Introduction to Materials Management
Chapter 4 – Material Requirements Planning
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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Independent versus Dependent Demand Independent Demand
Not related to demand for other assemblies or products, instead from outside sources
Generally forecasted demand Dependent Demand
Generally related to production of an end product (as defined on the MPS)
Can be calculated instead of forecasted
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Dependent Demand Approach – Materials Requirement Planning (MRP) Major Objectives of MRP
Determine Requirements – Calculated to meet product requirements defined in the MPS
What to order How much to order When to order When to schedule delivery
Keep Priorities Current
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Links To Other MPC Functions
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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Major Inputs to MRP Master Production Schedule
quantities and times Inventory records of all items to be
planned Planning factors such as lead times,
order quantities, and safety stock Current status of each item
Bills of material for MPS items
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Sample Bill of Materials
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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Bill of Material Points The BOM shows all parts to make
one of the item Each part has one, and only one,
part number A part is defined by form, fit, and
function – any change requires a new part number
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Sample Product Tree for the BOM
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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Breaking Down the BOM into More Detail – the Multilevel Bill
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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Example in Page 68
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Indented BOM – Use Indentation to Show Parent-Component Relationships
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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Planning Bills of Material Artificial grouping of components
for Planning Purposes Used to simplify
Forecasting Planning Master Scheduling
Represent an average, not buildable product
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Sample Planning BOM
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Where-Used and Pegging Where-used reports - shows the
parents for a component (contrast with a bill of materials that show the components for a parent)
Pegging report – shows the parents for a component, but only those parents where there is an existing requirement
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Figure 4.10 in page 70
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Major Uses for Bills of Material Defines the product Provides method for design change
control Planning – What is needed and
when Order entry – order configuration
and pricing Production – Parts needed to
assemble a product Costing – material cost of goods
sold
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Basic MRP Record
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Some Key Terms Lead time – span of time for a process Exploding – process of multiplying
requirements by usage to get BOM requirements
Offsetting – Placing requirements in the proper period based on lead time
Planned orders – Orders planned during the explosion, but not yet released for processing
Low-level code – lowest level on which a part resides on the Bill of Materials
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Some Key Terms, Continued Scheduled receipts – Open orders
released for processing (production or purchase) scheduled to be received at a defined time.
Gross Requirements – Total of a component needed to meet requirements not taking any existing inventory into account
Net Requirements – Actual amount of a component needed to meet requirement after existing requirements taken into account
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Some Key Terms, Continued Projected available – The expected
inventory position at the end of the period
Planned order release – the amount that should be ordered (using the lot size) to prevent a negative projected available balance
Planned order receipt – when the order should be available for use, offset by lead time from the planned order release
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Example ProblemLead time for this component is 2 weeks and order quantity is 200. Complete the table. What action should be taken?
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Example problem solution
The order for 200 should be released
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Example for a multilevel BOM
Lead time for each component is 1 week
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Netting and exploding zero-level parts
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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Netting and exploding first-level parts
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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Completed Material Requirements Plan
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Sample Multiproduct MRP Explosion
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Points About the MRP Record Current time – beginning of first period
(often called time buckets) Items considered available at beginning
of period Quantity in Projected Available row
considered at end of period Current period often called action
bucket – action should be taken to avoid a future problem
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Planner Responsibilities for MRP Launch Orders – Production or
Purchasing Reschedule orders as required Reconcile errors and search for
causes Solve critical material shortages
Replan Expedite
Coordinate with other functions to resolve problems
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Moving through time – an example
This record shows the status of the part Monday morning. Thecomputer is showing the need to release the order of 30
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
During the week, the following events happen:
Only 25 units of the scheduled receipt move into inventory. The balanced is scrapped
The gross requirement for week 3 is changed to 10. The gross requirement for week 4 is increased to
50. The gross requirement for week 7 is 15. An inventory count reveals there are 10 more in
inventory than the record shows The gross requirement for week 1 is issued from
inventory The planned order release of 30 in week 1 is
released and becomes a scheduled receipt in week 3.
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
The new record reflects those events from week 1:
Introduction to Materials Management, 7th EditionArnold, Chapman, Clive
© 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.
Homework Assignment
Problems 4.5, 4.9, 4.11, 4.15
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