The MRP Heuristic
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Transcript of The MRP Heuristic
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The MRP Heuristic
MRP stands for Materials Requirement Planning It is a widely used approach for production
planning and scheduling in industry It is the approach embedded in many
commercially available software applications
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MRP Assumptions
No capacity constraints A task initiated in period t completes in period
t+i
Product structure is typically assumed to be of the assembly type
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Formulation
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The MRP Solution Approach
Solve the lot sizing problem for each item independently starting with the end-items (finished products) and working your way down the bill-of-material (BOM)
The selected production quantities for an item, determine the demand for the items that are its immediate predecessors (its input items)
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Solving the Lot Sizing Problem
Solve the problem for each item optimally (e.g., using the Wagner-Whittin algorithm)
Solve the problem approximately using a heuristic (e.g., using a fixed order quantity, a fixed order period, or a lot for lot heuristic)
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Example
Item: Stool (Leadtime = 1 week)
Week 0 1 2 3 4 5 6Gross Reqs 120Sched ReceiptsProj Inventory 20 20 20 20 20 -100 -100Net Reqs 100Planned Orders 100
Item: Base (Leadtime = 1 week)
Week 0 1 2 3 4 5 6Gross Reqs 100Sched ReceiptsProj Inventory 0 0 0 0 -100 -100 -100Net Reqs 100Planned Orders 100
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Example (Continued…)
Item: Legs (Leadtime = 2 weeks)
Week 0 1 2 3 4 5 6Gross Reqs 400Sched Receipts 200Proj Inventory 0 0 0 0 -200 -200 -200Net Reqs 200Planned Orders 200
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MRP Terminology
Netting: determining net requirements against projected inventory for each period
Lot Sizing: determining order quantities
Time Phasing: determining when production orders should be initiated, given the production lead time
BOM Explosion: determining gross requirements for components
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MRP Terminology (Continued…)
Master Production Schedule (MPS): due dates and quantities for all top level items (finished products)
Bill of Material (BOM): the items that goes into each sub-assembly and into the finished product
Projected Inventory: (on hand plus scheduled receipts) for all items
Planned Lead times: production lead times
Level code: a number assigned to an item depending on the lowest position in the BOM where it can be found
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The Netting Procedure
Dt: Gross requirements in period t for some item
St: Quantity currently scheduled to complete in period
t (i.e., a scheduled receipt)
It: projected on-hand inventory for the end of period t
Nt: Net requirement for period t
Qt: Planned orders in period t (production quantity
initiated in period t)
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The Basic Steps
Step 1: Let t = 1Step 2: It = It-1 - Dt
Step 3: If It 0, then let t = t + 1 and go back to step 2, otherwise, let Nt = - It and set Nt’ = Dt’ for all t’ > t
Step 4: Use a lot sizing method to determine Qt for t=1,…, T, taking into account the production leadtime
Step 5: Use the production quantities Qt in determining the gross requirements for all items that are used by the item under current consideration
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Example – The Input Data
Part Number
Current On-Hand
Scheduled Receipts Lot Sizing Rule
Lead Time
Due Quantity
A 20 FOP, 2 weeks 2 weeks
B 40 FOP, 2 weeks 2 weeks
100 40 Lot-for Lot 2 weeks
300 50 2 100 Lot-for-Lot 1 week
500 40 Lot-for-Lot 4 weeks
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Example – Part A
Part A 1 2 3 4 5 6 7 8
Gross requirements 15 20 50 10 30 30 30 30
Scheduled receipts 10 10 100
Adjusted SRs 20 100
Projected on-hand
20 5 5 55 45 15 -15 --- ---
Net requirements 15 30 30
Planned order receipts 45 30
Planned order releases 45 30
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Example – Part B
Part B 1 2 3 4 5 6 7 8
Gross requirements 10 15 10 20 20 15 15 15
Scheduled receipts
Adjusted SRs
Projected on-hand
40 --- --- --- ---
Net requirements
Planned order receipts
Planned order releases
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Example – Part B
Part B 1 2 3 4 5 6 7 8
Gross requirements 10 15 10 20 20 15 15 15
Scheduled receipts
Adjusted SRs
Projected on-hand
40 30 15 5 -15 --- --- --- ---
Net requirements 15 20 15 15 15
Planned order receipts 35 30 15
Planned order releases 35 30 15
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Example – Part 500
Part 500 1 2 3 4 5 6 7 8
Gross requirements 35 30 15
Scheduled receipts
Adjusted SRs
Projected on-hand
40 40 5 5 -25 --- --- --- ---
Net requirements 25 15
Planned order receipts 25 15
Planned order releases 25* 15
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Example – Part 500
Part 500 1 2 3 4 5 6 7 8
Gross requirements
Scheduled receipts
Adjusted SRs
Projected on-hand
40 --- --- --- ---
Net requirements
Planned order receipts
Planned order releases
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Example – Part 100
Part 100 1 2 3 4 5 6 7 8
Gross requirements from AGross requirements from 500
Gross Requirments2525
1515
90
90
60
60
Scheduled receipts
Adjusted SRs
Projected on-hand
40 15 0 0 -90 --- --- --- ---
Net requirements 90 --- 60
Planned order receipts 90 60
Planned order releases 90 60
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The MRP Planning Loop
1. Fixed lead times lead to poor due date performance
2. Management decides to increase lead time
3. Longer lead time requires longer forecasting horizon
4. Longer forecasting horizon creates errors in estimating demand
5. Errors in estimating demand lead to poor due date performance.
6. Management decides to increase lead time
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Enhancements to MRP
MRP II: The functionality of materials requirement planning (MRP) + capacity requirement planning (CRP)
APS: Advanced Planning Systems (software applications with the ability to solve the underlying optimization problem)
ERP: Enterprise Requirement Planning (MRP or APS capabilities integrated into an enterprise-wide information system)