Material Requirement Planning

Material Requirement Planning

Assumptions

The following assumptions implied in the creation of Material Requirement Planning (MRP):

1. The lot size for each month is constant throughout the entire year.
2. There is no margin of error in the demand focused for each year.
3. Any excessive purchase for a particular month serves as an opening balance for the subsequent period.
4. The supply chain represents a perfect market without any changes in the demand or supply within the twelve months of extrapolation.

Lot Sizes for X52

The lot sizes for each month are maintained constant. As a result, the months with a lower demand leads to a surplus in production which is factored in the calculation for the gross requirement in the following months. For instance, the lot size for January is 3,000, while the demand for the same period is 2,700. The first month in the MRP, therefore, has a deficit of 300. The implication is that February will have a surplus twice that of January.

Current 23A, 46B, 29C

The amount of 23A required to produce the lot sizes per month is calculated from the material consumed. To make a single product, it requires 2, 1, and 3 units of 23A, 46B, and 29C, respectively. The table below shows the number of the raw materials required in making the lot sizes for one month.

Table of Current Materials

Therefore, 6,000, 3000, and 9,000 of 23A, 46B, and 29C are required in the manufacture of the 3,000 Lot sizes per month.

Ending Inventory

The ending inventory takes into account the surplus production for each month (NC State University, 2011). The column assumes that all the demanded products for a particular month are sold. As a result, at the end of the sales for each month, the starting balance for the next month is zero. The implication is that apart from January, the forecast ensures that the remaining periods have a closing balance of X52. Similarly, the closing balance of each of the components required in the manufacture of X52 is zero for the entire period except for January. Therefore, the MRP developed to facilitate a job shop production system.

Overproduction

Overproduction refers to the amount of the product produced above the speculated demand (Maxus Knowledge, 2014). Since the lot size is maintained constant for each month, there is an overproduction that spills to the next month. For instance, in January, the lot size is 3,000, yet the demand is 2,700. The difference between the lot sizes and the order is the surplus for a month. Deduction of the excess from the lot sizes for the next month helps in determining the materials required in the supply chain. The approach maintains a steady supply of the product to the customers without any margin of error.

Closed Loop Planning Component of the MRP

Each of the months in the MRP forms the net requirements and release for the subsequent months. Therefore, none of the months is considered independently. Instead, each month is an intricate component of the other in closed-loop planning (Hill & Lewicki, 2007). The MRP attached in the spreadsheet document is thus accurate as long as supply, production, and demand of the products are continuous throughout each of the included periods according to the linear regression statistics (Rutgers University, 2012). Disregard of any of the components invalidates the closed-loop planning component of the MRP.