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3 rd. Industrial Eng. Chapter 3 Production Planning & control2011- 2012 Dr. May George

Materials requirements planningMaterials requirements planning (MRP) is used for determining the number of parts, components, and materials needed to produce a product (end item) . In brief, MRP is a means designed to answer what, when, how many for each part, component, subassemblies and final products. MRP provides time scheduling information specifying when each of the subassemblies, parts, and components should be ordered or produced The objectives of MRP are to determine quantity and timing of material requirements to keep schedule priorities updated and valid.

MRP needs three inputs: the authorized MPS, the BOM file, and the inventory records file. Once the MPS has been input, MRP checks inventory availability. If a need is determined, MRP checks the BOM file for material needed, and then generates planned orders. MRP outputs are:- Planned orders to be released at a future time.- Order release notices to execute the planned orders.- Changes in due dates of open orders due to rescheduling. - Cancellations or suspensions of open orders due to cancellation or suspension of orders on the master production schedule.

Inventory status data: Planned order releases. The inventory record: consist of- Gross requirements: The total period demand for the item - Scheduled receipts: An open order with an assigned due date- Projected available: The projected inventory balance for the period- Planned orders: Quantities & released dates suggested by the MRP system

There are two types of demand Independent Demand

- The demand for finished products.

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- Does not depend on the demand of other products- Needs to be forecasted

Dependent Demand- Is the demand derived from finished products- Is the demand for component parts based on the number of end items being produced and is managed by the MRP system Bill Of Materials:

BOM: a listing of all of the raw materials, parts, subassemblies, and assemblies, purchased and manufactured needed to produce one unit of a product.

Product structure tree : Visual depiction of the requirements in a bill of materials, where all components are listed by levels.

Fig. (1) MRP system

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Fig. (2) MPSSome terms used with MRP:

Time bucket: period, usually 1 week. Planning horizon: number of periods, then this is divided into time fences. Lead time offset: offsets a planned order release from a required replenishment. Net requirement: difference between the gross requirements and the available

inventory.(Net Req. = Gros.Req – Avi. Inv.)

Gross requirements: anticipated future usage of (or demand for) the item during each period.

Scheduled receipts: existing replenishment orders due in at the beginning of the period.

Projected on hand: projected inventory status for the item at the beginning of each period.

Net requirements: Gross Requirements minus Scheduled Receipts minus Projected on hand. ( Net.Req.= Gros.Req.- Scheduled Receipt –POH).

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Planned order receipt: planned receipt of replenishment orders at the beginning of the period.

Planned order release: release of planned replenishment orders for the item using lead-time offset.

Available inventory for the first period = On hand inventory + schedule Receipt of the first period- allocation – backorders - safety stock.Available inventory for other periods = Projected Available balance at the end of last period + scheduled receipt of the current period. Time FencesA policy or guideline established to note where various restrictions or changes in operating procedures take place. For example, changes to the master production schedule can be accomplished easily beyond the cumulative lead time, while changes inside the cumulative lead time become increasingly more difficult to a point where changes should be resisted. Time fences can be used to define these points.

Time Zones1-Frozen ZoneIn forecasting, this is the period in which no changes can be made to scheduled work orders based on changes in demand. Use of a frozen zone provides stability in the manufacturing schedule.

2- Firm planned order (FPO):A planned order that can be frozen in quantity and time. The computer is not allowed to change it automatically; this is the responsibility of the planner in charge of the item that is being planned. This technique can aid planners working with MRP systems to respond to material and capacity problems by firming up selected planned orders. In addition, firm planned orders are the normal method of stating the master production schedule. 3- Slushy Zone Capacity and material are committed to less extent. Tradeoffs must be met between marketing and manufacturing

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4- Liquid Zone Any changes can be made to the MPS

Fig.(2) product structure tree without lead time

Master Production Schedule RecordFor Make-to-stock environment, with fixed orders of 125 units. There are 110 units in inventory to start. When is new order (quantities) needed to satisfy the forecasted demand?For a given product, the demand for 12 months, and Projected available are listed in the table (1). The calculation will follow these equations (lead times, lot size and time fence: fixed period, must be known):

Projected Available = beginning inventory + MPS shipments – forecasted demand

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The MPS row shows when replenishment shipments need to arrive to avoid a stock out (negative projected available just to show the calculation)Week BI 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 50 50 50 50 75 75 75 75 50 50 50 50

Projected available 110 60 10 -40

MPS

Week BI 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 50 50 50 50 75 75 75 75 50 50 50 50

Projected available 110 60 10 85 35 -40

MPS 125

Week BI 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 50 50 50 50 75 75 75 75 50 50 50 50

Projected available 110 60 10 85 35 85 10 -65

MPS 125 125

Week BI 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 50 50 50 50 75 75 75 75 50 50 50 50

Projected available 110 60 10 85 35 85 10 60 110 60 10 85 35

MPS 125 125 125 125 125

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Typical Product structure diagram:

Set parts and Quantities for Product -X in table below:

parts quantity Unit scale Lead time(week)

Items Q. Total Q.

X 500 1 500 500A 2 each 1 500X2 1000B 1 = 2 500X1 500C 3 = 2 500X3 1500D 2 = 1 500X2 1000E 3 = 2 500X3 1500

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5 weeks 4 3 2 1 0

Fig. (3) lead times for Product X

Time-phased Bills: lead time scheduling:Forward scheduling: start at today‘s date and schedule forward to determine the earliest date the job can be finished. If each item takes one period to complete, the clipboards can be finished in three periods.

Backward scheduling: start at the due date and schedule backwards to determine when to begin work. If an order for clipboards is due by period three, we should start production now. See the example:

Fig. (4)lead times for clipboard

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X: end

A- sub

B- sub assemble E

C

D


Lot sizing rules: For purchased items or for technical reasons, there may be a minimum or maximum order sizes .Purchased items/subassemblies may require multiples of predetermined amounts (e.g., multiples of 50).Rules are used to change the frequency of replenishment orders & set the quantity of each order (balance holding & ordering costs to reduce total costs). Common rules used for lot sizing determination are:

Fixed Order Quantity (FOQ): It is useful to select a fixed lot size for a

material, if it is only delivered, for example, in pallets of a certain quantity or

in tanks of a certain size

Lot-for-Lot (L4Lor LFL) you plan using lot-for-lot order quantity, when you

want to procure the exact lot size again. Lots as required or planned.

Periodic Order Quantity (POQ): In period lot-sizing procedures, the system

groups several requirements within a time interval together to form a lot.

Other lot sizes:

oEconomic order quantity (EOQ) oLeast total cost (LTC): calculates a lot size that equalizes holding and ordering

costs.oLeast unit cost (LUC): averages the LTC across the lot size.oOptimal lot size.

Example Comparing Lot Size Rules: Three common lot sizing rules used within MRP Systems are fixed order quantity (FOQ), lot for lot (L4L), and period order quantity (POQ). Cost comparison is based on Inventory holding costs ($0.10 per period) and ordering cost ($25 per order). In this example POQ is best at $133.50.

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