Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Manufacturing Planning and Control

MPC 6th Edition

Chapter 6

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Material Requirements Planning (MRP)

Material Requirements Planning (MRP) has the managerial objective of providing “the right part at the right time” to meet the schedules for completed products.

MRP provides a formal plan for each part number–raw materials, components, and finished products.

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Agenda

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Resourceplanning

Sales and operationsplanning

Demandmanagement

Master productionscheduling

Detailed capacityplanning

Detailed materialplanning

Material andcapacity plans

Shop-floorsystems

Suppliersystems

Enterprise R

esource Planning (E

RP

) S

ystem

Front End

Engine

Back End

Manufacturing Planning and Control System

Time-phased requirement (MRP) records

Routing file

Bills of material

Inventory status data

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Basic MRP Record

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Basic MRP Record

On hand

Period

1 2 3 4 5

Gross requirements 10 40 10

Scheduled receipts 50

Projected available balance 4 54 44 44 4 44

Planned order releases 50

Lead time = 1 periodLot size = 50

A previously released order due in period 1

A unreleased order due in period 5

Requirements from all sources

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Bill of Materials

The BOM shows the components and sub-assemblies required to produce a product

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Product Structure Diagram

Sub-assemblies are represented by separate levels

Finished product is located at the top, components below

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Indented Bill of Materials

Finished item is not indented

Components and sub-assemblies are indented relative to their order of usage

Level 1 components

Level 1 sub-assemblies

Level 2 sub-assemblies

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Explosion

Explosion–the process of translating product requirements into component part requirementsConsiders existing inventories and scheduled

receipts Calculating the quantities of all components

needed to satisfy requirements for any given part.Continued until all parts have been considered,

leading to exact requirements for all purchased and/or raw material parts

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Gross and Net Requirements

Gross requirements represent the total planned usage for the part Net requirements account for existing inventory and/or scheduled

receipts100 req’d – 25 inventory = 75 net req’d

75 req’d – 22 inventory – 25 sched. rec. = 28 net req’d

Net req’d for assembly becomes gross req’d for component

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Demand Types in MRP

Dependent–component or sub-assembly demand driven by net requirements from the next higher level (e.g. scoop demand caused by net requirements for scoop assemblies)

Independent–demand driven by requirements from outside the firm (e.g. customer orders)

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Lead Time Offsetting

Gross to net explosion shows how much of each part is required, but not when

Timing requires consideration of two factorsLead times–how long does it take to obtain the

component or sub-assemblyPrecedent relationships–the order in which parts

must be assembled MRP considers both factors when developing

the plan

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Scheduling Logic

Two common approaches to scheduling existFront schedule–schedule each step as early as

possibleBack schedule–schedule each step as late as

possible MRP combines back scheduling and gross to net

explosionReduced inventoriesMinimized storage time

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Back Scheduling

Top handle assembly has the longest duration of any sub-assembly

Scoop assembly must be complete before final assembly can begin

Only when all sub-assemblies and components are available can final assembly begin

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MRP RecordsPlanned order release for top handle assembly becomes gross requirement for top handle component and nail (note 2 nails required per assembly)

Lot-for-lot order policy exactly matches supply to net requirements

Fixed lot size order policy requires orders in multiples of lot size

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MRP Technical Issues

Processing frequency–recalculating all records and requirements is called regeneration This is a computationally intensive process so it is often run

in the background and during periods of low system demand Net change approach only recalculates those records

that have experienced changes Less frequent processing results in an out-of-date

picture More frequent processing increases computer costs

and may lead to system nervousness

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Safety Stock and Safety Lead Time

Safety stock is buffer stock over and above the quantity needed to satisfy gross requirementsUsed when quantity uncertainty is the issue

Safety lead time changes both the release and due date of shop and/or purchase orders to provide a margin for errorUsed when timing of orders is the issueSafety lead time is not just an inflated lead time

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Pegging

Pegging provides a link between demand (order releases, customer orders, etc.) and the gross requirements for partsPegging records include the specific part

numbers associated with a gross requirement

Pegging information can track the impact of a problem (e.g. material shortage) back to the order(s) it will affect

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Firm Planned Orders

Regeneration of the MRP records can lead to large numbers of planned order changes

To avoid this, a planned order can be converted to a firm planned order (FPO)An FPO is not the same as a scheduled

delivery, but can’t be changed by the MRP system

Temporarily overrides the MRP system to provide stability or to solve problems

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Planning Horizon

Total amount of time included in MRP calculationsLonger planning horizon increases

computational requirementsShorter planning horizon may result in less-

effective plans if significant future demand is not visible

At a minimum, should cover the cumulative lead time for all finished goods items

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Scheduled Receipts vs. Planned Order Releases

Scheduled receipts represent an actual commitment (purchase order, production order, etc.)

Planned orders are only the current plan and can be changed more easily

Scheduled receipts for production orders already have component materials assigned Scheduled receipts do not impact gross requirements

Planned order releases do not have component materials assigned Planned order releases do impact gross requirements

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Using the MRP System

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MRP Planner Tasks

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Exception Codes

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Bottom-Up Replanning

Using pegging data to guide efforts to solve material shortagesPegging data allows the planner to take

action only when actual customer orders are impacted

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MRP System OutputPart number and description MRP system data

MRP planning data

Exception messages

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MRP System Dynamics

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Principles

Effective use of an MRP system allows development of a forward-looking approach to managing material flows.

The MRP system provides a coordinated set of linked product relationships, which permits decentralized decision making for individual part numbers.

All decisions made to solve problems must be implemented within the system, and transactions must be processed to reflect the resultant changes.

Effective use of exception messages allows attention to be focused on the “vital few” rather than the “trivial many.”

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Quiz – Chapter 6

Material Requirements Planning (MRP) takes place in the front end systems of the manufacturing planning and control system? (True/False)

In a Material Requirements Planning (MRP) system, what does time-phasing of gross requirements mean?

Front scheduling logic starts each step of the process as late as possible? (True/False)

A lot-for-lot order policy generates orders for a fixed quantity, independent of actual requirements? (True/False)

Processing all Material Requirements Planning (MRP) records in a single computer run is called ___________?

Safety lead time involves inflating lead times to ensure stock availability? (True/False)