Material Requirement Planning

Three Functions of MRP

Three Functions of MRP

• Order Plan and COntrol

• Priority Plan and control

• Provision of a basis for planning capacity requirements and development of broad business plans

EXAM: What is the input for MRP systems?

• Establishes minimum planning horizon

• Includes time fence (time bucket)

• Includes varying levels of detail within time bucket

BOM stands for

Bill of material

BOM structure Tree

• Items above given level are called parents

• Items below given level are called components or children

BOM HAS 2 bills…

Single-Level Bill vs. Multilevel bill

BOM containts a list of

components, ingredients, and materials needed to make product

Time-Phased inventory Status record

-gross requirements

Scheduled receipts

on-hand Projections

Net Required

Plan order Releases

Plan order releases (POR) Lot-for-lot ordering process

a lot-sizing technique that generates exactly what is required to meet
the plan. In other words, the order or production quantity
matches the net requirements without excess or shortag

Gross Requirements (GR)

the total demand for a product or material without considering any adjustments for existing inventory levels or orders that have already been placed

Scheduled Receipts (SR)

The expected or planned quantity of
materials or products that will be received at a specific future date

On-Hand Projections (OH)

the anticipated or projected quantity of inventory that a business expects to have available at a specific future date. (whatever left to use

Net Required (NR)

the number of item you need to order. The result of
adjusting gross requirements for inventory on hand and scheduled receipts.

Planned Order releases (POR)

the quantity
of Net requirements that are planned to be ordered or
manufactured in the beginning of the period OR the
scheduled date for an order to be released

Planned Order receipt =

Net Required (NR)

Lot-for-lot Ordering Process

a lot-sizing technique that generates exactly what is required to meet
the plan. In other words, the order or production quantity
matches the net requirements without excess or shortage.

Exact amt of net requirement = to what we are ordering for our suppliers

Net requirement formula

[Gross Req + Safety Sock] - [On hand + Sched. Receipts]