Requirements planning provides a framework for managing production. In the last two decades the most widely used term for this framework has been materials requirements planning (MRP) because in its earliest versions it focused on managing materials. Later on, the same concepts were applied in situations where it was also important to consider workerhours. This extension gave rise to procedures for capacity requirements planning. Beyond labor and material, further applications dealt with equipment, tooling and other resources. These variations gave rise to the broader term manufacturing resource planning, which is often referred to as MRP II. At the core of all these approaches is the logic of material requirements planning, and so we can think of our subject as MRP-based systems for planning and control of production, or simply MRP systems. In this note, we review this framework, and examine a number of models appropriate for use with MRP. It is often useful to think of MRP as primarily a management information system rather than a decision-making system. From this viewpoint an MRP system takes production decisions, records the implications of those decisions in an appropriate database, and conveys the implications in various reports and signals. It may also collect status information about production. By contrast, the decision-making process itself identifies production situations where a course of action must be determined, considers a number of alternatives, and selects an action according to a particular criterion. The MRP system then helps to formulate and implement those decisions. The distinction between information gathering and decisionmaking is helpful because the models we consider attempt to formalize decisions made in production planning and control. The MRP framework provides the context for those decisions. We can think of this framework as appropriate for the manufacture of complex products. (We usually think in terms of assembling a discrete product from various components, but the ideas have also been applied in process manufacturing and in the provision of services.) The final product is called an end item. A generic description of the end item might look like the diagram shown in Figure 1. This diagram shows a product structure; that is, a specification of the sequence in which purchased parts, fabricated components, and subassemblies are processed and brought together to form the end item. The end item is said to be at the top level, or level 0, in this diagram. The subassemblies that are brought together directly to form the end item are at level 1, their subassemblies are at level 2, and so on. Moving down the diagram is analogous to reversing the production operations and disassembling the product into its constituent parts. This process terminates at nodes on the diagram corresponding to parts and raw materials that are purchased as inputs. This teaching note was adapted from Chapter 12 of Logistics of Production and Inventory (Handbooks in Operations Research and Management Science, Volume 4) by Prof. Kenneth R. Baker of the Tuck School of Business at Dartmouth
An Introduction to MRP (with Practice Problems)
Figure 1. A Product Structure Diagram.
An important distinction can be drawn between the demand for the end item and demand for one of its components. We say that end item demand is independent demand, whereas component demand is dependent demand. Independent demand occurs externally, and independent demand quantities are determined by the customer. Dependent demand, by contrast, is derived from the need to assemble an end item, and dependent demand quantities are determined by the technological design of the product. (This distinction is not always complete; in Figure 1, there could be independent demand for part 6 – as a spare – as well as dependent demand for the same part required in the end item.) The reason for this distinction...