Material Requirements Planning: Introduction To Materials Management, 8e Introduction To Materials Management, 8e

Introduction to
MATERIALS MANAGEMENT
CHAPTER 4
Material
Requirements
Planning
IntroductiontotoMaterials
Introduction MaterialsManagement,
Management,8e 8e Copyright © 2017 by Pearson Education, Inc.
Chapman,Arnold,
Chapman, Arnold,Gatewood,
Gatewood,and
andClive
Clive All Rights Reserved
Independent versus Dependent
Demand
• Independent Demand
▪ Not related to demand for other assemblies or
products
▪ From outside sources
▪ Generally forecasted demand
• Dependent Demand
▪ Generally related to production of an end
product (as defined on the MPS)
▪ Can be calculated instead of forecasted
Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

Chapman, Arnold, Gatewood, and Clive All Rights Reserved
Dependent Demand Approach –
Material Requirement Planning (MRP)
• Major Objectives of MRP

▪ Determine requirements – Calculated to meet
product requirements defined in the MPS
• What to order
• How much to order
• When to order
• When to schedule delivery
▪ Keep priorities current

Links To Other MPC Functions

Major Inputs to MRP
• Master Production Schedule quantities and times

• Inventory records of all items to be planned
▪ Planning factors such as lead times, order
quantities, and safety stock
▪ Current status of each item
• Bills of material for MPS items

Sample Bill of Material

Bill of Material Points
• The BOM shows all parts to make one of the item

• Each part has one, and only one, part number
• A part is defined by form, fit, and function
• Any change requires a new part number

Sample Product Tree for the BOM

Breaking Down the BOM into More
Detail – the Multilevel Bill

Indented BOM – Use Indentation to
Show Parent-Component Relationships

Planning Bill of Material
• Artificial grouping of components for planning

purposes
• Used to simplify
▪ Forecasting
▪ Planning
▪ Master Scheduling
• Represents an average, not buildable product

Sample Planning BOM

Where-Used and Pegging
• Where-used reports
▪Shows the parents for a component (contrast
with a bill of material that shows the
components for a parent)
• Pegging report
▪Shows the parents for a component, but only
those parents where there is an existing
requirement

Major Uses for Bills of Material
• Defines the product

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

Basic MRP Record

Key Terms
• Lead time – Span of time for a process

• Exploding – Process of multiplying requirements
by usage to get BOM requirements
• Offsetting – Placing requirements in the proper
period based on lead time
• Planned orders – Orders planned during the
explosion, but not yet released for processing
• Low-level code – Lowest level on which a part
resides on the bill of material

Key Terms (continued)
• Scheduled receipts – Open orders released for

processing (production or purchase) scheduled to
be received at a defined time
• Gross Requirements – Total of a component
needed to meet requirements not taking any
existing inventory into account
• Net Requirements – Actual amount of a
component needed after existing requirements
taken into account

Key Terms (continued)
• Projected available – The expected inventory

position at the end of the period
• Planned order release – The amount that should
be ordered (using the lot size) to prevent a
negative projected available balance
• Planned order receipt – When the order should be
available for use, offset by lead time from the
planned order release

Example Problem
Lead time for this component is 2 weeks and order

quantity is 200. Complete the table. What action should
be taken?

Example Problem Solution
The order for 200 should be released

Example of a Multilevel BOM
Lead time for each component is 1 week

Netting and Exploding Level 0
Parts

Netting and exploding Level 1
Parts

Completed Material Requirements
Plan

Sample Multiproduct MRP
Explosion

Points About the MRP Record
• Current time – beginning of first period (often

called time buckets)
• Items considered available at beginning of period
• Quantity in Projected Available row considered at
end of period
• Current period often called action bucket – action
should be taken to avoid a future problem

Planner Responsibilities for MRP
• Launch Orders – Production or Purchasing

• Reschedule orders as required
• Reconcile errors and search for causes
• Solve critical material shortages
▪ Replan
▪ Expedite
• Coordinate with other functions to resolve
problems

Moving Through Time –
An Example
This record shows the status of the part Monday morning.

The computer is showing the need to release the order of
30
During the week, the following
events happen
• Only 25 units of the scheduled receipt move into
inventory. The balanced is scrapped.
• The gross requirement for week 3 is changed to 10.
• The gross requirement for week 4 is increased to 50.
• The gross requirement for week 7 is 15.
• An inventory count reveals there are 10 more in
inventory than the record shows
• The gross requirement for week 1 is issued from
inventory
• The planned order release of 30 in week 1 is released
and becomes a scheduled receipt in week 3.
The new record reflects those
events from week 1

Additional Key Terms
• Firm Planned orders – Orders not yet released,

but “frozen” in quantity and time to reduce
system “nervousness”
• Exception messages – Messages generated by
the computer signaling planner action needed
• Bottom-up replanning – Actions to correct for
changed conditions made as low as possible in
the product structure


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Introduction to

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

• Major Objectives of MRP

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

• Master Production Schedule quantities and times

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

• The BOM shows all parts to make one of the item

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

• Artificial grouping of components for planning

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

• Defines the product

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

• Lead time – Span of time for a process

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

• Scheduled receipts – Open orders released for

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

• Projected available – The expected inventory

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

Lead time for this component is 2 weeks and order

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

The order for 200 should be released

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

Lead time for each component is 1 week

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

• Current time – beginning of first period (often

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

• Launch Orders – Production or Purchasing

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

This record shows the status of the part Monday morning.

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

• Firm Planned orders – Orders not yet released,

Introduction to Materials Management, 8e Copyright © 2017 by Pearson Education, Inc.

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