7.8 MRP Logic in Brief
7.8.1 A Sample of Management Information (Output) from MRP
MRP output includes a report similar to the sample shown in Table-7.2 for each item in the product structure. The sample report shows that 400 units of this item are needed (GR) in week 4 and another 500 are needed in week 8. No outstanding orders were previously placed, so there are no units of this item scheduled for receipt as of this time. There are, however, 50 uncommitted units of the item already available in inventory, and these will go toward meeting the week 4 requirement. Consequently, net requirements are 350 units for week 4 and 500 units for week 8. Thus we should plan on receiving 350 units in week 4 and 500 units in week 8. Since this item has a 3 week procurement lead time, the first order must be placed (released) in week 1 and the second order in week 5.
Table 7.2. An MRP report for one item Item identification: #3201—Mounting bracket
Lead time: 3 weeks, Report date: Week 0
Week 1 2 3 4 5 6 7 8
Gross requirement 400 500
Scheduled receipts
Available for next period: 50 50 50 50
Net requirements 350 500
Planned order receipts 350 500
Planned order releases (POR) 350 500
This report identifies the procurement actions required to keep production on schedule. It also gives suppliers advanced notification of the demands soon to be placed on them. Weekly updating will revise schedules to reflect that an order must be received earlier (expedited), can be received later (de- expedited), or can even be cancelled. This information system is especially important when there are many end items with hundreds or thousands of related subcomponents that must be coordinated among numerous suppliers and work centers.
Example 7.2. A company makes kitchen chairs called model H. It requires two subassemblies F and G, one for the seat and the front legs and another for the backrest and rear legs (see Figure 7.7). To assemble the seat to the front legs, a worker needs four fasteners. Similarly, two assemble the backrest to the rear legs, a worker needs 4
Material Requirement Planning 145 more fasteners. The two subassemblies are then attached to each other with four more fasteners. When the two subassemblies are combined, the chair is complete.
H Complete Chair
LT = 1
F (1) LT = 2 Seat/front legs
assembly
E (4) LT = 1 Fastner G (1) LT = 2
Backrest/rear legs
A (1) LT = 4 Front legs
E (4) LT = 1 fastener
C (1) LT = 2
Seat
B (1) LT = 4 Rear legs
E (4) LT = 1 fastener
D (1) LT = 2
back
RMB
RMA RMC RMD
Level-0
Level-1
Level-2
Level-3
Figure 7.7. Product Structure Tree and Item information.
Solution: The solution is shown in Table 7.3 below. The steps are self explanatory.
Table 7.3. Material Requirements Plan
H 0 1 100 50 0 Gross requirement 1 2 3 4 5 6 7 500
Scheduled receipts
Available = 50 50 50 50 50 50 50 50 0
Net requirements 450
Planned order receipts 450
Planned order releases 450
G 1 2 200 30 60 Gross requirement 450
Scheduled receipts
Available = 110 110 110 110 110 110 110 0
Net requirements 340
Planned order receipts 340
Planned order releases 340
Level code
Item ID Lead time (weeks) On hand Safety-stock Allocated
Assume Lot-for-lot
ordering Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8
146 A Modern Approach to Operations Management
F 1 2 52 30 20 Gross requirement 450
Scheduled receipts
Available = 2 2 2 2 2 2 2 0
Net requirements 448
Planned order receipts 448
Planned order releases 448
A 2 4 50 20 30 Gross requirement 50 448
Scheduled receipts 50
Available = 0 0 0 0 0 0
Net requirements 0 448
Planned order receipts 448
Planned order releases 448
C 2 2 60 20 30 Gross requirement 448
Scheduled receipts
Available = 10 10 10 10 10 0
Net requirements 438
Planned order receipts 438
Planned order releases 438
B 2 4 150 20 30 Gross requirement 340
Scheduled receipts
Available = 100 100 100 100 100 0
Net requirements 240
Planned order receipts 240
Planned order releases 240
D 2 2 52 20 30 Gross requirement 50 340
Scheduled receipts
Available = 2 2 2 0 0
Net requirements 48 340
Planned order receipts 48 340
Planned order releases 48 340
E 2 1 500 300 150 Gross requirement 3152 1800
Scheduled receipts
Available = 50 50 50 50 50 0 0 0
Net requirements 3102 1800
Planned order receipts 3102 1800
Planned order releases 3102 1800
Material Requirement Planning 147 Example 7.3. If the MPS specifies 200 units of Product P1 in week 17. Number in the parenthesis indicates the no. of units of that item required to produce 1 unit of the item at the next higher level. For example, 4 C1 are required to produce 1 unit of SA1, and 2SA1s are required to produce I unit of P1. 716 units of C5 are already in the inventory. C4 is a purchased item and that 75 units of C4 are scheduled to arrive in week 12.
C2(2) C1(4)
SA1(2)
C3(2) C4(1)
P1 (1)
SA2(1)
C5(16) LT = 1
LT = 2 LT = 1 LT = 2 LT = 1 LT = 2
200 (LT = 1)
LT = 2
Figure 7.8. Product Structure.
• Then from the given product structure in Figure 7.8, we can calculate the required no. of units of each subassembly and each component as follows:
SA1 = 400, SA2 = 200, C1 = 1600, C2 = 800, C3 = 400, C4 = 200, C5 = 3200
• We must consider the lead times required for each item. P1 has a lead time of 1 week. This means that 400 units of SA1 and 200 units of SA2 must be available at the end of week 16. The LT for SA2 is 2 weeks. This means that 400 units of C3, 200 units of C4, and 3200 units of C5 must be ready no later than the end of week 12.
• These calculated requirements for each item is the gross no. of units needed to satisfy the MPS. If some of these items are already in inventory or if an order is scheduled for delivery in the near future, then these must be subtracted from the GR to determine the net requirements (NR) for satisfying the MPS.
Since 716 units of C5 are already in the inventory, the NR for C5 = 3200 – 716 = 2484 units.
75 units of C4 are scheduled to arrive in week 12. Our GR for C4 were calculated earlier as 200 units to be available at the end of week 14. So, the NR for C4 = 200-75 = 125 units.
• These are shown in the following Table 7.4.
Table 7.4
Period 10 11 12 13 14 15 16 17 18 19
Item: P1 LT = 1 200
Gross requirements Scheduled receipts On hand = 0
Net requirements 200
Planned order releases 200
Item: SA2 LT = 2
Gross requirements 200
Scheduled receipts On hand = 0
Net requirements 200
148 A Modern Approach to Operations Management
Planned order releases 200
Item: C3 LT = 2
Gross requirements 400
Scheduled receipts On hand = 0
Net requirements 400
Planned order releases 400
Item: C4 LT = 1
Gross requirements 200
Scheduled receipts 75
On hand = 0 75 75 75
Net requirements 125
Planned order releases 125
Item: C5 LT = 2
Gross requirements 3200
Scheduled receipts
On hand = 716 716 716 716 716 716
Net requirements 2484
Planned order releases 2484
Example 7.4. A firm produces a maintenance and repair parts cart (MRP cart) for use in a warehouse. The cart product structure is shown below. The firm has 2 axles (number 2005) and 1 wheel assembly (number 2006) in stock. They have an order for 3 carts in period 10. Use an MRP format with lot-for-lot ordering (i.e. order the exact number of units required), and determine the order size and order-release period for all components.
Cart LT = 2
Frame Assembly (1)
LT = 2 Bed (1)
LT = 1
Ring LT = 1
Handle LT = 1
Grips (2) LT = 2
Support (2) LT = 1
Wheel & Axle Assembly (2)
LT = 2
Axle (1) LT = 1
Wheel (2) Assembly LT = 3
Wheel (1) LT = 2 Tire (1)
LT = 2
Bearing (1) LT = 2
Cap (1) LT = 2
1001 1002 1003
2005 2006
2004 2003
2002 2001
3001 3002 3003 3004
C099
Figure 7.9. Product Structure.
Material Requirement Planning 149 Solution: The solution steps are shown in Table 7.5.
Table 7.5
Period (Weeks) 1 2 3 4 5 6 7 8 9 10
Requirement 3
Item = Cart; Code No = C099; Quantity = 1:
Lead Time = 2; Lot-for-Lot; Safety Stock = 0
Gross Requirement 0 0 0 0 0 0 0 0 0 3
Scheduled Receipt 0 0 0 0 0 0 0 0 0 0
On Hand Quantity 0 0 0 0 0 0 0 0 0 0
Net Requirement 0 0 0 0 0 0 0 0 0 3
Planned Order Receipt 3
Planned Order Release 3
Item = Bed; Code No = 1001; Quantity/Assembly = 1:
Lead Time = 1; Lot-for-Lot; Safety Stock = 0
Gross Requirement 0 0 0 0 0 0 0 3 0 0
Scheduled Receipt 0 0 0 0 0 0 0 0 0 0
On Hand Quantity 0 0 0 0 0 0 0 0 0 0
Net Requirement 0 0 0 0 0 0 0 3 0 0
Planned Order Receipt 3
Planned Order Release 3
Item = Frame; Code No = 1002, Quantity/Assembly = 1:
Lead Time = 2; Lot-for-Lot; Safety Stock = 0
Gross Requirement 0 0 0 0 0 0 0 3 0 0
Scheduled Receipt 0 0 0 0 0 0 0 0 0 0
On Hand Quantity 0 0 0 0 0 0 0 0 0 0
Net Requirement 0 0 0 0 0 0 0 3 0 0
Planned Order Receipt 3 0
Planned Order Release 3
Item = Wheel & Axle Assembly; Code No = 1003; Quantity/Assembly = 2:
Lead Time = 2; Lot-for-Lot; Safety Stock = 0
Gross Requirement 0 0 0 0 0 0 0 6 0 0
Scheduled Receipt 0 0 0 0 0 0 0 0 0 0
On Hand Quantity 0 0 0 0 0 0 0 0 0 0
Net Requirement 0 0 0 0 0 0 0 6 0 0
Planned Order Receipt 6
Planned Order Release 6
150 A Modern Approach to Operations Management Item = Ring; Code No = 2001; Quantity/Assembly = 1;
Lead Time = 1; Lot-for-Lot; Safety Stock = 0
Gross Requirement 0 0 0 0 0 3 0 0 0 0
Scheduled Receipt 0 0 0 0 0 0 0 0 0 0
On Hand Quantity 0 0 0 0 0 0 0 0 0 0
Net Requirement 0 0 0 0 0 3 0 0 0 0
Planned Order Receipt 3 0
Planned Order Release 3
Item = Handle; Code No = 2002; Quantity/Assembly = 1 Lead Time = 1; Lot-for-Lot; Safety Stock = 0
Gross Requirement 0 0 0 0 0 3 0 0 0 0
Scheduled Receipt 0 0 0 0 0 0 0 0 0 0
On Hand Quantity 0 0 0 0 0 0 0 0 0 0
Net Requirement 0 0 0 0 0 3 0 0 0 0
Planned Order Receipt 3 0
Planned Order Release 3
Item = Grips; Code No = 2003; Quantity/Assembly = 2:
Lead Time = 2; Lot-for-Lot; Safety Stock = 0
Gross Requirement 0 0 0 0 0 6 0 0 0 0
Scheduled Receipt 0 0 0 0 0 0 0 0 0 0
On Hand Quantity 0 0 0 0 0 0 0 0 0 0
Net Requirement 0 0 0 0 0 6 0 0 0 0
Planned Order Receipt 6
Planned Order Release 6
Item = Support; Code No = 2004; Quantity/Assembly = 2:
Lead Time = 1; Lot-for-Lot; Safety Stock = 0
Gross Requirement 0 0 0 0 0 6 0 0 0 0
Scheduled Receipt 0 0 0 0 0 0 0 0 0 0
On Hand Quantity 0 0 0 0 0 0 0 0 0 0
Net Requirement 0 0 0 0 0 6 0 0 0 0
Planned Order Receipt 6
Planned Order Release 6
Item = Axle; Code No = 2005; Quantity/Assembly = 1:
Lead Time = 1; Lot-for-Lot; Safety Stock = 0
Gross Requirement 0 0 0 0 0 6 0 0 0 0
Scheduled Receipt 0 0 0 0 0 0 0 0 0 0
On Hand Quantity = 2 2 2 2 2 2 2 0 0 0 0
Net Requirement 0 0 0 0 0 4 0 0 0 0
Planned Order Receipt 4
Planned Order Release 4
Material Requirement Planning 151 Item = Wheel Assembly; Code No = 2006; Quantity/Assembly = 2:
Lead Time = 3; Lot-for-Lot; Safety Stock = 0
Gross Requirement 0 0 0 0 0 12 0 0 0 3
Scheduled Receipt 0 0 0 0 0 0 0 0 0 0
On Hand Quantity = 1 1 1 1 1 1 1 0 0 0 0
Net Requirement 0 0 0 0 0 11 0 0 0 3
Planned Order Receipt 11 3
Planned Order Release 11 3
Item = Tire; Code No = 3001; Quantity/Assembly = 1:
Lead Time = 2; Lot-for-Lot; Safety Stock = 0
Gross Requirement 0 0 11 0 0 0 0 0 0 0
Scheduled Receipt 0 0 0 0 0 0 0 0 0 0
On Hand Quantity 0 0 0 0 0 0 0 0 0 0
Net Requirement 0 0 11 0 0 0 0 0 0 0
Planned Order Receipt 11
Planned Order Release 11
Item = Wheel; Code No = 3002; Quantity/Assembly = 1:
Lead Time = 2; Lot-for-Lot; SStock = 0
Gross Requirement 0 0 11 0 0 0 0 0 0 0
Scheduled Receipt 0 0 0 0 0 0 0 0 0 0
On Hand Quantity 0 0 0 0 0 0 0 0 0 0
Net Requirement 0 0 11 0 0 0 0 0 0 0
Planned Order Receipt 11
Planned Order Release 11
Item = Bearing; Code No = 3003; Quantity/Assembly = 1:
Lead Time = 2; Lot-for-Lot; SStock = 0
Gross Requirement 0 0 11 0 0 0 0 0 0 0
Scheduled Receipt 0 0 0 0 0 0 0 0 0 0
On Hand Quantity 0 0 0 0 0 0 0 0 0 0
Net Requirement 0 0 11 0 0 0 0 0 0 0
Planned Order Receipt 11
Planned Order Release 11
Item = Cap; Code No = 3004; Quantity/Assembly = 1:
Lead Time = 2; Lot-for-Lot; Safety Stock = 0
Gross Requirement 0 0 11 0 0 0 0 0 0 0
Scheduled Receipt 0 0 0 0 0 0 0 0 0 0
On Hand Quantity 0 0 0 0 0 0 0 0 0 0
Net Requirement 0 0 11 0 0 0 0 0 0 0
Planned Order Receipt 11
Planned Order Release 11
152 A Modern Approach to Operations Management Summary
Item Description Code Number Quantity Required Release Date
Cart C099 3 Week 8
Bed 1001 3 Week 7
Frame 1002 3 Week 6
Wheel & Axle Assembly 1003 6 Week 6
Ring 2001 3 Week 5
Handle 2002 3 Week 5
Grip 2003 6 Week 4
Support 2004 6 Week 5
Axle 2005 4 Week 5
Wheel Assembly 2006 11 Week 3
Tire 3001 11 Week 1
Wheel 3002 11 Week 1
Bearing 3003 11 Week 1
Cap 3004 11 Week 1