Scps -materials_requirements_planning

Materials Requirement Planning
Supply Chain Planning and
Scheduling 1
Supply Chain
Planning and
Scheduling
Material Requirements
Planning
The MPS states the
definitive schedule for
end items… we still
need to plan the
components required to
produce the end items

Scheduling 2
Material
Requirements
Planning
Planning and Control Hierarchy
Material
Requirements
Planning
(MRP)
Master
Production
Schedule
(MPS)
Production
Activity
Control
(PAC)
Sales and
Operations
Planning
(S&OP)
Strategic
Business
Plan
TimeScope
Level of Detail
Low High
Short
Long
Master Plan
Planning Phase
Implementation
phase

Scheduling 3
Links To Other MPC Functions
Major Objectives of MRP
Determine Requirements from Purchasing and
Production
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
Adjustment to changing situations

Scheduling 4
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 such as availability, allocation, and availability
for future demand
Bills of material for MPS items
MPS
MRP
Inventory
Records
Bill of
Materials
At the MRP level there is
a key difference from the
previous steps in the
planning process… it is
the way in which demand
requirements are
calculated

Scheduling 5
Nature of demand at the MRP level
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
ProductionProduction
PlanPlan
MPSMPS
MRPMRP
The key instrument
used at the MRP level
is the Bill of Materials

Scheduling 6
The Bill of Material (BOM)
The BOM shows all the parts required to make one 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
Product Tree
The product tree is graphic representation of the bill of
materials
Key concepts: Parent and Component

Scheduling 7
Multilevel bill
Breaks down the BOM into more detail
Single-level bill
Single-level
bill
Multiple bills
Often, two or more products use the same components
5
3In this example we have a
table with a different finishing
(e.g. top with rounded edges)
5

Scheduling 8
Exercise
Given the following parents and components, construct a
product tree. The numbers in brackets show the
quantities required per item.
How many G’s are required to make one A item?
Which components are purchased?
Construct the appropriate single level trees
A B C E
B(2) E(2) G(2) G(4)
C(4) F(1) F(3)
D(3) H(2)
Exercise (cont.)
Construct a product tree. The numbers in brackets show
the quantities required per item.
How many G’s are required to make one A item?

Scheduling 9
Exercise (cont.)
Which components are purchased?
Construct the appropriate single level trees
There are other
representations of
the bill of materials

Scheduling 10
Summarized parts list
Lists all the parts required to make one complete
assembly, but does not contain information about the
way the product should be made or assembled
Indented BOM
The indentation is used to show parent-component
relationships

Scheduling 11
Planning Bill of Material
Artificial grouping of components for Planning
Purposes
Used to simplify
Forecasting
Planning
Master Scheduling
Represent an average, not buildable product
Planning Bill of Material

Scheduling 12
The Bill of Material (BOM)
The BOM shows all parts to make one 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
Product tree
Parent - component
Single / Multiple level bill
Other presentations of the BOM
Indented BOM
Summarized part list
Planning BOM
“Where-used” and “Pegging” data
Where-used report
It is the reverse of the BOM, it lists all the parents for
a given component
Pegging report
It is like the where-used report, but it shows only the
parents creating the current demand for the
components, the quantities needed and when they
are needed

Scheduling 13
Pegged report
A
C B
C D
Pegged Requirements
Item
number
Week
1 2 3 4 5
C 50 125 25 50 150
Demand for part C comes from
product A and part B
MPS
Week 1 2 3 4 5
A 50 25 25 50 50
Source of requirements (Where Used)
A 50 25 25 50 50
B 100 100
(Fixed Order Policy for part B)
How do we prepare
the Material
Requirements Plan?

Scheduling 14
The MRP Planning Process
Determines
Components needed
Quantities
Due dates
Involves
Exploding and offsetting
Gross and Net requirements
Releasing orders
Capacity Requirements Planning
Low-level coding and netting
Multiple Bill of Materials
MPS
MRP
Inventory
Records
Bill of
Materials
Exploding and Offsetting
Exploding: The process of multiplying the requirements
by the usage quantity for all items throughout the product
tree
Offsetting: The process of placing the exploded
requirements in their proper period based on lead time
A
B C
D E
LT: 1 week
LT: 1 weekLT: 1 week
LT: 1 weekLT: 2 weeks
LT: Lead Time

Scheduling 15
Exploding and Offsetting
Planned order:Planned order: A suggested order quantity, release date, and due date created by the system’s
logic. Planned orders are created by the computer, and exist only within the computer, therefore
they can be changed or deleted if conditions change
A
B C
D E
LT: 1 week
Part number
Week
1 2 3 4 5
A
Planned order receipt 50
Planned order release
B
Planned order receipt
C
D
E
Exercise
Using the product tree and lead times above complete the table to determine planned order
receipts and releases. There are 200 Ls required in week 5
M
N O(2)
P Q
LT: 1 week
Part number
Week
1 2 3 4 5
M
Planned order receipt 200
N
O
P
Q

Scheduling 16
Gross requirement: Total independent and dependent
demand for an item or assembly
Net requirement: Requirements after discounting
available inventory, scheduled receipts and safety stock
The planned order release of the parent becomes the
gross requirement of the component
Net requirement = Gross
requirement
Available
inventory
-
Complete the table: Lead time for the part is two weeks
and the lot size is 100 units
Week 1 2 3 4
Gross requirements
Projected available 75
Net requirements
75
100
50
25
45
80
20
100
20
60

Scheduling 17
A
B C
D E
LT: 1 wk
LT: 1 wkLT: 1 wk
LT: 1 wkLT: 2 wks
Part number
Week
1 2 3 4 5
A
Gross requirements
Net requirements
20 20 20 20
30
50
0
30
30
B
Gross requirements
Net requirements
10 10
20
10
30
0
20
20
C
Gross requirements
Projected available
Net requirements
0 0 0
30
30
0
30
30
D
Gross requirements
Projected available
Net requirements
0
20
20
0
20
20
E
Gross requirements
Projected available
Net requirements
0
20
20
0
20
20
In this example we are
using a L4L policy
Releasing Orders
Releasing an order means that authorization is
given to buy or make an item
Planned orders are not real orders yet, they still
have to be released
Placing orders is the material planner’s
responsibility
Orders are released only when the release date
arrives, that usually the current week (week 1)

Scheduling 18
Key points about the basic MRP record
Part number
Week
1 2 3 4 5
A
Gross requirements
Scheduled receipts
Net requirements
10 10 10
10
20
30
50
0
30
30
Time bucket
Planning horizon
Today
Considered available
at the beginning of
the time bucket
Projected on-hand
balance at the end of
the period
Action bucket
The releasing orders process
Check availability of components
If available, allocate necessary quantity to work
order
If not available,
release authorization for purchase or manufacturing,
create scheduled receipt,
cancel planned order receipt, and
Allocate required quantities of a parents components
to that order

Scheduling 19
Part
number
Week
1 2 3 4 5
D
Gross requirements
Scheduled receipts
Projected available
Net requirements
0
20
20
20
0
20
20
E
Gross requirements
Scheduled receipts
Projected available
Net requirements
0
20
20
20
0
20
20
Here, planned orders are released by the planner and
scheduled receipts are created
Scheduled receipt: Open orders released for
processing (production or purchase) scheduled to be
received at a defined time
Open order: A released manufacturing or purchase
order. When goods are available for use the order is
closed and the scheduled receipt disappears
Net requirement calculation: Now it is possible to
consider scheduled receipts
Net requirement = Gross
requirement
Available
inventory
Scheduled
receipt
- -

Scheduling 20
Exercise
Complete the table: Lead time for the item is two weeks
and the lot size is 200 units.
What action should be taken?
Week 1 2 3 4
Gross requirements
Scheduled receipts
Net requirements
50 250
200
100 50
Exercise
Complete the table: Lead time for the item is two weeks
and the lot size is 100 units.
What is the projected available at the end of week 3?
When is it planned to release an order?
Week 1 2 3 4
Gross requirements
Scheduled receipts
Net requirements
20 65
100
35 25

Scheduling 21
Low-Level Coding and Netting
A part may reside at more than one level in a Bill of
Material
The process of collecting gross requirements and netting
can be simplified by using low-level codes
Low-level code: Lowest level on which a part resides
on the Bill of Materials
A
B C
C D
Level
0
1
2
Low-Level Coding
Low-level codes are determined by starting at the lowest
level of a bill of material and working up, recording the
level against the part.
Part C is found at both levels 2 and 1, we assign the
lowest one
This is to make sure we have accounted for all its
sources of demand before exploding it.
A
B C
C D
Level
0
1
2
Part Low-level code
D 2
C 2
B 1
A 0

Scheduling 22
Low-level Coding and Netting
Start at level zero
Look for all low-level zero
parts and record their
gross requirements.
Net their requirements
With all low-level 0
identified it is possible to
start netting and
exploding the
requirements for the
components at the next
level
For this exercise:
Requirements are for 1 unit
All lead times are 1 week
Part
number
Week
1 2 3 4 5
A
Level 0
Gross requirements
Scheduled Receipts
Net requirements
20 20 20 20
30
50
0
30
30
B
Level 1
Gross requirements
Scheduled Receipts
Net requirements
30
Continue at level 1
Repeat the routine
followed in the first step
Notice that B is low-level
code 1, therefore it can be
netted and exploded
However, part C has low-
level code 2, which
means there may be
further requirements.
Therefore, it is not netted
at this point
For this exercise:
Part
number
Week
1 2 3 4 5
B
Level 1
Gross requirements
Scheduled Receipts
Net requirements
10 10 10
20
30
0
20
20
C
Level 2
Gross requirements
Scheduled Receipts
Net requirements
20 30
D
Level 2
Gross requirements
Scheduled Receipts
Projected available
Net requirements
20

Scheduling 23
Continue at low-level 2
Repeat the routine as
before
Now it is found that part C
has low-level 2, there are
no additional
requirements and it can
be netted at this point
The bill of material has
been reached and there is
no need for further
explosion
For this exercise:
Part
number
Week
1 2 3 4 5
A
Gross requirements
Scheduled Receipts
Net requirements
20 20 20 20
30
50
0
30
30
B
Gross requirements
Scheduled Receipts
Net requirements
10 10 10
20
30
0
20
20
C
Gross requirements
Scheduled Receipts
Net requirements
10 10
10
20
0
10
10
30
30
0
30
30
D
Gross requirements
Scheduled Receipts
Projected available
Net requirements
0 0
20
20
0
20
20
Multiple Bills of Material
A part or component may be used in more than one product. The
same procedure that is used for a single bill of material can be used
for multiple products. All bills must be netted and exploded level by
level as in the previous example.
20(1) + 30(2) = 80
Part B Part C

Scheduling 24
Example
A
C(2)
F(2)
B
F(1)
Multiproduct
What if part F is present,
but at different levels?
Apply low-level coding
Example
All lead-times are
1 week
Order policy is
L4L
A
C(2)
F(2)
B
F(1)
Low-level
code
Part number
Week
1 2 3 4 5
0 A
Gross requirements
Scheduled Receipts
Net requirements
20 20 20 20
30
50
0
30
30
0 B
Gross requirements
Scheduled Receipts
Net requirements
10 10
20
30
0
20
20
1 C
Gross requirements
Scheduled Receipts
Net requirements
10 10 10
50
60
0
50
50
2 F
Gross requirements
Scheduled Receipts
Projected available
Net requirements
0
20
20
0
20
20
100
100
0
100
100

Scheduling 25
Well, that’s the MRP
logic, but it is applied
by a software…
What’s the role of
people at the MRP
level of planning?
Planner’s responsibilities for MRP
Release Orders – Production or Purchasing
Reschedule open orders as required
Reconcile errors and search for causes
Solve critical material shortages
Replan
Expedite
Coordinate with other functions to resolve
problems

Scheduling 26
Types of orders used by planners
Planned orders: Planned orders are
automatically scheduled and controlled by the
computer
Released orders: Open orders launched by the
planner. These are substituted in the MRP file as
scheduled receipts.
Firm Planned orders: Orders not yet released,
but “frozen” in quantity and time to reduce
system “nervousness”
%
Messages issued by the MRP software
The software
Nets, explodes requirements offsets, and creates planned
orders.
It does not release orders or reschedules open orders
But it issues messages suggesting the planner to take action
Exception messages
(suggestions for release, possible problems)
(Actions taken by the planner affecting MRP)
Transaction messages

Scheduling 27
Managing the MRP
The planner receives feedback
Suppliers actions
Changes to orders in the factory
Management actions
The planner must evaluate the feedback and
take corrective action considering the following:
Priority: correct amounts and dates
Bottom-up replanning: corrective actions should occur
as low in the product structure as possible
Reducing system nervousness: smoothing reaction
to variability
Example
As the MRP planner, you arrive at work Monday morning and look at the
MRP record for part 2876.
There is an exception message to release planned order of 30 in week 1
The following transactions take place
Only 25 units of the scheduled receipt are received into inventory, the balance is
scrapped
The gross requirement for week 3 is changed to 10
The gross requirement for week 4 is increased to 50
The requirement for week 7 is 15
An inventory count reveals there are 10 more in inventory than the record shows
The 35 gross requirement for week 1 is issued from inventory
The planned order release for 30 in week 1 is released and becomes a scheduled
receipt in week 3
Week 1 2 3 4 5 6 7
Gross requirements
Scheduled receipts
Net requirements
35
30
15
30
10
5
30
15
20
10
30
30
20
10
30
30
15
5
20
15
15
30
Order quantity:
30 units
Lead time:
2 weeks

Scheduling 28
Exercise
Its Monday morning and you have arrived at work.
Complete the following MRP record as it would appear Monday
morning.
During the week the following events occur. Enter them in the MRP
record
The planned order for 100 in week 1 is released
Thirty of the scheduled receipts from week 1 are scrapped
An order for 20 is received for delivery in week 3
An order for 40 is received for delivery in week 6
The gross requirements of 70 in week 1 are issued
Week 1 2 3 4 5
Gross requirements
Scheduled receipts
Net requirements
70
100
40 80 50 40
Order quantity= 100 units
Lead time= 2 weeks
MRP v. MRP II
MRP is a computer based application designed
to manage the large amounts of data and
calculations required to schedule requirements
MRP II deals with other factors influencing
production scheduling
Helps verify and ensure the feasibility of priority plans
by considering capacity
Its objective is to help collect and distribute
information used to coordinate and harmonize the
different functions that have an effect on
manufacturing

Scheduling 29
MRP v. MRP II
Areas outside manufacturing that are included
by using MRP II:
Maintenance management
Cost accounting
Stock management
Sales orders
Procurement
Personnel levels
MRP II requires considerable computing power
due to all the activities connected by it
From MRP II to ERP
Organizations require increasing levels of integration of
information and decision making
This decision making goes beyond that required for
manufacturing to encompass that of the company as a
whole
IT systems have been developed with the purpose of
satisfying these needs
The resulting software solutions are called Enterprise
Resource Planning (ERP)

Scheduling 30
Capacity Requirements Planning
Check against available capacity
Units of output
Standard time
Available time
Utilization
Rated capacity
Calculation of capacity required
Load
Work center load report
Supply Chain
Planning and
Scheduling
Material Requirements
Planning

Scps -materials_requirements_planning

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