Transcript Chapter 12

BUAD306
MRP
Disaggregating & Why It’s
Important

Enables managers to take aggregate plan
and break it down into actual units being
produced




Especially important in companies with
multiple product lines
Show quantities and timing of items to be
produced (specific products)
Enables rough cut capacity planning to test
feasibility
Feeds the MRP process
Materials Requirement
Planning (MRP)
A computerized inventory control and
production planning system for
dependent demand inventories
(individual parts that make up a final
product).
 Objective: To ensure that material is
available when needed and to
maintain the lowest possible level of
inventory.

Dependent Demand
Items are used internally to produce a
final product
 Example: Production of cookies

MRP Impacts
Inventory levels
 Purchasing materials
 Manufacturing activities
 Delivery schedules

MRP Questions

MRP is designed to answer these
three questions:
What is needed?
 How much is needed?
 When is it needed?

Master Production
Schedule
Bill
of
Materials
Material
Requirements
Planning
Planned Order Releases
Work Orders
Purchase
Orders
MRP Inputs
Inventory
Master
File
MRP Outputs
Rescheduling
Notices
MRP Uses
Dependent and discrete items (where
demand varies)
 Complex products
 Job shop production (where each job
takes a different path through the
system)
 Assemble-to-order environments
(previously completed subassemblies
are configured to order)

Master Production Schedule
Drives MRP process with a schedule
of finished products
 Quantities represent production not
demand
 Quantities may consist of a
combination of customer orders &
demand forecasts
 Quantities represent what needs to be
produced, not what can be produced

Terms of Production
Time Periods/Buckets – how long it
takes to execute portions of the
master schedule tasks
 Cumulative lead time - the total length
of time needed to manufacture a
product
 Time fence - a date beyond which no
changes in the master schedule are
allowed

Bill of Materials (BOM)

The list of items that go into the
product
Includes a brief description of each
item
 Specifies when and in what quantity
each item is needed in the assembly
process


Created with Product Structure Tree
Product Structure Tree

Visual depiction of
the BOM
requirements–
where all
components are
listed by level
Example 1 - Product Structure Tree
Shelves
Legs
Wheel Assemblies
Stickers
Electrical Assembly
Mat
AV Cart
Example 1 - Product Structure Tree
Cart
Shelves
(4)
Mat (1)
Wheel
Assembly(1)
Legs(4)
Stickers(2)
Electrical
Assembly(1)
Tires(4)
Surge Protector(4)
Axels(4)
Power Cord (1)
Brakes (2)
Example 2 - Product Structure Tree for Product X
Level
X
0
B(4)
1
2
D(3)
3
E(4)
C
E(2)
E(2)
F(2)
What total quantity of each
component (B, C, D, E and F) is
needed to produce one X?
Inventory Master File
A database of information on every
item produced, ordered, or inventoried
 Cycle Counting – Taking physical
counts of at least some inventory
items reconciling differences as they
occur

Example 3 - Product Structure Tree for Product X
Level
X
0
B(4)
1
2
3
D(3)
E(4)
C
E(2)
E(2)
F(2)
What if you needed 10 X’s and we had the
following inventory:
B–4
C – 10
D–8
E – 60
F - 10
Terms of Production
Time Periods/Buckets – how long it
takes to execute portions of the
master schedule tasks
 Cumulative lead time - the total length
of time needed to manufacture a
product
 Time fence - a date beyond which no
changes in the master schedule are
allowed

MRP EXAMPLE 4: The table below lists the components
needed to assemble an end item, lead times, and
quantities on hand.

If 30 units of the end item are to be assembled, how many
additional units of E are needed? (HINT: You do not have to
develop an MRP to do this)
Item
End
LT (wk)
1
Amount on hand 4
B
2
10
C
3
10
D
3
25
E
1
12
F
2
30
G
1
5
H
2
10
End item
B (2)
E (2)
C
F (3)
G (2)
D (3)
E (2)
H (4)
E (2)
MRP EXAMPLE 5 – CUMULATIVE LEAD TIME:
An order for the end item is scheduled to be shipped at
the start of week 11. What is the latest week that the
order can be started and still be ready to ship on time?
(You do not have to develop an MRP)
Item
End
LT (wk)
1
Amount on hand 4
B
2
10
C
3
10
D
3
25
E
1
12
F
2
30
G
1
5
H
2
10
End item
B (2)
E (2)
C
F (3)
G (2)
D (3)
E (2)
H (4)
E (2)
Time-Phased Plan
Week number:
Item:
Gross Requirements
Scheduled Receipts
Projected on hand
Net Requirements
Planned-order receipts
Planned-order releases
1
2
3
4
5
6
7
Lot-for-lot: the order or run size for each period is set equal
to the demand for that period.
8
MRP Processing

Takes the end item requirements
specified by the master schedule and
“explodes” them into time-phased
requirements for assemblies, parts,
and raw materials using the bill of
materials offset by lead times.
MRP Processing Terms
Gross Requirements: Total expected
demand for an item or raw material in
a time period.
 Scheduled Receipts: Open orders
scheduled to arrive from vendors or
elsewhere in the pipeline.
 Projected on hand: Expected amount
of inventory that will be on hand at the
beginning of each time period

MRP Processing Terms
Net
Gross
Requirements = Requirements in period t
in period t
Projected
inventory + Safety
in period t
stock
Net requirements: The actual amount
needed in each time period
 Planned-order releases: Planned
amount to order in each time period;
planned-order receipts offset by lead
time

MRP EXAMPLE 1 – MRP SCHEDULE
A product structure tree for end item X is below. A manager
wants to know the materials requirements for ordered part R
that will be needed to complete 120 units of X by the start of
week 5. Lead times for items are one week for level 0 and
level 1 items and 2 weeks for level 2 items. There is a
scheduled receipt of 60 units of M at the END of week 1 and
100 units of R at the START of week 1. Lot for lot ordering is
used.
X
M (3)
R (2)
Level 0
I (2)
P
N (4)
Level 1
V
Level 2
MRP EXAMPLE 1a – MRP SCHEDULE
A product structure tree for end item X is below. A manager
wants to know the materials requirements for ordered part R
that will be needed to complete 120 units of X for the start of
week 6 and 150 for the start of week 8. Lead times for items
are one week for level 0 and level 1 items and 2 weeks for
level 2 items. There is a scheduled receipt of 60 units of M
at the END of week 1 and 100 units of R at the START of
week 1. Lot for lot ordering is used.
X
M (3)
R (2)
Level 0
I (2)
P
R (4)
Level 1
V
Level 2
MRP EXAMPLE 1b – MRP SCHEDULE
A product structure tree for end item X is below. A manager
wants to know the materials requirements for ordered part R
that will be needed to complete 150 units of X for the start of
week 6 and 200 for the start of week 8. Lead times for items
are one week for X and M and 2 weeks for all other items.
There is a scheduled receipt of 60 units of M at the END of
week 1 and 100 units of R at the START of week 1. Lot for
lot ordering is used.
X
M (3)
R (2)
Level 0
I (2)
P
R (4)
Level 1
V
Level 2
MRP EXAMPLE 1c – MRP SCHEDULE
Demand for X: 100 in SOW 7
100 in SOW8
All LTs = 1 week
60 Ms to arrive in EOW1
100 Rs to arrive SOW1
I has a minimum order requirement of 500 units
M must be ordered in BATCHES of 300
X
M (3)
R (2)
Level 0
I (2)
P
R (4)
R (2)
V
Level 1
Level 2
MRP HW # 5
End item P is composed of three subassemblies: K, L
and W. K is assembled using 3Gs and 4 Hs. L is made of
2 Ms and and 2 Ns. W is made of 3 Zs. On hand
inventories are 20 Ls, 40 Gs, and 200 Hs. Scheduled
receipts are 10 Ks at the start of week 3, 30 Ks at the start
of week 6, and 200 Ws at the start of week 3.
One hundred Ps will be shipped at the start of week 6 and
another 100 at the start of week 7. Lead times are two
weeks for subassemblies and one week for components
G, H and M. Final assembly of P requires one week.
Include an extra 10% scrap allowance in each planned
order of G. Minimum order size for H is 200.