M14B_SLAC0460_06_SE_C14B.

QXD 10/20/09 9:47 Page 422

Supplement to Materials requirements

Chapter 14 planning (MRP)

Introduction
Materials requirements planning (MRP) is an approach to calculating how many parts or
materials of particular types are required and what times they are required. This requires
data files which, when the MRP program is run, can be checked and updated. Figure S14.1
shows how these files relate to each other. The first inputs to materials requirements plan-
ning are customer orders and forecast demand. MRP performs its calculations based on the
combination of these two parts of future demand. All other requirements are derived from,
and dependent on, this demand information.

Figure S14.1 Materials requirements planning (MRP) schematic

Master production schedule

The master production schedule (MPS) forms the main input to materials requirements
planning and contains a statement of the volume and timing of the end-products to be made.
It drives all the production and supply activities that eventually will come together to form
the end-products. It is the basis for the planning and utilization of labour and equipment,
and it determines the provisioning of materials and cash. The MPS should include all sources
of demand, such as spare parts, internal production promises, etc. For example, if a manu-
facturer of earth excavators plans an exhibition of its products and allows a project team
to raid the stores so that it can build two pristine examples to be exhibited, this is likely to
leave the factory short of parts. MPS can also be used in service organizations. For example,
in a hospital theatre there is a master schedule that contains a statement of which operations
are planned and when. This can be used to provision materials for the operations, such as
the sterile instruments, blood and dressings. It may also govern the scheduling of staff for
operations.
M14B_SLAC0460_06_SE_C14B.QXD 10/20/09 9:47 Page 423

Supplement to Chapter 14 Materials requirements planning (MRP) 423

The master production schedule record

Master production schedules are time-phased records of each end-product, which contain
a statement of demand and currently available stock of each finished item. Using this
information, the available inventory is projected ahead in time. When there is insufficient
inventory to satisfy forward demand, order quantities are entered on the master schedule
line. Table S14.1 is a simplified example of part of a master production schedule for one item.
In the first row the known sales orders and any forecast are combined to form ‘Demand’.
The second row, ‘Available’, shows how much inventory of this item is expected to be in
stock at the end of each weekly period. The opening inventory balance, ‘On hand’, is shown
separately at the bottom of the record. The third row is the master production schedule, or
MPS; this shows how many finished items need to be completed and available in each week
to satisfy demand.

Table S14.1 Example of a master production schedule

Week number
1 2 3 4 5 6 7 8 9
Demand 10 10 10 10 15 15 15 20 20
Available 20 10 0 0 0 0 0 0 0
MPS 0 0 10 10 15 15 15 20 20
On hand 30

Chase or level master production schedules

In the example in Table S14.1, the MPS increases as demand increases and aims to keep avail-
able inventory at 0. The master production schedule is ‘chasing’ demand (see Chapter 11)
and so adjusting the provision of resources. An alternative ‘levelled’ MPS for this situation
is shown in Table S14.2. Level scheduling involves averaging the amount required to be
completed to smooth out peaks and troughs; it generates more inventory than the previous
MPS.

Table S14.2 Example of a ‘level’ master production schedule

Week number
1 2 3 4 5 6 7 8 9
Demand 10 10 10 10 15 15 15 20 20
Available 31 32 33 34 30 26 22 13 4
MPS 11 11 11 11 11 11 11 11 11
On hand 30

Available to promise (ATP)

The master production schedule provides the information to the sales function on what can
be promised to customers and when delivery can be promised. The sales function can load
known sales orders against the master production schedule and keep track of what is avail-
able to promise (ATP) (see Table S14.3). The ATP line in the master production schedule
shows the maximum that is still available in any one week, against which sales orders can be
loaded.
M14B_SLAC0460_06_SE_C14B.QXD 10/20/09 9:47 Page 424

424 Part Three Planning and control

Table S14.3 Example of a level master production schedule including available to promise

Week number
1 2 3 4 5 6 7 8 9
Demand 10 10 10 10 15 15 15 20 20
Sales orders 10 10 10 8 4
Available 31 32 33 34 30 26 22 13 4
ATP 31 1 1 3 7 11 11 11 11
MPS 11 11 11 11 11 11 11 11 11
On hand 30

The bill of materials (BOM)

From the master schedule, MRP calculates the required volume and timing of assemblies,
sub-assemblies and materials. To do this it needs information on what parts are required for
each product. This is called the ‘bill of materials’. Initially it is simplest to think about these as
a product structure. The product structure in Figure S14.2 is a simplified structure showing the
parts required to make a simple board game. Different ‘levels of assembly’ are shown with
the finished product (the boxed game) at level 0, the parts and sub-assemblies that go into
the boxed game at level 1, the parts that go into the sub-assemblies at level 2, and so on.
A more convenient form of the product structure is the ‘indented bill of materials’.
Table S14.4 shows the whole indented bill of materials for the board game. The term
‘indented’ refers to the indentation of the level of assembly, shown in the left-hand column.
Multiples of some parts are required; this means that MRP has to know the required number
of each part to be able to multiply up the requirements. Also, the same part (for example, the
TV label, part number 10062) may be used in different parts of the product structure. This
means that MRP has to cope with this commonality of parts and, at some stage, aggregate the
requirements to check how many labels in total are required.

Figure S14.2 Product structure for the Treasure Hunt game

M14B_SLAC0460_06_SE_C14B.QXD 10/20/09 9:47 Page 425

Supplement to Chapter 14 Materials requirements planning (MRP) 425

Table S14.4 Indented bill of materials for board game

Part number: 00289

Description: Board game
Level: 0
Level Part number Description Quantity
0 00289 Board game 1
.1 10077 Box lid 1
.1 10089 Box base assy 1
..2 20467 Box base 1
..2 10062 TV label 1
..2 23988 Inner tray 1
.1 10023 Quest cards set 1
.1 10045 Character set 1
.1 10067 Die 2
.1 10062 TV label 2
.1 10033 Game board 1
.1 10056 Rules booklet 1

Inventory records

MRP calculations need to recognize that some required items may already be in stock. So, it
is necessary, starting at level 0 of each bill, to check how much inventory is available of each
finished product, sub-assembly and component, and then to calculate what is termed the
‘net’ requirements, that is the extra requirements needed to supplement the inventory so
that demand can be met. This requires that three main inventory records are kept: the item
master file, which contains the unique standard identification code for each part or com-
ponent, the transaction file, which keeps a record of receipts into stock, issues from stock and
a running balance, and the location file, which identifies where inventory is located.

The MRP netting process

The information needs of MRP are important, but it is not the ‘heart’ of the MRP procedure.
At its core, MRP is a systematic process of taking this planning information and calculat-
ing the volume and timing requirements which will satisfy demand. The most important
element of this is the MRP netting process. Figure S14.3 illustrates the process that MRP
performs to calculate the volumes of materials required. The master production schedule is
‘exploded’, examining the implications of the schedule through the bill of materials, checking
how many sub-assemblies and parts are required. Before moving down the bill of materials
to the next level, MRP checks how many of the required parts are already available in stock.
It then generates ‘works orders’, or requests, for the net requirements of items. These form
the schedule which is again exploded through the bill of materials at the next level down. This
process continues until the bottom level of the bill of materials is reached.

Back-scheduling
In addition to calculating the volume of materials required, MRP also considers when each
of these parts is required, that is, the timing and scheduling of materials. It does this by a
process called back-scheduling which takes into account the lead time (the time allowed for
completion of each stage of the process) at every level of assembly. Again using the example
of the board game, assume that 10 board games are required to be finished by a notional
M14B_SLAC0460_06_SE_C14B.QXD 10/20/09 9:47 Page 426

426 Part Three Planning and control

Figure S14.3 Example of the MRP netting process for the board game

planning day which we will term day 20. To determine when we need to start work on all the
parts that make up the game, we need to know all the lead times that are stored in MRP files
for each part (see Table S14.5).
Using the lead-time information, the programme is worked backwards to determine
the tasks that have to be performed and the purchase orders that have to be placed. Given the
lead times and inventory levels shown in Table S14.5, the MRP records shown in Figure S14.4
can be derived.

Table S14.5 Back-scheduling of requirements in MRP

Part no. Description Inventory Lead time Re-order

on-hand day 0 (days) quantity
00289 Board game 3 2 20
10077 Box lid 4 8 25
10089 Box base assy 10 4 50
20467 Box base 15 12 40
23988 Inner tray 4 14 60
10062 TV label 65 8 100
10023 Quest cards set 4 3 50
10045 Character set 46 3 50
10067 Die 22 5 80
10033 Game board 8 15 50
10056 Rules booklet 0 3 80
M14B_SLAC0460_06_SE_C14B.QXD 10/20/09 9:47 Page 427

Supplement to Chapter 14 Materials requirements planning (MRP) 427

Figure S14.4 Extract of the MRP records for the board game
M14B_SLAC0460_06_SE_C14B.QXD 10/20/09 9:47 Page 428

428 Part Three Planning and control

MRP capacity checks

The MRP process needs a feedback loop to check whether a plan was achievable and whether
it has actually been achieved. Closing this planning loop in MRP systems involves checking
production plans against available capacity and, if the proposed plans are not achievable at
any level, revising them All but the simplest MRP systems are now closed-loop systems. They
use three planning routines to check production plans against the operation’s resources at
three levels.
● Resource requirements plans (RRPs) – involve looking forward in the long term to predict
the requirements for large structural parts of the operation, such as the numbers, locations
and sizes of new plants.
● Rough-cut capacity plans (RCCPs) – are used in the medium-to-short term, to check the
master production schedules against known capacity bottlenecks, in case capacity constraints
are broken. The feedback loop at this level checks the MPS and key resources only.
● Capacity requirements plans (CRPs) – look at the day-to-day effect of the works orders
issued from the MRP on the loading individual process stages.

Summary

■ MRP stands for materials requirements planning which is a dependent demand system that
calculates materials requirements and production plans to satisfy known and forecast sales
orders. It helps to make volume and timing calculations based on an idea of what will be neces-
sary to supply demand in the future.
■ MRP works from a master production schedule which summarizes the volume and timing of
end products or services. Using the logic of the bill of materials (BOM) and inventory records,
the production schedule is ‘exploded’ (called ‘the MRP netting process’) to determine how
many sub-assemblies and parts are required, and when they are required.
■ Closed-loop MRP systems contain feedback loops which ensure that checks are made against
capacity to see if plans are feasible.
■ MRP II systems are a development of MRP. They integrate many processes that are related to
MRP, but which are located outside the operation’s function.