Operations and Supply Chain Management The Core

MATERIAL REQUIREMENTS PLANNING chapter 9 279
An MRP record is kept for each item managed by the system. The record contains
gross requirements, scheduled receipts, projected available balance, net requirements,
planned-order receipts, and planned-order releases data. Gross requirements are the total
amount required for a particular item. These requirements can be from external customer
demand and also from demand calculated due to manufacturing requirements. Scheduled
receipts represent orders that have already been released and that are scheduled to arrive
as of the beginning of the period. Once the paperwork on an order has been released, what
was prior to that event’s “planned” order now becomes a scheduled receipt. Projected
available balance is the amount of inventory expected as of the end of a period. This can
be calculated as follows:
Projected Projected
available = available − Gross + Scheduled Planned-
+ order
requirements
balance t balance t receipts t
t–1 receipts t
One thing that needs to be considered is the initial projected available balance. In the
case where safety stock is needed, the on-hand balance needs to be reduced by the safety
stock. So, projected available balance in period zero is on-hand minus the safety stock.
A net requirement is the amount needed when the projected available balance plus the
scheduled receipts in a period are not sufficient to cover the gross requirement. The plannedorder
receipt is the amount of an order that is required to meet a net requirement in the
period. Finally, the planned-order release is the planned-order receipt offset by the lead time.
Beginning with meter A, the projected available balance is 50 units and there are no
net requirements until week 9. In week 9, an additional 1,200 units are needed to cover
the demand of 1,250 generated from the order scheduled through the master schedule. The
order quantity is designated “lot-for-lot,” which means that we can order the exact quantity
needed to meet net requirements. An order, therefore, is planned for receipt of 1,200 units
for the beginning of week 9. Since the lead time is two weeks, this order must be released
at the beginning of week 7.
Meter B is similar to A, although an order for 10 units is scheduled for receipt in
period 5. We project that 70 units will be available at the end of week 5. There is a net
requirement for 400 additional units to meet the gross requirement of 470 units in week 9.
This requirement is met with an order for 400 units that must be released at the beginning
of week 7.
Item C is the subassembly used in both meters A and B. We need additional Cs only
when either A or B is being made. Our analysis of A indicates that an order for 1,200 will
be released in week 7. An order for 400 Bs also will be released in week 7, so the total
demand for C is 1,600 units in week 7. The projected available balance is the 40 units
on-hand minus the safety stock of 5 units we have specified, or 35 units. In week 7, the
net requirement is 1,565 units. The order policy for C indicates an order quantity of 2,000
units, so an order receipt for 2,000 is planned for week 7. This order needs to be released
in week 6 due to the one-week lead time. Assuming this order is actually processed in the
future, the projected available balance is 435 units in weeks 7, 8, and 9.
Item D, the transformer, has demand from three different sources. The demand in week
6 is due to the requirement to put Ds into subassembly C. In this case, two Ds are needed
for every C, or 4,000 units (the product structure indicates this two-to-one relationship).
In the seventh week, 1,200 Ds are needed for the order for 1,200 As that are scheduled to
be released in week 7. Another 270 units are needed in week 9 to meet the independent
demand that is scheduled through the master schedule. The projected available balance at
the end of week 4 is 280 units (200 on-hand plus the scheduled receipt of 100 units minus