Chapter 15 Material Requirements Planning
Chapter 14 - Material Requirements Planning
CHAPTER 14 MATERIAL REQUIREMENTS PLANNING Review and Discussion Questions 1. Discuss the meaning of MRP terms such as planned order release and scheduled order receipts. A planned order release is an order currently planned to be released. It has not been released. Consequently, the planned order release can be changed based upon changes in demand as one example. A scheduled order receipt, on the other hand, reflects an order that has already been released. The scheduled order receipt indicates the anticipated arrival of the released order. Due to variations in delivery times, it may not arrive exactly at the planned arrival time. 2. Many practitioners currently update MRP weekly or biweekly. Would it be more valuable if it were updated daily? Discuss. The performance of any operation will naturally vary from day to day. When the observed time period in which performance is measured is a week or two, the daily variations are smoothed; that is, the variations in performance are averaged. For example, below-average performance in one day may be offset by a higher-than-average performance the next day. Daily MRP runs monitor performance too closely and may even create an exception report calling a normal variation an abnormal deviation from expected output. 3. What is the role of safety stock in an MRP system? The role of safety stock in an MRP system is to buffer any uncertainties in quantities. One cause of quantity uncertainties is quality. Safety lead time should be used to offset any uncertainties in timing, from such occurrences as production or purchase delays. The addition of safety stock results in extra inventory being carried, thus reducing performance. If possible, any uncertainties in the quantities should be eliminated so that no safety stock is needed. 4. Contrast the significance of the term lead time in the traditional EOQ context and in an MRP system. In the traditional context, lead time is fixed—either as a discrete time or as a probability distribution. Such lead time constancy or variation is outside of the inventory model. Lead time in an MRP system is assumed to be a variable. While specific lead times are stated for planning purposes, these times may be speeded up or delayed as conditions warrant. Indeed, it is this ability to detect needed changes in lead times—either by expediting or de-expediting—that many users cite as one of the most valuable features of MRP.
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Chapter 14 - Material Requirements Planning
5. Discuss the importance of the master production schedule in an MRP system. The master production schedule “drives” the system. It states the planned due dates for end items. Material requirements planning computer runs, however, involve an iterative process. The master production schedule “proposes” or “hypothesizes” a tentative schedule. After the MRP run with this schedule, the shop scheduler examines the MRP plan for impractical loads on the productive system —either by stating excessive demands on personnel or equipment, or in excessive idle time. Then the master production schedule is revised and the program is run again. Because the entire MRP system is geared to satisfying the master production schedule, it is critical that the master production schedule be correct at the start of the first MRP run. The production scheduler then knows what effects any changes he makes on the schedule will have on the original MRP schedule. He can then take appropriate action as necessary, such as requesting that customers be contacted to try to extend promised dates if they are too close, or to arrange for early delivery or additional storage space if products will be completed prior to the promised delivery date. 6. “MRP just prepares shopping lists. It does not do the shopping or cook the dinner.” Comment. An MRP system generates schedules to meet material needs. It starts with the master schedule and develops a time phased schedule which specifies what, when, and how many units of each material are required. Whether this schedule is adhered to, depends first on the master scheduler who may change the schedule. Then an inventory control personnel may choose to change order quantities or timing. Then the purchasing department may make further modifications to a purchase order, and finally the production scheduler may actually release the work to production—(which may be at some time other than that called for in the MRP schedule). 7. What are the sources of demand in an MRP system? Are these dependent or independent, and how are they used as inputs to the system? An MRP system has both dependent and independent item demands. The major demands on the system occur through the master production schedule (these are usually of independent origin). From here on throughout the system, the demands are then dependent on the master production schedule. Orders for spare parts and repair parts normally do not go through the master production schedule unless their amounts are large enough to place a significant load on the productive system. These demands (which are usually independent) are fed into the inventory records file by-passing the master production schedule. Once there, they are then exploded into the required parts and materials needed during the normal course of the MRP run. The parts and materials needed to make the spares and repair parts are, therefore, dependent demand.
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Chapter 14 - Material Requirements Planning
8. State the types of data that would be carried in the bill of materials file and the inventory record file. The Bill of Materials file contains information about the product, including a listing of parts numbers, quantities needed per unit or product, and the assembly or process flow stipulating how the unit is structured. Engineering design changes that affect the product structure are placed into the Bill of Materials file. Also, parts or material changes that occur through a change of vendors or material composition are also added to update the file. The Inventory Record file contains a great deal of information about each inventory item. At a minimum, the file would contain the number of units on hand and on order, the number reserved for prior commitments, the cost of the item, the name and address of the vendor, the lead time needed to obtain a shipment, and any shipment size restrictions. Additional information may be added as desired, such as that contained in Exhibit 14.8.
Problems (sample MRP schedule worksheet) Period Item LT= Q=
Item LT= Q=
Item LT= Q=
Item LT= Q=
Item LT= Q=
Gross requirements Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases Gross requirements Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases Gross requirements Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases Gross requirements Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases Gross requirements Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases
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Chapter 14 - Material Requirements Planning
Item LT= Q=
Gross requirements Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases
Item LT= Q=
Gross requirements Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases
Item LT= Q=
Gross requirements Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases
1. X A(4)
B(2) D(3)
C(3) E(1)
F(4)
G(2)
b. X 10 5
A 40 4
B 15 0
C 29 5
D 27 0
E -10
F 18 0
G 490
2. Period Item J LT= 1 week Q= L4L
1
2 75
3
4 50
5 70
40
40 35 35
0
0 50 50 70
0 70 70
Gross requirements Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases
35
50
14-4
6
7
8
9
10
Chapter 14 - Material Requirements Planning
3. Period Item X LT= 1 Q= L4L
Gross requirements Scheduled receipts
Item Y LT= 2 Q= L4L
Gross requirements Scheduled receipts
Item Z LT= 3 Q= L4L
Gross requirements Scheduled receipts
Item A LT= 2 Q== L4L
Gross requirements Scheduled receipts
Item B LT= 1 Q== L4L
Gross requirements Scheduled receipts
Item C LT= 3 Q== L4L
Gross requirements Scheduled receipts
On hand from prior period
1
2
3
4
5
6
7
8
9
10 100
20
20
20
20
20
20
20
20
20
20 80 80
Net requirements Planned order receipts Planned order releases
On hand from prior period
80 160 40
40
40
40
40
40
40
40
Net requirements Planned order receipts Planned order releases
On hand from prior period
120 240 30
30
30
30
30
30
30
210 420
120
50 370 370
0 120 120
30
30 210 210
60
60
Net requirements Planned order receipts Planned order releases
On hand from prior period
50
50
50
50
50
370
120
Net requirements Planned order receipts Planned order releases
On hand from prior period
240 100
100
100
100
100
100
Net requirements Planned order receipts Planned order releases
On hand from prior period
40 120 120
100 140 140
140 840 900
900
900
900
Net requirements Planned order receipts Planned order releases
14-5
900
900
60
60
Chapter 14 - Material Requirements Planning 4.
Level 0
Z
A(2)
C(3)
Period Item Z LT= 2 Q= L4L
Gross requirements Scheduled receipts
Item A LT= 1 Q= L4L
Gross requirements Scheduled receipts
Item B LT= 1 Q= L4L
Gross requirements Scheduled receipts
Item C LT= 1 Q= L4L
Gross requirements Scheduled receipts
Item D LT= 1 Q= L4L
Gross requirements Scheduled receipts
1
2
3
1
B(4)
D(4)
2
E(2)
3
4
5
6
7
8
9
10 50
On hand from prior period
Net requirements
50 50
Planned order receipts Planned order releases
50 100
On hand from prior period
Net requirements
100 100
Planned order receipts Planned order releases
100 200
On hand from prior period
Net requirements
200 200
Planned order receipts Planned order releases
200 300
On hand from prior period
Net requirements
300 300
Planned order receipts Planned order releases
300 400
On hand from prior period
Net requirements
400 400
Planned order receipts Planned order releases
400
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Chapter 14 - Material Requirements Planning
Item E LT= 3 Q= L4L
Gross requirements Scheduled receipts
800
On hand from prior period
Net requirements
800 800
Planned order receipts Planned order releases
800
5. Level
B(3)
0
C
1
2
B
E(2)
D
E(2)
F
Period
A
D
E(2)
F
3
D(2)
4
F
1
2
3
4
5
6
7
8 30
9
10
0
10 0
10
10
10
10
10
10 20 20
0
0
Gross requirements Scheduled receipts
50
20 60
On hand from prior period
0 50 50 60
40
40
40
40
180
180
180
180
Item A LT= 2 Q= L4L
Gross requirements Scheduled receipts
Item B LT= 1 Q= L4L Item C LT= 1 Q= 50
Gross requirements Scheduled receipts
Item D LT= 2 Q= 50 Item E LT= 1 Q= 200
Gross requirements Scheduled receipts
On hand from prior period
Net requirements Planned order receipts Planned order releases
Net requirements Planned order receipts Planned order releases
On hand from prior period
50
20 10
10
10
10
10
Gross requirements Scheduled receipts
50
50 60
On hand from prior period
0 50 50
0 60 100
100
220
100
0 220 400
Net requirements Planned order receipts Planned order releases
Net requirements Planned order receipts Planned order releases
On hand from prior period
50 50 50
100
10 10 50 40 40 0
100
100
Net requirements Planned order receipts Planned order releases
0 60 60
400
14-7
180
Chapter 14 - Material Requirements Planning
Item F LT= 1 Q= L4L
Gross requirements Scheduled receipts
400 50 150
On hand from prior period
200
200
Net requirements Planned order receipts Planned order releases
200 200 200
200
6. Product structure tree
Level A
B(2)
E
0
C(3)
F(2)
F(2)
1
D(2)
2
D
3
D(2)
Low-level coded product structure tree Level
B(2)
E
F(2)
A
0
C(3)
1
2
F(2)
D(2)
D
D(2)
Indented bill of materials
Single level bill of materials
.A
A .B(2)
B(2) C(3) D(2)
.E .D(2) .F(2)
B
14-8
3
Chapter 14 - Material Requirements Planning .C(3)
E F(2)
.F(2) .D
C
.D(2)
D F(2) E D(2)
Period Item A LT= 1 Q= L4L Item B LT= 2 Q= L4L Item C LT= 1 Q= L4L Item D LT= 1 Q= L4L Item E LT= 2 Q= 50 Item F LT= 1 Q= 180
1
2
3
4
5
6
7
Gross requirements
8 20
9
10
Scheduled receipts On hand from prior period
Net requirements Planned order receipts
20 20
Planned order releases Gross requirements
20 40
Scheduled receipts On hand from prior period
Net requirements Planned order receipts
40 40
Planned order releases Gross requirements
40 60
Scheduled receipts On hand from prior period
15
15
15
15
15
15
Net requirements Planned order receipts Planned order releases Gross requirements
45 45
100
15 45 45 40
Scheduled receipts On hand from prior period
50
50
Net requirements Planned order receipts Planned order releases Gross requirements
50
Scheduled receipts
20 0
On hand from prior period
50 50 50
0
0
0 40 40
20 20 50
30
30
30
30
30
80
90
80 180
100
10
10
10
10
45 40 20
20
Net requirements Planned order receipts Planned order releases Gross requirements
0 45 45 40
50
Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases
180
14-9
Chapter 14 - Material Requirements Planning 7. Level
A
0
B
1
C(4)
C
D(2)
Period Item A LT= 2 Q= L4L
Gross requirements Scheduled receipts
Item B LT= 2 Q= 50
Gross requirements Scheduled receipts
Item C LT= 1 Q= 100
Gross requirements Scheduled receipts
Item D LT= 3 Q= L4L
Gross requirements Scheduled receipts
Item E LT= 2 Q= L4L
Gross requirements Scheduled receipts
Item F LT= 2 Q= 50
Gross requirements Scheduled receipts
On hand from prior period
E
E
D(2)
F(3)
F(3)
F
2
E
3
F(3)
4
1
2
3
4
5
6
7
8
9
10 50
10 20
30
30
30
30
30
30
30
30
30 20 20
30
30
Net requirements Planned order receipts Planned order releases
20 20
On hand from prior period
0 20 50
Net requirements Planned order receipts Planned order releases
On hand from prior period
50 200 100 50
150
150
150
150
150 50 100
50
50
30
30
200
0
0
0
0
0
100
50
10 90 90
0 50 50
30
30
30
30
Net requirements Planned order receipts Planned order releases
On hand from prior period
20
100 200 100
100
100 200
200
Net requirements Planned order receipts Planned order releases
On hand from prior period
10
10
10
10
90 270
50 150
0 270 300
30 120 150 50
Net requirements Planned order receipts Planned order releases
On hand from prior period
Net requirements Planned order receipts Planned order releases
300
150
14-10
50 30
30 20 50
Chapter 14 - Material Requirements Planning 8. Level
B(2)
D(3)
Period
Item B LT= 2 Q= 40 Item C LT= 1 Q= L4L Item D LT= 3 Q= 160 Item E LT= 2 Q= L4L Item F LT= 2 Q= L4L
0
C
1
2
B(3)
F
D(3)
E
Item A LT= 2 Q= 20
A
F
3
D
E
E
E(4)
4
1
2
3
4
5
6
7
8
9
10 20
5
5
10 5
15
15
15
15
15
15
15 5 20
10
10
60 20 10 30 40
10
10
40
40
0
0
Gross requirements Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases Gross requirements Scheduled receipts On hand from prior period
10
10
10
10
Net requirements Planned order receipts Planned order releases Gross requirements
20 40 10 30 40 20
Scheduled receipts On hand from prior period
Net requirements Planned order receipts
20 20
Planned order releases Gross requirements
120
120
20 20
100 20 160
140
20
Scheduled receipts On hand from prior period
100
100
100
160 160 60 100
100
100
Net requirements Planned order receipts Planned order releases Gross requirements Scheduled receipts On hand from prior period
80 0
0
0
0
Net requirements Planned order receipts Planned order releases Gross requirements
80 40 40 0
Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases
40
14-11
40 0 40 40
0 80 80
0
Chapter 14 - Material Requirements Planning
9.
14-12
Chapter 14 - Material Requirements Planning
Period
1 20
2 20
3
4
5
6 60
7
8 50
20
0 20 20
0
0
0
0 60 60
0
0 50 50
Item A LT= 1 Q= L4L
Gross requirements Scheduled receipts
Item B LT= 1 Q= L4L
Gross requirements Scheduled receipts
Item C LT= 2 Q= L4L
Gross requirements Scheduled receipts
60
On hand from prior period
60
Item D LT= 1 Q= 50
Gross requirements Scheduled receipts
Item E LT= 2 Q= 100
Gross requirements Scheduled receipts
180
On hand from prior period
20
Item F LT= 2 Q= 100
Gross requirements Scheduled receipts
0 180 200 200 360 0 360 400 300
On hand from prior period
Net requirements Planned order receipts Planned order releases
On hand from prior period
20 40 30 50
60 120 40
40
40
Net requirements Planned order receipts Planned order releases
80
0
0
Planned order receipts Planned order releases
25
Planned order receipts Planned order releases
25
200
On hand from prior period
Net requirements Planned order receipts Planned order releases
25 155 200
200
Net requirements Planned order receipts Planned order releases
400
0
100
0 100 100
100 150
0
0 180 180 150 150
0
0 150 150
45
45 105 150
45
45
45
45
45
20 130 200
70
70
70
70
70
80
300
100
40 40 100 100
60 240 300
60 40 100
60
60
60
60
180 180
Net requirements
10
50 100
180
Net requirements
On hand from prior period
40 80 80
9
150 150
10.
14-13
Chapter 14 - Material Requirements Planning
Period
1
2 30
3
4
5 30
6
7
8 40
20
20 10 10
0
0
0 30 30
0
0
0 40 40
Item A LT= 1 Q= L4L
Gross requirements Scheduled receipts
Item B LT= 1 Q= L4L
Gross requirements Scheduled receipts
Item C LT= 1 Q= >50
Gross requirements Scheduled receipts
Item D LT= 2 Q= 100
Gross requirements Scheduled receipts
10
On hand from prior period
20
10
100
100
Item E LT= 2 Q= 50
Gross requirements Scheduled receipts
On hand from prior period
Net requirements Planned order receipts Planned order releases
On hand from prior period
10 10 10 0
30 30 0
0
Net requirements Planned order receipts Planned order releases
On hand from prior period
Planned order receipts Planned order releases
40
50 100
Net requirements
On hand from prior period
10
150
0
10 90 100
10
10 140 150
0 40 40
40
40 20 50
80 30
10 20 100 100
30
50 100
30 80
150
Net requirements Planned order receipts Planned order releases
0
60 40
10
40 40
30 20 50 10
Net requirements
Planned order receipts Planned order releases
0 30 30
9
80 20 100
30 50 50 40 80
40
40
40
10
10
10
10
150 10
150
14-14
10
10 140 150
Chapter 14 - Material Requirements Planning
11. Least Total Cost Period Gross Requirements On-hand Net requirements Planned order receipts
1 30 90 0
Planned order releases
250
Least Unit Cost Period Gross Requirements On-hand Net requirements Planned order receipts Planned order releases Calculations Weeks Quantity ordered 4 4 to 5 4 to 6 4 to 7 4 to 8 4 to 9 4 to 10 9 9 to 10
20 90 170 190 250 450 500 200 250
1 30 90 0
2 50 60 0
3 10 10 0
4 20 0 20 250
5 70 230 0
6 80 160 0
7 20 80 0
8 60 60 0
9 200 0 200 250
10 50 50 0
7 20 280 0
8 60 260 0
9 200 200 0
10 50 0 50 50
250
2 50 60 0
3 10 10 0
4 20 0 20 450
5 70 430 0
6 80 360 0
450
50
Carrying Order Total cost Unit cost cost cost $0.00 $10.00 $10.00 $0.500 0.70 10.00 10.70 0.119 2.30 10.00 12.30 0.072 2.90 10.00 12.90 0.068 5.30 10.00 15.30 0.061 15.30 10.00 25.30 0.056 18.30 10.00 28.30 0.057 0.00 10.00 10.00 2.50 10.00 12.50
For Least Total Cost, order for periods 4 through 8, since carrying cost is the closest to ordering cost. For Least Unit Cost, order for periods 4 through 9, since this has the lowest unit cost.
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Chapter 14 - Material Requirements Planning
12.
Level 0
A
B(2)
D(3)
Period
E(2)
1
1
C(4)
2
F(2)
3
2
E(2)
4
5
6
7
8
9
Item A LT= 1 Q= L4L
Gross requirements Scheduled receipts
Item B LT= 2 Q= L4L
Gross requirements Scheduled receipts
Item C LT= 2 Q= L4L
Gross requirements Scheduled receipts
400
On hand from prior period
0 400 400
Item D LT= 3 Q= L4L
Gross requirements Scheduled receipts
Item E LT= 2 Q= L4L
Gross requirements Scheduled receipts
1200
On hand from prior period
0 1200 1200
On hand from prior period
0 100 100
Net requirements Planned order receipts Planned order releases
100 200
On hand from prior period
0 200 200
Net requirements Planned order receipts Planned order releases
200
Net requirements Planned order receipts Planned order releases
400 600
On hand from prior period
0 600 600
Net requirements Planned order receipts Planned order releases
600
Net requirements Planned order receipts Planned order releases
10 100
1200
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Chapter 14 - Material Requirements Planning
Item F LT= 3 Q= L4L
Gross requirements Scheduled receipts
800
On hand from prior period
0 800 800
Net requirements Planned order receipts Planned order releases
800
13. a. Product Structure Tree
Level 0
A
B(2)
E(4)
C(3)
F(3)
H(2)
E(5)
D
1
2
D(3)
3
G(2)
b. Low-level Coded Product Structure Tree
Level
B(2)
F(3)
E(4)
H(2)
E(5)
A
0
C(3)
1
D(3)
G(2)
c. Indented Parts List .A .B(2) .E(4) .F(3) .C(3) .D(3)
14-17
D
2
3
Chapter 14 - Material Requirements Planning .H(2) .E(5) .G(2) .D(1)
d.
Level 0 Level 1 Level 2 Level 3
100 units of A 200 units of B 300 units of C 600 units of F 600 units of H 1000 units of D (3x3x100 + 1x100) 3800 units of E (4x2x100 + 5x2x3x100) 1200 units of G
14. Period
1
2
3
4
5
6
7
8
9
10
Gross Requirements
20
10
15
45
10
30
100
20
40
150
On-hand
70
50
40
25
Net requirements
20
Planned order receipts
180
Planned order releases Weeks
180
4
Quantity ordered 20
Carrying cost $0.00
Order cost $9.00
Total cost $9.00
Unit cost
4 to 5
30
0.20
4 to 6
60
1.40
9.00
9.20
0.307
9.00
10.40
4 to 7
160
0.173
7.40
9.00
16.40
4 to 8
0.103
180
9.00
9.00
18.00
0.100
4 to 9
220
13.00
9.00
22.00
0.100
4 to 10
370
31.00
9.00
40.00
0.108
$0.450
Least Total Cost method indicates that 180 units should be ordered to cover the needs for periods 4 through 8, since the carrying cost is equal to the order cost ($9). Least Unit Cost it tied at $.100 for ordering for periods 4 through 8 and 4 through 9. Therefore, order either 180 or 220 units in period 2.
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Chapter 14 - Material Requirements Planning
15. Period Standard Model Sports Model Item Radio/ CD LT= 2 Q= L4L
Item Std. trim LT= 2 Q= L4L
Item Std. Hardware LT= 3 Q= L4L
Item Sports trim LT= 2 Q= L4L
Item Sports HardWare LT= 3 Q= L4L
1
2
3
Gross requirements
4 300
5
300
200 200
50 250 250
0 200 200
6
7
8 400 100 500
0
0
0 500 500
Scheduled receipts On hand from prior period
50
50
50
250
200
Net requirements Planned order receipts Planned order releases Gross requirements
500 300
400
300 300
400 400
Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases Gross requirements
300
400 300
400
300 300
400 400
Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases Gross requirements
300
400 200
100
200 200
100 100
Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases Gross requirements
200
100 200
100
200 200 100
100 100
Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases
200
14-19
CHAPTER 14 MATERIAL REQUIREMENTS PLANNING Review and Discussion Questions 1. Discuss the meaning of MRP terms such as planned order release and scheduled order receipts. A planned order release is an order currently planned to be released. It has not been released. Consequently, the planned order release can be changed based upon changes in demand as one example. A scheduled order receipt, on the other hand, reflects an order that has already been released. The scheduled order receipt indicates the anticipated arrival of the released order. Due to variations in delivery times, it may not arrive exactly at the planned arrival time. 2. Many practitioners currently update MRP weekly or biweekly. Would it be more valuable if it were updated daily? Discuss. The performance of any operation will naturally vary from day to day. When the observed time period in which performance is measured is a week or two, the daily variations are smoothed; that is, the variations in performance are averaged. For example, below-average performance in one day may be offset by a higher-than-average performance the next day. Daily MRP runs monitor performance too closely and may even create an exception report calling a normal variation an abnormal deviation from expected output. 3. What is the role of safety stock in an MRP system? The role of safety stock in an MRP system is to buffer any uncertainties in quantities. One cause of quantity uncertainties is quality. Safety lead time should be used to offset any uncertainties in timing, from such occurrences as production or purchase delays. The addition of safety stock results in extra inventory being carried, thus reducing performance. If possible, any uncertainties in the quantities should be eliminated so that no safety stock is needed. 4. Contrast the significance of the term lead time in the traditional EOQ context and in an MRP system. In the traditional context, lead time is fixed—either as a discrete time or as a probability distribution. Such lead time constancy or variation is outside of the inventory model. Lead time in an MRP system is assumed to be a variable. While specific lead times are stated for planning purposes, these times may be speeded up or delayed as conditions warrant. Indeed, it is this ability to detect needed changes in lead times—either by expediting or de-expediting—that many users cite as one of the most valuable features of MRP.
14-1
Chapter 14 - Material Requirements Planning
5. Discuss the importance of the master production schedule in an MRP system. The master production schedule “drives” the system. It states the planned due dates for end items. Material requirements planning computer runs, however, involve an iterative process. The master production schedule “proposes” or “hypothesizes” a tentative schedule. After the MRP run with this schedule, the shop scheduler examines the MRP plan for impractical loads on the productive system —either by stating excessive demands on personnel or equipment, or in excessive idle time. Then the master production schedule is revised and the program is run again. Because the entire MRP system is geared to satisfying the master production schedule, it is critical that the master production schedule be correct at the start of the first MRP run. The production scheduler then knows what effects any changes he makes on the schedule will have on the original MRP schedule. He can then take appropriate action as necessary, such as requesting that customers be contacted to try to extend promised dates if they are too close, or to arrange for early delivery or additional storage space if products will be completed prior to the promised delivery date. 6. “MRP just prepares shopping lists. It does not do the shopping or cook the dinner.” Comment. An MRP system generates schedules to meet material needs. It starts with the master schedule and develops a time phased schedule which specifies what, when, and how many units of each material are required. Whether this schedule is adhered to, depends first on the master scheduler who may change the schedule. Then an inventory control personnel may choose to change order quantities or timing. Then the purchasing department may make further modifications to a purchase order, and finally the production scheduler may actually release the work to production—(which may be at some time other than that called for in the MRP schedule). 7. What are the sources of demand in an MRP system? Are these dependent or independent, and how are they used as inputs to the system? An MRP system has both dependent and independent item demands. The major demands on the system occur through the master production schedule (these are usually of independent origin). From here on throughout the system, the demands are then dependent on the master production schedule. Orders for spare parts and repair parts normally do not go through the master production schedule unless their amounts are large enough to place a significant load on the productive system. These demands (which are usually independent) are fed into the inventory records file by-passing the master production schedule. Once there, they are then exploded into the required parts and materials needed during the normal course of the MRP run. The parts and materials needed to make the spares and repair parts are, therefore, dependent demand.
14-2
Chapter 14 - Material Requirements Planning
8. State the types of data that would be carried in the bill of materials file and the inventory record file. The Bill of Materials file contains information about the product, including a listing of parts numbers, quantities needed per unit or product, and the assembly or process flow stipulating how the unit is structured. Engineering design changes that affect the product structure are placed into the Bill of Materials file. Also, parts or material changes that occur through a change of vendors or material composition are also added to update the file. The Inventory Record file contains a great deal of information about each inventory item. At a minimum, the file would contain the number of units on hand and on order, the number reserved for prior commitments, the cost of the item, the name and address of the vendor, the lead time needed to obtain a shipment, and any shipment size restrictions. Additional information may be added as desired, such as that contained in Exhibit 14.8.
Problems (sample MRP schedule worksheet) Period Item LT= Q=
Item LT= Q=
Item LT= Q=
Item LT= Q=
Item LT= Q=
Gross requirements Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases Gross requirements Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases Gross requirements Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases Gross requirements Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases Gross requirements Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases
14-3
Chapter 14 - Material Requirements Planning
Item LT= Q=
Gross requirements Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases
Item LT= Q=
Gross requirements Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases
Item LT= Q=
Gross requirements Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases
1. X A(4)
B(2) D(3)
C(3) E(1)
F(4)
G(2)
b. X 10 5
A 40 4
B 15 0
C 29 5
D 27 0
E -10
F 18 0
G 490
2. Period Item J LT= 1 week Q= L4L
1
2 75
3
4 50
5 70
40
40 35 35
0
0 50 50 70
0 70 70
Gross requirements Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases
35
50
14-4
6
7
8
9
10
Chapter 14 - Material Requirements Planning
3. Period Item X LT= 1 Q= L4L
Gross requirements Scheduled receipts
Item Y LT= 2 Q= L4L
Gross requirements Scheduled receipts
Item Z LT= 3 Q= L4L
Gross requirements Scheduled receipts
Item A LT= 2 Q== L4L
Gross requirements Scheduled receipts
Item B LT= 1 Q== L4L
Gross requirements Scheduled receipts
Item C LT= 3 Q== L4L
Gross requirements Scheduled receipts
On hand from prior period
1
2
3
4
5
6
7
8
9
10 100
20
20
20
20
20
20
20
20
20
20 80 80
Net requirements Planned order receipts Planned order releases
On hand from prior period
80 160 40
40
40
40
40
40
40
40
Net requirements Planned order receipts Planned order releases
On hand from prior period
120 240 30
30
30
30
30
30
30
210 420
120
50 370 370
0 120 120
30
30 210 210
60
60
Net requirements Planned order receipts Planned order releases
On hand from prior period
50
50
50
50
50
370
120
Net requirements Planned order receipts Planned order releases
On hand from prior period
240 100
100
100
100
100
100
Net requirements Planned order receipts Planned order releases
On hand from prior period
40 120 120
100 140 140
140 840 900
900
900
900
Net requirements Planned order receipts Planned order releases
14-5
900
900
60
60
Chapter 14 - Material Requirements Planning 4.
Level 0
Z
A(2)
C(3)
Period Item Z LT= 2 Q= L4L
Gross requirements Scheduled receipts
Item A LT= 1 Q= L4L
Gross requirements Scheduled receipts
Item B LT= 1 Q= L4L
Gross requirements Scheduled receipts
Item C LT= 1 Q= L4L
Gross requirements Scheduled receipts
Item D LT= 1 Q= L4L
Gross requirements Scheduled receipts
1
2
3
1
B(4)
D(4)
2
E(2)
3
4
5
6
7
8
9
10 50
On hand from prior period
Net requirements
50 50
Planned order receipts Planned order releases
50 100
On hand from prior period
Net requirements
100 100
Planned order receipts Planned order releases
100 200
On hand from prior period
Net requirements
200 200
Planned order receipts Planned order releases
200 300
On hand from prior period
Net requirements
300 300
Planned order receipts Planned order releases
300 400
On hand from prior period
Net requirements
400 400
Planned order receipts Planned order releases
400
14-6
Chapter 14 - Material Requirements Planning
Item E LT= 3 Q= L4L
Gross requirements Scheduled receipts
800
On hand from prior period
Net requirements
800 800
Planned order receipts Planned order releases
800
5. Level
B(3)
0
C
1
2
B
E(2)
D
E(2)
F
Period
A
D
E(2)
F
3
D(2)
4
F
1
2
3
4
5
6
7
8 30
9
10
0
10 0
10
10
10
10
10
10 20 20
0
0
Gross requirements Scheduled receipts
50
20 60
On hand from prior period
0 50 50 60
40
40
40
40
180
180
180
180
Item A LT= 2 Q= L4L
Gross requirements Scheduled receipts
Item B LT= 1 Q= L4L Item C LT= 1 Q= 50
Gross requirements Scheduled receipts
Item D LT= 2 Q= 50 Item E LT= 1 Q= 200
Gross requirements Scheduled receipts
On hand from prior period
Net requirements Planned order receipts Planned order releases
Net requirements Planned order receipts Planned order releases
On hand from prior period
50
20 10
10
10
10
10
Gross requirements Scheduled receipts
50
50 60
On hand from prior period
0 50 50
0 60 100
100
220
100
0 220 400
Net requirements Planned order receipts Planned order releases
Net requirements Planned order receipts Planned order releases
On hand from prior period
50 50 50
100
10 10 50 40 40 0
100
100
Net requirements Planned order receipts Planned order releases
0 60 60
400
14-7
180
Chapter 14 - Material Requirements Planning
Item F LT= 1 Q= L4L
Gross requirements Scheduled receipts
400 50 150
On hand from prior period
200
200
Net requirements Planned order receipts Planned order releases
200 200 200
200
6. Product structure tree
Level A
B(2)
E
0
C(3)
F(2)
F(2)
1
D(2)
2
D
3
D(2)
Low-level coded product structure tree Level
B(2)
E
F(2)
A
0
C(3)
1
2
F(2)
D(2)
D
D(2)
Indented bill of materials
Single level bill of materials
.A
A .B(2)
B(2) C(3) D(2)
.E .D(2) .F(2)
B
14-8
3
Chapter 14 - Material Requirements Planning .C(3)
E F(2)
.F(2) .D
C
.D(2)
D F(2) E D(2)
Period Item A LT= 1 Q= L4L Item B LT= 2 Q= L4L Item C LT= 1 Q= L4L Item D LT= 1 Q= L4L Item E LT= 2 Q= 50 Item F LT= 1 Q= 180
1
2
3
4
5
6
7
Gross requirements
8 20
9
10
Scheduled receipts On hand from prior period
Net requirements Planned order receipts
20 20
Planned order releases Gross requirements
20 40
Scheduled receipts On hand from prior period
Net requirements Planned order receipts
40 40
Planned order releases Gross requirements
40 60
Scheduled receipts On hand from prior period
15
15
15
15
15
15
Net requirements Planned order receipts Planned order releases Gross requirements
45 45
100
15 45 45 40
Scheduled receipts On hand from prior period
50
50
Net requirements Planned order receipts Planned order releases Gross requirements
50
Scheduled receipts
20 0
On hand from prior period
50 50 50
0
0
0 40 40
20 20 50
30
30
30
30
30
80
90
80 180
100
10
10
10
10
45 40 20
20
Net requirements Planned order receipts Planned order releases Gross requirements
0 45 45 40
50
Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases
180
14-9
Chapter 14 - Material Requirements Planning 7. Level
A
0
B
1
C(4)
C
D(2)
Period Item A LT= 2 Q= L4L
Gross requirements Scheduled receipts
Item B LT= 2 Q= 50
Gross requirements Scheduled receipts
Item C LT= 1 Q= 100
Gross requirements Scheduled receipts
Item D LT= 3 Q= L4L
Gross requirements Scheduled receipts
Item E LT= 2 Q= L4L
Gross requirements Scheduled receipts
Item F LT= 2 Q= 50
Gross requirements Scheduled receipts
On hand from prior period
E
E
D(2)
F(3)
F(3)
F
2
E
3
F(3)
4
1
2
3
4
5
6
7
8
9
10 50
10 20
30
30
30
30
30
30
30
30
30 20 20
30
30
Net requirements Planned order receipts Planned order releases
20 20
On hand from prior period
0 20 50
Net requirements Planned order receipts Planned order releases
On hand from prior period
50 200 100 50
150
150
150
150
150 50 100
50
50
30
30
200
0
0
0
0
0
100
50
10 90 90
0 50 50
30
30
30
30
Net requirements Planned order receipts Planned order releases
On hand from prior period
20
100 200 100
100
100 200
200
Net requirements Planned order receipts Planned order releases
On hand from prior period
10
10
10
10
90 270
50 150
0 270 300
30 120 150 50
Net requirements Planned order receipts Planned order releases
On hand from prior period
Net requirements Planned order receipts Planned order releases
300
150
14-10
50 30
30 20 50
Chapter 14 - Material Requirements Planning 8. Level
B(2)
D(3)
Period
Item B LT= 2 Q= 40 Item C LT= 1 Q= L4L Item D LT= 3 Q= 160 Item E LT= 2 Q= L4L Item F LT= 2 Q= L4L
0
C
1
2
B(3)
F
D(3)
E
Item A LT= 2 Q= 20
A
F
3
D
E
E
E(4)
4
1
2
3
4
5
6
7
8
9
10 20
5
5
10 5
15
15
15
15
15
15
15 5 20
10
10
60 20 10 30 40
10
10
40
40
0
0
Gross requirements Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases Gross requirements Scheduled receipts On hand from prior period
10
10
10
10
Net requirements Planned order receipts Planned order releases Gross requirements
20 40 10 30 40 20
Scheduled receipts On hand from prior period
Net requirements Planned order receipts
20 20
Planned order releases Gross requirements
120
120
20 20
100 20 160
140
20
Scheduled receipts On hand from prior period
100
100
100
160 160 60 100
100
100
Net requirements Planned order receipts Planned order releases Gross requirements Scheduled receipts On hand from prior period
80 0
0
0
0
Net requirements Planned order receipts Planned order releases Gross requirements
80 40 40 0
Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases
40
14-11
40 0 40 40
0 80 80
0
Chapter 14 - Material Requirements Planning
9.
14-12
Chapter 14 - Material Requirements Planning
Period
1 20
2 20
3
4
5
6 60
7
8 50
20
0 20 20
0
0
0
0 60 60
0
0 50 50
Item A LT= 1 Q= L4L
Gross requirements Scheduled receipts
Item B LT= 1 Q= L4L
Gross requirements Scheduled receipts
Item C LT= 2 Q= L4L
Gross requirements Scheduled receipts
60
On hand from prior period
60
Item D LT= 1 Q= 50
Gross requirements Scheduled receipts
Item E LT= 2 Q= 100
Gross requirements Scheduled receipts
180
On hand from prior period
20
Item F LT= 2 Q= 100
Gross requirements Scheduled receipts
0 180 200 200 360 0 360 400 300
On hand from prior period
Net requirements Planned order receipts Planned order releases
On hand from prior period
20 40 30 50
60 120 40
40
40
Net requirements Planned order receipts Planned order releases
80
0
0
Planned order receipts Planned order releases
25
Planned order receipts Planned order releases
25
200
On hand from prior period
Net requirements Planned order receipts Planned order releases
25 155 200
200
Net requirements Planned order receipts Planned order releases
400
0
100
0 100 100
100 150
0
0 180 180 150 150
0
0 150 150
45
45 105 150
45
45
45
45
45
20 130 200
70
70
70
70
70
80
300
100
40 40 100 100
60 240 300
60 40 100
60
60
60
60
180 180
Net requirements
10
50 100
180
Net requirements
On hand from prior period
40 80 80
9
150 150
10.
14-13
Chapter 14 - Material Requirements Planning
Period
1
2 30
3
4
5 30
6
7
8 40
20
20 10 10
0
0
0 30 30
0
0
0 40 40
Item A LT= 1 Q= L4L
Gross requirements Scheduled receipts
Item B LT= 1 Q= L4L
Gross requirements Scheduled receipts
Item C LT= 1 Q= >50
Gross requirements Scheduled receipts
Item D LT= 2 Q= 100
Gross requirements Scheduled receipts
10
On hand from prior period
20
10
100
100
Item E LT= 2 Q= 50
Gross requirements Scheduled receipts
On hand from prior period
Net requirements Planned order receipts Planned order releases
On hand from prior period
10 10 10 0
30 30 0
0
Net requirements Planned order receipts Planned order releases
On hand from prior period
Planned order receipts Planned order releases
40
50 100
Net requirements
On hand from prior period
10
150
0
10 90 100
10
10 140 150
0 40 40
40
40 20 50
80 30
10 20 100 100
30
50 100
30 80
150
Net requirements Planned order receipts Planned order releases
0
60 40
10
40 40
30 20 50 10
Net requirements
Planned order receipts Planned order releases
0 30 30
9
80 20 100
30 50 50 40 80
40
40
40
10
10
10
10
150 10
150
14-14
10
10 140 150
Chapter 14 - Material Requirements Planning
11. Least Total Cost Period Gross Requirements On-hand Net requirements Planned order receipts
1 30 90 0
Planned order releases
250
Least Unit Cost Period Gross Requirements On-hand Net requirements Planned order receipts Planned order releases Calculations Weeks Quantity ordered 4 4 to 5 4 to 6 4 to 7 4 to 8 4 to 9 4 to 10 9 9 to 10
20 90 170 190 250 450 500 200 250
1 30 90 0
2 50 60 0
3 10 10 0
4 20 0 20 250
5 70 230 0
6 80 160 0
7 20 80 0
8 60 60 0
9 200 0 200 250
10 50 50 0
7 20 280 0
8 60 260 0
9 200 200 0
10 50 0 50 50
250
2 50 60 0
3 10 10 0
4 20 0 20 450
5 70 430 0
6 80 360 0
450
50
Carrying Order Total cost Unit cost cost cost $0.00 $10.00 $10.00 $0.500 0.70 10.00 10.70 0.119 2.30 10.00 12.30 0.072 2.90 10.00 12.90 0.068 5.30 10.00 15.30 0.061 15.30 10.00 25.30 0.056 18.30 10.00 28.30 0.057 0.00 10.00 10.00 2.50 10.00 12.50
For Least Total Cost, order for periods 4 through 8, since carrying cost is the closest to ordering cost. For Least Unit Cost, order for periods 4 through 9, since this has the lowest unit cost.
14-15
Chapter 14 - Material Requirements Planning
12.
Level 0
A
B(2)
D(3)
Period
E(2)
1
1
C(4)
2
F(2)
3
2
E(2)
4
5
6
7
8
9
Item A LT= 1 Q= L4L
Gross requirements Scheduled receipts
Item B LT= 2 Q= L4L
Gross requirements Scheduled receipts
Item C LT= 2 Q= L4L
Gross requirements Scheduled receipts
400
On hand from prior period
0 400 400
Item D LT= 3 Q= L4L
Gross requirements Scheduled receipts
Item E LT= 2 Q= L4L
Gross requirements Scheduled receipts
1200
On hand from prior period
0 1200 1200
On hand from prior period
0 100 100
Net requirements Planned order receipts Planned order releases
100 200
On hand from prior period
0 200 200
Net requirements Planned order receipts Planned order releases
200
Net requirements Planned order receipts Planned order releases
400 600
On hand from prior period
0 600 600
Net requirements Planned order receipts Planned order releases
600
Net requirements Planned order receipts Planned order releases
10 100
1200
14-16
Chapter 14 - Material Requirements Planning
Item F LT= 3 Q= L4L
Gross requirements Scheduled receipts
800
On hand from prior period
0 800 800
Net requirements Planned order receipts Planned order releases
800
13. a. Product Structure Tree
Level 0
A
B(2)
E(4)
C(3)
F(3)
H(2)
E(5)
D
1
2
D(3)
3
G(2)
b. Low-level Coded Product Structure Tree
Level
B(2)
F(3)
E(4)
H(2)
E(5)
A
0
C(3)
1
D(3)
G(2)
c. Indented Parts List .A .B(2) .E(4) .F(3) .C(3) .D(3)
14-17
D
2
3
Chapter 14 - Material Requirements Planning .H(2) .E(5) .G(2) .D(1)
d.
Level 0 Level 1 Level 2 Level 3
100 units of A 200 units of B 300 units of C 600 units of F 600 units of H 1000 units of D (3x3x100 + 1x100) 3800 units of E (4x2x100 + 5x2x3x100) 1200 units of G
14. Period
1
2
3
4
5
6
7
8
9
10
Gross Requirements
20
10
15
45
10
30
100
20
40
150
On-hand
70
50
40
25
Net requirements
20
Planned order receipts
180
Planned order releases Weeks
180
4
Quantity ordered 20
Carrying cost $0.00
Order cost $9.00
Total cost $9.00
Unit cost
4 to 5
30
0.20
4 to 6
60
1.40
9.00
9.20
0.307
9.00
10.40
4 to 7
160
0.173
7.40
9.00
16.40
4 to 8
0.103
180
9.00
9.00
18.00
0.100
4 to 9
220
13.00
9.00
22.00
0.100
4 to 10
370
31.00
9.00
40.00
0.108
$0.450
Least Total Cost method indicates that 180 units should be ordered to cover the needs for periods 4 through 8, since the carrying cost is equal to the order cost ($9). Least Unit Cost it tied at $.100 for ordering for periods 4 through 8 and 4 through 9. Therefore, order either 180 or 220 units in period 2.
14-18
Chapter 14 - Material Requirements Planning
15. Period Standard Model Sports Model Item Radio/ CD LT= 2 Q= L4L
Item Std. trim LT= 2 Q= L4L
Item Std. Hardware LT= 3 Q= L4L
Item Sports trim LT= 2 Q= L4L
Item Sports HardWare LT= 3 Q= L4L
1
2
3
Gross requirements
4 300
5
300
200 200
50 250 250
0 200 200
6
7
8 400 100 500
0
0
0 500 500
Scheduled receipts On hand from prior period
50
50
50
250
200
Net requirements Planned order receipts Planned order releases Gross requirements
500 300
400
300 300
400 400
Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases Gross requirements
300
400 300
400
300 300
400 400
Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases Gross requirements
300
400 200
100
200 200
100 100
Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases Gross requirements
200
100 200
100
200 200 100
100 100
Scheduled receipts On hand from prior period
Net requirements Planned order receipts Planned order releases
200
14-19
