Chapter 16: Material Requirements Planning

1. Chapter 16: Material Requirements Planning Outline • Finished Product and Components • Importance of an MRP system • Input and Output of an MRP system • MRP Calculation • Lot Sizing

2. Material Requirements Planning • Used for dependent demand management • Useful for Assembly/Manufacturing • If the finished product is composed of many components, MRP can be be used to optimize the inventory costs.

3. Back slats Seat cushion Leg supports Seat-frame boards Back legs Front legs Finished Product and Components

4. Inventory without an MRP System

5. Inventory with an MRP System

6. MRP Input and Output Master Production Schedule Orders Forecasts Bill of Materials file MRP computer program Inventory file Reports To Production To Purchasing

7. April May 14 15 16 17 18 19 20 21 Ladder-back chair 150 150 Kitchen chair 120 120 Desk chair 200 200 200 200 Aggregate production plan 790 550 for chair family Master Production Schedule

8. Bill of Material: Product Structure Level 0 Level 1 Level 2 Level 3

9. Bill of Material

10. Bill of Material

11. On Hand Inventory and Lead time Component Units in Lead Inventory time (weeks) Seat Subassembly 25 2 Seat frame 50 3 Seat frame boards 75 1

12. MRP Calculation

13. Time of Order Placement

14. Text Problem 16-10: Each unit of A is composed of one unit of B, two units of C, and one unit of D. C is composed of two units of D and three units of E. Items A, C, D, and E have on-hand inventories of 20, 10, 20, and 10 units, respectively. Item B has a scheduled receipt of 10 units in period 1, and C has a scheduled receipt of 50 units in Period 1. Lot-for-lot (L4L) is used for Items A and B. Item C requires a minimum lot size of 50 units. D and E are required to be purchased in multiples of 100 and 50, respectively. Lead times are one period for Items A, B, and C, and two periods for Items D and E. The gross requirements for A are 30 in Period 2, 30 in Period 5, and 40 in Period 8. Find the planned order releases for all items.

15. Level 0 Level 1 Level 2

21. Lot-Sizing • Plan order releases from the given net requirements of an items over the next T periods. • Techniques: • Lot-for-Lot (L4L) • EOQ • Least Total Cost (LTC) • Least Unit Cost (LUC) • Notes • Inventory costs are computed on the ending inventory. • L4L minimizes carrying cost • LTC is useful if the costs do not change over time • LUC may be useful if the costs change over time • The problem extended to all items is difficult to solve

22. Text Problem 16-11: The MRP gross requirements for Item A are shown here for the next 10 weeks. Lead time for A is three weeks and setup cost is $10. There is a carrying cost of $0.01 per unit per week. Beginning inventory is 90 units. Week Gross requirements Week Gross requirements 1 30 6 80 2 50 7 20 3 10 8 60 4 20 9 200 5 70 10 50 Determine the lot sizes.

23. Lot-for-lot

24. EOQ

25. Least Unit Cost

26. Least Unit Cost

27. Least Total Cost j 1 2 3 4 5 6 7 r 20 70 80 20 60 200 50 j Units in the inventory at the end of Week H. Ord. Total Order for weeks Q 4 5 6 7 8 9 10 Cost Cost Cost 1 week, week 4 2 weeks, weeks 4 to 5 3 weeks, weeks 4 to 6 4 weeks, weeks 4 to 7 5 weeks, weeks 4 to 8 6 weeks, weeks 4 to 9 7 weeks, weeks 4 to 10

28. Least Total Cost

29. Reading and Exercises • Reading: Chapter 16 up to p. 644, 649-652 • Exercises: Chapter end problems 9, 15, 17