To get started on planning the light subassembly, some basic informa- tion about the subassembly is required.
On- hand inventory balance: 3
Planning lead time: 2 periods Minimum order quantity: 25 units
For illustration purposes and to show just how the MPS and MRP matrices are linked via the computer software, the bottom rows of the MPS matrix (master schedule by due date and master schedule by start date) are shown in Figure 3.6 on page 66. The various orders for
65
The Mechanics of Master Scheduling
20 completed fl ashlights in periods 2, 4, 6, and 8 of the master schedule line are shown to trigger respective gross requirements for the same quantity one period earlier in the MRP matrix (MPS quantities by due date and offset by planning lead time to the start date).
The projected gross requirements row of the MRP matrix repre- sents demand for the identifi ed item, not from the fi nal customer, but from the master schedule—specifi cally, from the MPS row. For instance, when the master scheduler placed a supply order for 20 com- pleted fl ashlights in period 2 on the master schedule, that translated into a projected gross requirement of 20 light subassemblies in period
Figure 3.5 Master Schedule Linked to Material Requirements Planning
1 on the MRP matrix. Taking the lead time into account, the computer software system places this requirement of 20 units in period 1 of the MRP matrix.4 The same process repeats itself whenever a supply or- der appears on the MPS row of the master schedule.
Projected gross requirements are the sum of all the demands over time for this item. In our simple example, the light subassembly is used only in the fl ashlight that’s master scheduled. In a more com- plex environment, that same light subassembly might be used in other products manufactured by the company, in which case the demand for the light subassembly from many different master schedules would
Figure 3.6 The MRP Matrix—Light Subassemblies
4 Remember, the stated lead time to take the head, light, and body subassemblies and produce a fl ashlight is one period, which is not to be confused with the lead time of two periods that it takes to build the light subassembly itself.
67
The Mechanics of Master Scheduling accumulate in the various projected gross requirements time periods of the light subassembly’s MRP matrix.
The scheduled receipts shown in the MRP matrix are supply orders that either MRP planners or schedulers have placed. (There are no computer planned orders here.) These scheduled receipts can go by many possible names—work orders, shop orders, production orders, manufacturing orders, campaigns, or run rates, to name a few—and are used for parts and items that the company builds or produces.
Purchase orders or confi rmed supplier schedules are used for parts, materials, or items that the company buys. It is important to under- stand that a scheduled receipt is expected to be received in the period shown and will be used in calculating the projected available balance, the next row in the MRP matrix.
Just as in the MPS matrix row of the same name, the projected avail- able balance is where the projected inventory balance is refl ected. The past- due column in this row contains the starting on- hand balance, but from that point forward, the projected available balance is the sum of on- hand balance for the prior period and scheduled receipts for the period being calculated less the projected gross requirements for that period. That fi gure, in effect, becomes the projected begin- ning on- hand balance for the next period. For example, in Figure 3.6 we see an on- hand balance of 3 light subassemblies, added to the 25 scheduled to be received in period 1; this represents an available supply of 28 in period 1, and since demand in that period (projected gross requirements) is 20, the projected available balance for the pe- riod is 8 (3 + 25 – 20).
The MRP system calculates the projected available balance quan- tity in much the same way as does the MPS system. The basic calcula- tion in both systems is to take the projected ending available balance from the prior period and add scheduled receipts from the period being evaluated, then subtract the anticipated demand for that pe- riod. This yields the projected available balance for the period being calculated.
The planned order release row contains the equivalents of the com- puter planned orders found in the master schedule. It is the row in which the computer attempts to deal with any potential supply
shortages that appear in the projected available balance row. For ex- ample, the MRP matrix for the light subassembly projects a negative available balance (the top row of numbers in periods 5 through 8) un- less some action is taken. Anticipated demand from the master sched- ule outstrips the expected supply of light assemblies by a cumulative of 7 units in periods 5 and 6, and by a cumulative of 27 units in periods 7 and 8.
To avoid a defi cit situation from developing in period 5, a computer planned order is needed to arrive in period 5, and therefore must be released in period 3 (remember, the lead time for light subassemblies is two periods). What should be the size of the order? Ideally, the com- puter would place an order for 7 units (assuming no minimum order quantity) in period 3 to cover the 7-unit defi cit expected in period 5.
However, the minimum order quantity for this item has been speci- fi ed as 25, and that is what shows up in the planned order release row of period 3.
If the MRP planner or scheduler accepts the computer software’s recommendation, he or she will convert the computer planned order into a scheduled receipt when period 3 becomes the current period (period 1), and a surplus of 18 units will be available in period 5, as refl ected in the bottom half of the cell (13 + 25 – 20).
An important point is now being made. In order for a computer planned order to be recognized as a scheduled receipt, the scheduler or planner must take affi rmative action. Remember, only supply or- ders placed by a scheduler or planner appear in the scheduled receipt row. It follows that once the computer planned order is converted into a scheduled receipt, it will be deleted when MRP is next run.
Lower- level requirements are maintained when the system creates an allocation for each lower- level part or item required to support the scheduled receipt. These time- phased allocations are maintained automatically by the system’s software and generally stored in a re- quirements fi le.
Looking ahead to future periods, no activity takes place in period 6, so the projected available balance remains at 18 units. In period 7 a demand for 20 units creates a projected negative balance of 2 units
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The Mechanics of Master Scheduling (18 + 0 scheduled receipts – 20). The origin of this demand is the computer planned order for 20 fl ashlights in period 8 of the master schedule. Using the planned lead time of one period for the fl ashlight has resulted in this CPO generating a projected gross requirement in period 7 in the MRP matrix. The computer cannot abide a negative balance for the light subassembly, so another planned order must be released, this time in period 5 (taking into account the light subassem- bly’s two- period lead time) to ensure suffi cient supply of the light sub- assembly in period 7. If the computer’s recommendation is followed and the computer planned order is converted into a scheduled receipt to be received in period 7, a projected surplus balance of 23 units will be available at the end of period 7 (18 + 25 – 20).
In period 8, the projected available balance will remain at either – 27 units if no action is taken, or at 23 units if the CPO releases are converted to scheduled receipts when appropriate. The CPO sched- uled for release in period 3 should be converted to a scheduled receipt two periods prior to the CPO scheduled for release in period 5.
The projected gross requirements (demand), projected available balance, and planned order release (supply) rows are automatically calculated by the MRP software system. Only the scheduled receipt row is maintained by MRP schedulers and planners.
Analysis
Using the on- hand balance, projected gross requirements, and sched- uled receipts, the MRP system will project the available balance over each planning period, making it possible for the system to determine the true material need dates. If the projected available balance goes negative and then returns to positive, the system recognizes that a tim- ing problem exists—that is, there is enough on order, but some of the orders are scheduled too late. If the projected available balance goes negative and stays negative, the system recognizes a volume problem and calls for additional supply orders.
Reviewing the MRP matrix for the light subassembly we observed in periods 5 through 8, the projected available balance went negative and
remained negative (top set of numbers)—evidence of a volume prob- lem. Some type of order action has to take place, and the computer software has suggested that two releases be made to put the supply and demand for light subassemblies back into balance. The scheduled receipts of 25 units in periods 1 and 3 are both necessary and sched- uled properly to prevent the close-in projected available balance from becoming negative, which would have otherwise signifi ed a timing problem.
Each time that MRP is run, this kind of analysis takes place within the computer and action messages are generated as appropriate.
Based on the analysis just completed, the MRP system would not rec- ommend that any action be taken until period 3 becomes the current period.
The fl ashlight example just given has explained the basics of both the MPS and the MRP logic, how internal calculations are made, and how the system—with the input of the scheduler or planner—main- tains a balance of demand and supply. Just as important, the example showed the connection between the master schedule for the fl ashlight and how it is supported by the MRP system for each of the fl ashlight’s components, examining one of those components—the light sub- assembly—in detail.
Experienced manufacturing people will be quick to recognize this as a very simplifi ed case. Few manufactured products are as simple as the one just shown, and even a fl ashlight is more complex in its com- ponent makeup than this illustration has revealed. In fact, each of the fl ashlight components used in the example (head subassembly, light subassembly, and body subassembly) can be exploded into its compo- nents and their subcomponents. This complexity of detail, even for a simple fl ashlight, is more typical of the multilevel product structure that most schedulers experience.
This added detail is brought in here to make the point that MRP will continue to explode requirements through the defi ned bills- of- material in order to generate an MRP plan for every one of the items identifi ed as part of the fi nal fl ashlight.
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The Mechanics of Master Scheduling