Materials Requirements Planning

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

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| Completion status: this resource is considered to be complete.

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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.

## Contents

* 1 Materials Requirements Planning (MRP)
* 1.1 Creating an MRP schedule
* 1.1.1 Netting
* 1.1.2 Backscheduling
* 1.1.3 Exploding
* 2 See Also

## Materials Requirements Planning (MRP)[edit | edit source]

### Creating an MRP schedule[edit | edit source]

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 | WK 10

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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

Item 2001

Item 3001

And following empty MRP table:

| WK 1 | WK 2 | WK 3 | WK 4 | WK 5 | WK 6 | WK 7 | WK 8 | WK 9 | WK 10

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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[edit | edit source]

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 4 | WK 5 | WK 6 | WK 7 | WK 8 | WK 9 | WK 10

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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[edit | edit source]

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 8 | WK 9 | WK 10

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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[edit | edit source]

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 8 | WK 9 | WK 10

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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 8 | WK 9 | WK 10

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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 |  |  |  |  |  |  |  |

## See Also[edit | edit source]

* MPS - Master Production Schedule
* Bill of Material