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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Manufacturing Planning and ControlMPC 6th EditionChapter 6Material 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.AgendaResourceplanningSales and operationsplanningDemandmanagementMaster productionschedulingDetailed capacityplanningDetailed materialplanningMaterial andcapacity plansShop-floorsystemsSuppliersystemsEnterprise Resource Planning (ERP) SystemFront EndEngineBack EndManufacturing Planning and Control SystemTime-phased requirement (MRP) recordsRouting fileBills of materialInventory status dataBasic MRP RecordBasic MRP RecordOn handPeriod12345Gross requirements104010Scheduled receipts50Projected available balance4544444444Planned order releases50Lead time = 1 periodLot size = 50A previously released order due in period 1A unreleased order due in period 5Requirements from all sourcesBill of MaterialsThe BOM shows the components and sub-assemblies required to produce a productProduct Structure DiagramSub-assemblies are represented by separate levelsFinished product is located at the top, components belowIndented Bill of MaterialsFinished item is not indentedComponents and sub-assemblies are indented relative to their order of usageLevel 1 componentsLevel 1 sub-assembliesLevel 2 sub-assembliesExplosionExplosion–the process of translating product requirements into component part requirementsConsiders existing inventories and scheduled receiptsCalculating 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 partsGross and Net RequirementsGross requirements represent the total planned usage for the partNet requirements account for existing inventory and/or scheduled receipts100 req’d – 25 inventory = 75 net req’d75 req’d – 22 inventory – 25 sched. rec. = 28 net req’dNet req’d for assembly becomes gross req’d for componentDemand Types in MRPDependent–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)Lead Time OffsettingGross to net explosion shows how much of each part is required, but not whenTiming 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 assembledMRP considers both factors when developing the planScheduling LogicTwo common approaches to scheduling existFront schedule–schedule each step as early as possibleBack schedule–schedule each step as late as possibleMRP combines back scheduling and gross to net explosionReduced inventoriesMinimized storage timeBack SchedulingTop handle assembly has the longest duration of any sub-assemblyScoop assembly must be complete before final assembly can beginOnly when all sub-assemblies and components are available can final assembly beginMRP 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 requirementsFixed lot size order policy requires orders in multiples of lot sizeMRP Technical IssuesProcessing frequency–recalculating all records and requirements is called regenerationThis is a computationally intensive process so it is often run in the background and during periods of low system demandNet change approach only recalculates those records that have experienced changesLess frequent processing results in an out-of-date pictureMore frequent processing increases computer costs and may lead to system nervousnessSafety Stock and Safety Lead TimeSafety stock is buffer stock over and above the quantity needed to satisfy gross requirementsUsed when quantity uncertainty is the issueSafety 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 timePeggingPegging 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 requirementPegging information can track the impact of a problem (e.g. material shortage) back to the order(s) it will affectFirm Planned OrdersRegeneration of the MRP records can lead to large numbers of planned order changesTo 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 systemTemporarily overrides the MRP system to provide stability or to solve problemsPlanning HorizonTotal 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 visibleAt a minimum, should cover the cumulative lead time for all finished goods itemsScheduled Receipts vs. Planned Order ReleasesScheduled receipts represent an actual commitment (purchase order, production order, etc.)Planned orders are only the current plan and can be changed more easilyScheduled receipts for production orders already have component materials assignedScheduled receipts do not impact gross requirementsPlanned order releases do not have component materials assignedPlanned order releases do impact gross requirementsUsing the MRP SystemMRP Planner TasksException CodesBottom-Up ReplanningUsing pegging data to guide efforts to solve material shortagesPegging data allows the planner to take action only when actual customer orders are impactedMRP System OutputPart number and descriptionMRP system dataMRP planning dataException messagesMRP System DynamicsPrinciplesEffective 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.”Quiz – Chapter 6Material 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)
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