The document provides an overview and example of materials requirement planning (MRP). MRP is a system used to determine the materials, components, and quantities needed to meet production schedules. The example shows how MRP works by using a bill of materials (BOM) and lead times to create a schedule that determines when orders need to be placed to ensure availability of all items when needed for production. Key outputs of MRP include planned order schedules, inventory reports, and exception reports to monitor discrepancies.

1. 1
MATERIALS REQUIREMENT
PLANNING

2. 2
OBJECTIVES

Materials requirement Planning (MRP)

MRP Logic and Product Structure Trees

Time Fences

MRP Example

MRP II and Lot Sizing

3. 3
MATERIALS REQUIREMENT
PLANNING (MRP)

Fundamental Questions in Manufacturing are –
• What are we going to make?
• What does it take to make it?
• What do we have?
• What do we have to get?

4. Materials Requirement
Planning
•
Materials requirement planning (MRP) is a
means for determining the number of parts,
components, and materials needed to
produce a product
•
MRP provides time scheduling information
specifying when each of the materials, parts,
and components should be ordered or
produced
•
•
Dependent demand drives MRP
MRP is a software system
4

5. 5
Product Hierarchy
End Product
Assembly 2
Assembly 1
Subassembly 1
Component A
Subassembly 2
Component E
Component B
Component C
Raw Material X
Component D
Raw material Y
Component F

6. 6
MRP Example of BOM
Top
Leg
Short Rail
Long Rail
16-6

7. 7
BOM (Product Structure)
Table (End Item)
1 week
Leg Assembly (1)
1 week
Short Rails (2) Long Rails (2)
1 week
1 week
Top (1)
2 weeks
Legs (4)
1 week
16-7

8. Example of MRP Logic and
Product Structure Tree
Given the product structure tree for “A” and the lead time and
demand information below, provide a materials requirements
plan that defines the number of units of each component and
when they will be needed
Product Structure Tree for Assembly A
A
B(4)
D(2)
C(2)
E(1)
D(3)
F(2)
Lead Times
A
1 day
B
2 days
C
1 day
D
3 days
E
4 days
F
1 day
Total Unit Demand
Day 10 50 A
Day 8
20 B (Spares)
Day 6
15 D (Spares)
8

9. 9
First, the number of units of “A” are scheduled
backwards to allow for their lead time. So, in the
materials requirement plan below, we have to place
an order for 50 units of “A” on the 9th day to receive
them on day 10.
Day:
A Required
Order Placement
1
2
3
4
5
6
7
8
9
50
LT = 1 day
10
50

10. 10
Next, we need to start scheduling the components that make up
“A”. In the case of component “B” we need 4 B’s for each A.
Since we need 50 A’s, that means 200 B’s. And again, we back
the schedule up for the necessary 2 days of lead time.
Day:
1
2
3
4
5
20
LT = 2
A
B(4)
D(2)
D(3)
9
50
200
200
Spares
4x50=200
C(2)
E(1)
7
8
20
A Required
Order Placement
B Required
Order Placement
6
F(2)
10
50

11. Finally, repeating the process for all components, we have the
final materials requirements plan:
Day:
A
LT=1
B
LT=2
C
LT=1
D
LT=3
E
LT=4
F
LT=1
1
2
4
5
6
20
7
8
9
20
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
3
11
10
50
50
200
200
100
55
20
55
20
400
400
100
300
200
300
200
200
200
A
B(4)
D(2)
Part D: Day 6
C(2)
E(1)
D(3)
40 + 15 spares
F(2)
©The McGraw-Hill Companies, Inc., 2001

12. Master Production Schedule
(MPS)

12
Time-phased plan specifying how
many and when the firm plans to build
each end item
Aggregate Plan
Aggregate Plan
(Product Groups)
(Product Groups)
MPS
(Specific End Items)

13. 13
Types of Time Fences

Frozen
–
No schedule changes allowed within this
window

Moderately Firm
–
Specific changes allowed within product
groups as long as parts are available

Flexible
–
Significant variation allowed as long as overall
capacity requirements remain at the same
levels

14. 14
Example of Time
Fences
Moderately
Firm
Frozen
Flexible
Capacity
Forecast and available
capacity
Firm Customer Orders
8
15
Weeks
26

15. Materials Requirement
Planning System
Based on a Master Production
Schedule, a Materials Requirement
Planning system:
• Creates schedules identifying the specific
parts and materials required to produce End
Items
• Determines exact unit numbers needed
• Determines the dates when orders for those
materials should be released – based on
Leadtimes
15

16. 16
Aggregate
product
plan
Firm orders
from known
customers
Engineering
design
changes
Master production
Schedule (MPS)
Bill of
material
file
Primary reports
Planned order schedule for
inventory and production
control
Materials
Planning
(MRP
computer
program)
Forecasts
of demand
from random
customers
Inventory
transactions
Inventory
record file
Secondary reports
Exception reports
Planning reports
Reports for performance
control
©The McGraw-Hill Companies, Inc., 2004

17. 17
Bill of Materials (BOM) File
A Complete Product Description
• Materials
• Parts
• Components
• Production sequence
• Modular BOM
• Subassemblies
• Super BOM
• Fractional options

18. 18
Inventory Records File
• Each inventory item carried as a
separate file
• Status according to “time buckets”
• Pegging each parent item that created
Identify
• demand

19. 19
Primary MRP Reports
• Planned orders to be released at a future time
• Order release notices to execute the planned
•
•
orders
Changes in due dates of open orders due to
rescheduling
Cancellations or suspensions of open orders
due to cancellation or suspension of orders on
the master production schedule
• Inventory status data

20. 20
Secondary MRP Reports
• Planning reports, for example, forecasting
•
•
inventory requirements over a period of
time
Performance reports used to determine
agreement between actual and
programmed usage and costs
Exception reports used to point out
serious discrepancies, such as late or
overdue orders

21. 21
Additional MRP Scheduling
Terminology
• Gross Requirements
• Scheduled receipts
• Projected available balance
• Net requirements
• Planned order receipt
• Planned order release

22. 22
MRP Example
Item
X
A
B
C
D
X
A(2)
C(3)
B(1)
C(2)
On-Hand Lead Time (Weeks)
50
2
75
3
25
1
10
2
20
2
D(5)
Requirements include 95 units (80 firm orders and 15 forecast) of X
Requirements include 95 units (80 firm orders and 15 forecast) of X
in week 10
in week 10

23. 23
Day:
X
A(2)
It takes
It takes
2 A’s for
2 A’s for
each X
each X
X
LT=2
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
1
2
3
4
5
6
7
8
9
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
20
40
45
10 10
10
10
35
25
10
35
35
40
40
40
100
20 20
20
20
20
80
20
20
80
80
25
20
20

24. 24
Day:
X
LT=2
X
A(2)
B(1)
It takes
It takes
1 B for
1 B for
each X
each X
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
1
2
3
4
5
6
7
8
9
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
20
40
45
10 10
10
10
35
25
10
35
35
40
40
40
100
20 20
20
20
20
80
20
20
80
80
25
20
20

25. 25
Day:
X
LT=2
X
A(2)
C(3)
It takes 3
It takes 3
C’s for
C’s for
each A
each A
B(1)
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
1
2
3
4
5
6
7
8
9
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
20
40
45
10 10
10
10
35
25
10
35
35
40
40
40
100
20 20
20
20
20
80
20
20
80
80
25
20
20

26. 26
Day:
X
LT=2
X
A(2)
C(3)
B(1)
C(2)
It takes 2
It takes 2
C’s for
C’s for
each B
each B
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
1
2
3
4
5
6
7
8
9
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
20
40
45
10 10
10
10
35
25
10
35
35
40
40
40
100
20 20
20
20
20
80
20
20
80
80
25
20
20

27. 27
Day:
X
LT=2
X
A(2)
C(3)
B(1)
C(2)
It takes 5
It takes 5
D’s for
D’s for
each B
each B
D(5)
Onhand
50
A
LT=3
Onhand
75
B
LT=1
Onhand
25
C
LT=2
Onhand
10
D
LT=2
Onhand
20
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
Gross requirements
Scheduled receipts
Proj. avail. balance
Net requirements
Planned order receipt
Planner order release
1
2
3
4
5
6
7
8
9
10
95
50 50
50
50
50
50
50
50
50
50
45
45
45
90
75 75
75
75
75
75
75
75
15
15
15
45
25 25
25
25
25
25
20
40
45
10 10
10
10
35
25
10
35
35
40
40
40
100
20 20
20
20
20
80
20
20
80
80
25
20
20

28. 28
Closed Loop MRP
Production Planning
Master Production Scheduling
Material Requirements Planning
Capacity Requirements Planning
No
Feedback
Realistic?
Yes
Execute:
Capacity Plans
Material Plans
Feedback

29. 29
EVOLUTION OF MRP - II
MRP
MPS
PPC
IC
ENG
CC
-
Materials Requirement Planning
Master Production Schedule
Production Planning and Control
Inventory Control
Engineering Data
Cost Control

30. 30
Manufacturing Resource Planning
(MRP II)

Goal: Plan and monitor all resources of
a manufacturing firm (closed loop):
–
–
marketing
–
finance
–

manufacturing
engineering
Simulate the manufacturing system

31. 31
Question Bowl
Which type of industry has only “medium”
expected benefits from the use of MRP?
a.
Assemble-to-stock
b.
Fabricate-to-stock
c.
Assemble-to-order
d.
Fabricate-to-order
e.
Process
Answer: e. Process

32. 32
Question Bowl
a.
b.
c.
d.
e.
To ensure good master scheduling, a master
scheduler must do which of the following?
Never lose sight of the aggregate plan
Identify and communicate all problems
Be involved with customer order promising
Be visible to all levels of management
All of the above
Answer: e. All of the above (Correct answer can also
include objectively trade off manufacturing, marketing,
and engineering conflicts and include all demands from
product sales, warehouse replenishment, spares, and
interplant requirements.)

33. 33
Question Bowl
The purpose of a “time fence” is which of the
following?
a.
Make sure the cows don’t get out of the barn
b.
Control flow through the production system
c.
Maximize sales to retailers
d.
All of the above
e.
None of the above
Answer: b. Control flow through the
production system

34. 34
Question Bowl
Which of the following is an objective under an
MRP system?
a.
To improve customer service
b.
Minimize inventory investment
c.
Maximize production operating efficiency
d.
All of the above
e.
None of the above
Answer: d. All of the above

35. 35
Question Bowl
a.
b.
c.
d.
e.
Which of the following is one of the three
main inputs into an MRP system?
BOM file
Exception report
Planning report
All of the above
None of the above
Answer: a. BOM file (Correct answer can
also include Master Schedule and Inventory
Records File.)

36. 36
Question Bowl
An MRP program accesses the status of a job
according to specific time periods called which
of the following?
a.
Peg record
b.
Time fence
c.
Time bucket
d.
Time clock
e.
None of the above
Answer: c. Time bucket

37. 37
Question Bowl
In MRP, workload per work center can be
determined. When the work capacity is
exceeded, which of the following options can be
implemented to correct the imbalance of
workload?
a.
Work overtime
b.
Renegotiate the due date and reschedule
c.
Subcontract to an outside shop
d.
All of the above
e.
None of the above
Answer: d. All of the above (Correct answer can also
include selecting an alternative work center and
rescheduling the work at a different time.)

38. 38
Question Bowl
Which of the following are reasons why a Lot-ForLot (L4L) method of lot sizing can be used in an
MRP application?
a.
Minimizes carrying costs
b.
Sets planned orders to exactly match the net
requirements
c.
Produces exactly what is needed
d.
Does not carry any units over into future periods
e.
All of the above
Answer: e. All of the above