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MRP System Structure

The MRP system most closely interacts with the MPS schedule, the bill of materials file. the  inventory records file, and the output reports. Exhibit 17.6 shows a portion of Exhibit 15.1in Chapter J 5 with several additions. Note that capacity is not addressed here. nor are there any feedback loops to higher levels. We discuss these elements later in this chapter under MRP II and capacity requirements planning. Each facet of Exhibit 17.6 is subsequently explained in more detail. but essentially the MRP system works as follows: Forecasted sales and firm orders for products are used to create  an MPS. which states the number of items to be produced during specific time periods.A bill of materials file identifies the specific materials used to make each item and the correct uantities of each. The inventory records file contains data such as the number of units  on hand and on order. These three sources-(a) the MPS, (b) the bill of materials file. and ‘wi(e) the inventory records file-become the data sources for the MRP program.


essentially expands or “explodes” the MPS into a detailed order scheduling plan for the entire production sequence

Demand for Products

As stated earlier. the demand for end item is primarily derived from two sources: The first  is known customers who have placed specific orders. such as those generated by sales personnel,or from interdependent transactions. These orders usually carry promised delivery dates. There is no forecasting involved in these orders-we simply add them up. The second source is forecasted demand. These are tae normal independent-demand orders; the forecasting  models presented in Chapter 9 can be used to predict the quantities. The demand fom both the known customers and the forecast demand are used as inputs for developing the MPS.

Available-to-Promise When a firm manufactures products to meet a projected sales  forecast, the MPS also can provide information on the quantities and dates when specificproducts and models will be available for delivery. The quantities and delivery dates of these products that have not been previously committed are often referred to as availableto- promise ..As an illustration, a firm has scheduled to. build 100 units of a given product during the first week of February, of which 35 are to meet specific customer orders and the remaining 65 are to meet forecasted customer orders. However, at a given point in time, for example, the third week in January. the marketing department has already taken orders for 40 of the 65 that are to be built to forecast. This leaves 25 units that are available-to-promise . for delivery during that week.

Demand for Spare Parts and Supplies In addition to the demand for end products, customers also order specific parts and components as spare parts to provide for service and repair. These demands for items less complex than the end product are not usually part of the MPS; instead, they are fed directly into the MRP program at their appropriate levels. That is, they are added in as a gross requirement for that part or component

Bill of Materials File
The bill of materials (BOM) file contains the complete product description, listing not only the materials, parts, and components but also the sequences in which the product is created. The BOM file is often referred to as the product structure or product tree file because it shows how a product is put together. It identifies each item and thequantity used per unit of the item in which it is used. To illustrate this, consider the prduct tree for Product A, as  hown in Exhibit 17.7. Product A consists of two units of Part B and three units of Part C.   Part B consists of one unit of Part D and four units of Part E. Each Part C consists of two units of Part F. five units of Part G. and four units of Part H. In the past, BOM files often have listed subassemblies and part as indented files. This clearly identifies each item and  the manner in which it is assembled because each indentation signifies the components ofthe item. A comparison of the indented files in Exhibit 17.8 with the item structure in Exhibit 17. 7 shows the ease of relating the two displays. From a compute standpoint, however, storing items in indented parts lists is very inefficient. To compute the amount of each i tem nee ed at the lower levels, each item would have to be expanded (“exploded”) and  summed. A mor  efficient procedure is to store parts data in a single-level explosion. Thatis. each item and component is listed showing only its parent and the number of units.


needed per unit of its parent. This avoids duplication because it includes each assembly only once. Exhibit 17.8 shows a comparison between the single-level list and the indented l ist for Product A.A data element (called a pointer or locator) also is contained in eac  file to identify the parent of each part and allow a retracing upward through the process.

Low-Level Coding If all identical parts occur at the same level for each end product.  the total number of parts and materials needed for a product can be easily computed. However.consider Product L shown in Exhibit 17.9a. Notice that Item N in Product B. for example. occur both as an input to L and as an input to M. Item therefore needs to be lowered to level 2 (Exhibit 17.9b) to bring all the Ns down to their lowest common level. Th s is referred to as low-level coding. When all identical items are placed at the same level. it becomes a simple matter for the computer to scan across each level and summarize the number of units of each item required. Similarly, Items Sand T are lowered to level 4.

Inventory Records Filee
The inventory records file in a computerized system can be quite lengthy. Each item in inventory  i carried as a eparate file, and the range of details carried about an item is almostlirnitle . lthough Exhibit 17.10 is from an earlier ver ion of MRP, it shows the variety of information contained in the inventory records files. The MRP program accesses the status   egment of the file according to specific time periods (called time buckets in \IRP <lang). These files are acce e as needed during the program run.


The MRP program performs its analysi from the top of the product structure downward, exploding requirements le.•el by level. There are times, however, when it is desirable – to identify the parent item that caused the materials requirement. The MRP program allows  the creation of a peg record file either separately or as part of the inventory record file.Pegging requirements allows us to retrace a materials requirement upward in the product structure through each level, identifying each parent item that created the demand. Inventory Transactions File The inventory statu file is kept up to date by posting inventory transactions as they occur. These changes are a result of stock receipts and disbursements, ‘crap and obsolescence losse . wrong parts, canceled orders, and so forth


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