM: FRAME LOT SIZE: 2000 GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE NET REQUIREMENTS

LT: 3 SS: 0

WEEK

10 1000 2000

11 0

12

13

14

15

16 0

1300 800 1200 1400

600

PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES

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WEEK

ITEM: FRAME LOT SIZE: 2000 GROSS REQUIREMENTS F i n a l SCHEDULED RECEIPTS AVAILABLE

LT: 3 SS: 0

10 1000 2000

11 0

12

13

14

15

16 0

1300 800 1200 1400

(ON-HAND = 600) (ON-

2600 1600 1600 300 1500 300 900 0 0 0 500 2000 2000 2000 0 1100 2000 0

NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES

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MRP Schedule for Engine Assemblies for Weeks 10 - 16, considering : Gross Requirements come from moped Planned-Order-Releases There is an On-Hand balance of 300 engine assemblies at the end of week 9 There is a Scheduled Receipt for 1000 engine assemblies in week 10 The firm uses a Lot Size (multiple) of 500 for ordering engine assemblies Safety Stock of 100 engine assemblies is desired Lead time for engine assemblies is 1 week ITEM: ENGINE ASSEM. LT: 1 LOT SIZE: 500 SS: 100
WEEK

10 1000 1000

11 0

12

13

14

15

16 0

I N I T I A L

GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 300) (ONNET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES

1300 800 1200 1400

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ITEM: ENGINE ASSEM. LT: 1 LOT SIZE: 500 SS: 100 GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE F i n a l

WEEK

10 1000 1000

11 0

12

13

14

15

16 0

1300 800 1200 1400

(ON-HAND = 300) 1200 200 200 400 100 400 (ON1100 400 1100 1000 1500 500 1500 1000 1500 500 1500 1000

NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES

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Lot Sizing in MRP Programs

Lot-for-lot (L4L) Economic order quantity (EOQ)

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Manufacturing Resource Planning - (MRP II)

Successor to the MRP, it integrates planning of all aspects (not just production) of a manufacturing firm. MRP II integrates functions such as production planning, scheduling,capacity requirement planning, operations planning etc

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ERP
a software that organises & manages a companys business processes by sharing information across functional areas.

Useful for global companies and those that share data regularly benefit the most from ERP.

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R/3 System Functional Components

Financial Accounting

Sales & Distribution

R/3 System Functional Components

Human Resources

Manufacturing & Logistics

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Financial Accounting
Financial s,controlling, Asset management

Human Resources Payroll & Benefits admn. Applicant data administration Personnel development planning Workforce planning Schedule & shift planning Time management Travel expense accounting Sales and Distribution Customer management Sales order management Distribution Shipping and transportation mgmt

Manufacturing & Logistics Materials management Plant maintenance Quality management Project mgmt system

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Major vendors

SAP ORACLE Peoplesoft (Oracle) BAAN Microsoft J D Edwards(Oracle)

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ACC, Arvind Mills, Bharat Forge,., Crompton Greaves,, Essar Oil,Essar Steel, Grasim, Haldia Petrochemicals, Ispat Industries, Kalyani Brakes, L & T, Mahindra, MICO,Microland, ONGC, Ranbaxy, Tata Communications, M&M,TELCO,TISCO,UTI

,Siemens,P&G,Colgate,WIDIA,Volvo,Telco,Samsung,ABB