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Material Requirements
Planning
ISQA 459 Class 4 Mellie Pullman

Materials Requirements
Planning
 Material Requirements Planning (MRP)
 MRP Logic and Product Structure
Trees
 MRP Example
 Lot Sizing in MRP Programs

Planning
 Materials requirements planning (MRP)
is the logic 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.

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
B(4)
D(2) E(1)
C(2)
A
D(3) F(2)
Lead Times
A 1 day
B 2 days
C 1 day
D 3 days
E 4 days
F 1 day
Demand
Day 10 50 A
Day 8 20 B (Spares)
Day 6 15 D (Spares)

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” in the 9th
week to receive them in the 10th week.
Day: 1 2 3 4 5 6 7 8 9 10
A Required 50
Order Placement 50
LT = 1 day

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.
D a y : 1 2 3 4 5 6 7 8 9 1 0
A R e q u i re d 5 0
O rd e r P la c e m e n t 5 0
B R e q u i re d 2 0 2 0 0
O rd e r P la c e m e n t 2 0 2 0 0
Spares
LT = 2
B(4)
D(2) E(1)
A 4x50=200
C(2)
D(3) F(2)

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

Planning System
 Based on a master production
schedule, a material requirements
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 lead times.

Firm orders
from known
customers
Forecasts
of demand
from estimates
Aggregate
product
plan
Master
production
schedule
(MPS)
Material
planning
(MRP)
Engineering
design
changes
Bill of
material
file
Inventory
transactions
Inventory
record
file
Reports
9

Bill of Materials (BOM) File
A Complete Product Description
 Materials
 Parts
 Components
 Production sequence
 Modular BOM
 Component or Subassemblies BOM
 Planning BOM or kits
 create an artificial parent to the BOM used for
inexpensive items like washers or pins to group.
 Explosion: revealing the requirements for each
component.

Coding
 If identical items
exist at various
levels in the BOM:
 Item is coded at
lowest level at which
it occurs
 D (Level 2 or Level
3)
 This number
identifies the part at
the lowest level of
usage.
A
B C
D E E F
G D

Inventory Records File
 Buckets= time units in MRP system
 Week bucket vs. day bucket
 Each inventory item carried as a separate
file
 Status according to “time buckets”.
 Pegging
 Identify each parent item that created demand.
 Parent vs. child
 Parent= Items above the current level
 Child = Items below the current level

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.

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.

Additional MRP Scheduling
Terminology
 Gross Requirements: needed during each period.
 Scheduled Receipts: Existing orders that arrive at beginning
of period.
 On-hand or available balance:
 (depending on software convention, could be at the beginning
of each period or end):
 Book: Inventory balance at end of each period.
 Net requirements: What is need to meet requirements and
safety stock.
 Planned order receipt: arrives at beginning of period.
 Planned order release: Addresses lead time.

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

Lot Sizing in MRP
Programs
 Lot-for-lot (L4L)
 Economic order quantity (EOQ)
 Least total cost (LTC)
 Least unit cost (LUC)
 Part Period Balancing-changing lot
sizes to reflect requirements in the
future (how many periods should be
combined to reduce cost)

MRP Game
Different types of lot sizes

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