Introduction to Materials

Management
Chapter 4 Material
Requirements Planning
 Independent versus Dependent
Demand
Independent Demand
Not related to demand for other assemblies
or products, instead from outside sources
Generally forecasted demand
Dependent Demand
Generally related to production of an end
product (as defined on the MPS)
Can be calculated instead of forecasted
Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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 Dependent Demand Approach
Materials Requirement Planning (MRP)
Major Objectives of MRP
Determine Requirements Calculated to
meet product requirements defined in the
MPS
What to order
How much to order
When to order
When to schedule delivery
Keep Priorities Current
Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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 Links To Other MPC Functions

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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 Major Inputs to MRP
Master Production Schedule quantities
and times
Inventory records of all items to be
planned
Planning factors such as lead times, order
quantities, and safety stock
Current status of each item
Bills of material for MPS items
Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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 Sample Bill of Materials

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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 Bill of Material Points
The BOM shows all parts to make one
of the item
Each part has one, and only one, part
number
A part is defined by form, fit, and
function any change requires a new
part number

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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 Sample Product Tree for the BOM

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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 Breaking Down the BOM into
More Detail the Multilevel Bill

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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 Example in Page 68

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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Indented BOM Use Indentation to
Show Parent-Component Relationships

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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 Planning Bills of Material
Artificial grouping of components for
Planning Purposes
Used to simplify
Forecasting
Planning
Master Scheduling
Represent an average, not buildable
product
Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
Arnold, Chapman, Clive All Rights Reserved.
 Sample Planning BOM

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
Arnold, Chapman, Clive All Rights Reserved.
 Where-Used and Pegging
Where-used reports - shows the
parents for a component (contrast with a
bill of materials that show the components for
a parent)
Pegging report shows the parents for
a component, but only those parents
where there is an existing requirement

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
Arnold, Chapman, Clive All Rights Reserved.
 Figure 4.10 in page 70

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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 Major Uses for Bills of Material
Defines the product
Provides method for design change
control
Planning What is needed and when
Order entry order configuration and
pricing
Production Parts needed to assemble
a product
Costing material cost of goods sold
Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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 Basic MRP Record

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
Arnold, Chapman, Clive All Rights Reserved.
 Some Key Terms
Lead time span of time for a process
Exploding process of multiplying
requirements by usage to get BOM
requirements
Offsetting Placing requirements in the
proper period based on lead time
Planned orders Orders planned during the
explosion, but not yet released for processing
Low-level code lowest level on which a part
resides on the Bill of Materials
Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
Arnold, Chapman, Clive All Rights Reserved.
 Some Key Terms, Continued
Scheduled receipts Open orders released
for processing (production or purchase)
scheduled to be received at a defined time.
Gross Requirements Total of a component
needed to meet requirements not taking any
existing inventory into account
Net Requirements Actual amount of a
component needed to meet requirement after
existing requirements taken into account
Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
Arnold, Chapman, Clive All Rights Reserved.
 Some Key Terms, Continued
Projected available The expected inventory
position at the end of the period
Planned order release the amount that
should be ordered (using the lot size) to
prevent a negative projected available
balance
Planned order receipt when the order
should be available for use, offset by lead
time from the planned order release
Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
Arnold, Chapman, Clive All Rights Reserved.
 Example Problem
Lead time for this component is 2 weeks and order quantity is
200. Complete the table. What action should be taken?

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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 Example problem solution

The order for 200 should be released

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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 Example for a multilevel BOM

Lead time for each component is 1 week

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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 Netting and exploding zero-level
parts

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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 Netting and exploding first-level
parts

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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 Completed Material Requirements
Plan

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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Sample Multiproduct MRP Explosion

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
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 Points About the MRP Record
Current time beginning of first period (often
called time buckets)
Items considered available at beginning of
period
Quantity in Projected Available row
considered at end of period
Current period often called action bucket
action should be taken to avoid a future
problem
Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
Arnold, Chapman, Clive All Rights Reserved.
 Planner Responsibilities for
MRP
Launch Orders Production or
Purchasing
Reschedule orders as required
Reconcile errors and search for causes
Solve critical material shortages
Replan
Expedite
Coordinate with other functions to
resolve problems
Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
Arnold, Chapman, Clive All Rights Reserved.
 Moving through time an
example

This record shows the status of the part Monday morning. The
computer is showing the need to release the order of 30

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
Arnold, Chapman, Clive All Rights Reserved.
 During the week, the following
events happen:
Only 25 units of the scheduled receipt move into
inventory. The balanced is scrapped
The gross requirement for week 3 is changed to 10.
The gross requirement for week 4 is increased to 50.
The gross requirement for week 7 is 15.
An inventory count reveals there are 10 more in inventory
than the record shows
The gross requirement for week 1 is issued from inventory
The planned order release of 30 in week 1 is released and
becomes a scheduled receipt in week 3.

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
Arnold, Chapman, Clive All Rights Reserved.
 The new record reflects those
events from week 1:

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
Arnold, Chapman, Clive All Rights Reserved.
 Homework Assignment

Problems 4.5, 4.9, 4.11, 4.15

Introduction to Materials Management, 7th Edition 2012, 2008, 2004, 2001, 1998, 1996 Pearson Education, Upper Saddle River, NJ 07458.
Arnold, Chapman, Clive All Rights Reserved.