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MGMT 37501
Materials Management
SystemsMaterials Requirements
PlanningChapter 4
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MGMT 37502
• Material Requirements Planning is a system to calculate requirements for dependent demand items
• It establishes a schedule (priority plan) showing the components required at each level of the assembly and, based on lead times, calculates the time when these components will be needed
• It is a system to avoid missing parts for the end item
Ch.4: Material Requirements Planning
Material Requirements Planning
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MGMT 37503
Ch.4: Material Requirements Planning
Material Requirements Planning Process• We need to determine
– What to order– How much to order– When to order
• This will involve– Lead times– Bills of material– Inventory Status– Planning data
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MGMT 37504
Ch.4: Material Requirements Planning
Nature of Demand• Two Types of Demand
– Independent• Is not related to the demand for any other product and must be
forecast
• Master production schedule (MPS) items are independent demand items
– Dependent• Is directly related to other items or end items
• Such demand should be calculated and need not and should not be forecast
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MGMT 37505
Ch.4: Material Requirements Planning
Nature of DemandIndependent Demand
(Forecast)
Dependent Demand(Calculated)
Table
Legs(4)
Ends(2)
Sides(2)
Top(1)
HardwareKit (1)
Item #206
Item #433
Item #711
Item #025
Item #822
If you have an order for 23 Tables, what components would you need to produce them?
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MGMT 37506
• Two Major Objectives– Determine Requirements
• What to order• How much to order• When to order• When to schedule delivery
– Keep Priorities Current• It must be able to add and delete, expedite, delay, and
change orders based upon present priorities
Ch.4: Material Requirements Planning
Objectives of MRP
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MGMT 37507
Ch.4: Material Requirements Planning
Linkages with Other Manufacturing Planning and Control Functions
BusinessPlan
ProductionPlan
MPS
PC and Purchasing
MRP
Planning
Execution
•The MRP is driven by the MPS; it is concerned with the components needed to make the end items. •The MRP in turn drives, or is input to, productioncontrol (PC) and purchasing
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MGMT 37508
• Four Major Inputs:– Master Production
Schedule
– Inventory Records
– Planning Data
– Bills of Material
Ch.4: Material Requirements Planning
Inputs to the MRP System
MRP
MPS
PlanningData
Bill ofMaterial
InventoryStatus
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MGMT 37509
• Master Production Schedule (MPS)– The MPS provides information on planned and scheduled
orders for end items (how much is wanted and when)
• Inventory Status– Inventory status provides information on what is already
available. Inventory records include the status of each item, including amounts on order and on hand and the location
Ch.4: Material Requirements Planning
Inputs to the MRP System
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MGMT 375010
• Bills of Material– Bills of material describe components and the quantity of each needed to
make one unit
• Planning Data– Planning data include lot size, lead time, scrap factors, yield factors, and
safety stock
• The Computer– Computers are needed because they are fast , accurate, and have the
ability to store and manipulate data and produce information rapidly
Ch.4: Material Requirements Planning
Inputs to the MRP System
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MGMT 375011
Bill of Material“a listing of all the subassemblies, intermediates, parts, and raw
materials that go into making the parent assembly showing the quantities of each required to make an assembly”
APICS Dictionary, 8th edition, 1995
• The bill of material shows all the parts required to make one of the item
• Each part or item has only one part number
Ch.4: Material Requirements Planning
Bills of Material
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MGMT 375012
• Parent–Component Relationship– An assembly is considered a parent, and the items that comprise it are
called its component items.
Ch.4: Material Requirements Planning
Bills of Material
Table
Legs(4)
Ends(2)
Sides(2)
Top(1)
HardwareKit (1)
Item #206
Item #433
Item #711
Item #025
Item #822
Parent
Component
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MGMT 375013
• The multilevel bill is made up of subassemblies. The subassemblies reflect the way manufacturing plans to build the product.
• The lowest items on the bill are usually purchased parts.
• All parts and subassemblies have unique numbers.
• By convention, the final assembly is considered level zero. Levels down the bill are numbered consecutively.
Ch.4: Material Requirements Planning
Bills of Material
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MGMT 375014
• The multilevel bill is a collection of single-level bills. Each single-level bill shows the parts to make one parent.
• To reduce storage space and to make maintenance easier, the computer stores single-level bills only.
• Items can be both parents of components and components of other parents.
Ch.4: Material Requirements Planning
Bills of Material
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MGMT 375015
Ch.4: Material Requirements Planning
Bills of Material• Low-Level Coding and Netting - A component may reside on
more than one level in a bill of material– The low-level code is the lowest level on which a part resides in all bills
of material. Every part has only one low-level code.
– Low-level are determined by starting at the lowest level of a bill of material and, working up, recording the level against the part. If a part occurs on a higher level, its existence on the lower level has already been recorded.
– Once the low-level codes are obtained, the net requirements for each part can be calculated.
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MGMT 375016
• Uses for Bills of Material– Product Definition– Engineering Change Control– Service Parts– Planning– Order Entry– Manufacturing– Costing– Etc.
• Maintaining bills of material and their accuracy is extremely important
Ch.4: Material Requirements Planning
Bills of Material
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MGMT 375017
Ch.4: Material Requirements Planning
Lead Times, Exploding, and Offsetting
• Lead time: The time from when an order is placed until the part is ready for use.
• Exploding: Multiplying the parent requirements by the usage quantity through the product tree
• Offsetting: Placing the requirements in their proper time periods based on lead times
A
B C
D E
LT: 1 wk
LT: 2 wk LT: 1 wk
LT: 1 wk LT: 1 wk
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MGMT 375018
Ch.4: Material Requirements Planning
Planned Orders• Planned Order Receipt
– That quantity planned to be received at a future date as a result of a planned order release.
• Planned Order Release
– Planned order releases are just planned; they have not been released. Orders for material should not be released until the planned order release date arrives.
• The planned order release of the parent becomes the gross requirement of the component.
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MGMT 375019
Ch.4: Material Requirements Planning
Releasing Planned Orders• Releasing Planned Orders
– Check availability of components– Create shop packet or purchase requisition– Allocate components to that order– Release planned order, creating a scheduled receipt
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MGMT 375020
Ch.4: Material Requirements Planning
Basic MRP Record• The current time is the beginning of the first period.
• The top row shows time periods, called time buckets.
• The number of periods in the record is called the planning horizon.
• An item is considered available at the beginning of the time bucket in which it is required.
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MGMT 375021
Ch.4: Material Requirements Planning
Basic MRP Record• The quantity shown in the projected available row is the
projected available balance at the end of the period; all other quantities are for the beginning of the period.
• The immediate or most current period is called the action bucket.
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MGMT 375022
Ch.4: Material Requirements Planning
Example from Pg. 88 (85 3rd. Ed.)
Week 1 2 3 4
Gross ReqtsProj Avail (75)Net ReqtsPlan Order RcptPlan Order Rls
50 45 20
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MGMT 375023
Ch.4: Material Requirements Planning
Example from Pg. 88Week 1 2 3 4
Gross ReqtsProj Avail (75)Net ReqtsPlan OrderRcptPlan Order Rls
755025
45-2020
20
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MGMT 375024
Ch.4: Material Requirements Planning
Example from Pg. 88
Week 1 2 3 4
Gross ReqtsProj Avail (75)Net ReqtsPlan Order RcptPlan Order Rls
755025
458020100
20
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MGMT 375025
Ch.4: Material Requirements Planning
Example from Pg. 88
Week 1 2 3 4
Gross ReqtsProj Avail (75)Net ReqtsPlan Order RcptPlan Order Rls
75
100
5025
458020100
2060
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MGMT 375026
Ch.4: Material Requirements Planning
Example from Pg. 90 (87 3rd Ed.)Week 1 2 3 4
Gross ReqtsSched ReceiptsProj Avail (150)Net ReqtsPlan Order RcptPlan Order Rls
50 250200
100 50
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MGMT 375027
Ch.4: Material Requirements Planning
Example from Pg. 90Week 1 2 3 4
Gross ReqtsSched ReceiptsProj Avail (150)Net ReqtsPlan Order RcptPlan Order Rls
50
100
25020050
100
50200
50
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MGMT 375028
Ch.4: Material Requirements Planning
Example from Pg. 90Week 1 2 3 4
Gross ReqtsSched ReceiptsProj Avail (150)Net ReqtsPlan Order RcptPlan Order Rls
50
100
25020050
100
15050200
50
100
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MGMT 375029
Ch.4: Material Requirements Planning
Example from Pg. 90Week 1 2 3 4
Gross ReqtsSched ReceiptsProj Avail (150)Net ReqtsPlan Order RcptPlan Order Rls
50
100
200
25020050
100
15050200
50
100
Release the order for 200 units.
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MGMT 375030
Ch.4: Material Requirements Planning
Using the Material Requirements Plan
• The computer can perform all calculations and create planned order releases, but it does not (usually) issue purchase or manufacturing orders or reschedule open orders. Computer software can create exception messages and suggest types of action.
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MGMT 375031
Ch.4: Material Requirements Planning
Using the Material Requirements Plan
• On the basis of action and exception messages, the planner can release planned orders, reschedule existing orders in or out, or change quantities. In addition, the planner works with other planners, master production schedulers, production activity control, and purchasing to solve problems as they arise.
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MGMT 375032
Ch.4: Material Requirements Planning
The Basic Responsibilities of a Planner
– Launch (release) orders to purchasing or manufacturing
– Reschedule due dates of open (existing) orders as required
– Reconcile errors and try to find their cause
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MGMT 375033
Ch.4: Material Requirements Planning
The Basic Responsibilities of a Planner
– Address critical material shortages by expediting or re-planning
– Coordinate with other planners, master production schedulers, production activity control, and purchasing to resolve problems
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MGMT 375034
Ch.4: Material Requirements Planning
Material Planner’s 3 Types of Orders
– Planned orders - calculated and controlled by the software
– Released orders - scheduled receipts; releasing is the responsibility of the planner
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MGMT 375035
Ch.4: Material Requirements Planning
Material Planner’s 3 Types of Orders
– Firm planned orders - the planner tells the computer that the order is not to be changed; the planner uses firm planned orders to override the software in terms of quantity, time, or both. When re-planning, the software will not change the planner’s decision.
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MGMT 375036
Ch.4: Material Requirements Planning
Managing the Material Requirements Plan
The planner must consider three important factors when managing the MRP:– Priority - refers to maintaining the correct due dates by
constantly evaluating the true due-date need for released orders and, if necessary, expediting or de-expediting.
– Bottom-up Re-planning - Action to correct for changed conditions should occur as low in the product structure as possible
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MGMT 375037
Ch.4: Material Requirements Planning
Managing the Material Requirements Plan
The planner must consider three important factors when managing the MRP:– Reducing System Nervousness - Requirements can change
rapidly and by small amounts. The planner must judge whether the changes are important enough to react to and whether an order should be released.
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MGMT 375038
Ch.4: Material Requirements Planning
Questions
Questions: 2, 3, 5, 6, 9, 18, 19, 21, 23