Operations and Supply Chain Management The Core

MATERIAL REQUIREMENTS PLANNING chapter 9 285
Least Unit Cost Run Size for an MRP Schedule
exhibit 9.17
WEEKS QUANTITY ORDERED CARRYING COST ORDER COST TOTAL COST UNIT COST
1 50 $ 0.00 $47.00 $47.00 $0.9400
1–2 110 3.00 47.00 50.00 0.4545
1–3 180 10.00 47.00 57.00 0.3167
1–4 240 19.00 47.00 66.00 0.2750
1–5 335 38.00 47.00 85.00 0.2537 1st order
1–6 410 56.75 47.00 103.75 0.2530 Least unit cost
1–7 470 74.75 47.00 121.75 0.2590
1–8 525 94.00 47.00 141.00 0.2686
? 60 0.00 47.00 47.00 0.7833 2nd order
7–8 115 2.75 47.00 49.75 0.4326 Least unit cost
WEEK NET REQUIREMENTS PRODUCTION QUANTITY ENDING INVENTORY HOLDING COST SETUP COST TOTAL COST
1 50 410 360 $18.00 $47.00 $ 65.00
2 60 0 300 15.00 0.00 80.00
3 70 0 230 11.50 0.00 91.50
4 60 0 170 8.50 0.00 100.00
5 95 0 75 3.75 0.00 103.75
6 75 0 0 0 0.00 103.75
7 60 115 55 2.75 47.00 153.50
8 55 0 0 0 0.00 $153.50
CONCEPT CONNECTIONS
LO9–1 Explain what material requirements planning (MRP) is.
∙ An enterprise resource planning (ERP) system integrates application programs in
accounting, sales, manufacturing, and the other functions in a firm. MRP is typically an
application within the ERP system.
∙ MRP is the logic that calculates the number of parts, components, and other materials
needed to produce a product.
∙ MRP determines detailed schedules that show exactly what is needed over time.
∙ MRP is most useful in industries where standard products are made in batches from common
components and parts.
∙ The master production schedule (MPS) is a plan that specifies what will be made by a
production system in the future.
∙ The items scheduled in the MPS are referred to as “end items” and represent the products
that drive the requirements for the MRP system.
∙ The MPS is a plan for meeting all the demands for the end items, including customer
demand, the demand for replacements, and any other demands that might exist.
∙ Often, “time fences” are used in the MPS to make the schedules calculated by the MRP
system stable and ensure their feasibility. When the MPS is based on forecast demand, rather
than actual demand, a feature known as “available to promise” is often used that identifies