MRP

MRP is the engine of any material planning software, computerized version of MRP IS Created 1977

MPS= HOW MANY END PRODUCT DO I NEED TO MAKE, FOR E-G- I AM MAKING CAR AND MARKETING
DEPT TELLS ME THAT YOU NEED TO MAUFACTURE 100 CARS, FOR 100 CARS.

100 CARS IN WEEK 3 IS MY MPS (END OF PRODUCT)

BOM

Bill of Material tell me what do I need to make those 100 cars, one car need 5 tires and steering wheel
(BILL OF MATERIAL IS PRODCUT STRUCTURE What components we required to manufacture the
product) 100X5= 500 Tires

INPUT PROCESS

1.MPS-------------

2.BOM------------ BOM EXPLOSION

3.Inventory----------

Its tell the Data how much material we have

NETTING (Its Combine with Inventory & BOM Explosion)

We required 500 tires but let supposed we have 200 in inventory so net requirement is 300 tires

OFF SETTING

Suppose we need the car in week 3 , so we plan the car manufacturing in week 2 and tires take 1 week
to come when order is placed , so I order tires in 1 week because supplier takes 1 week to supply the
tires. We order things according to our lead time
What to order

When to order

Netting would tell me How much to order

Aggregate planning

There two simple method of Aggregate Planning

Family of product, Group of product

Small car could be a group

High generator be a group

High Voltage air condition be a group

Medium term (12 to 18 months) scope of planning

Main idea of aggregate planning is to match demand & supply

2.1 If the opening inventory is 400 units, demand is 900 units,
and production is 800 units,
what will be the ending inventory?
ANSWERS TO PROBLEMS opening inventory + production –
demand 400 + 800 – 900 = 300 units

2.2 A company wants to produce 500 units over the next 3

months at a level rate. The
months have 19, 20, and 21 working days, respectively. On the
average, how much should
the company produce each day to level production?

ANSWERS
Total working days = 19 + 20 + 21 = 60 Average daily production
= 500  60 = 8.3 units

2.3 for Students

2.6 A production line is to run at 1000 units per month. Sales are
forecast as shown in the
following. Calculate the expected period-end inventory. The opening
inventory is
500 units. All periods have the same number of working days.

Period 1 2 3 4 5 6

Forecast 700 700 1100 1600 1100 800

Planned Production 1000 1000 1000 1000 1000 1000

Planned 500
Inventory

Planned production – forecast+ planned inventory

Period 1 2 3 4 5 6

Forecast 700 700 1100 1600 1100 800

Planned Production 1000 1000 1000 1000 1000 1000

Planned 500 800 1100 1000 400 300 500

Inventory

2.7 A company wants to develop a level production plan for a

family of products. The open- ing inventory is 100 units,
and an increase to 160 units is expected by the end of the
plan. The demand for each period is given in what
follows. How much should the company produce each
period? What will be the ending inventories in each
period? All periods have the same number of working
days.
 Period 1 2 3 4 5 6 Total

Forecast Demand 100 120 130 140 120 110

Planned Production

Planned 100
Inventory

Total production = Period production =

720 + 160 – 1600 = 780 units

Period production =780 6= 130 units

Period 1 2 3 4 5 6 Total

Forecast Demand 100 120 130 140 120 110 720

130 130 130 130 130 130 780
Planned Production
130 140 140 130 140 160
Planned 100
Inventory

2.8 A company wants to develop a level production plan

for a family of products. The open- ing inventory is
500 units, and a decrease to 300 units is expected by
the end of the plan. The demand for each of the
periods is given in what follows. All periods have the
same number of working days. How much should
 the company produce each period? What will be the
ending inventories in each period? Do you see any
problems with the plan?

Period 1 2 3 4 5 6 Total

Forecast Demand 1300 1200 800 600 800 1000

Planned Production

Planned 500
Inventory

Solution:
Total Production= Ending Inventory – Opening Inventory
Total production= 5700 + 300 - 500= 5500 units

Period production=5500  6= 917 units

Period 1 2 3 4 5 6 Total

Forecast Demand 1300 1200 800 600 800 1000

5700
917 917 917 917 917 917 5500
Planned Production

117 -167 -50 267 383 300

Planned 500
Inventory
 2.9 A company wants to develop a level production plan. The
beginning inventory is zero. Demand for the next four
periods is given in what follows.
a. What production rate per period will give a zero inventory at the end
of period 4?
b. When and in what quantities will back orders occur?
c. What level production rate per period will avoid back orders? What
will be the end- ing inventory in period 4?

Period 1 2 3 4 Total
32
Forecast Demand 9 5 9 9
8 8 8 8 32
Planned Production
-1 2 1 0
Planned Inventory 0

Solution
Forecast demand total = 9+5+9+9= 32/4=8
Period 1 2 3 4 Total
32
Forecast Demand 9 5 9 9
9 9 9 9 36
Planned Production
0 4 4 4
Planned Inventory 0

There is a stockout of 1 unit in period one. The cost will be: Stockout cost: 1  $500 = $500
Carrying cost: 3  $50 = 150 Total cost: = $650 c. Total period inventory = 0 + 5 + 3 + 4 = 12
units The cost will be = $50  12 = $600 Since there are no stockouts this will be the total cost
of the plan.

2.11) A company wants to develop a level production plan for a family

of products. The open- ing inventory is 100 units, and an
increase to 130 units is expected by the end of the plan. The
 demand for each month is given in what follows. Calculate the
total production, daily production, and production and ending
inventory for each month.

Month May Jun Jul Aug Total

Working Days 21 19 20 10

Forecast Demand 115 125 140 150

Planned Production

Planned 100
Inventory

SOLUTION
a. Total production = 530 + 130 – 100 = 560
b. Daily production=560/70 = 8 units
c. The monthly production for May=(21x8) =168 units
d. The ending inventory for May=153 units

Month May Jun Jul Aug Total

70
Working Days 21 19 20 10
530
Forecast Demand 115 125 140 150
168 152 160 80 560
Planned Production
153 180 200 130
Planned 100
Inventory

2.12 FOR STUDENTS

 Month Jan Feb Mar Apr May Jun Total
119
Working Days 20 22 20 20 18 19
5600
Forecast Demand 1200 1300 800 700 700 900
874 961 874 874 787 830 5200
Planned Production
274 -65 9 183 270 270
Planned 600
Inventory

Total production = 5600 + 200 – 600 = 5200

Daily production = 5200 119 = 43.7 units per day

There will be a stock out of 65 units in February.

2.15 The opening backlog is 900 units. Forecast demand is
shown in the following. Calculate the weekly production for
level production if the backlog is to be reduced to 200 units.

Week 1 2 3 4 5 6 Total

Forecast Demand 600 700 700 700 600 500

Planned Production

Projected 900
Backlog

Solution:
Total production= demand + opening backlog – ending backlog
= 3800 + 900 –200= 4500 units

Weekly production = 4500  6=750 units Week

Week 1 2 3 4 5 6 Total
3800
Forecast Demand 600 700 700 700 600 500
750 750 750 750 750 750 4500
Planned Production
750 700 650 600 450 200
Projected 900
Backlog
 2.16 The opening backlog is 1100 units. Forecast demand is
shown in the following. Calculate the weekly
production for level production if the backlog is to be
increased to 1200 units.

Week 1 2 3 4 5 6 Total

Forecast Demand 1200 1100 1200 1200 1100 1000

Planned Production

Projected 1100
Backlog

Solution:

Desired ending backlog = 1200

Total production = demand + opening backlog – ending backlog

= 6800 + 1100 – 1200 = 6700 units

Weekly production = 6700  6 = 1117 units

Week 1 2 3 4 5 6 Total

Forecast Demand 1200 1100 1200 1200 1100 1000 7300

1117 1117 1117 1117 1117 1117 7200
Planned Production
1183 1166 1249 1332 1315 1198
Projected 1100
Backlog
2.17 For the following data, calculate the number of workers
required for level production and the resulting month-end
inventories. Each worker can produce 14 units per day, and
the desired ending inventory is 9000 units.

Month 1 2 3 4 Total

Working Days 20 24 12 19

Forecast Demand 28,000 27,500 28,500 28,500

Planned Production

Planned Inventory 11,500

Solution:
Total Production= Forecast demand + Ending Inventory-
Planned Inventory
Total production = 112,500 + 9000 – 11,500 = 110,000 units
Daily production= 110,000 75 = 1466.67 units
Number of workers required = 1466.67/14 = 104.76  105
Actual daily production=105  14= 1470 units

1470x20=2400, ………….
Month 1 2 3 4 Total

Working Days 20 24 12 19 75
112500
Forecast Demand 28,000 27,500 28,500 28,500
29400 35280 17640 27930 110250
Planned Production
12900 20680 9820 9250
Planned Inventory 11,500
2.18 For the following data, calculate the number of workers
required for level production and the resulting month-end
inventories. Each worker can produce 9 units per day, and the
desired ending inventory is 800 units. Why is it not possible to
reach the ending inventory target?

Month 1 2 3 4 5 6 Total

Working Days 20 24 12 22 20 19

Forecast Demand 2800 3000 2700 3300 2900 3200

2880 3456 1728 3168 2880 2736

Planned Production

1080 1456 868 868 980 536

Planned 1000
Inventory

Solution:

Total production = 17900 + 800 – 1000 = 17700

Daily production = 17700/117 = 151.28 units Number of workers
required = 151.28/9 = 16.81  17 workers
Actual daily production = 17  9 = 153 units

Month 1 2 3 4 5 6 Total

Working Days 20 24 12 22 20 19
 Forecast Demand 2800 3000 2700 3300 2900 3200

3060 3672 1836 3366 3060 2907

Planned Production

1260 1932 1068 1134 1294 1001

Planned 1000
Inventory

It is not possible to meet the ending inventory target

because of the extra fraction of a
worker needed. The only way to do it would be to reduce
the number of workers to 16 at some
point.