Operations Management: Material Requirements Planning (MRP) for Product K and its Components

This case study explores the application of Material Requirements Planning (MRP) in operations management. We're dealing with Product K, which has a specific bill of materials (BOM) structure: 2 units of component A are needed per unit of K, 5 units of B per K, 1 unit of B per A, 3 units of C per A, and 2 units of D per A.

The demand for Product K is as follows: 100 units in week 4, 200 units in week 5, and 100 units in week 8. Product K has a lead time of one week and no inventory on hand. A Lot for Lot ordering policy is used.

Components A, B, C, and D also have lead times of one week, and their respective starting inventories are 100, 120, 50, and 100 units.

Specific ordering policies apply to each component:

• Component A: Minimum order quantity is 250 units, Lot for Lot ordering, and safety stock is 50 units.
• Component B: Minimum order quantity is 600 units, Lot size is 300 units, and safety stock is 0 units.
• Component C: Minimum order quantity is 800 units, Lot for Lot ordering, and safety stock is 50 units.
• Component D: Minimum order quantity is 400 units, Lot size is 400 units, and safety stock is 0 units.

Objective:

1. Generate a Master Production Schedule (MPS) for Product K from week 1 to week 8.
2. Generate separate MRP worksheets for components A, B, C, and D. Each table will include the following columns: Week, Gross Requirements, Projected On Hand, Net Requirements, Planned Order Receipt, and Planned Order Release.

MPS for Product K:

| Week | MPS | |---|---| | 1 | 0 | | 2 | 0 | | 3 | 0 | | 4 | 100 | | 5 | 200 | | 6 | 0 | | 7 | 0 | | 8 | 100 |

MRP Worksheet for Component A:

| Week | Gross Requirements | Projected On Hand | Net Requirements | Planned Order Receipt | Planned Order Release | |---|---|---|---|---|---| | 1 | 0 | 100 | 0 | 0 | 0 | | 2 | 0 | 100 | 0 | 0 | 0 | | 3 | 0 | 100 | 0 | 0 | 0 | | 4 | 200 | 100 | 100 | 250 | 100 | | 5 | 500 | 0 | 500 | 750 | 500 | | 6 | 0 | 0 | 0 | 0 | 0 | | 7 | 0 | 0 | 0 | 0 | 0 | | 8 | 100 | 0 | 100 | 350 | 100 |

MRP Worksheet for Component B:

| Week | Gross Requirements | Projected On Hand | Net Requirements | Planned Order Receipt | Planned Order Release | |---|---|---|---|---|---| | 1 | 0 | 120 | 0 | 0 | 0 | | 2 | 0 | 120 | 0 | 0 | 0 | | 3 | 0 | 120 | 0 | 0 | 0 | | 4 | 500 | 120 | 380 | 600 | 600 | | 5 | 1000 | 0 | 1000 | 900 | 900 | | 6 | 0 | 0 | 0 | 0 | 0 | | 7 | 0 | 0 | 0 | 0 | 0 | | 8 | 500 | 0 | 500 | 800 | 800 |

MRP Worksheet for Component C:

| Week | Gross Requirements | Projected On Hand | Net Requirements | Planned Order Receipt | Planned Order Release | |---|---|---|---|---|---| | 1 | 0 | 50 | 0 | 0 | 0 | | 2 | 0 | 50 | 0 | 0 | 0 | | 3 | 0 | 50 | 0 | 0 | 0 | | 4 | 300 | 50 | 250 | 800 | 800 | | 5 | 900 | 0 | 900 | 950 | 950 | | 6 | 0 | 0 | 0 | 0 | 0 | | 7 | 0 | 0 | 0 | 0 | 0 | | 8 | 150 | 0 | 150 | 950 | 950 |

MRP Worksheet for Component D:

| Week | Gross Requirements | Projected On Hand | Net Requirements | Planned Order Receipt | Planned Order Release | |---|---|---|---|---|---| | 1 | 0 | 100 | 0 | 0 | 0 | | 2 | 0 | 100 | 0 | 0 | 0 | | 3 | 0 | 100 | 0 | 0 | 0 | | 4 | 200 | 100 | 100 | 400 | 400 | | 5 | 400 | 0 | 400 | 800 | 800 | | 6 | 0 | 0 | 0 | 0 | 0 | | 7 | 0 | 0 | 0 | 0 | 0 | | 8 | 200 | 0 | 200 | 600 | 600 |

Note:

• This example utilizes Lot for Lot ordering for Product K and Components A and C. This means that planned order releases exactly match the net requirements in each week.
• Component B and D use Lot size ordering, which results in orders placed for a specific quantity (300 units for B, 400 units for D) rather than meeting the precise net requirement.
• The safety stock levels are considered in the projected on-hand calculations. For instance, in week 4 for component A, the safety stock of 50 units is included in the projected on-hand inventory (100 + 50 = 150), leading to a net requirement of 100 units (200 – 150 = 100).