introduction to materials management chapter 4 – material requirements planning

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.

All Rights Reserved.

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




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




Links To Other MPC Functions




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




Sample Bill of Materials




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




Sample Product Tree for the BOM




Breaking Down the BOM into More Detail – the Multilevel Bill




Example in Page 68




Indented BOM – Use Indentation to Show Parent-Component Relationships




Planning Bills of Material Artificial grouping of components

for Planning Purposes Used to simplify

Forecasting Planning Master Scheduling

Represent an average, not buildable product




Sample Planning BOM




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




Figure 4.10 in page 70




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




Basic MRP Record




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




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




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




Example ProblemLead time for this component is 2 weeks and order quantity is 200. Complete the table. What action should be taken?




Example problem solution

The order for 200 should be released




Example for a multilevel BOM

Lead time for each component is 1 week




Netting and exploding zero-level parts




Netting and exploding first-level parts




Completed Material Requirements Plan




Sample Multiproduct MRP Explosion




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




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




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




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.




The new record reflects those events from week 1:




Homework Assignment

Problems 4.5, 4.9, 4.11, 4.15

introduction to materials management chapter 4 – material requirements planning

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