5. Material Requirements Planning

Material Requirements Planning (MRP) is a material planning methodology developed in the 1970's making use of computer technology. The main features of MRP are the creation of material requirements via exploding the bills of material, and time-phasing of requirements using posted average lead times.

MRP II was developed as the second generation of MRP and it features the closed loop system: production planning drives the master schedule which drives the material plan which is the input to the capacity plan. Feedback loops provide input to the upper levels as a reiterative process.

MRP has 2 major objectives: determine requirements and keep priorities current.

Determine requirements through explosion
MRP derives demand for components, subassemblies, materials, etc., from demand for and production schedules of parent items.  The material requirements plan’ s objective is to determine what components are needed to meet the MPS and, based on lead time, to calculate the periods when the components must be available. It must determine the following:
- What to order,
- How much to order,
- When to order,
- When to schedule delivery.

Keep priorities current through offseting
MRP offsets replenishment orders (purchase orders or production schedules) relative to the date when replenishment is needed. The demand for, and supply of, components changes daily. Customers enter or change orders. In this ever-changing world, a MRP must be able to keep plans current. It must be able to add and delete, expedite, delay and change orders.

Nature of demand
There are 2 types of demand: independent and dependent. Independent demand is not related to the demand for any other product. It must be forecast. However, since dependent demand is directly related to the demand for higher-level assemblies or products, it can be calculated. MRP is designed to this calculation.

An item can have both a dependent and an independent demand. Dependency can be horizontal or vertical. The dependency of a component on its parent is vertical. However, components also depend on each other (horizontal dependency). If one component is going to be a week late then the final assembly is a week late. The other components are not needed until later. Planners are concerned with horizontal
dependency when a part is delayed or there is a shortage, for then other parts will have to be rescheduled.

The MPS drives the MRP. The MRP is a priority plan for the components needed to make the products in the MPS. The plan is valid only if capacity is available when needed to make the components and the plan must be checked against available capacity. The process of doing so is called capacity requirements planning (CRP).

MRP drives , or is input to, Production Activity Control (PAC) and purchasing. MRP plans the release and receipt dates for orders. PAC and purchasing must plan and control the performance of the orders to meet the due dates.

Bill of Materials

The product structure provides a hierarchical classification of the items which form a product. With the product structure, the understanding of the components which compose a product as well as their attributes, can be represented. The product structure shows the material, component parts subassemblies and other items in a hierarchical structure that represents the grouping of items on an assembly drawing or the grouping of items that come together at a stage in the manufacturing process.

In the very early phases of new product design, engineers begin the design by sketching out a structure for the product which identifies the major components and systems that will combine to create the desired product. For each component, existing standard parts and previously designed custom parts must be evaluated for their ability to provide the necessary function. In those cases for which no existing alternative can be identified, the engineer must specify that new parts should be created, and the details of the structure begin to emerge. Product structure management provides the mechanism to capture and manage as-designed product structures with ease. It allows for the creation and re-use of unlimited numbers of parts and assemblies, to provide for many different variations of a basic structure or the creation of complex, one-of-a-kind structures.

Later in the development cycle, engineering parts lists or drawing parts lists are used to create a version of the product structure to support manufacturing. This standalone product structure is called the bill of materials.

Bill of Materials

A bill of material is a formally structured list for an object (semi-finished or finished product) which lists all the component parts of the object with the name, reference number, quantity, and unit of measure of each component. A bill of material can only refer to a quantity greater than or equal to one of an object. It is a product data structure, which captures the end products, its assemblies, their quantities and relationships.

There are usually two kinds of bills of materials needed for a product: engineering and manufacturing BOM. The engineering BOM normally lists items according to their relationships with parent product as represented on assembly drawings. But this may not be sufficient to show the grouping of parts at each stage of the production process nor include all of the data needed to support manufacturing or procurement. These requirements may force the arrangement of the product structure to be different in order to assure manufacturability. Thus, engineering and manufacturing will usually have different valid views for the same product.

Summarized Bill of materials
Summarized Bill of materials contains a bill of materials for Product 1 in which the total usage of each item is collected into a single list for the product. This kind of list is convenient for the master production schedule but results in the duplication assemblies. This implies that each product bill that uses assembly must be changed whenever there is a change in assembly. Furthermore, since lead times of intermediate assemblies cannot be determined, parts are ordered too early the first time they are encountered in the product structure.

Indented bill of materials
Other arrangements used in arranging the bill of materials is by indenting the product data as shown in Figure. One disadvantage of this method is that all components of an assembly are repeated each time the assembly is used, resulting in massive duplication of data.

Single Level Bill Of Material
Maintains a unique end item for each possible configuration. This BOM structure is appropriate for MTS where the MPS is stated in end items. For each end item a single level bill is maintained which contains those components that physically go into the item. The single level BOM is consists of:
· Parent Item no.
· Component Item no.
· The qty needed to make a single parent item.
· The date on which this bill became active.
· The date on which this bill became inactive.
· The operation sequence number where this material is used.

Multi Level Bill of Material
A multi level BOM can be expanded as necessary to adequately describe a product that has subassemblies. When this is done it takes on a multi level tree structure. The tree has several levels. Each part or assembly has given a unique no. It is composed of the building blocks of single level product trees & each subassembly has it’s own BOM, but this has to be defined once & when it is defined it can be used by any other product that requires the same subassembly. The way that a product is defined is a key input to the master schedule.

Planning BOM

It is an artificial grouping of items or events in BOM format used to facilitate master scheduling & material planning. Planning bills are a huge asset to good master schedulers. These planning shortcuts make it easier for master schedulers to maintain the plans without thousands of SKU-level forecasted orders to manipulate. If, for example, in January the forecasted plan for the month of July has 100,000 units and planning bills are used, the requirements driving the material requirements planning (MRP) plan would consist of one BOM (the planning bill) with a quantity of 100,000. The planning bill would take the expected mix and ratio it.

Modular BOM

Subassemblies - links components parts to options. When the combinations of end-item product are many, it is better to use the MPS at the option or module level. The MPS is stated in the terms in which the product is sold not built.

“A type of planning bill that is arranged in product modules or options. It is often used in companies where the product has many optional features, e.g., assemble-to-order companies such as automobile manufacturers”.

 It is artificially arranged according to product modules or options. Modules are std. units that can be prepared in advance of receiving a customer order. The fact that modules are std. means that the producer assumes lower risk in their production to stock against a sales forecast. An option is a customer selectable choice from an offered produce feature. Each option or module will be defined fully in BOM as a single level of BOM. Thus the modular BOM’s structure’s architecture links component parts to options but it doesn’t link either options or components to end item configurations. If the options are simply buildable subassemblies, they should be treated as end items. The use of modular BOM reduces the no. of end items scheduled, facilitates order entry & permits more efficient computer storage & system maintenance.

Common Parts Bill
“A type of planning bill that groups common components for a product or family of products into one bill of material, structured to a pseudo parent item number”. Kitting is a commonly used adaptation of the common parts BOM.

Super Bills of Material

“A type of planning bill, located at the top level in the structure that ties together various modular bills (and possibly a common parts bill) to define an entire product or product family. The quantity per relationship of the super bill to its modules represents the  forecasted percentage of demand of each module. The master-scheduled quantities of the super bill explode to create requirements for the modules that also are master scheduled”.
The super bill ties together several modular bills to define the product structure of the family. It describes the related options or modules that make up the avg end item & exists at the highest level of the structure to tie them together.

Item Where Used Report
Use the Item Where Used Report to report the assemblies that use the inventory items you specify.

Pegging report
In manufacturing, a pegging report is a record showing the relationship between demand and supply. Pegging reports are generated by Material Requirements Planning Systems. This report is used to develop the manufacturing strategies, to order components based upon the requirement proposed by the S&OP Team.
The report shows the creation of demand for the components by the parents, the quantities needed, and the schedule to which they are needed

MRP Process Flow

The three major inputs of an MRP system are the master production schedule, the product structure records, and the inventory status records. Without these basic inputs the MRP system cannot function.

The demand for end items is scheduled over a number of time periods and recorded on a master production schedule (MPS). The master production schedule expresses how much of each item is wanted and when it is wanted. The MPS is developed from forecasts and firm customer orders for end items, safety stock requirements, and internal orders. MRP takes the master schedule for end items and translates it into individual time-phased component requirements.

The product structure records, also known as bill of material records (BOM), contain information on every item or assembly required to produce end items. Information on each item, such as part number, description, quantity per assembly, next higher assembly, lead times, and
quantity per end item, must be available.

The inventory status records contain the status of all items in inventory, including on hand inventory and scheduled receipts. These records must be kept up to date, with each receipt, disbursement, or withdrawal documented to maintain record integrity.

MRP will determine from the master production schedule and the product structure records the gross component requirements; the gross component requirements will be reduced by the available inventory as indicated in the inventory status records.

Information Needed for MRP

Information Obtained from MRP