I.

Background of the organization:

Let's consider an ideal organization called ABC Electronics. ABC Electronics is a global
electronics manufacturer that produces a wide range of consumer electronic devices such as
smartphones, tablets, and smart home appliances. They have multiple production facilities
located in different countries and a vast network of suppliers to source their raw materials.

II. Introduction:

1. Gross requirement (GR):

Gross requirement refers to the total quantity of a particular item that is needed to fulfill
customer demand. It includes both the actual demand from customers as well as any additional
requirements for safety stock or other purposes. In the case of ABC Electronics, the gross
requirement would be determined by analyzing customer orders, sales forecasts, and any other
factors that influence demand. For example, if ABC Electronics receives customer orders for
10000
, artphonesndaheyt lsoane e d t o ma i nt a i n a s a f e t y s t oc k of 2, 000 uni t s , t he n t he gr os s
m
requirement for smartphones would be 12,000 units.

2. Scheduled receipts (SR):

Scheduled receipts are the planned quantities ofm aterials orproducts thatare expected to arrive
at a specific time in the future. This includes both purchased items from suppliers and internally
produced items. In the case of ABC Electronics, scheduled receipts would include components
and raw materials that are sourced from suppliers, as well as internally produced sub-assemblies
or finished products. For example, if ABC Electronics has scheduled receipts of 5, 000
smartphone screens from their supplier next week, then the scheduled receipts for smartphone
screens would be 5,000 units.

3. Projected available balance (PAB):

Projected available balance is the calculated quantity of inventory that w ill be available at a
specific point in time, taking into account the current inventory balance, scheduled receipts, and
gross requirements. In the case of ABC Electronics, projected available balance would help
determine whether they have enough inventory to meet customer demand or if they need to
adjust their production or procurement plans. For example, if ABC Electronics currently has
2,000 smartphone screens in inventory, and they have scheduled receipts of 5,000 units and a
gross requirement of 12,000 units, then the projected available balance for smartphone screens
would be 7,000 units (2,000 units current inventory + 5,000 units scheduled receipts).

4. Net requirements:

Net requirements are the actual quantity of materials or products that need to be produced or
purchased to meet the gross requirements, taking into account the projected available balance . In
the case of ABC Electronics, net requirements would help determine the additional production or
procurement needed to fulfill customer demand. For example, if ABC Electronics has a gross
requirement of 12,000 smartphone screens and a projected available balance of 7,000 units, then
the net requirement for smartphone screens would be 5,000 units (12,000 units gross requirement
- 7,000 units projected available balance).

5. Planned order receipt:

Planned order receipt refers to the planned quantity of materials or products that will be received
at a specific time in the future to meet the net requirements . In the case of ABC Electronics,
planned order receipts would be generated based on the net requirements and taking into account
factors such as lead time and supplier capabilities. For example, if ABC Electronics has a net
requirement of 5,000 smartphone screens, they would plan to receive a planned order receipt of
5,000 units from their supplier.

6. Planned order release:

Planned order release is the planned quantity of m aterials or products that w illbe released for
production or purchase at a specific time in the future. It is based on the net requirements and
takes into account factors such as lead time and capacity constraints. In the case of ABC
Electronics, planned order releases would be generated based on the net requirements and
considering factors such as production capacity and avai
lability of resources. For example, if ABC Electronics needs to produce an additional 5, 000
smartphone screens internally, they would release a planned order of 5,000 units to their
production department.

7. Material requirements planning process:

( ) requirem ents planning (M RP) process is a system atic approach to planning and
managing the flow of materials and products within an organization. It involves determining the
gross requirements, scheduled receipts, projected available balance, net requirements, and
planned orders for each item in the inventory. In the case of ABC Electronics, the MRP process
would be used to calculate the gross requirements, scheduled receipts, projected available
balance, net requirements, and planned orders for all the components and raw materials needed
for their electronic devices. This would help ABC Electronics optimize their inventory levels,
reduce costs, and meet customer demand efficiently.

III. Application:

In the case of ABC Electronics, the application of these concepts would involve using MRP
software or tools to calculate the gross requirements, scheduled receipts, projected available
balance, net requirements, planned order receipts, planned order releases, and overall material
requirements planning process. The MRP system would take into account various factors such as
customer demand forecasts, lead times for procurement and production, current inventory levels,
and supplier capabilities to generate accurate plans for production and procurement .

For example, let's say ABC Electronics receives customer orders for 10, 000 smartphones . Based
on historical data and sales forecasts, they determine that they also need to maintain a safety
stock of 2,000 units. This gives them a gross requirement of 12,000 smartphones. They have
scheduled receipts of 5,000 smartphone screens from their supplier next week. Currently, they
have 2,000 smartphone screens in inventory. Using the MRP system, ABC Electronics can
calculate the projected available balance (7,000 units) and the net requirement (5,000 units).
They can then plan to receive a planned order receipt of 5,000 smartphone screens from their
supplier and release a planned order of 5,000 units for production.

IV. Conclusion and Recommendation:

Based on the application of these concepts in ABC Electronics, it is evident that the material
requirements planning process and the use of gross requirements, scheduled receipts, projected
available balance, net requirements, planned order receipts, and planned order releases are
crucial for effective inventory management and production planning. By accurately calculating
these parameters and planning accordingly, ABC Electronics can optimize their inventory levels,
reduce costs, and meet customer demand efficiently.

It is recommended that ABC Electronics continue using MRP software or tools to streamline
their inventory management process. They should regularly update their data on gross
requirements, scheduled receipts, and current inventory levels to ensure accurate calculations and
planning. Additionally, they should monitor their actual production and purchase orders to
compare them with the planned orders and make any necessary adjustments to maintain optimal
inventory levels. This will help ABC Electronics improve their supply chain efficiency,
minimize stockouts, and enhance customer satisfaction.