UBS, GURGAON

Executive MBA Program

Handout on Material Requirements Planning (MRP) – Numerical Technique

An MRP Problem, and its Numerical Solution

(Remember: MRP is applicable in the case of dependent demand.)

Example: JW engineering has received an order for supplying 100 units of product A, which is
manufactured by assembling 3 units of B, 2 of C, and 2 of D. The subassemblies for these
products are:

B: 3 of E, and 2 of F.
C: 2 of F, and 1 of G.
D: 2 of E, and 3 of H.

Lead times for assemblies and subassemblies are:

Item A B C D E F G H
Lead time (weeks) 1 3 3 2 1 3 2 2

Show the product structure and bill of materials (BOM) by lowest level coding. For 100 units of
A to be supplied by the end of the 8th week, develop MRP planned order release schedule vis-à-
vis weekly requirement, assuming zero inventory at present. (Are there any other assumptions?)

We first draw the product tree (structure) as shown below:

Level 0: A(1) 100

B(3) 300 C(2) 200 D(2) 200

Level 2 E(3) F(2) F(2) G(1) E(2) H(3)

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Handout on MRP problem solving – numerical technique (prepared by
A. Ramachandran, Course Instructor) 1
Bill of Materials (BOM) in detail:

Parts reqd. No. of units reqd. Lead time (LT) Stock on hand Economic
(for parent) (in weeks) (SOH) (in order
units) quantity
(EOQ)
A 1 1 0 Flexible
B 3 for 1 of A 3 0 Flexible
C 2 for 1 of A 3 0 Flexible
D 2 for 1 of A 2 0 Flexible
E 3 for 1 of B + 1 0 Flexible
2 for 1 of D
F 2 for 1 of B + 3 0 Flexible
2 for 1 of C
G 1 for 1 of C 2 0 Flexible
H 3 for 1 of D 2 0 Flexible

(Usually, you also have situations of the kind where some prior period orders, for some of the
parts, are expected to be received some time during the present planning horizon. And there
could be some SOH at the beginning, and EOQ for a part could be a specified quantity.) The
Master Production Schedule (MPS) is therefore:

Week No. 1 2 3 4 5 6 7 8
Demand - - - - - - - 100

(You normally have demands specified for many of the intervening weeks too!) The MRP
computations are shown below:

Item: A EOQ = Flexible LT = 1

Week No. 0 1 2 3 4 5 6 7 8
Projected - - - - - - - - 100
requirement
(PR)
Receipts (R) - - - - - - - - 100 @4
SOH
0 0 0 0 0 0 0 0 100-100=0
@1 @5
Shortfall (SF) 0-100=-100
@2
Planned order 100
release (POR) @3

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Handout on MRP problem solving – numerical technique (prepared by
A. Ramachandran, Course Instructor) 2
Item: B EOQ = Flexible LT = 3

Week No. 0 1 2 3 4 5 6 7 8
Projected - - - - - - - 300
requirement from
(PR) [3B for @3
1A]
Receipts (R) - - - - - - - 300
SOH
0 0 0 0 0 0 0 0
Shortfall (SF) -300
Planned order 300
release (POR)

Item: C EOQ = Flexible LT = 3

Week No. 0 1 2 3 4 5 6 7 8
Projected - - - - - - - 200
requirement
(PR) [2C for
1A]
Receipts (R) - - - - - - - 200
SOH
0 0 0 0 0 0 0 0
Shortfall (SF) -200
Planned order 200
release (POR)

Item: D EOQ = Flexible LT = 2

Week No. 0 1 2 3 4 5 6 7 8
Projected - - - - - - - 200
requirement
(PR) [2D for
1A]
Receipts (R) - - - - - - - 200
SOH
0 0 0 0 0 0 0 0
Shortfall (SF) -200
Planned order 200
release (POR)

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Handout on MRP problem solving – numerical technique (prepared by
A. Ramachandran, Course Instructor) 3
Item: E EOQ = Flexible LT = 1

Week No. 0 1 2 3 4 5 6 7 8
Projected - - - - 900 400
requirement
(PR) [3E for
1B, 2E for 1D]
Receipts (R) - - - - 900 400
SOH
0 0 0 0 0 0
Shortfall (SF) -900 -400
Planned order 900 400
release (POR)

Item: F EOQ = Flexible LT = 3

Week No. 0 1 2 3 4 5 6 7 8
Projected - - - - 600 +
requirement 400 =
(PR) [2F for 1000
1B, 2F for 1C]
Receipts (R) - - - - 1000
SOH
0 0 0 0 0
Shortfall (SF) -1000
Planned order 1000
release (POR)

Item: G EOQ = Flexible LT = 2

Week No. 0 1 2 3 4 5 6 7 8
Projected - - - - 200
requirement
(PR) [1G for
1C]
Receipts (R) - - - - 200
SOH
0 0 0 0 0
Shortfall (SF) -200
Planned order 200
release (POR)

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Handout on MRP problem solving – numerical technique (prepared by
A. Ramachandran, Course Instructor) 4
Item: H EOQ = Flexible LT = 2

Week No. 0 1 2 3 4 5 6 7 8
Projected - - - - - 600
requirement
(PR) [3H for
1D]
Receipts (R) - - - - - 600
SOH
0 0 0 0 0 0
Shortfall (SF) -600
Planned order 600
release (POR)

MRP Summary:

Week No. 0 1 2 3 4 5 6 7 8
Projected E 900 E 400 B 300 A 100
requirement F 1000 H 600 C 200
(PR) G 200 D 200
Planned order F G E 900 B 300 D 200 A 100
release (POR) 1000 200 H 600 C 200
E 400

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Handout on MRP problem solving – numerical technique (prepared by
A. Ramachandran, Course Instructor) 5