Materials Requirements Planning

Resource type: this resource contains a tutorial or tutorial notes.

Completion status: this resource is considered to be complete.

This tutorial shows the MRP scheduling which consists of three different processes: Netting, Backscheduling and Exploding. It helps to understand how this works by providing step-by-step instructions and how the MPS change after each step.

Materials Requirements Planning (MRP)

Creating an MRP schedule

The example table for Materials Requirements Planning is shown below:

	WK 1	WK 2	WK 3	WK 4	WK 5	WK 6	WK 7	WK 8	WK 9
Gross requirements	10		20		30		40		50
Scheduled receipts			20
Projected Available		0			-30	0	-40	0	-50
Net requirements					30		40		50
Planned order receipts					30		40		50
Planned order releases		30		40		50

For this learning resource, we assume the product has following Product Structure (Bill of Material):

Item 1001

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Item 2001

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Item 3001

And following empty MRP table:

	WK 1	WK 3	WK 5	WK 7	WK 9
Gross requirements	10	20	30	40	50
Scheduled receipts
Projected Available
Net requirements
Planned order receipts
Planned order releases

Data for Item 1001:

Lead time = 3 weeks
Lot size quantity = lot for lot (any amount can be ordered)
On hand quantity = 10

Data for Item 2001:

Lead time = 1 week
Lot size quantity = 50
On hand quantity = 30

Data for Item 3001:

Lead time = 1 week
Lot size quantity = 100
On hand quantity = 10

The MRP takes the following inputs:

Forecast - gross requirements for the product
Lead time - the time needed for the parts to arrive
Lot size quantity - only multiples of this quantity can be ordered
On hand quantity - quantity currently held in stock
Scheduled receipts - quantity of part still due to arrive (can be counted as 'on hand')

To create Master Production Schedule, we need to know the gross requirements for each week (these are taken from the forecast). Then by using Netting, Backscheduling and Exploding, we find out the net requirements and we create Planned Order Receipts.

The MRP contains tables (similar to the one above) for each item from the Bill of Material. The forecast for the top item (the product) is filled into the gross requirements section for Item 1001.

Netting

Netting creates a planned order receipt for the net requirements. It's calculated by combining quantity on hand with scheduled receipts less gross requirements. The output of this calculation is projected available. Depending on projected available, planned order is created.

If the projected available > 0
or if the projected available = 0

Then no net requirements exists.

If the projected available < 0

Then there is a need to plan for replenishment.

Assuming that there is schedule receipt for 20 parts due to arrive in week 3, we calculate the net requirements for all weeks.

	WK 1	WK 2	WK 3	WK 5	WK 7	WK 9
Gross requirements	10		20	30	40	50
Scheduled receipts			20
Projected Available		0		-30	-40	-50
Net requirements				30	40	50
Planned order receipts				30	40	50
Planned order releases

As we can see, Planned Order Receipts are the same as the Net Requirements. This is because we plan to cover the requirements. '0' results are omitted for the clear view.

Backscheduling

Backscheduling is done when there are planned order receipts from the previous Netting Calculation. Based on Lead Time for the item and the planned order receipt - the Planned Order Release is created. As we can see from the Item 1001 data above - the lead time = 3 weeks. This makes the system to release orders 3 weeks earlier than it is required. (Requirements for 30 in week 5 - released in week 2).

	WK 1	WK 2	WK 3	WK 4	WK 5	WK 6	WK 7	WK 9
Gross requirements	10		20		30		40	50
Scheduled receipts			20
Projected Available		0			-30		-40	-50
Net requirements					30		40	50
Planned order receipts					30		40	50
Planned order releases		30		40		50

Exploding

When the backscheduling is done, the exploding is executed. Exploding process takes a Planned Order at particular level n and explode it using the Bill of Material giving the Gross Requirements for the level n+1 (level below). Resulting output is a set of Gross Requirements for the next item. This is used for the netting of that item. Exploding moves down through the Product Structure level-by-level starting from the Product Level to the Raw Material level. The following table represents this.

	WK 1	WK 2	WK 3	WK 4	WK 5	WK 6	WK 7	WK 9
Item 1001
Gross requirements	10		20		30		40	50
Scheduled receipts			20
Projected Available		0			-30		-40	-50
Net requirements					30		40	50
Planned order receipts					30		40	50
Planned order releases		30		40		50
Item 2001
Gross requirements		30		40		50
Scheduled receipts
Projected Available
Net requirements
Planned order receipts
Planned order releases

The Gross Requirements for the Item 2001 are in bold (as well as where they come from in Item 1001).
The next step is to do Netting for the Item 2001, after which we do backscheduling and new explosion which gives us Item 3001 and so on, always taking the relevant data for the item into consideration (lead times, qty on hand and lot size). Complete MPS will look like the following:

	WK 1	WK 2	WK 3	WK 4	WK 5	WK 6	WK 7	WK 9
Item 1001
Gross requirements	10		20		30		40	50
Scheduled receipts			20
Projected Available	10	0			-30		-40	-50
Net requirements					30		40	50
Planned order receipts					30		40	50
Planned order releases		30		40		50
Item 2001
Gross requirements		30		40		50
Scheduled receipts
Projected Available	30			-40	10	-40
Net requirements				40		40
Planned order receipts				50		50
Planned order releases			50		50
Item 3001
Gross requirements			50		50
Scheduled receipts
Projected Available	10		-40	60	10
Net requirements			40
Planned order receipts			100
Planned order releases		100