Operations Management�Material Requirements Planning (MRP)

2. Global Company Profile: Collins Industries
Dependent Inventory Model Requirements
Master Production Schedule
Bills of Materials
Accurate Inventory records
Purchase Orders Outstanding
Lead Times for Each Component
MRP Structure

3. MRP Management
MRP Dynamics
MRP and JIT
Lot-Sizing Techniques
Extensions in MRP
Closed-Loop MRP
Capacity Planning
Material Requirements Planning II (MRP II)
Enterprise Resource Planning (ERP)

4. MRP In Services
Distribution Resource Planning (DRP)
DRP Structure
Allocation

5. When you complete this chapter, you should be
able to :
Identify or Define:
Planning bills and kits
Phantom bills
Low-level coding
Lot sizing

6. When you complete this chapter, you should be
able to :
Describe or Explain:
Material requirements planning
Distribution requirements planning
Enterprise resource planning

7. Largest manufacturer of ambulances in the
world
International competitor
12 major ambulance designs
18,000 different inventory items
6,000 manufactured parts
12,000 purchased parts
MRP: IBM’s MAPICS

8. Collins requires:
Material plan must meet both the requirements of
the master schedule and the capabilities of the
production facility
Plan must be executed as designed
Effective “time-phased” deliveries, consignments,
and constant review of purchase methods
Maintenance of record integrity

9. Inventory
Process
stage
Demand
Type
Number
& Value
Other
Raw Material WIP
Finished
Goods
Independent
Dependent
A Items
B Items
C Items
Maintenance
Dependent
Operating

10. Item
Materials With
Independent Demand
Materials With
Dependent Demand
Demand
Source
Company Customers Parent Items
Material
Type
Finished GoodsWIP & Raw Materials
Method of
Estimating
Demand
Forecast & Booked
Customer Orders
Calculated
Planning
Method
EOQ & ROP MRP

11. Aggregate
Production Plan
Marketing
Customer
Demand
Engineering
Design
Completion
Management
Return on
Investment
Capital
Human
Resources
Manpower
Planning
Procurement
Supplier
Performance
Finance
Cash Flow
Production
Capacity
Inventory

12. Effective use of dependent demand
inventory models requires that the
operations manager know the:
master production schedule
specifications or bills-of-material
inventory availability
purchase orders outstanding
lead times

13. Production Plan
Execute Material
Plans
Master Production
Schedule
Material
Requirements
Plan
Capacity
Requirements
Plan
Execute Capacity
Plans
Realistic??
No
Yes

14. Make to Order
(Process Focus)
Assemble to
Order or
Forecast
(Repetitive)
Stock to Forecast
(Product Focus)
Schedule finished
product
Steel, Beer,
Bread Light
bulbs, Paper
Print shop
Machine shop
Fine dining restaurant
Examples:
Number of end
items
Number of
inputs
Typical focus of the
master production
schedule Schedule
orders
Schedule
modules
Motorcycles, autos,
TVs, fast-food
restaurant

15. List of components & quantities needed to
make product
Provides product structure (tree)
Parents: Items above given level
Children: Items below given level
Shows low-level coding
Lowest level in structure item occurs
Top level is 0; next level is 1 etc.

17. Modular bills
Modules are final components used to make
assemble-to-stock end items
Planning bills
Used to assign artificial parent
Reduces number of items scheduled
Phantom bills
Used for subassemblies that exist temporarily

18. Bicycle(1)
P/N 1000
Handle Bars (1)
P/N 1001
Frame Assembly (1)
P/N 1002
Wheels (2)
P/N 1003
Frame (1)
P/N 1004

19. 1 2 3 4 5 6 7 8
D
G
2 weeks
1 week
F
E
3 weeks
2 weeks
A
1 week
C
1 week
B
2 weeks to
produce
E
D
Must have D and E
completed here so
production can begin on B
2 weeks
1 week
Start production
of D

20. Manufacturing computer information system
Determines quantity & timing of dependent
demand items
1 2 3 4 5
Gross Requirements 2 20 25 15
Scheduled Receipts 5 30
Available 25 23 33 33 8
Net Requirements 7
Planned Order Receipts 7
Planned Order Releases 7


© 1995
Corel
Corp.

21. Computer system
Mainly discrete products
Accurate bill-of-material
Accurate inventory status
99% inventory accuracy
Stable lead times
© 1984-1994 T/Maker Co.

22. Increased customer satisfaction due to meeting
delivery schedules
Faster response to market changes
Improved labor & equipment utilization
Better inventory planning & scheduling
Reduced inventory levels without reduced
customer service

23. MRP by period report
MRP by date report
Planned orders report
Purchase requirements
Exception reports
MRP
Programs
Master Production
Schedule
BOM
Lead Times
(Item Master File)
(Bill-of-Material)
Inventory Data
Purchasing data

25. Forecast &
Firm Orders
Material
Requirements
Planning
Aggregate
Production
Planning
Resource
Availability
Master
Production
Scheduling
Shop
Floor
Schedules
Capacity
Requirements
Planning
Realistic?
No, modify CRP, MRP, or MPSNo, modify CRP, MRP, or MPS
YesYes

26. Master
Production
Schedule
Bill of
Materials
Material
Requirements
Planning System
Inventory
Status
Planned Order
& Other
Reports
Item Master
Purchasing
Data

27. Shows items to be produced
End item, customer order, module
Derived from aggregate plan

28. Shows items to be produced
End item, customer order, module
Derived from aggregate plan
Item/WeekOct 3Oct 10Oct 17Oct 24
Drills 300 200 310 300
Saws 300 450 310 330
Example

29. Therefore, these are
the gross
requirements for B10
40+10
= 50405020
15+30
= 45
1 2 3 4 5 6 7 8Periods
Gross requirements: B
Periods
1010
123
Master schedule
for S sold directly
40 50 15
A
CB
567891011
Lead time = 4 for A
Master schedule for A
40 20 30
S
B C
8910 1211 13
Lead time = 6 for S
Master schedule for S

30. Supports “preplanning”
Problem with system “nervousness”
“Time fence” - allows a segment of the master
schedule to be designated as “not to be
rescheduled”
“Pegging” - tracing upward in the bill-of-
materials from the component to the parent
item
That a manager can react to changes, doesn’t
mean he/she should

31. MRP - a planning and scheduling technique with
fixed lead times
JIT - a way to move material expeditiously
Integrating the two:
Small bucket approach and back flushing
Balanced flow approach

32. Lot-for-lot
Economic Order Quantity
Part Period Balancing
Wagner-Whitin Algorithm

36. Closed loop MRP
Capacity planning - load reports
MRP II - Material Resource Planning
Enterprise Resource Planning

38. Tactics for smoothing the load and minimizing the
impact of changed lead time include:
Overlapping - reduces the lead time, entails sending
pieces to the second operation before the entire lot has
completed the first operation
Operations splitting - sends the lot to two different
machines for the same operation
Lot splitting - breaking up the order and running part of
it ahead of the schedule

40. MRP II with ties to customers and suppliers

42. Can be used when demand for service or
service items is directly related to or
derived from demand for other services
restaurant - rolls required for each meal
hospitals - implements for surgery
etc.

44. DRP requires:
Gross requirements, which are the same as
expected demand or sales forecasts
Minimum levels of inventory to meet customer
service levels
Accurate lead times
Definition of the distribution structure