IE 376

PRODUCTION INFORMATION SYSTEMS

Course Notes
Lecture #2.A
Material Requirements Planning

IE 376
Bilkent University
 Manufacturing Planning and Control System
Resource Sales and operations Demand
planning planning management

Enterprise Resource Planning (ERP) System

Master production
scheduling Front End

Detailed material Inventory

Routing Bills of
planning status
file material
data
Time-phased
requirement (MRP)
Detailed capacity records
planning Engine
Material and
capacity plans

Shop-floor Supplier Back End

systems systems

6-2
 Materials Requirements Planning (MRP)
• Computer based information system to handle
ordering and scheduling of dependent demand items
• It has been the most widely implemented large scale
production management system with several thousand
systems implemented in industry around the world.
 MRP converts the production plan for final products into
requirements for component items and raw materials:
• What is needed
• When is needed
• How much is needed
When should procurement, fabrication, assembly start
for completing end items on time

Procurement of
Fabrication
raw material D
of part E Subassembly A
Final assembly
Procurement of and inspection
raw material F Procurement of
part C
Procurement of Procurement of
raw material G part H Subassembly B

1 2 3 4 5 6 7 8 9 10 11
 Traditional Inventory Control Approaches

• Two bin policy

(reorder point, fixed batch size)

• Periodic order cycle policy

(fixed period, order up to target inventory
level)
 Key Insight
– Independent Demand
— demand driven by requirements from outside
the firm (e.g. customer orders)
– Dependent Demand
— component or sub-assembly demand driven
by net requirements from the next higher level

It makes no sense to independently forecast

dependent demands.
• Dependent items are needed just prior to when
they are needed for production
• Demand is lumpy
• Little or no safety stock

Independent Demand Dependent Demand

Demand
Demand

“Lumpy” demand
Stable demand
Amount on hand

Amount on hand
Time Time

Safety stock
Time Time
 Inventory Control MRP System
• Part oriented • Product/component oriented
• Replenish Supply • Actual requirements
• Independent demand • Dependent (derived) demand
• Continuous item demand • Discrete/lumpy item demand
• Random demand pattern • Known lumpy demand pattern
• Continuous lead time
demand • No lead time demand
• Reorder point ordering
signal • Time-phased ordering signal
• Historical demand base
• Forecast all items • Future production base
• Forecast master schedule
• Quantity based system items
• Quantity and time-based
system
 Observations
• From control of the level of stock
to discrete control on the flow of material
(MRP orders only what components are required to maintain
manufacturing flow)

• Therefore, a requirements planning system lays the basis for both

production scheduling and raw material purchasing.

• MRP tells user what must be done in order to meet the master schedule, as
opposed to what can be done.

• Master Production Schedule:

• Production Plan for the SKUs (planning unit), on a weekly (planning buckets)
basis for the next quarter (planning horizon)
• Materials Requirement Plan:
• Production/Purchasing Plan for the components/raw materials/assemblies
(planning unit), on a weekly (planning buckets) basis for the next quarter (planning
horizon)
 Basic structure of an MRP system

Master Production
Schedule (MPS)
Master Parts Bill of Materials
Database (BOM)

Open Purchase Explosion of Parent Planned Orders into Open Shop

Orders Component Gross Requirements Orders
Netting to Generate Net Requirements
Lot Sizing and Off-Setting

Planned Order Releases

On Hand Purchasing / Manufacturing
Inventory
Purchase Production
Orders Orders
 Assumptions
1. Known deterministic demands.

2. Fixed, known production lead times.

3. Infinite capacity.

Idea is to “back out” demand for components by

using lead times and bills of material.
 MRP Procedure
1. Netting: Net requirements = Gross requirements -
Projected Inventory - Scheduled Receipts
2. Lot Sizing: Conversion of the net requirement to a
planned order quantity using a lot size
3. Time Phasing: Placing a planned order by backward
scheduling from the required date by the lead time
4. Generating appropriate action and exception messages
5. BOM Explosion: Explosion of parent item production
gross requirements for all components using the BOM
relationships.
 Inputs

Open Orders
 Inputs
– Master Production Schedule (MPS): due dates
and quantities for all top level items
– Bills of Material (BOM): for all parent items
– Inventory Status: On Hand Inventory
– Scheduled Receipts (Open orders)
• Open Purchase Orders
• Open Production Orders
– Planned Lead times: for all items
– Lot sizes and lot sizing rules
– Safety stocks and stocking policies
 MRP Inputs

• Master Production Schedule: Which end items are to

be produced, when these are needed, and in what
quantities.
– The planning horizon is divided into time periods
called time-buckets (typically weeks)
WEEK NUMBER
Item: A 1 2 3 4
Quantity 100

100 units of A needed at beginning of week 3

– The planning horizon should be long enough to
cover the cumulative lead time. (total lead time
required from ordering of parts or raw materials to
completion of final assembly)
 Master Production Schedule
April May

1 2 3 4 5 6 7 8

Ladder-back chair 150 150

Kitchen chair 120 120

Desk chair 200 200 200 200

Aggregate
production plan 670 670
for chair family
 Bill Of Materials (BOM)
A formal/systematic representation of the product structure and the
assembly steps required for its synthesis from its components and
subassemblies. 100 units
022

115 119
(3) (2)

251 252 291 251

(1) (4) (2) (1)

•Subassembly 115: 3x(number of 022) 3x100 300

•Subassembly 119: 2x(number of 022) 2x100 200
•Component 251: 1x(number of 115) 1x300
1x(number of 119) 1x200 500
•Component 252: 4x(number of 115) 4x300 1200
•Component 291: 2x(number of 119) 2x200 400
Bill of Materials

Back slats Seat cushion

Leg supports Seat-frame

boards

Back Front
legs legs A
Ladder-back
chair
Bill of Materials
A
Ladder-back
chair

Back slats Seat cushion

B (1) C (1) D (2) E (4)
Ladder-back Seat Front Leg
subassembly subassembly legs supports

Leg supports Seat-frame

F (2) G (4) H (1) I (1) boards
Back Back Seat Seat
legs slats frame cushion
Back Front
legs legs A
Ladder-back
J (4) chair
Seat-frame
boards
 Other MRP Inputs

• Inventory on Hand
• Scheduled Receipts
• Open Purchase Orders
• Open Production Orders
• Lead time information
• Lot sizing information (policy and parameters)
• Safety stock information (policy and parameters)
 (Production) Lead Times
The expected time interval between the time that the order for
a new production lot is released, and the time that the lot is
available (to be used in the fabrication of its parent component).

Lead times incorporate: set-up times, processing times, transfer

time, and waiting times.

022
1 week

115(3) 119(2)
2 weeks 3 weeks

251(1) 252(4) 291(2) 251(1)

1 week 2 weeks 1 week 1 week
 Lead Time Offsetting

 Gross to net explosion shows how much of

each part is required, but not when
 Timing requires consideration of two factors
⚫ Lead times–how long does it take to obtain
the component or sub-assembly
⚫ Precedent relationships–the order in which
parts must be assembled
 MRP considers both factors when developing
the plan
6-22
“Time-Phased” Product Structure

[1] 251
(1)
[2] 115
(3)
[2] 252
[1]
[1] (4) 022
291
(2) [3] 119
(2)
[1]
251
(1)
5 4 3 2 1

Time in weeks
 Example: Time-Phased
Production Requirements
Part Week
No. 1 2 3 4 5 6 7 Lead Time
Ord. Rec. 100 1 week
022
Ord. Rel. 100
Ord. Rec. 300 2 weeks
115
Ord. Rel. 300
Ord. Rec. 200 3 weeks
119
Ord. Rel. 200
Ord. Rec. 200 300 1 week
251
Ord. Rel. 200 300
Ord. Rec. 1200 2 weeks
252
Ord. Rel. 1200
Ord. Rec. 400 1 week
291
Ord. Rel. 400
 Gross Requirements
The cumulative time-phased demand for a certain part, integrating the part
demand generated from the production plans of its parent items, and also,
additional external demand, arising, for instance, from the need for spare parts,
inter-plant shipments, etc.

A B

C(2) D(1) C(1) E(1)

Item A
Period 1 2 3 4 5 6 7 8 9 10 11 12
……….
Planned Ord. Rel. 30

Item B
Period 1 2 3 4 5 6 7 8 9 10 11 12
…………
Planned Ord. Rel. 30 75

Item C
Period 1 2 3 4 5 6 7 8 9 10 11 12
Gross Requirements 12 10 90 75

Interplant Shipment Service order

 MRP Processing (Explosion Calculus)

• Time-phased requirement of all items using BOM and

lead times. For every item and for every time period
calculate:
– Gross requirements: Total demand
– Scheduled receipts: Orders scheduled to arrive at the
beginning of the period
– Projected available balance: Expected Inventory at the
beginning of the period
– Net requirements: Actual amount needed
– Planned-order releases: Planned amount to order in the
period (P.O.R. offset by lead time)
 Example (Chair Assembly)
Bill-of-Materials (BOM) File: List of all raw materials,
parts, subassemblies needed to produce the product.
– Illustrated using a product-structure tree:

Level
0 Chair

1 Leg Back
Assembly Seat Assembly

Cross Side Cross Back

2 Legs (2)
bar Rails (2) bar Supports (3)

3
 Example (Chair Assembly)

• Suppose that a 100-unit delivery of chairs is

scheduled at the start of week 6. Determine the
size and the timing of back-support parts to meet
this delivery.
LEADTIME
Final Assembly 1 week
Back Assembly 1 week
Back Support Procur. 2 weeks

• The firm has 20 back support units available and

60 more is scheduled to arrive at the beginning
of Week 4.
 Week Number 1 2 3 4 5 6
Part: Chair Gross Requirements 100
LT: 1 Scheduled Receipts
Planned Available Balance
Net Requirements 100
Planned Order Releases 100

Week Number 1 2 3 4 5 6
Part: Back Gross Requirements 100
Assembly Scheduled Receipts
LT: 1 Planned Available Balance
Net Requirements 100
Planned Order Releases 100
 Week Number 1 2 3 4 5 6
Part: Back Gross Requirements 300
Support Scheduled Receipts 60
LT: 2 Planned Available Balance 20 20 20 0
Net Requirements 220
Planned Order Releases 220

• Should Net Requirements = Planned Order Releases?

Lot-for-lot production
• Other common lot sizing rules:
– Economic Order Quantity (EOQ)
– Fixed Period Ordering
(Order to cover a fixed # of coming periods)
• Extra production is carried into future periods as inventory
 Week Number 1 2 3 4 5 6
Part: Back Gross Requirements 300
Support Scheduled Receipts 60
LT: 2 Planned Available Balance 20 20 20 0
Net Requirements 220
Planned Order Releases 220

• Suppose that the lot-size of back support units is 50.

Can only produce at multiples of 50.
Week Number 1 2 3 4 5 6
Part: Back Gross Requirements 300
Support Scheduled Receipts 60
LT: 2 Planned Available Balance 20 20 20 30 30 30
Net Requirements 220
Planned Order Releases 250
 BOM Levels
•Level 0: End Items (SKU’s)
•Level 1: Items that constitute components (are children) of level-0 item(s)
only
•Level 2: Items that are children of level 1, and, potentially, some level 0
items only
•Level i: Items that are children of level i-1, and, potentially, some level 0 to
i-2 item(s) only
A B

C D F D H

E F E C G E C G

E F E F

Level 0: A, B Level 1: D, H Level 2: C, G Level 3: E, F

Inventory Record
Item: C Lot Size: 230 units
Description: Seat subassembly Lead Time: 2 weeks

Week

1 2 3 4 5 6 7 8

Gross
requirements 150 0 0 120 0 150 120 0

Scheduled
receipts 230 0 0 0 0 0 0 0

Planned
Available 37
Balance

Planned
receipts

Planned order
releases
Inventory Record
Item: C Lot Size: 230 units
Description: Seat subassembly Lead Time: 2 weeks

Week

1 2 3 4 5 6 7 8

Gross
requirements 150 0 0 120 0 150 120 0

Scheduled
receipts 230 0 0 0 0 0 0 0

Planned
Available 37
Balance

Planned
receipts Explanation:
Gross requirements are the total demand for
Planned order
the two chairs. Projected on-hand inventory
releases
in week 1 is 37 + 230 – 150
Inventory Record
Item: C Lot Size: 230 units
Description: Seat subassembly Lead Time: 2 weeks

Week

1 2 3 4 5 6 7 8

Gross
requirements 150 0 0 120 0 150 120 0

Scheduled
receipts 230 0 0 0 0 0 0 0

Planned
Available 37 117
Balance

Planned
receipts Explanation:
Gross requirements are the total demand for
Planned order
the two chairs. Projected on-hand inventory
releases
in week 1 is 37 + 230 – 150 = 117 units.
Inventory Record
Item: C Lot Size: 230 units
Description: Seat subassembly Lead Time: 2 weeks

Week

1 2 3 4 5 6 7 8

Gross
requirements 150 0 0 120 0 150 120 0

Scheduled
receipts 230 0 0 0 0 0 0 0

Planned
Available 37 117
Balance

Planned
receipts Scheduled
Planned available Inventory on Gross
or planned
balance at end of
Planned order = hand at end of + receipts in – requirements
releases week t week t - 1 in week t
week t
Inventory Record
Item: C Lot Size: 230 units
Description: Seat subassembly Lead Time: 2 weeks

Week

1 2 3 4 5 6 7 8

Gross
requirements 150 0 0 120 0 150 120 0

Scheduled
receipts 230 0 0 0 0 0 0 0

Planned
Available 37 117 117 117 –3 –3 –153 –273 –273
Balance

Planned
receipts Scheduled
Planned available Inventory on Gross
or planned
balance at end of
Planned order = hand at end of + receipts in – requirements
releases week t week t - 1 in week t
week t
Planned Orders
Explanation:
Item: C Lot Size: 230 units
Without a newSeat
Description: order in week 4,
subassembly Lead Time: 2 weeks
there will be a shortage of three
Week
units: 117 + 0 + 0 – 120 = – 3
units. 1 2 3 4 5 6 7 8

Gross
requirements 150 0 0 120 0 150 120 0

Scheduled
receipts 230 0 0 0 0 0 0 0

Planned
Available 37 117 117 117 –3 –3 –153 – 273 – 273
Balance

Planned
receipts

Planned order
releases
Planned Orders
Explanation:
Item: C Lot Size: 230 units
Adding the planned
Description: receipt
Seat subassembly Lead Time: 2 weeks
brings the balance to
Week
117 + 0 + 230 – 120 = 227 units.
1 2 3 4 5 6 7 8

Gross
requirements 150 0 0 120 0 150 120 0

Scheduled
receipts 230 0 0 0 0 0 0 0

Planned
Available 37 117 117 117 227
Balance

Planned
230
receipts

Planned order
releases
Planned Orders
Explanation:
Item: C Lot Size: 230 units
Adding the planned
Description: receipt
Seat subassembly Lead Time: 2 weeks
brings the balance to
Week
117 + 0 + 230 – 120 = 227 units.
1 2 3 4 5 6 7 8

Gross
requirements 150 0 0 120 0 150 120 0

Scheduled
receipts 230 0 0 0 0 0 0 0

Planned
Available 37 117 117 117 227
Balance

Planned
230
receipts

Planned order
releases
Planned Orders
Explanation:
Item: C Lot Size: 230 units
Offsetting for Seat
Description: a two-week lead time
subassembly Lead Time: 2 weeks
puts the corresponding planned
Week
order release back to week 2.
1 2 3 4 5 6 7 8

Gross
requirements 150 0 0 120 0 150 120 0

Scheduled
receipts 230 0 0 0 0 0 0 0

Planned
Available 37 117 117 117 227
Balance

Planned
230
receipts

Planned order
230
releases
Planned Orders
Explanation:
Item: C Lot Size: 230 units
Offsetting for Seat
Description: a two-week lead time
subassembly Lead Time: 2 weeks
puts the corresponding planned
Week
order release back to week 2.
1 2 3 4 5 6 7 8

Gross
requirements 150 0 0 120 0 150 120 0

Scheduled
receipts 230 0 0 0 0 0 0 0

Planned
Available 37 117 117 117 227
Balance

Planned
230
receipts

Planned order
230
releases
Planned Orders
Explanation:
Item: C Lot Size: 230 units
TheDescription:
first planned
Seat order lasts
subassembly Lead Time: 2 weeks
until week 7, when projected
Week
inventory would drop to – 43.
1 2 3 4 5 6 7 8

Gross
requirements 150 0 0 120 0 150 120 0

Scheduled
receipts 230 0 0 0 0 0 0 0

Planned
Available 37 117 117 117 227 227 77 –43
Balance

Planned
230
receipts

Planned order
230
releases
Planned Orders
Explanation:
Item: C Lot Size: 230 units
Adding the second
Description: planned
Seat subassembly Lead Time: 2 weeks
receipt brings the balance to
Week
77 + 0 + 230 – 120 = 187.
1 2 3 4 5 6 7 8

Gross
requirements 150 0 0 120 0 150 120 0

Scheduled
receipts 230 0 0 0 0 0 0 0

Planned
Available 37 117 117 117 227 227 77 187
Balance

Planned
230 230
receipts

Planned order
230
releases
Planned Orders
Explanation:
Item: C Lot Size: 230 units
TheDescription:
corresponding planned
Seat subassembly Lead Time: 2 weeks
order release is for week 5.
Week

1 2 3 4 5 6 7 8

Gross
requirements 150 0 0 120 0 150 120 0

Scheduled
receipts 230 0 0 0 0 0 0 0

Planned
Available 37 117 117 117 227 227 77 187
Balance

Planned
230 230
receipts

Planned order
230 230
releases
Planned Orders
Item: C Lot Size: 230 units
Description: Seat subassembly Lead Time: 2 weeks

Week

1 2 3 4 5 6 7 8

Gross
requirements 150 0 0 120 0 150 120 0

Scheduled
receipts 230 0 0 0 0 0 0 0

Planned
Available 37 117 117 117 227 227 77 187 187
Balance

Planned
230 230
receipts

Planned order
230 230
releases
 Explosion
 Explosion–the process of translating product
requirements into component part requirements
⚫ Considers existing inventories and scheduled
receipts
 Calculating the quantities of all components
needed to satisfy requirements for any given
part.
⚫ Continued until all parts have been considered,
leading to exact requirements for all purchased
and/or raw material parts
6-47
 The “MRP Explosion” Calculus
mater al requ rements External Demand
plann ng

Level 0
Initial
Inventories
Level 1

Capacity
Planning
Level 2
Scheduled
Receipts

Level N
Planned
Gross Requirements Order Releases
MRP Explosion
Item: Seat subassembly
Lot size: 230 units

Week
Lead
time: 2 weeks 1 2 3 4 5 6 7 8

Gross
requirements 150 0 0 120 0 150 120 0

Scheduled
receipts 230 0 0 0 0 0 0 0

Planned
Available 37 117 117 117 227 227 77 187 187
Balance

Planned
230 230
receipts

Planned order
230 230
releases
MRP Explosion
Item: Seat subassembly
Lot size: 230 units

Week
Lead
time: 2 weeks 1 2 3 4 5 6 7 8

Gross
150 0 0 120 0 150 120 0
requirements

Planned
230 230
receipts

Planned
order 230 230
releases

Item: Seat frames Item: Seat cushion

Lot size: 300 units Lot size: L4L

Week Week
Lead Lead
time: 1 week 1 2 3 4 5 6 7 8 time: 1 week 1 2 3 4 5 6 7 8

Gross Gross
requirements requirements

Scheduled Scheduled
0 300 0 0 0 0 0 0 0 0 0 0 0 0 0 0
receipts receipts

Planned Planned
Available 40 Available 0
Balance Balance

Planned Planned
receipts receipts

Planned Planned
order order
releases releases
MRP Explosion
Item: Seat subassembly
Lot size: 230 units

Week
Lead
time: 2 weeks 1 2 3 4 5 6 7 8

Gross
150 0 0 120 0 150 120 0
requirements

Planned
230 230
receipts

Planned
order 230 230
releases

Usage quantity: 1 Usage quantity: 1

Item: Seat frames Item: Seat cushion
Lot size: 300 units Lot size: L4L

Week Week
Lead Lead
time: 1 week 1 2 3 4 5 6 7 8 time: 1 week 1 2 3 4 5 6 7 8

Gross Gross
0 230 0 230
requirements requirements

Scheduled Scheduled
0 300 0 0 0 0 0 0 0 0 0 0 0 0 0 0
receipts receipts

Planned Planned
Available 40 Available 0
Balance Balance

Planned Planned
receipts receipts

Planned Planned
order order
releases releases
MRP Explosion Item: Seat subassembly
Lot size: 230 units

Week
Lead
time: 2 weeks 1 2 3 4 5 6 7 8

Gross
150 0 0 120 0 150 120 0
requirements

Planned
230 230
receipts

Planned
order 230 230
releases

Usage quantity: 1 Usage quantity: 1

Item: Seat frames Item: Seat cushion
Lot size: 300 units Lot size: L4L

Week Week
Lead Lead
time: 1 week 1 2 3 4 5 6 7 8 time: 1 week 1 2 3 4 5 6 7 8

Gross Gross
0 230 0 0 230 0 230 0 0 230
requirements requirements

Scheduled Scheduled
0 300 0 0 0 0 0 0 0 0 0 0 0 0 0 0
receipts receipts

Planned Planned
Available 40 Available 0
Balance Balance

Planned Planned
receipts receipts

Planned Planned
order order
releases releases
MRP Explosion
Item: Seat subassembly
Lot size: 230 units

Week
Lead
time: 2 weeks 1 2 3 4 5 6 7 8

Gross
150 0 0 120 0 150 120 0
requirements

Planned
230 230
receipts

Planned
order 230 230
releases

Item: Seat frames Item: Seat cushion

Lot size: 300 units Lot size: L4L

Week Week
Lead Lead
time: 1 week 1 2 3 4 5 6 7 8 time: 1 week 1 2 3 4 5 6 7 8

Gross Gross
0 230 0 0 230 0 0 0 0 230 0 0 230 0 0 0
requirements requirements

Scheduled Scheduled
0 300 0 0 0 0 0 0 0 0 0 0 0 0 0 0
receipts receipts

Planned Planned
Available 40 40 110 110 110 180 180 180 180 Available 0 0 0 0 0 0 0 0 0
Balance Balance

Planned Planned
300 230 230
receipts receipts

Planned Planned
order 300 order 230 230
releases releases
MRP Explosion
Item: Seat frames Item: Seat cushion
Lot size: 300 units Lot size: L4L

Week Week
Lead Lead
time: 1 week 1 2 3 4 5 6 7 8 time: 1 week 1 2 3 4 5 6 7 8

Gross Gross
0 230 0 0 230 0 0 0 0 230 0 0 230 0 0 0
requirements requirements

Planned Planned
300 230 230
receipts receipts

Planned Planned
order 300 order 230 230
releases releases

Item: Seat-frame boards

Lot size: 1500 units

Week
Lead
time: 1 week 1 2 3 4 5 6 7 8

Gross
requirements

Scheduled
0 0 0 0 0 0 0 0
receipts

Planned
Available 200
Balance

Planned
receipts

Planned
order
releases
 MRP Explosion
Item: Seat frames Item: Seat cushion
Lot size: 300 units Lot size: L4L

Week Week
Lead Lead
time: 1 week 1 2 3 4 5 6 7 8 time: 1 week 1 2 3 4 5 6 7 8

Gross Gross
0 230 0 0 230 0 0 0 0 230 0 0 230 0 0 0
requirements requirements

Planned Planned
300 230 230
receipts receipts

Planned Planned
order 300 order 230 230
releases releases

Usage quantity: 4
Item: Seat-frame boards
Lot size: 1500 units

Week
Lead
time: 1 week 1 2 3 4 5 6 7 8

Gross
0 0 0 1200 0 0 0 0
requirements

Scheduled
0 0 0 0 0 0 0 0
receipts

Planned
Available 200
Balance

Planned
receipts

Planned
order
releases
MRP Explosion
Item: Seat frames Item: Seat cushion
Lot size: 300 units Lot size: L4L

Week Week
Lead Lead
time: 1 week 1 2 3 4 5 6 7 8 time: 1 week 1 2 3 4 5 6 7 8

Gross Gross
0 230 0 0 230 0 0 0 0 230 0 0 230 0 0 0
requirements requirements

Planned Planned
300 230 230
receipts receipts

Planned Planned
order 300 order 230 230
releases releases

Item: Seat-frame boards

Lot size: 1500 units

Week
Lead
time: 1 week 1 2 3 4 5 6 7 8

Gross
0 0 0 1200 0 0 0 0
requirements

Scheduled
0 0 0 0 0 0 0 0
receipts

Planned
Available 200 200 200 200 500 500 500 500 500
Balance

Planned
1500
receipts

Planned
order 1500
releases
 Example: The (complete) MRP
Explosion Calculus
s
algor thm
Item BOM: stra ghtfırıl
Alpha Item Lead Time Current Inv. Pos.
Alpha 1 10
B 2 20
B(1) C(1) C 3 0
D 1 100
E 1 10
F 1 50
D(2) C(2) E(1) F(1)

E(1) F(1) Gross Reqs for Alpha

Period 6 7 8 9 10 11 12 13
Gross Reqs. 50 50 100

Item Levels:
MPS

Level 0: Alpha Level 1: B Level 2: C, D Level 3: E, F

 MRP and Transactions - Production
Weeks 1 2 3 4 5 6
Packaged Yoga 4
MPS Dates Feb 14- Feb 21- Feb 28- Mar 07- Mar 14- Mar 21-
Feb 20 Feb 27 Mar 06 Mar 13 Mar 20 Mar 27

Master Production Schedule 40 30 40 50 40 50

Tested Yoga 4
MPS
Weeks 1 2 3 4 5 6
Dates Feb 14- Feb 21- Feb 28- Mar 07- Mar 14- Mar 21-
Feb 20 Feb 27 Mar 06 Mar 13 Mar 20 Mar 27
Gross Requirements 40 30 40 50 40 50
Inventory Rec ERP Scheduled Receipts 50
Location Item Qty
Projected Available Bal 80 40 10 20 0 0 0
Depot Yoga 4 80
Planned Order Receipts 30 40 50
Planned Order Release 30 40 50
Yoga 4
Testing is Production (Work) Order ERP
done
internally Prod Ord No Work Center Item Quantity Start Date End Date
(“in house”) 87004 Testing Yoga 4 50 Feb 7, 2025 Feb 28, 2025
 MRP and Transactions – Production
Weeks 1 2 3 4 5 6
Packaged Yoga 4
MPS Dates Feb 14- Feb 21- Feb 28- Mar 07- Mar 14- Mar 21-
Feb 20 Feb 27 Mar 06 Mar 13 Mar 20 Mar 27

Master Production Schedule 40 30 40 50 40 50

Tested Yoga 4
MRP
Weeks 1 2 3 4 5 6
Dates Feb 14- Feb 21- Feb 28- Mar 07- Mar 14- Mar 21-
Feb 20 Feb 27 Mar 06 Mar 13 Mar 20 Mar 27
Gross Requirements 40 30 40 50 40 50
Scheduled Receipts 50
Projected Available Bal 80 40 10 20 0 0 0
Planned Order Receipts 30 40 50
Planned Order Release 30🗸 40 50

New Production (Work) Order ERP

Prod Ord No Work Center Item Quantity Start Date End Date

87005 Testing Yoga 4 30 Feb 14, 2025 Mar 07, 2025

 MRP and Transactions – Production
Weeks 2 3 4 5 6 7
Packaged Yoga 4
MPS Dates Feb 21- Feb 28- Mar 07- Mar 14- Mar 21- Mar 28-
Feb 27 Mar 06 Mar 13 Mar 20 Mar 27 Apr 04

Master Production Schedule 30 40 50 35 50 60

Tested Yoga 4
MRP
Weeks 2 3 4 5 6 7
Dates Feb 21- Feb 28- Mar 07- Mar 14- Mar 21- Mar 28-
Feb 27 Mar 06 Mar 13 Mar 20 Mar 27 Apr 04
Gross Requirements 30 40 50 35 50 60
Inventory Rec ERP Scheduled Receipts 50 30
Location Item Qty
Projected Available Bal 40 10 20 0
Depot Tested 40
Yoga 4 Planned Order Receipts 35 50 60
Planned Order Release 35 50 60
Production (Work) Order ERP
Prod Ord No Work Center Item Quantity Start Date End Date
87004 Testing Yoga 4 50 Feb 7, 2025 Feb 28, 2025

87005 Testing Yoga 4 30 Feb 14, 2025 Mar 07, 2025

 MRP and Transactions - Purchasing
Weeks 1 2 3 4 5 6
Packaged Yoga 4
MPS Dates Feb 14- Feb 21- Feb 28- Mar 07- Mar 14- Mar 21-
Feb 20 Feb 27 Mar 06 Mar 13 Mar 20 Mar 27

Master Production Schedule 40 30 40 50 40 50

Tested Yoga 4
MRP
Weeks 1 2 3 4 5 6
Dates Feb 14- Feb 21- Feb 28- Mar 07- Mar 14- Mar 21-
Feb 20 Feb 27 Mar 06 Mar 13 Mar 20 Mar 27
Gross Requirements 40 30 40 50 40 50
Inventory Rec ERP Scheduled Receipts 50
Location Item Qty
Projected Available Bal 80 40 10 20 0 0 0
Depot Tested 80
Yoga 4 Planned Order Receipts 30 40 50
Planned Order Release 30 40 50
Yoga 4
Testing is Purchase Order ERP
done by a Purchase Ord No Vendor Item Quantity Start Date End Date
supplier
92012 Lenovo Europe Yoga 4 50 Feb 7, 2025 Feb 28, 2025
 MRP and Transactions - Purchasing
Weeks 1 2 3 4 5 6
Packaged Yoga 4
MPS Dates Feb 14- Feb 21- Feb 28- Mar 07- Mar 14- Mar 21-
Feb 20 Feb 27 Mar 06 Mar 13 Mar 20 Mar 27

Master Production Schedule 40 30 40 50 40 50

Tested Yoga 4
MRP
Weeks 1 2 3 4 5 6
Dates Feb 14- Feb 21- Feb 28- Mar 07- Mar 14- Mar 21-
Feb 20 Feb 27 Mar 06 Mar 13 Mar 20 Mar 27
Gross Requirements 40 30 40 50 40 50
Scheduled Receipts 50
Projected Available Bal 80 40 10 20 0 0 0
Planned Order Receipts 30 40 50
Planned Order Release 30🗸 40 50

New Purchase Order ERP

Purchase Ord No Supplier Item Quantity Start Date End Date

92013 Lenovo Europe Yoga 4 30 Feb 14, 2025 Mar 07, 2025
 Material Requirements Planning
Weeks 2 3 4 5 6 7
Packaged Yoga 4
MPS Dates Feb 21- Feb 28- Mar 07- Mar 14- Mar 21- Mar 28-
Feb 27 Mar 06 Mar 13 Mar 20 Mar 27 Apr 04

Master Production Schedule 30 40 50 35 50 60

Tested Yoga 4
MRP
Weeks 2 3 4 5 6 7
Dates Feb 21- Feb 28- Mar 07- Mar 14- Mar 21- Mar 28-
Feb 27 Mar 06 Mar 13 Mar 20 Mar 27 Apr 04
Gross Requirements 30 40 50 35 50 60
Inventory Rec ERP Scheduled Receipts 50 30
Location Item Qty
Projected Available Bal 40 10 20 0
Depot Tested 40
Yoga 4 Planned Order Receipts 35 50 60
Planned Order Release 35 50 60
Purchase Order ERP
Purchase Ord No Supplier Item Quantity Start Date End Date
92012 Lenovo Europe Yoga 4 50 Feb 7, 2025 Feb 28, 2025

92013 Lenovo Europe Yoga 4 30 Feb 14, 2025 Mar 07, 2025
 Scheduled Receipts vs. Planned Order
Releases
• Scheduled receipts represent an actual commitment
(purchase order, production order, etc.)
• Planned orders are only the current plan and can be changed
more easily
• Scheduled receipts for production orders already have
component materials assigned
– Scheduled receipts do not impact gross requirements
• Planned order releases do not have component materials
assigned
– Planned order releases do impact gross requirements
 MRP Terminology
• Gross Requirements (GR): anticipated future
usage of an item during each period
• GR(demand) are time phased, which means they
are stated on a unique period-by-period basis,
rather than aggregated or averaged.
• Scheduled Receipts (SR): existing/released orders
for an item due at the beginning of a period
• Planned Receipts (PR): planned orders for an item
due at the beginning of a period
• Projected Available Balance (PAB): projected
inventory status for an item at the end of a period
 MRP Terminology
• Planned Order Releases (POR): planned
replenishment orders for an item which are
scheduled to be released at the beginning of a
period
• Net Requirements (NR): net anticipated usage of an
item during each period
• The period of the MRP time-phased record is also
called time bucket
• Number of periods in the record is called planning
horizon
• When a planned order is created for the most
immediate or current period, it is in the action
bucket
 Elements of MRP
Inputs Outputs
Service-Parts Inventory
Orders and Transaction Data
Forecasts
Order Changes
Inventory Order
Planned Order
and SRs Schedule

Master MRP
Production System Planning
Schedule Report
Performance
Exception
Bill of
Materials File Reports
 IE 376
PRODUCTION INFORMATION SYSTEMS

Course Notes
Lecture # 2.B
The Use of the MRP System

IE 376
Bilkent University
 The use of the MRP system

• Representing Bill of Materials in MRP

• Managing variety
• Handling change
• Safety stocks and lead times
• Order launching
 Bill of Materials (BOM)

• BOM can be structured to provide information by

either tracing down (exploding) or tracing up
(imploding) a product structure
• Explosion begins with the parent and breaks into
its lower-level components; implosion begins with
the component and builds into the parent or
higher level
 Formats of BOM

1. Single-level explosion
2. Indented explosion
3. Summary explosion
4. Single-level implosion
5. Indented implosion
6. Summary implosion
 Example: Multilevel product structure

A Level 0

B (1) 10 (3) C (1) Level 1

20 (1) D (2) 30 (2) 40 (1) 50 (1) Level 2

10 (1) 30 (1) Level 3

1. Single-level explosion BOM for assemblies A, B, C, and D

Component Quantity per

Assembly Part Number Assembly
A B 1
C 1
10 3
B D 2
20 1
C 30 2
40 1
50 1
D 10 1
30 1
 2. Indented explosion BOM for product A

Part Number Quantity per Unit of

Level 1 2 3 Description Assembly Measure
B 1
. 20 1
. D 2
. . 10 1
. . 30 1
C 1
. 30 2
. 40 1
. 50 1
10 3
 3. Summary explosion BOM for product A

Quantity Unit of
Assembly Component Description Required Measure
A 10 5
20 1
30 4
40 1
50 1
(B) (1)
(C) (1)
(D) (2)
4. Single-level implosion BOM for components 10, 20, 30, 40, and 50

Component Assembly Quantity

Part number Used on Per Assembly Description
10 A 3
D 1
20 B 1
30 C 2
D 1
40 C 1
50 C 1
 5. Indented implosion BOM for component 30

Component Assembly
Part number Used on Quantity Description
30 D 1
. B 2
. . A 1
C 2
. A 1
6. Summary implosion BOM for components D, 10, and 30

Component Assembly Quantity

Part number Used on Required Description
D A 2
B 2
10 A 5
B 2
D 1
30 A 4
B 2
C 2
D 1
 Product Structure/ BOM of
MSI Motor Cycle
Finished Product
MSI Motor Cycle
1300-1400-XX

Power Train Chassis Body Electrical System

2300-101-_ _ 2300-200-_ _ 2300-300-_ _ 2300-400-_ _ _

2300-101-_ _ Head lamp

2300-500-_ _
2300-102-_ _

Engine Gear Exhaust Injector Wiring Electric Starter

3300-112-_ _ 3300-120-_ _ 3300-130-_ _ 3300-140-_ _ 3300-400-_ _ 3300-420- _ _

3300-113-_ _

Front Handle Fuel Seat Chrome

Fender bar Tank Accessories
3300-310-_ _ 3300-320-_ _ 3300-340-_ _ 3300-350-_ _ 3300-380-_ _

Mirror
3300-500-_ _

Front Front Frame Rear Rear Shock Break Lube

Wheel Fork Fork Wheel Absorbers System
3300-210-_ _ 3300-220-_ _ 3300-230-_ _ 3300-240-_ _ 3300-250-_ _ 3300-260-_ _ 3300-270-_ _ 3300-280-_ _
Display Material Master
Basic data view
Basic data view continued
MRP 1 view
MRP 2 view
Explode BOM
Other relevant information regarding BOM

• Effective dates
– Due to engineering changes, components that are used in end items
or subassemblies may change
– These changes are reported through engineering change orders
– The information should be maintained in the bill of materials in the
manufacturing database
– For the assembly of product X,
• Use part Y1 between 01-09-2021 and 01-04-2022
• Use part Y2 between 01-04-2022 and 01-01-2023
• Alternative components, substitution possibilities
– For the assembly of product X,
• Use part Y1 if available
• Otherwise use part Y2
 Low-level coding

Assign to each part a code which designates the lowest level on

any BOM on which the part is found

A Level 0

B (1) 10 (3) C (1) Level 1

20 (1) D (2) 30 (2) 40 (1) 50 (1) Level 2

10 (1) 30 (1) Level 3

 Systems with many end-item options
• Maintaining all end-item buildable configurations is appropriate for
a make-to-stock company producing a limited number of end items
• Such a structure is not feasible for a company that provides many
options
• Consider General Motors with billions of possible end items. Many
options regarding air-conditioning, number of doors, transmission,
fancy trim, etc.
• How to plan and execute these systems?
• Use, for instance, the air-conditioning option as a bill of materials
(modular bill of materials)
– This bill of materials cannot be used in the physical building
process for air conditioners. Air conditioning knobs are planned
by the air-conditioning bill of materials, but installed during the
dashboard assembly
– The modular bill of materials focuses on how the car is sold, not
how it is made
The MPS hourglass

end items

MPS
options

components
 Planning Bill of Materials

• Planning BOM is any use of bill of material approaches

for planning only, as opposed to use for building the
product.
• The modular BOM involves one form of planning
BOM, since it is used for developing material plans
and modules not all are buildable.
• The most widely used planning BOM is the ‘Super Bill’.
• The super bill shows all possible options as
components with their average usage.
 Bicycle example

• 3 frame options
• 5 gearing options
• 3 handlebar options
• 2 water bottle options (yes or no)
• “Common parts”

• 3 * 5 * 3 * 2 = 90 distinct finished items

 Bicycle example

Bicycle

Frames Gearing Handle Bars Bottle Common

--- Regular --- 3-speed --- Regular --- Yes

--- Heavy duty --- 5-speed --- Comfort

--- Light --- 10-speed --- Race

--- 12-speed

--- 15-speed
Super Bill!
 Bicycle example

Bicycle

Frames Gearing Handle Bars Bottle Common

(100%)
--- Regular 50% --- 3-speed 10% --- Regular 50% --- Yes 65%

--- Heavy duty 30% --- 5-speed 5% --- Comfort 20%

--- Light 20% --- 10-speed 58% --- Race 30%

--- 12-speed 18%

--- 15-speed 9% Shows how the product is sold,

not how it is built!
 Technical issues

• Murphy’s law: If anything can go wrong, it will.

• Change is continuous within the manufacturing

environment. Therefore, it is essential that the MRP
system mirrors the actual conditions in the shop,
that is, both the physical system and the
information system should cope with scrap,
incorrect counts, incorrect BOM, etc.
 Handling change

• Planned events
• Unplanned events
– New order in MPS
– Order completed late
– Scrap loss
– Engineering changes in BOM

Database must reflect reality !

 Handling change

• Regenerative MRP: completely re-do MRP calculations

starting with MPS and exploding through BOMs.
• Net Change MRP: store material requirements plan and
alter only those parts affected by change (continuously
on-line or batched daily).
• Comparison:
• Regenerative fixes errors.
• Net change responds faster to changes (but must
be regenerated occasionally for accuracy).
 Frequency of replanning

Computational cost
versus
Maintaining the validity of requirements plan
 Top-down replanning

• Use MRP system with changes (e.g., altered MPS or

scheduled receipts) to recompute plan
– May lead to infeasibilities (exception codes)
– Orlicky suggested using minimum lead times
– Bottom line is that MPS may be infeasible

• Rescheduling in top-down planning:

– Adjust either the due date or quantity of any planned
order
 Rescheduling example
MRP record before week 1
1 2 3 4 5
Part 1234 Gross Requirements 30 20 20 0 45
Scheduled Receipts 50
Lead Time =2 Projected Available Balance 10 30 10 40 40 45
Lot Size = 50
Planned Order Receipts 50 50
Planned Order Releases 50 50

MRP planner launches (releases) a planned order of 50 units

Create a purchase order or a production order
Changes and transactions during week 1
• Actual usage of item 1234 in week 1 was only 20 instead of the planned 30
• The scheduled receipt for 50 due in week 1 was received on Tuesday, but 10 units
were rejected, so only 40 were actually received
• The inventory was counted on Thursday and additional 20 pieces were found
• The requirement date for the 45 pieces in week 5 was changed to week 4
• Marketing requested additional 5 pieces for samples in week 2
• The requirement for week 6 has been set at 25
 Rescheduling example
MRP record preceding week 2
2 3 4 5 6
Part 1234 Gross Requirements 25 20 45 0 25
Scheduled Receipts 50
Lead Time =2 Projected Available Balance 50 25 55 10 10 35
Lot Size = 50
Planned Order Receipts 50
Planned Order Releases 50

Problem
• Scheduled receipt in week 3 is not needed until week 4.
• The due date needs to be changed for this order, otherwise the order may
be worked ahead of another order that is really needed earlier
• The problem will be reported by an MRP exception message ”Reschedule
the receipt currently due in week 3 to week 4”
 Bottom-up replanning

• Planner manages the replanning process

• Use pegging and firm planned orders to guide
rescheduling process
– pegging allows for tracing of release to sources in MPS
– FPO’s allow for fixing of releases necessary for firm
customer orders
– compressed lead times (expediting) are often used to
justify using FPO’s to override system lead times
 Pegging

• Pegging relates all the gross requirements for a part to all

planned order releases or other sources of demand that
created the requirement
– The pegging records contain the specific part number or
numbers of the sources of all gross requirements
• By pegging it is possible to ascend the BOM and identify the
item’s end-product (implosion)
• Advantage: when an item shortage occurs, it allows to trace
the impact of a material problem on all subassemblies and
end products affected by this shortage
• Drawback: it adds more complexity in the MRP information
storage requirements
 Pegging

• Identify gross requirements with next level in BOM

(single pegging) or customer order (full pegging) that
generated it. Single is used more often because full is
difficult due to lot-sizing, yield loss, safety stocks, etc.

• Firm Planned Orders (FPO’s): planned orders that the

MRP system does not automatically change when
conditions change. Remedial action by temporarily
overriding the normal planning procedures to provide
stability or solve problems.
 Bottom-up replanning alternatives

• Renegotiate plan factors (e.g., lead times)

• Planned order releases and scheduled receipts
(change timing and/or quantity)
• Use safety stock
• Change allocation
• Change due dates
• Lose order
 Bottom-up Replanning Shovel

Example Top Handle Assembly

Spot purchase Nail (2)

1 2 3 4 5 6 7 8 9 10
Top Handle Gross Requirements 20 10 20 5 35 10
Assembly
Scheduled Receipts
Projected Available Balance 25 25 5 5 0 0 0 0 0 0 0
Lead Time =2
Planned Order Receipts 5 20 5 35 10
Planned Order Releases 5 20 5 35 10

Nail Gross Requirements 10 40 10 70 20

(2 required) Scheduled Receipts 50
Projected Available Balance 4 54 44 44 4 44 44 24 4
Lead Time=1
Lot Size = 50 Planned Order Receipts 50 50
Planned Order Releases 50 50
 Bottom-up replanning example

• Scheduled receipt of 50 nails arrives on Wednesday

• On Thursday quality control reveals that that the vendor sent
the wrong size
• This means only 4 of the 10 gross requirement in week 2 can
be satisfied
• By pegging this gross requirement up to its parent planned
order (5 units of top handle assembly), we find that only 7 of
the gross requirement for 10 units in week 4 can be satisfied
• This means only 7 snow shovels can be assembled in week 4
 Bottom-up replanning example

• Case 1: Customer is willing to wait

– Do not assemble 10 units of shovel in week 4
– Change the planned assembly schedule of shovels: 7 in week 4, 3 in week
5. (Why?)
• Case 2: Customer is not willing to wait
– Issue an emergency order to the vendor for 6 nails to be received within
week 1 (at the beginning of week 2)
– Find an alternative supplier
– Order more nails for the beginning of week 3 and negotiate a one-week
lead time reduction in the top handle assembly. The planned order release
for 5 units of top handle assembly is scheduled for week 3 and converted
to a firm planned order.
– Negotiate a one-week lead time reduction in the snow shovel assembly
and place a firm planned order for 10 in week 5. This results in a gross
requirement for 10 top handle assemblies in period 5 instead of period 4.
 Firm planned order

Item Qty Start Date End Date

Top Handle Assembly 5 Week 3 Week 4
 Exception codes

• To identify possible data inaccuracy issues

– Dates beyond the planning horizon
– Exceptionally large or small order quantities
– Invalid part numbers
• System diagnostics
– Planned orders in the immediate time period (or two to three periods
out)
– Present timing or amount for a scheduled receipt is not satisfactory
– Level 0 requirements cannot be satisfied unless the present planning
factors used in MRP are changed (the order should have been placed
in the past)
 Time representation

• Bucketed approach divides the planning horizon into a

prespecified number of equal-length periods (time
buckets).

• Bucketless systems specify the exact release and due

dates for each requirement, scheduled receipt, and
planned order. These systems provide more precise
time-phased information.
 Planning horizon

• It should be longer than the longest cumulative lead time

for any product (total lead time required from ordering of
parts or raw materials to completion of final assembly)
• But not too long for accurate forecasts!

Procurement of Fabrication
raw material D of part E Subassembly A
Final assembly
Procurement of and inspection
raw material F Procurement of
part C
Procurement of Procurement of
raw material G part H Subassembly B

1 2 3 4 5 6 7 8 9 10 11
 Safety stocks and safety lead times

• Safety stocks:
– generate net requirements to ensure minimum level of
inventory at all times
– used as hedge against quantity uncertainty (e.g., yield
loss)
• Safety lead times:
– inflate production lead times in part record
– used as hedge against timing uncertainty (e.g., delivery
delays)
 Safety stocks

• Protection against unexpected fluctuations versus

inventory costs
• Case 1. Safety stocks should be used for independent
demand items as protection primarily against forecast
errors.
• Case 2. In case of unreliable supplier, it should be used at
the component level.
 Safety stock example

Item: Screws (Leadtime = 1 week)

Week 1 2 3 4 5 6
Gross Requirements 400 200 800
Scheduled Receipts 500
Planned Available Balance 100 100 20 20 20
Planned Order Receipts 120 800
Planned Order Releases 120 800

NOTE: Safety stock level is 20.

 Safety stock vs. safety lead time
1 2 3 4 5
No buffering Gross Requirements 20 40 20 0 30
Order Quantity = 50 Scheduled Receipts 50
Lead time = 2 weeks
Projected Available Balance 40 20 30 10 10 30
Planned Order Receipts 50
Planned Order Releases 50

Safety Stock = Gross Requirements 20 40 20 0 30

20 units Scheduled Receipts 50
Projected Available Balance 40 20 30 60 60 30
Planned Order Receipts 50
Planned Order Releases 50

Safety Lead Time = Gross Requirements 20 40 20 0 30

1 week Scheduled Receipts 50
Projected Available Balance 40 20 30 10 60 30
Planned Order Receipts 50
Planned Order Releases 50
 Service parts

• Service parts (or spare parts) are used in service

and maintenance

• External (independent) demand for these parts

must be included in gross requirements
0

4
 MRP planner tasks

• Purchase orders
Release • Shop floor (production) orders

Reschedule • Change due dates of existing orders (when desirable)

• Set lot sizes and lead times

Analyze and Update • Adjust scrap allowances and safety stocks

Reconcile • Identify errors and inconsistencies and eliminate their root causes

Identify Problems • Take action now to prevent future crises

Solve Shortages • Adjust records and system parameters to prevent recurrence

Enhance • Identify system enhancements to improve performance

 Order launching and allocation

• Order launching is the process of releasing orders to the shop or

vendors
– This process is prompted by MRP when a planned order release is in
the current time period (action bucket)
– Order launching converts the planned order into a scheduled receipt
reflecting the lead time offset
– May include inflation factor to compensate for shrinkage
• Allocation is a step prior to order launching that involves an
availability check for the necessary components
• After availability checking and allocation, picking tickets are
typically created and sent to the stockroom
 MRP system output
Part number and description MRP system data

MRP planning data

Exception messages
 IE 376
PRODUCTION INFORMATION SYSTEMS

Course Notes
Lecture #3
Lot Sizing in MRP

IE 376
Bilkent University
 IE 376

Lot Sizing in MRP

• Lot size is the quantity ordered/produced at one time

• Large lots are preferred because:

– Changeovers cost less and use less capacity
– Annual costs of purchase orders are less
– Price breaks and transportation breaks can be utilized

• Small lots are preferred because:

– Lower inventory carrying cost
– Reduced risk of obsolescence
– Shorter time window to produce customer order
 IE 376

Lot Sizing in MRP

• Lot-for-Lot Method (chase strategy)
– direct translation of net requirements into order quantities
• Economic Order Quantities (EOQ)
• Periodic Order Quantities (POQ)
– uses EOQ formula to compute the time interval between orders
– lot sizes vary based on the coverage period requirements
– doesn’t allow for combining orders during periods of low demand
• Wagner-Whitin Algorithm (optimal method)
• Part Period Balancing
– tries to make setup cost equal to holding cost
• Silver-Meal Heuristic
• Least Unit Cost Method
 IE 376

Criticisms of EOQ

• Successfully applied to many environments (where the

underlying assumptions reasonably hold)
– used in setting lot sizes in batch manufacturing environments,
MRP type systems, managing input buffers, etc.
• Simple method considering the economic trade-off between
fixed setup costs and inventory holding costs
• Too simplified?
– stable and known demand
– independent products (ignores complex resource constraints)
– setup costs are hard to estimate (true cost of a setup depends on
the capacity utilization)
 IE 376

Example 1: Lot-Sizing Decision

The net requirements for a material from an MRP schedule are:

Week
1 2 3 4 5 6 7 8
Net Requirements 1000 0 1300 800 1200 1300 0 800

It costs $400 to change over the machines for this material in the
affected work center. It costs $0.40 per unit when one unit of this
material must be carried in inventory from one week to the next.

Identify the lot-sizing method that results in the least carrying and
changeover costs for the 8-week schedule.
 IE 376

Example 1: Lot-Sizing Decision

Lot-for-Lot Method

Week
1 2 3 4 5 6 7 8
Net Requirements 1000 0 1300 800 1200 1300 0 800
Beginning Inventory 0 0 0 0 0 0 0 0
Production Lots 1000 0 1300 800 1200 1300 0 800
Ending Inventory 0 0 0 0 0 0 0 0

Carrying cost = 0($.40) = $0

Changeover cost = (6)($400) = $2,400
Total cost = $2,400
IE 376

Example 1: Lot-Sizing Decision

Economic Order Quantities (EOQ)

K = $400.00

D = [(Net Req for 8 weeks)/8 weeks](50 weeks/year)

= (6400/8)(50) = 40,000

h = ($0.40 per week)(50 weeks/year) = $20.00

2 KD 2(40,000)(400)
EOQ = = = 1265
h 20
 IE 376

Example 1: Lot-Sizing Decision

Economic Order Quantities (EOQ)

Week
1 2 3 4 5 6 7 8
Net Requirements 1000 0 1300 800 1200 1300 0 800
Beginning Inventory 0 265 265 230 695 760 725 725
Production Lots 1265 0 1265 1265 1265 1265 0 1265
Ending Inventory 265 265 230 695 760 725 725 1190

Carrying cost = (4855)($.40) = $1,942

Changeover cost = (6)($400) = $2,400
Total cost = $4,342
IE 376

Example 1: Lot-Sizing Decision

Periodic Order Quantities (POQ)

Time between orders = (# Weeks/year)/(# Orders/year)

= 50/(D/EOQ)

= 50/(40,000/1,265)

= 1.58 or 2 weeks
 IE 376

Example 1: Lot-Sizing Decision

Periodic Order Quantities (POQ)

Week
1 2 3 4 5 6 7 8
Net Requirements 1000 0 1300 800 1200 1300 0 800
Beginning Inventory 0 0 0 800 0 1300 0 800
Production Lots 1000 0 2100 0 2500 0 800 0
Ending Inventory 0 0 800 0 1300 0 800 0

Carrying cost = (2900)($.40) = $1,160

Changeover cost = (4)($400) = $1,600
Total cost = $2,760
IE 376

Example 2: Lot-Sizing Decision

t 1 2 3 4 5 6 7 8 9 10
Net Requirements 20 50 10 50 50 10 20 40 20 30
Wagner-Whitin 80 0 0 130 0 0 0 90 0 0
Ending Inventory 60 10 0 80 30 20 0 50 30 0

K = $100.00
ഥ = (300/10) = 30
𝐷
h = $1.00/unit/week

Wagner-Whitin cost (optimal cost): (280)(1)+(3)(100)=$580

IE 376

Example 2: Lot-Sizing Decision

t 1 2 3 4 5 6 7 8 9 10
Net Requirements 20 50 10 50 50 10 20 40 20 30
Lot-for-Lot 20 50 10 50 50 10 20 40 20 30

K = $100.00
ഥ = (300/10) = 30
𝐷
h = $1.00/unit/week

Lot-for-Lot cost = (10)(100) = $1,000

IE 376

Example 2: Lot-Sizing Decision

t 1 2 3 4 5 6 7 8 9 10
Net Requirements 20 50 10 50 50 10 20 40 20 30
EOQ 77 0 77 0 77 0 0 77 0 0
Ending Inventory 57 7 74 24 51 41 21 58 38 8

K = $100.00 2 KD 2 100  30
ഥ = (300/10) = 30
𝐷 Q= = = 77
h = $1.00/unit/week h 1

EOQ cost = (1)(379) + (4)(100) = $779

IE 376

Example 2: Lot-Sizing Decision

t 1 2 3 4 5 6 7 8 9 10
Net Requirements 20 50 10 50 50 10 20 40 20 30
POQ 80 0 0 110 0 0 80 0 0 30
Ending Inventory 60 10 0 60 10 0 60 20 0 0

K = $100.00
ഥ = (300/10) = 30
𝐷 Time between orders = 77/30
h = $1.00/unit/week approximately 3 weeks

POQ cost = (1)(220) + (4)(100) = $620

 IE 376

Lot Sizing in MRP

• Lot-for-Lot Method (chase strategy)
– direct translation of net requirements into order quantities
• Economic Order Quantities (EOQ)
• Periodic Order Quantities (POQ)
– uses EOQ formula to compute the time interval between orders
– lot sizes vary based on the coverage period requirements
– doesn’t allow for combining orders during periods of low demand
• Wagner-Whitin Algorithm (optimal method)
• Part Period Balancing
– tries to make setup cost equal to holding cost
• Silver-Meal Heuristic
• Least Unit Cost Method
 IE 376

Part Period Balancing

• This method balances the setup and inventory carrying

costs

• The order horizon is set equal to the number of periods

that most closely matches the total carrying cost over
that time interval with the setup cost

EE
 IE 376

Part Period Balancing

Step 1: Lot-size calculations begin in period T. Lot size = net

requirements in period T.

Step 2: Tentatively add the next period’s requirements to this lot. Call
this period L.

Step 3: Calculate the total carrying cost.

Step 4: Compare the total carrying cost for this lot to the setup cost.
If the total carrying cost is less than the setup cost, then go to step 2.

Step 5: Compare the total carrying cost incurred by including the

requirement of period L in the lot to the carrying cost incurred when
this requirement is not included. Order through the period in which
the total carrying cost is closer to the setup cost.
IE 376

Example 3: Lot-Sizing Decision

t 1 2 3 4 5 6 7 8 9 10 11 12
Net Requirements 124 60 316 183 0 55 43 154 0 0 114 171

K = $100.00
h = $0.21/unit/week

Total usage over three months = 1220

 IE 376

Example 3: Lot-Sizing Decision

First lot arriving in week 1

Tentative lot size Extra inv Weeks held Total carrying cost TCC>Setup
124 0 0 0 No
184 60 1 12.6 No
500* 316 2 145.32 Yes
O
K = $100.00 th s s greater
h = $0.21/unit/week stop

Since 145.32 is closer to 100 than 12.6, the lot size should be 500.
 IE 376

Example 3: Lot-Sizing Decision

Second lot arriving in week 4

Tentative lot size Extra inv Weeks held Total carrying cost TCC>Setup
183 0 0 0 No
183 0 1 0 No
238 55 2 23.10 No
281* 43 3 50.19 No
435 154 4 179.55 Yes

K = $100.00
h = $0.21/unit/week

Since 50.19 is closer to 100 than 179.55, the lot size should be 281.
IE 376

Example 3: Lot-Sizing Decision

Resulting ordering plan

t 1 2 3 4 5 6 7 8 9 10 11 12
Net Requirements 124 60 316 183 0 55 43 154 0 0 114 171
PPB 500 0 0 281 0 0 0 268 0 0 0 171
Ending Inventory 376 316 0 98 98 43 0 114 114 114 0 0

K = $100.00
h = $0.21/unit/week

PPB cost = (0.21)(1273) + (4)(100) = $667.33

 IE 376

Silver-Meal Heuristic

• This method determines the average cost per period as a

function of the number of periods the current order is to
span

• Decision criterion:
(Setup cost + Total carrying cost until end of period T)/T

• Stop the computation when this function first increases

 IE 376

Silver-Meal Heuristic

Step 1: Lot-size calculations begin in period T. Lot size = net

requirements in period T. Cost per period = (K + 0)/1 = K.

Step 2: Tentatively add the next period’s requirements to this lot. Call
this period L.

Step 3: Calculate the total carrying cost for the lot size in step 2. Add
the setup cost and divide the resulting cost by (L – T + 1) to find
cost/period. If this cost is less than that obtained by excluding the
requirement of period L, then go to step 2.

Step 4: Lot size for the order arriving in period T is the sum of the
requirements from period T to period (L – 1).
IE 376

Example 3: Lot-Sizing Decision

t 1 2 3 4 5 6 7 8 9 10 11 12
Net Requirements 124 60 316 183 0 55 43 154 0 0 114 171

K = $100.00
h = $0.21/unit/week

Total usage over three months = 1220

 IE 376

Example 3: Lot-Sizing Decision

First lot arriving in week 1

Tentative lot size Extra inv Weeks held Total cost Total cost/period
124 0 0 100 100
184* 60 1 112.6 56.3
500 316 2 245.32 81.77

K = $100.00
h = $0.21/unit/week
 IE 376

Example 3: Lot-Sizing Decision

Second lot arriving in week 3

Tentative lot size Extra inv Weeks held Total cost Total cost/period
316 0 0 100 100
499 183 1 138.43 69.2
499 0 2 138.43 46.1
554 55 3 173.08 43.3
597* 43 4 209.2 41.8
751 154 5 370.9 61.8

K = $100.00
h = $0.21/unit/week
IE 376

Example 3: Lot-Sizing Decision

Resulting ordering plan

t 1 2 3 4 5 6 7 8 9 10 11 12
Net Requirements 124 60 316 183 0 55 43 154 0 0 114 171
PPB 184 0 597 0 0 0 0 154 0 0 285 0
Ending Inventory 60 0 281 98 98 43 0 0 0 0 171 0

K = $100.00
h = $0.21/unit/week

Silver-Meal cost = (0.21)(751) + (4)(100) = $557.71

 IE 376

Least Unit Cost Method

• This method is similar to the Silver-Meal heuristic

• The total cost is now divided by the total number of

units demanded from period T to period L (rather than
the number of periods)
 IE 376

Example 3: Lot-Sizing Decision

First lot arriving in week 1
Tentative lot size Extra inv Weeks held Total cost Total cost / unit
124 0 0 100 0.81
184 60 1 112.6 0.61
500* 316 2 245.32 0.49
683 183 3 360.61 0.53

Second lot arriving in week 4

Tentative lot size Extra inv Weeks held Total cost Total cost / unit
183 0 0 100 0.55
183 0 1 100 0.55
238* 55 2 123.1 0.52
281 43 3 150.19 0.53
 IE 376

Example 3: Lot-Sizing Decision

Third lot arriving in week 7
Tentative lot size Extra inv Weeks held Total cost Total cost / unit
43 0 0 100 2.33
197 154 1 132.34 0.67
197 0 2 132.34 0.67
197* 0 3 132.34 0.67
311 114 4 228.1 0.73

Fourth lot arriving in week 11

Tentative lot size Extra inv Weeks held Total cost Total cost / unit
114 0 0 100 0.88
285* 171 1 135.91 0.48
IE 376

Example 3: Lot-Sizing Decision

Resulting ordering plan

t 1 2 3 4 5 6 7 8 9 10 11 12
Net Requirements 124 60 316 183 0 55 43 154 0 0 114 171
LUC 500 0 0 238 0 0 197 0 0 0 285 0
Ending Inventory 376 316 0 55 55 0 154 0 0 0 171 0

K = $100.00
h = $0.21/unit/week

LUC cost = (0.21)(1127) + (4)(100) = $636.67

IE 376

Example 3: Lot-Sizing Decision

Optimal ordering plan (Wagner-Whitin algorithm)

t 1 2 3 4 5 6 7 8 9 10 11 12
Net Requirements 124 60 316 183 0 55 43 154 0 0 114 171
Optimal Quantities 184 0 554 0 0 0 197 0 0 0 285 0
Ending Inventory 60 0 238 55 55 0 154 0 0 0 171 0

K = $100.00
h = $0.21/unit/week

Optimal cost = (0.21)(733) + (4)(100) = $553.93

IE 376

Example 3: Lot-Sizing Decision

Algorithm Total Cost

Optimal plan (Wagner-Whitin algorithm) 553.93
Least Unit Cost method 636.67
Silver-Meal heuristic 557.71
Part Period Balancing 667.33
IE 376

Lot-Sizing in SAP MRP

 IE 376

What lot-sizing policy to choose?

• Two sets of criteria for comparing lot sizing techniques:

– How easy to use in practice and how efficient in terms of
computations
– How efficient in terms of total setup and carrying costs

• Most widely used algorithms:

– Lot-for-Lot Method
– Least Unit Cost Method (or Silver-Meal Heuristic)
– Periodic Order Quantities (POQ) easy to mplement
 IE 376

When to use the Silver-Meal heuristic?

• EOQ works well when there is limited variability in demand
• The Silver-Meal heuristic can be used when demand is highly
variable
• A useful measure of the variability in a demand pattern is
the Coefficient of Variation (CV)
• For future periods with demand forecasts:
Standard deviation of demand per period
𝐶𝑉 =
Average demand per period

• Computational studies have shown that

– If CV < 0.2, use EOQ or POQ and take the average demand as your
demand parameter
– If CV > 0.2, use the Silver-Meal heuristic or the Least Unit Cost
method
 IE 376

Nervousness

• Nervousness occurs when even small changes in high-

level MRP records or master production schedule lead
to significant changes in the MRP plans

• Nervousness is most damaging in MRP systems with

many levels in the product structure

• Some lot-sizing techniques (such as POQ or FOP) can

amplify the nervousness
IE 376

Nervousness example
Item A (Leadtime = 2 weeks, Order Interval = 5 weeks)
Week 1 2 3 4 5 6 7 8
Gross Requirements 2 24 3 5 1 3 4 50
Scheduled Receipts
Planned available balance 28 26 2 13 8 7 4 0 0
Planned order receipts 14 50
Planned order releases 14 50

Component B (Leadtime = 4 weeks, Order Interval = 4 weeks)

Week 1 2 3 4 5 6 7 8
Gross Requirements 14 50
Scheduled Receipts 14
Planned available balance 2 2 2 2 2 2 0 0 0
Planned order receipts 48
Planned order releases 48

Note: Fixed Order Period (FOP) lot-sizing rule is used. When you need to
order, order enough to cover the net requirements of the next N periods.
IE 376

Nervousness example
Item A (Leadtime = 2 weeks, Order Interval = 5 weeks)
Week 1 2 3 4 5 6 7 8
Gross Requirements 2 23 3 5 1 3 4 50
Scheduled Receipts
Planned available balance 28 26 3 0 58 57 54 50 0
Planned order receipts 63
Planned order releases 63

Component B (Leadtime = 4 weeks, Order Interval = 4 weeks)

Week 1 2 3 4 5 6 7 8
Gross Requirements 63
Scheduled Receipts 14
Planned available balance 2 16 -47
Planned order receipts
Planned order releases 47*

Note: Small reduction in requirements caused large change in orders and

made the schedule infeasible.
 IE 376

Reducing nervousness

• Reduce the causes of plan changes:

– Stabilize MPS (e.g., frozen zones and time fences)
– Reduce unplanned demands by incorporating spare parts forecasts
into gross requirements
– Control changes in safety stocks or lead times
• Revise the lot-sizing procedures:
– Fixed order quantities at top level
– Lot-for-lot method at intermediate levels
– Fixed order intervals at bottom level
• Use Firm Planned Orders
 IE 376
PRODUCTION INFORMATION SYSTEMS

Course Notes
Lecture #4
Master Production Scheduling
MPS

IE 376
Bilkent University
 Dealing with the Problem Complexity
through Decomposition
Corporate Strategy
Aggregate Unit Aggregate Planning
Demand (Plan. Hor.: 1 year, Time Unit: 1 month)

Capacity and Aggregate Production Plans

End Item (SKU) Master Production Scheduling

Demand (Plan. Hor.: a few months, Time Unit: 1 week)

SKU-level Production Plans

Manufacturing Materials Requirement Planning

and Procurement (Plan. Hor.: a few months, Time Unit: 1 week)
lead times
Component Production lots and due dates

Part process Shop floor-level Production Control

plans (Plan. Hor.: a day or a shift, Time Unit: real-time)
 Aggregate Planning Problem
Aggr. Unit
Production Req.s Corporate Strategy

Aggregate
Unit Demand Aggregate
Production
Aggregate Planning Plan
(Sales and Operations Planning)
Aggregate
Unit Availability Required
(Current Inventory Production
Position) Capacity

dec s on var ables

Aggregate Production Plan: Production Capacity Plan:
•Aggregate Production levels •Workforce level(s)
•Aggregate Inventory levels •Overtime level(s)
•Aggregate Backorder levels •Subcontracted Quantities
 Proactive approaches to
demand management
• Influencing demand variation so that it aligns to available
production capacity:
– advertising
– promotional plans
– pricing
(e.g., airline and hotel weekend discounts, telecommunication
companies’ weekend rates)
• “Counter-seasonal” product (and service) mixing: Develop
a product mix with antithetic (seasonal) trends that level
the cumulative required production capacity.
– (e.g., lawn mowers and snow blowers)
 Modern Trends in Aggregate Planning
• To effectively achieve the competitive advantages and economies of
scale required in today’s markets, large corporations must plan and
manage their production activity across the entire supply chain.
• This introduces another spatial/geographical dimension to the
aggregate/capacity planning problem, and extends the initial cost
structure with additional items like transportation and
storage/handling costs.
• The problem gets especially complicated for companies with
multinational operations, since these companies must factor into
their planning decisions additional issues like:
– duties and tariffs and quotas
– exchange rates
– local corporate tax rates
– cultural, language and political issues
• Aggregate Planning recently called Sales & Operations
Planning
 Master Production Scheduling
An effective Master Production Schedule (MPS)
provides the basis for making good use of
manufacturing resources, making customer
delivery promises, resolving trade-offs
between sales and manufacturing, and
attaining the firm’s strategic objectives, as
reflected in the Sales and Operations Plan.
 MPS in the MPC System

Enterprise Resource Planning (ERP) System

Resource Sales and operations Demand
planning planning management

Rough-cut capacity Master production

planning scheduling
Front End

Engine
Detailed material
planning
 Master Production Scheduling (MPS)

• The MPS is a statement of what the company

wants to manufacture.
• The MPS drives MRP and is thus the key input
to the MRP process.
• The MPS is a statement of production, not a
statement of market. That is, the MPS is not a
forecast.
 Objectives of MPS
• Determine the quantity and timing of completion of end
items over a short-range planning horizon.
• Schedule end items (finished goods and parts shipped as end
items) to be completed promptly and when promised to the
customer.
• Avoid overloading or underloading the production facility so
that production capacity is efficiently utilized and low
production costs result.
 MPS Module

The MPS module takes into account

◼ The sales forecast,
◼ Backlog,
◼ Availability of material,
◼ Availability of capacity,
◼ Management policy, and
◼ Company goals, etc.

in determining the best manufacturing strategy.

 07.10.2025

MPS Problem JEEP

dang
Capacity Company Product Economic
Consts. Policies Charact. Considerations

Placed Orders Master Production

Forecasted Demand Schedule:
Current Inventory Positions MPS When & How Much
to produce for each
Already Initiated Production
product

Planning Time
Horizon unit
Capacity
Planning
 Master Production Scheduling
Process and Techniques
Determine supply and demand
relationships over time (time-
phased record)

Prepare production schedule

according to strategy (chase, level,
mixed)

Calculate projected available

balance (for available-to-promise
activities)

Revise plans as time passes (rolling

through time)
 Time-Phased Record
• A means of gathering and displaying critical
scheduling information (Forecast, available stock,
production schedule)
Period

On hand 1 2 3 4 5

Forecast 5 5 8 10 15

Projected available balance 20 25 30 32 32 27

Master production schedule 10 10 10 10 10

 Developing an MPS
• Schedulers must:
– estimate the total demand for products from all
sources
– assign orders to production slots
– make delivery promises to customers, and
– make detailed calculations for the MPS
 MPS Techniques
Level in MPS 1 2 3 4 5 6 7 8 9 10 11 12
Forecast 5 5 5 5 5 5 15 15 15 15 15 15
Available 25 30 35 40 45 50 45 40 35 30 25 20
MPS 10 10 10 10 10 10 10 10 10 10 10 10
On Hand 20

Chase in MPS 1 2 3 4 5 6 7 8 9 10 11 12
Forecast 5 5 5 5 5 5 15 15 15 15 15 15
Available 20 20 20 20 20 20 20 20 20 20 20 20
MPS 5 5 5 5 5 5 15 15 15 15 15 15
On Hand 20

Lot Sizing in MPS 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 5 5 5 5 5 5 15 15 15 15 15 15
Available 15 10 5 30 25 20 5 20 5 20 5 20
MPS 30 30 30 30
On Hand 20
 Rolling through time
1 2 3 4 5 6 7 8 9 10 11 12
Forecast 5 5 5 5 5 5 15 15 15 15 15 15
Available 15 10 5 30 25 20 5 20 5 20 5 20
MPS 30 30 30 30
On Hand 20

• Actual sales were 10 units instead of 5

• Marketing department decided that the original
forecast was incorrect and increased the forecast for
weeks 2-6 to 10.
• The forecast for week 13 is announced to be 15
 Rolling through time
• Using the Revised Forecast after one week without changes to the
MPS

2 3 4 5 6 7 8 9 10 11 12 13
Forecast 10 10 10 10 10 15 15 15 15 15 15 15
Available 0 -10 10 0 -10 -25 -10 -25 -10 -25 -10 -25
MPS 30 30 30 30
On Hand 10

◼ Using the Revised Forecast after one week with MPS

revised to accommodate changes
2 3 4 5 6 7 8 9 10 11 12 13
Forecast 10 10 10 10 10 15 15 15 15 15 15 15
Available 30 20 10 30 20 5 20 5 20 5 20 5
MPS 30 30 30 30 30
On Hand 10
 Actual Orders

forecasts
Projected demand

orders

weeks
 Available-to-Promise

• When immediate delivery is not expected (or

is not possible due to stockouts), a promised
delivery date must be established
• The order promising task is to determine when
the shipment can be made
• Available-to-promise (ATP) procedures
coordinate order promising with production
schedules
 Order Promising
Before week 1 1 2 3 4 5 6 7 8 9 10 11 12
Forecast 5 5 5 5 5 5 15 15 15 15 15 15
Orders 5 3 2
Available 15 10 5 30 25 20 5 20 5 20 5 20
ATP 10 30 30 30 30
MPS 30 30 30 30
On Hand 20

ATP=20-(5+3+2)

After week 1 2 3 4 5 6 7 8 9 10 11 12 13
Forecast 10 10 10 10 10 15 15 15 15 15 15 15
Orders 5 5 2
Available 30 20 10 30 20 5 20 5 20 5 20 5
ATP 28 30 30 30 30
MPS 30 30 30 30 30
On Hand 10

ATP=(30+10)-(5+5+2)
Master Production Scheduling (MPS)

• Should be accurate in the near term (firm orders)

• May be inaccurate in the long term (forecasts)
• Software supports
– forecasting
– order entry
– netting against inventory
• Frequently establishes a “frozen zone” in MPS
 Time Fences
◼ Time fences are used to manage the trade-off
between a stable MPS and needed flexibility
◼ The length of the intervals depend on the
marketing strategy and product structure
Capacity Frozen Negotiable Open

Time
Fences

Forecasted Demand
or
Available Capacity
Firm Customer
Orders

8 Weeks 16 Weeks Time into the Future

 Time Fences
◼ The rules for scheduling 6+
weeks
4-6
2-4 weeks
1-2 weeks
weeks
+/- 5% +/- 10% +/- 20%
No Change
Change Change Change
Frozen
Firm
Full
Open
Freezing the Master Production
Schedule
Demand Time Planning Time
Fence Fence

Inside the frozen

horizon no order
changes are allowed

Only occasional changes Minor changes Most changes

 Time Fences
• The rules for scheduling:

– Do not change orders in the frozen zone

– Do not exceed the agreed on percentage changes
when modifying orders in the other zones
– Try to level load as much as possible
– Do not exceed the capacity of the system when
promising orders.
 A good MPS must be...
▪ The MPS process and Production Planning
must be coordinated
▪ The MPS must drive the actual production
▪ The MPS process must be cross-functional
(ATP information should be derived from the MPS and
provided to the sales department)
▪ The MPS must be feasible
▪ The MPS must be a stable document