Manufacturing

Planning and Control

Chapter 8 - MRP

1
Copyright © 2021.
Material Requirements
Planning (MRP)
Material Requirements Planning
(MRP) has the managerial objective
of providing “the right part at the
right time” to meet the schedules for
completed products.
MRP provides a formal plan for each
part number–raw materials,
components, and finished products.

2
 Independent versus
Dependent Demand
 Independent Demand
⚫ Not related to demand for other assemblies or
products, instead from outside sources
⚫ Generally forecasted demand

 Dependent Demand
⚫ Generally related to production of an end
product (as defined on the MPS)
⚫ Component or sub-assembly demand driven by
net requirements from the next higher level
⚫ Can3 be calculated instead of forecasted
 Example
 A company makes wooden tables.

Table Independent demand

(Forecast)

Legs Ends Sides Top Hardware kit Dependent demand

(4) (2) (2) (1) (1) (Calculated)

The figures in parenthesis show the required quantities

of each component

4
Independent versus Dependent
Demand
 An item can have both dependent and independent demand
(Ex: A service or replacement part such as cars spare parts).
 Dependency can be horizontal or vertical.
 The dependency of a component on its parent is vertical.
This dependency is both in quantity and timing.
 However, components also depend on each other (horizontal
dependency) – mostly from timing point of view.
 Planners are concerned with horizontal dependency as all
parts must be available at the same time and in sufficient
quantity to manufacture the parent assembly - when a part is
delayed or there is a shortage, other parts will have to be
rescheduled.
5
Dependent Demand Approach –
Materials Requirement Planning
(MRP)
 Major Objectives of MRP
⚫ Determine Requirements – Calculated to
meet product requirements defined in the
MPS
• What components to order/produce
• How much of each to order/produce
• When to schedule delivery
• When to order/produce each (taking into
account lead times)
⚫ Keep Priorities Current – must be able to
add,
6
delete, expedite, delay and change
orders.
 Agenda
What is Material Requirements Planning (MRP)?

MRP and Manufacturing Planning & Control

MRP Record Processing

MRP Technical Issues

Using the MRP System

7
MRP System Dynamics
 Links to other MPC Functions
Resource Sales and operations Demand
planning planning management

Enterprise Resource Planning (ERP) System

Master production
scheduling Front End

Detailed material Inventory

Routing Bills of
planning status
file material
data
Time-phased
requirement (MRP)
Detailed capacity records
planning Engine
Material and
capacity plans

Shop-floor Supplier Back End

systems systems

8
 Major Inputs to MRP
1. Master Production Schedule (MPS)
quantities and times
2. Bills of Material (BOM) for MPS items
3. Inventory records of all items to be
planned. For each item:
⚫ Planning factors: lead times, order
quantities, safety stock and scrap (does
not change often)
⚫ Current status of each item: how much is
allocated and how much is available and
9 for future demand (dynamic).
 Bill of Material (BOM)
 Before making something, we must know
what components are needed to make it.
 APICS defines a BOM as: “a listing of all the
subassemblies, intermediates, parts and
raw materials that go into making the parent
assembly, showing the quantities of each
required to make an assembly”.
 BOM doesn’t contain any information about
the way the product is made or assembled.

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Bill of Materials

The BOM shows the

components and
sub-assemblies
required to produce
a product

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 Product Structure Diagram
Finished product is
located at the top,
components below

Sub-assemblies
are represented
by separate
levels
12
 Indented Bill of Materials
Finished item is not indented

Level 2 sub-assemblies

Level 1 sub-assemblies

Level 1 components

Components and sub-assemblies are indented relative to their

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order of usage
 Sample Bill of Materials

Figure 4.3 Simplified bill of material

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 Bill of Material Points

 The BOM shows all parts required to make

one of the item
 Each part or item has one, and only one,
part number
 A part is defined by its form, fit, or function –
if any of these changes, then it is not the
same part and it must have a new part
number

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 Sample Product Tree for the
BOM

No. of Units Part number

needed
Figure 4.4 Product tree

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 Breaking Down the BOM into
More Detail – the Multilevel Bill
Level 0

Level 1

Level 2

Level 3

Figure 4.5 Multilevel bill

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 Multiple Bills

 A multiple bill is used when companies use

the same components to make several
products.
 Particularly true with families of products.

 Example: the table company makes two

models that are similar except for the tops
which require different boards.

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 Multiple Bills

Figure 4.6 Multiple bills – model A

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 Multiple Bills

Figure 4.6 Multiple bills – model B

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 Single level bill

 A single-level bill of material contains only

the parent and its immediate components.
 The computer stores information
describing the product structures as a
single-level bill.
 A series of single level bills is needed to
completely define an item.
 For example, a table needs four single
level bills, one each for the table, base, top
and frame.
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Single level bill - Example

Figure 4.7 Single-level bills

 Single level bill
Advantages of using single-level bills:
1. Duplication of record is avoided (e.g. base
200 is used in both tables 100 & 150, but
only one base record is kept).
2. The number of records, and the file size
are reduced by avoiding such duplication.
3. Maintaining bills of material is simplified
(e.g. if there is a change in base 200, the
change need to be made in only one
place).
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 Indented BOM – Use Indentation to
Show Parent-Component
Relationships

24 Figure 4.8 Indented bill of material

 Planning Bills of Material
 Artificial grouping of components for Planning
Purposes
 Used to simplify Forecasting, Planning and
Master Production Scheduling.
 Represent an average, not buildable product
 Example: If the company makes tables with:
⚫ Three different leg styles.
⚫ Three different sides and ends
⚫ Three different tops
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 Planning Bills of Material

 In total, the company is making 3*3*3 = 27

different tables, each with its own BOM.
 The 27 bills can be simplified by showing
the percentage split for each type of
components on one bill.
 The percentage usage of components is
obtained from a forecast or past usage.
 Clearly, the percentage for each category
of component adds up to 100%.

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Sample Planning BOM

Figure 4.9 Planning bill

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 Major Uses for Bills of Material

 Defines the product

 Provides method for design change control
 Planning – What is needed and when
(MRP)
 Order entry – order configuration and
pricing
 Production – Parts needed to assemble a
product
 Costing – material cost of goods sold
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 MRP Process

 The purpose of MRP is to determine the

components needed, quantities, and due
dates so that items in the MPS are made on
time.
 Lead time (LT) for each component is an
important issue in the planning process.
 LT is the span of time needed to perform a
process or procure material.
 In manufacturing, it includes time for order
preparation, queuing, processing, moving,
receiving
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and inspection and any expected
delay.
 Basic MRP Record

Gross Requirements Scheduled Receipts

MRP Record

Net Requirements
Projected Available
Planned Order Receipt
Balance
Planned Order Release
30
 A previously
Basic MRP Record released order
due in period 1

Part # Period
Requirements
from all
On hand 1 2 3 4 5
sources

Gross requirements 10 40 10

Scheduled receipts 50

Projected available balance 4 54 44 44 4 44

Net requirements 6

Planned order receipt 50

Planned order release 50

An unreleased
order due in
Lead time = 31
1 period
period 5
Lot size = 50
 Basic MRP Record (cont.)
1. For each distinct component in BOM, we create an MRP
record
2. The time buckets shown in the top raw are usually in weeks
but could also be in days, whichever is more convenient to the
company.
3. The current time is the beginning of the first period.
4. The number of periods in the record is called the planning
horizon and it should be at least as long as the “planning time
fence”.
5. An item is considered available at the beginning of the time
bucket in which it is required.
6. The quantity shown in the projected available row is the
balance at the end of the period.
7. The32 immediate or most current period is called the action
bucket.
 Some Key Terms

 Gross Requirements (Gross) – Total of a

component needed to meet requirements not
taking into account any existing inventory.
 Scheduled receipts (SchRct) – Open orders
released for processing (production or purchase)
scheduled to be received at a defined time.
 Net Requirements (Net) – Actual amount of a
component needed to meet requirement after
PAB and Scheduled Receipts are taken into
account.
 Planned Order Receipt (PlnORct) – If Net is
33
positive, make plans to receive the order.
MRP Process

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 1-Net Requirements
Net requirements account for existing
inventory and/or scheduled receipts
 Check PABt =PABt-1+SchRctt-Grosst
If PABt < 0, you have Net Requirements and
Nett = Grosst-(PABt-1+SchRctt).
 Then we must plan to receive an order:
PlnORctt = Nett or Q (fixed order quantity).
 Then revise the PABt :
PABt = PABt-1+(PlnORctt*+SchRctt)-Grosst
* Planned
35 Order Receipts are to become Scheduled Receipts.
 Example problem
Complete the following table. Order quantity (lot
size) is 200.
Week 1 2 3 4
Gross Requirements 50 250 100 50
Scheduled receipts 200
Projected Available Balance 150
Net requirements
Planned order receipt
Q = 200
Nett = max{0,Grosst - (PABt-1+SchRctt)}
PABt = PABt-1+ (PlnORctt+SchRctt) - Grosst
 Example problem
Complete the following table. Order quantity (lot
size) is 200.
Week 1 2 3 4
Gross Requirements 50 250 100 50
Scheduled receipts 200
Projected Available Balance 150 100 50 150
-50 100
Net requirements 0 0 50 0

Planned order receipt 200

Q = 200 Lot sizing

Nett = max{0,Grosst - (PABt-1+SchRctt)}

PABt = PABt-1+ (PlnORctt+SchRctt) - Grosst
An order for 200 units should be received in the beginning of week 3.
 2-Offsetting

 Offsetting is the process of placing the

exploded requirements in their proper period
based on lead time (LT).
 The date for Planned Order Release (whether
production order or purchase order) should
proceed that of Planned Order Receipt by at
least the LT.

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 Example (Contd.): Offsetting
 Lead time for the item is 2 weeks

Week 1 2 3 4
Gross Requirements 50 250 100 50
Scheduled receipts 200
Projected Available Balance 150 100 50 150 100
Net requirements 50
Planned order receipt 200
Planned order release

An order for 200 units should be released in the beginning of week 1.

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 Example (Contd.): Offsetting
 Lead time for the item is 2 weeks

Week 1 2 3 4
Gross Requirements 50 250 100 50
Scheduled receipts 200
Projected Available Balance 150 100 50 150 100
Net requirements 50
Planned order receipt 200
Planned order release 200

An order for 200 units should be released in the beginning of week 1.

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 Releasing orders
 In many cases, requirements change on a daily basis.
 A computer-based MRP system automatically recalculates
planned orders as gross requirements change.
 It is the responsibility of the material planner to release the
orders (“Planned order release”) in the Action Bucket not the
computer.
 An order maybe released to purchasing to buy the material
(Purchase order), or to manufacturing to make the component
(Production order). After released, they become open orders.
 Open orders are controlled by the planner – who may
expedite, delay or even cancel them.
 Material planner may also freeze some of planned orders to
41
reduce system nervousness (firm planned order).
 Scheduled Receipts
 Once a planned order is released, the Planned
Order Receipt is replaced by a Scheduled
Receipt.
 Scheduled receipts are orders placed on
manufacturing or on a vendor and represent a
commitment to make or to buy.
 The scheduled receipts row shows the quantities
ordered and when they are expected to be
complete and available.
 Scheduled receipts are open orders and these
orders are closed upon delivery of the ordered
goods.
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 Example (Contd.)
 Release planned order in week 1
Action bucket

Week 1 2 3 4
Gross Requirements 50 250 100 50
Scheduled receipts 200 200
Projected Available Balance 150 100 50 150 100
Net requirements 50
Planned order receipt 200
Planned order release 200
An order for 200 is scheduled to be received in week 3
Net requirements is updated.
Nett = max{0,Grosst - (PABt-1+SchRctt)}
43
PABt = PABt-1+ (PlnORctt+SchRctt) - Grosst
 Scheduled Receipts vs.
Planned Order Releases
 Scheduled receipts represent an actual commitment
(purchase order, production order, etc.)
 Planned orders are only the current plan and can be
changed more easily
 Scheduled receipts for production orders already
have component materials assigned
⚫ Scheduled receipts do not impact gross requirements of
its children
 Planned order releases do not have component
materials assigned
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⚫ Planned order releases do impact gross requirements of
 3-Explosion (and Gross
Requirements)
 Production quantity in MPS becomes the
Gross Requirements for the end item.

 The Planned Order Release for the parent are

used to get the Gross Requirements of the
component by applying the explosion process.

 Explosion is the process of multiplying the

requirements by the usage quantity and
recording the appropriate requirements
throughout the product tree.
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 Example problem (explosion)
A 1 2 3 4 5 6
MPS 50 100

A LT=1

B C LT=3
LT=2
(1) (2)
LTs given are in weeks

Using the product tree above & LTs, determine

the planned order release and receipts. Use
lot-for-lot
46
policy.
 1 2 3 4 5 6
Gross Requirements 50 100
Scheduled receipts
A Projected Available Balance 0
Net requirements 50 100
Planned order receipt 50 100
Planned order release 50 100
x1
Gross Requirements 50 100
Scheduled receipts
B Projected Available Balance 0 x2
Net requirements 50 100
Planned order receipt 50 100
Planned order release 50 100
Gross Requirements 100 200
Scheduled receipts
C Projected Available Balance 0
Net requirements 100 200
Planned order receipt 100 200
Planned order release 100 200
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Example: Telephone Assembly

48
 Example (continued)
1. The final assembly is continuous and there is no
lead-time between level 0 and level 1.
2. All other purchasing/production lead times = 1
week
3. Lot-for-lot policy except for part #12 which is
3000.
4. Scheduled-Receipts and current on-hand
inventories are as given below.
5. There is no Scheduled-Receipts and current on-
hand inventories for the end item.
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 Example (continued)

 MPS for Telephone:

Week
1 2 3 4 5 6 7 8

MPS 600 1000 1000 2000 2000 2000 2000

 Calculate MRP records for 123 and 1211.

 We start with the MRP record of part #1
and then #12.
 Q: Gross requirements for part #1?

 A:
50 The same as the MPS.
 Current 1 2 3 4 5 6 7 8
1 Gross Requirements 600 1000 1000 2000 2000 2000 2000
Telephone Scheduled Receipts
Projected Av Balance
Level = 0 Net Requirements 600 1000 1000 2000 2000 2000 2000
Planned Receipts 600 1000 1000 2000 2000 2000 2000
Planned Order Release 600 1000 1000 2000 2000 2000 2000
x1
12 Gross Requirements 600 1000 1000 2000 2000 2000 2000
Base Scheduled Receipts 400 400 400
Assembly Projected Av Balance 800
Net Requirements
Planned Receipts
Level = 1
Planned Order Release

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 Current 1 2 3 4 5 6 7 8
12 Gross Requirements 600 1000 1000 2000 2000 2000 2000
Base Assembly Scheduled Receipts 400 400 400
Projected Av Balance 800 1200 1000 400 2400 400 1400 2400 400
Level = 1 Net Requirements 600 1600 600
Planned Receipts 3000 3000 3000
Planned Order Release 3000 3000 3000
x1
121 Gross Requirements 3000 3000 3000
Housing S/A Scheduled Receipts
Projected Av Balance 500 500 500
Net Requirements 2500 3000 3000
Level = 2
Planned Receipts 2500 3000 3000
Planned Order Release 2500 3000 3000
x4
123 Gross Requirements 12000 12000 12000
Rubber pad Scheduled Receipts 10000
Projected Av Balance 15000
15000 25000 13000 13000 1000
Net Requirements 11000
Level = 2
Planned Receipts 11000
Planned Order Release 11000
x1
1211 Gross Requirements 2500 3000 3000
Rubber pad Scheduled Receipts 1500
Projected Avv Balance 1200 2700 200 200
Net Requirements 2800 3000
Level = 3
Planned
52 Receipts 2800 3000
Planned Order Release 2800 3000
Gross requirements from all levels
and sources
A component may reside in more than one level in a bill of
material or may be used in more than one product.

C B

C D

Gross requirements for C has to be collected from all levels and

all sources before obtaining the net requirements for C
53
 Low level coding
 A component may Level
reside on more than one A 0
level in a bill of material.
 Component C occurs
C B 1
twice in the product tree
and at different levels.
 Low-level code: The
lowest level on which C D 2
a part resides in all
bills of material The gross requirements for C
 Until low-level code is has to be calculated from A and
reached, collect all gross B before obtaining the net
requirements. Then
perform netting. requirements for C
54
 Low level coding
• Every part has exactly one low level code
• Low level codes are determined by starting at the lowest level of
a BOM and working up recording the level against the part.
• If a part occurs on a higher level, its existence on the lower level
has already been recorded.
Level
A 0 Part Low-Level-Code
A 0
C B 1 B 1
C 2
C D 2 D 2
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 Example Problem
 The gross requirements
for A is 50 units in week 5. A

 All lead times are one

week and we have lot-for- C(1) B(1)
lot policy.
 The initial inventories are:
C(1) D(1)
20 units of A, 10 units of
B, and 10 units of C.

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Material Requirements Plan

57
Sample Multiproduct MRP Explosion

58
Multiproduct MRP with low-level
coding

(1)

Part Low-Level-Code
A 0
B 0
C 1
F 2
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60
 Scheduling Logic

 Two common approaches to scheduling

exist
⚫ Front schedule – schedule each step as
early as possible – starting from now
⚫ Back schedule – schedule each step as late
as possible – starting from due-date.
 MRP combines back scheduling and gross
to net explosion
⚫ Reduced inventories
61
⚫ Minimized storage time
Bill of Materials

The BOM shows the

components and
sub-assemblies
required to produce
a product

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Back Scheduling
Top handle
assembly has the
longest duration of
any sub-assembly

Welded top handle

bracket assembly
must be complete
before top handle
assembly can begin

Final Assembly

Final assembly can

begin only when all
sub-assemblies and
components are
available.

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 Back Scheduling – in relation to MRP
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32
Plan order release of
the longest item -
1118.
1605 19 20 21 22 23 24
Gross Requirements 50 100
1118 is in the action
Scheduled receipts
bucket and once
Projected Available
released, it becomes
Balance 0
Scheduled Receipt.
Net requirements 50 100
Planned order receipt 50 100 all other
Then,
Planned order release 50 100 planned orders
might become
Confirmed Planned
orders!

This is when MPS is

due.

1605 plan order

release.

64 Similarly... and all

the other
PlanORels…
 Planned order release
for top handle assembly
MRP Records becomes gross
requirement for top
handle component and
nail (note 2 nails
required per assembly)

Lot-for-lot order policy

exactly matches supply
to net requirements

Fixed lot size order

policy requires orders in
65 multiples of lot size
 MRP Technical Issues
 Processing frequency–recalculating all records and
requirements is called regeneration
⚫ This is a computationally intensive process so it is often
run in the background and during periods of low system
demand
 Net change approach only recalculates those
records that have experienced changes

 Less frequent processing results in an out-of-date

picture
 More frequent processing increases computer
66
costs and may lead to system nervousness
 Nervousness

 Nervousness occurs when even small

changes to higher-level MRP records or the
master production schedule leads to
significant changes in the MRP plans (1 unit
increase may require a new batch.)
 Nervousness is most damaging in MRP
systems with many levels in the product
structure

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 System nervousness - Firm Planned
Orders & lot-sizing

 Regeneration of the MRP records can lead

to large numbers of planned order changes
 To avoid this, a planned order can be
converted to a firm planned order (FPO)
⚫ An FPO is not the same as a scheduled
delivery, but can’t be changed by the MRP
system
⚫ Temporarily overrides the MRP system to
provide stability or to solve problems
 Lot-sizing
68 also contributes to nervousness
 Reducing System
Nervousness

Reduce the causes of MRP Change lot-sizing

plan changes procedures

Ways to Reduce
Nervousness

Manage execution
Use firm planned orders in nervousness by passing
MRP records users information less
frequently
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 Safety Stock and Safety Lead Time

 Safety stock is buffer stock over and above the

quantity needed to satisfy gross requirements
⚫ Used when quantity uncertainty is the issue
 Safety lead time changes the due date of the
planned order receipt (and hence the due date of
shop and/or purchase order release) to provide a
margin for error
⚫ Used when timing of orders is the issue
⚫ Safety lead time is not just an inflated lead time
(inflated LT will not give the same due-date for
order70 receipt).
Net Requirements w/ Safety
Stock
 Check PABt =PABt-1+SchRctt-Grosst
If PABt < SS, you have Net Requirements:
{PABt < SS  PABt-1+SchRctt-Grosst <SS or
PABt-1+SchRctt-(Grosst+SS)<0.}
Nett = (Grosst+SS)-(PABt-1+SchRctt)
 Then we must plan to receive an order:
PlnORctt = Nett or Q (fixed order quantity).
 Then revise the PABt :
PABt = PABt-1+(PlnORctt*+SchRctt)-Grosst
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 Safety Stock and Safety Lead Time

1605 1 2 3 4 5 6
Gross Requirements 3 35 10
LT=1 Scheduled receipts
Projected Available Balance 15 15 15 12
15 15 15 15
Net requirements 3 35 10
Safety Planned order receipt 3 35 10
Stock = 15 Planned order release 3 35 10

1605 1 2 3 4 5 6
Gross Requirements 3 35 10
LT=1 Scheduled receipts
Projected Available Balance 15 12 12
12+23 10
0 0
Net requirements 23 10
Safety LT=1 Planned order receipt
23 10
Planned order release 23 10

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 Scrap

 Scrap is usually stated as a scrap allowance.

Example, a process may generate 15% scrap.
The net requirement is 300 units

Q: With a scrap allowance of 15%, the process

would be required to make how many units?

A: 300 / (1 - 0.15) = 353 units

73
 Where-Used Report

 Where-used reports give not quite the same

information as a bill of material.
 Where-used report lists all parents in which
a component is used whereas the bill gives
the components for a parent.
 Used in implementing an engineering
change, or when materials are scarce, or in
costing a product.
 Example: P58: F is used in B and C.

74
 Pegging

 Pegging provides a link between demand

(order releases, customer orders, etc.) and
the gross requirements for parts
⚫ Pegging records include the specific part
numbers associated with a gross
requirement
⚫ Pegging information can track the impact of a
problem (e.g. material shortage) back to the
order(s) it will affect
75
 Pegging Reports

 Similar to a where-used report.

 However, pegging report shows ONLY those
parents for which there is an existing
requirements.
 More specifically, it shows the parents creating
the demand for the components, the quantities
needed and when they are needed.
 Pegging keeps track of the origin of the demand.

76
 Pegging Reports - Example

Week
A Item C
1 2 3 4 5

C B Gross
50 125 25 50 150
Requirements

C D
A 50 25 25 50 50

Pegged
requirements B 100 100

77
 Planning Horizon

 Total amount of time included in MRP calculations

⚫ Longer planning horizon increases computational
requirements
⚫ Shorter planning horizon may result in less-
effective plans if significant future demand is not
visible
⚫ At a minimum, planning horizon should cover the
cumulative lead time for all finished goods items.
i.e. Planning horizon ≥ Planning Time Fence.
78
Using the MRP System

MRP Planner Exception Codes

MRP
Aspects

Bottom-Up MRP System

Replanning Output

79
 MRP Planner Tasks
• Purchase orders
Release/Launch • Shop floor (production) orders

• Reschedule due dates of existing/open orders (when desirable)

Reschedule • Solve critical material shortages by expediting or re-planning.

• Set lot sizes and lead times

Analyze and Update • Adjust scrap allowances and safety stocks

• Identify errors and inconsistencies and eliminate their root

Reconcile causes

Identify Problems • Take action now to prevent future crises

Solve Shortages • Adjust records and system parameters to prevent recurrence

Enhance
80
• Identify system enhancements to improve performance
 Key Terms
 Firm Planned orders – Orders not yet
released, but “frozen” in quantity and time
despite the changes to reduce system
“nervousness”
 Exception messages – messages generated
by the computer signaling planner action
needed
 Transaction message – when the planner
must tell the MRP software of all actions
taken
81
that will influence the MRP records.
 Exception Codes
Separating the vital few from
the trivial many
Requirements
Part numbers that cannot be
Orders with
with planned satisfied
unsatisfactory
orders in the within system
timing or
immediate parameters
quantity
period (management
input needed)
82
MRP System Output
Part number and description MRP system data

MRP planning data

Exception messages
83
 MRP System Dynamics

MRP System Issues

Rescheduling– Complex Procedural
Transactions
moving the transactions– inadequacies–
during a
due date of an inventory situations the
period–
order to an adjustments, system wasn’t
unexpected
earlier or later service parts, designed to
changes
date etc. handle

84
 Priority
 Consider the following MRP record, with order
quantity of 300 units and LT=3 weeks

 What will happen if the gross requirements in

week 2 are changed from 50 units to 150 ?
85
 Priority
LT=3 weeks
But, it is too late to Plan a receipt for week 2.
A solution could be to expedite the scheduled
receipts of 300 units from week 3 to week 2.
OH 1 2 3 4 5
Gross Requirements 100 50+100 100 150 200
Scheduled Receipts 300 300
Projected Av Balance 150 50 -100
200 100 250 50
Net Requirements 50
Planned Receipts 300
Planned Order Release 300
We need to Plan a new receipt for week 4, but that’s
ok since it is in week 4 (beyond LT).
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This will trigger a Plan release in week 1 (just now).
 Priority
LT=3 weeks
If it is not possible to expedite, what do we do?
The extra 100 units of week 2 must be rescheduled
in week 3.
OH 1 2 3 4 5
Gross Requirements 100 50+100 100 150 200
Scheduled Receipts 300
Projected Av Balance 150 50 -100 100 250 50
Net Requirements 50
Planned Receipts 300
Planned Order Release 300

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 Bottom-up re-planning
 Actions to correct for changed conditions made
as low as possible in the product structure.
 For the previous example, if the part was a
component of another part, the first option is to
expedite the 300 units into week 2.
 This way, there is no need to make any
changes to the parent.
 If this is not possible, the planned order release
and the net requirements for the parent item
must be changed.
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 Bottom-Up Replanning

 Use pegging data to guide efforts to solve

material shortages
⚫ Pegging data allows the planner to take
action only when actual customer orders are
impacted

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 Regeneration Example
Problem
 You are the MRP planner with the following
MRP record (order quantity = 30 units & LT =
2 weeks)

30
 Example Problem (Contd.)

During the first week, the following transactions take place:

 An inventory count reveals there are 10 more than
recorded.
 The planned order release for 30 in week 1 is
released and becomes a scheduled receipt in week 3.
 Only 25 units of the scheduled receipts are received
into inventory.
 The 35 gross requirements for week 1 is issued from
inventory.
 The gross requirements for weeks 3 & 4 are changed
to 10 & 50 respectively.
 The requirement for week 7 is 15.
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 Example Problem (Contd.)
Current 1 2 3 4 5 6
Gross Requirements 35 10 15-5 30+20 15 20
Scheduled Receipts 30-5
Projected Av Balance 20+10 15 5 20 20 5 15
Net Requirements 10 10 15
Planned Receipts 30 30 30
Planned Order Release 30 30 30
The new MRP record at the beginning of next week is as follows:
Current 2 3 4 5 6 7
Gross Requirements 10 10 50 15 20 15
Scheduled Receipts 30
Projected Av Balance 20 10 30 10 25 5 20
Net Requirements 0 20 5 10
Planned Receipts 0 30 30 30
Planned92Order Release 0 30 30 30
 Summary of changes and
actions:
 The planned order release for week 4 has
shifted to week 3.
 Another planned order has been created for
release in week 5.
 Scheduled receipt in week 3 (scheduled in
week 1) is not needed until week 4 and it
should/could be rescheduled to week 4.
 The planned order in week 2 should be
released and become a scheduled receipt in
week 4.
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 Principles
 Effective use of an MRP system allows development of a
forward-looking approach to managing material flows.
 The MRP system provides a coordinated set of linked
product relationships, which permits decentralized decision
making for individual part numbers.
 All decisions made to solve problems must be implemented
within the system, and transactions must be processed to
reflect the resultant changes.
 Effective use of exception messages allows attention to be
focused on the “vital few” rather than the “trivial many.”

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 Quiz – Chapter 8
 In a Material Requirements Planning (MRP) system, what
does time-phasing of gross requirements mean?
 Front scheduling logic starts each step of the process as late
as possible? (True/False)
 A lot-for-lot order policy generates orders for a fixed quantity,
independent of actual requirements? (True/False)
 Processing all Material Requirements Planning (MRP)
records in a single computer run is called ___________?

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