Prof.

Nilson Ribeiro

PRODUCT STRUCTURE
BOM – Bill of Materials
ITEM OF DEMAND
LEVEL 0 BIC PEN INDEPENDENT

BODY LOAD TAMPA LEVEL 1

10 g 2g 0.5 g

Plastic D PLASTIC M DYE ITEMS OF

DEMAND
DEPENDENT
5g
INK pointer TUBE DRESS LEVEL 2

5g

PLASTIC M LEVEL 3

Note: When the quantity is not mentioned, it is the unit.

INDENTED BILL OF MATERIALS

Level Item
0. BIC pen
.1 BODY
.. 2 PLASTIC D 10 g
.1 LOAD
.. 2 INK 5g
.. 2 TIP
.. 2 dress
... 3 PLASTIC M 5 g
.1 TAMPA
.. 2 PLASTIC M 2 g
.. 2 DYE 0.5 g
 Professor Nilson Ribeiro

• The product structure answers 2 fundamental questions that the systems of

Production planning seeks to answer: WHAT and HOW MUCH.

The next question is WHEN we should take the managerial action of buying or
to produce.
• SHOULD WE BUY/PRODUCE AS EARLY AS POSSIBLE?
NO, to not load inventory beyond what is strictly necessary.
• So we should not buy/produce even a day before it is strictly necessary.
WE MUST BUY/PRODUCE AS LATE AS POSSIBLE!

THIS IS THE LOGIC OF MRP: schedule activities for the latest possible moment
to minimize inventories.

So, in addition to the product structure, with the quantities of child items, it is necessary
gather information about the acquisition times of various items - whether they are
purchased or produced.

For example, to produce 1,000 pens:

Bought or Time of
Level Item Quantity
Produced Obtaining
0. BIC pen 1000 P 1 week
0.1 BODY 1000 P 2 weeks
.. 2 PLASTIC D 10 g 10 kg C 1 week
.1 LOAD 1000 P 1 week
.. 2 INK 5g 5 kg C 1 semana
.. 2 TIP 1000 C 2 weeks
.. 2 tube dress 1000 P 2 weeks
... 3 PLASTIC M 5 g 5 kg C 1 week
.1 TAMPA 1000 P 2 weeks
.. 2 PLASTIC M 2 g 2 kg C 1 week
.. 2 Dye 0.5 g 0.5 kg C 1 week
 Professor Nilson Ribeiro

Assuming we have to deliver the order of 1000 pens in week 6, we have:

PEN

BODY LT = 1

Plastic D LT = 2

LT = 1 LOAD

LT = 1
INK

LT = 1
tip

LT = 2
TUBINHO

LT = 2
PLASTIC M
TAMPA
LT = 1
PLASTIC M LT = 2

LT = 1
DYE

LT = 1 Time

1 2 3 4 5 6 week

OP Pens 1000

OP Load 1000

OP Corpo 1000
OC Ink 5 kg
OP Tampa 1000
OC Plastic D 10 kg
OC Tip 1000
OP Tubinho 1000
OC Plastic M 2 kg
OC Dye 0.5 kg

OC Plastic M 5 kg
 Professor Nilson Ribeiro

SEQUENCE OF MANAGEMENT ACTIONS

WEEK 0 • None
WEEK 1 • Release Purchase Order for 5 kg of Plastic M(*)
• Release Purchase Order for 10 kg of Plastic D
• Release Purchase Order for 1000 Tips
WEEK 2 • Release Production Order of 1000 Tubes
• Release Purchase Order for 2 kg of Plastic M(*)
• Release Purchase Order for 0.5 kg of Dye
• Release Production Order for 1000 Bodies
WEEK 3 • Release Purchase Order for 5 kg of Paint
• Release Production Order for 1000 Caps
WEEK 4 • Release Production Order of 1000 Loads
WEEK 5 • Release Production Order for 1000 Pens
WEEK 6 • Deliver the 1000 pens

(*)Note: Whenever the same material appears more than once in the structure of
the product must consider the sum of its quantities in the highest level code
low level code

It is noted that MRP has a logic that starts from the future vision of need
finished products and then come 'exploding' the needs for level A components
level, back in time. That is why the logic of MRP is called "scheduling logic".
backward scheduling

IMPORTANCE OF SALES FORECASTS FOR THE GOOD FUNCTIONING OF

MRP

In today's competitive world, delivery deadlines are, due to competition, each

fewer times.

A production manager cannot wait for the receipt of a firm order.

to initiate the purchasing/production process.

It is essential to work based on the best vision of the future one has. That is to say,
based on sales forecasts.

Therefore, having good sales forecasting systems is almost a prerequisite.

for the proper functioning of MRP systems.
 Professor Nilson Ribeiro

CALCULATION OR 'EXPLOSION' OF NET MATERIALS REQUIREMENTS

In the presented example, it was considered that there is no stock of the product.
final (pen) as well as semi-finished products or raw materials.

Let's observe now how the MRP would calculate the placement requirements.
purchase and production orders, considering a possible occurrence of stocks of
specific items.

Based on the same need for the availability of finished products (1,000
pens in week 6), the calculations now follow a slightly different dynamic.

Let's assume that, by managerial decision, our company does not maintain any inventory.
of finished products, that is, ready pens.

This means that to make 1,000 pens available in week 6, we will have to
effectively start assembling the 1,000 pens in week 5.

In this case, the gross need (need for availability) is equal to the need.
liquid (need to obtain via purchase or production).

In order for the 1,000 pens to start being assembled in week 5, it is necessary
that there is availability (gross demand) of sufficient quantities of all
direct components (children) of the pen: 1,000 bodies, 1,000 refills, and 1,000 caps.

The question now is: in week 5, what inventory do we project to have of each of these?
components (let's assume we are in week 0)?

Without worrying for now about how we would have that information, let's suppose that
we have in stock in week 9: 200 bodies, no loads, and 1500 caps.

Based on this information, we can calculate the net need of

obtained items executed child of the pen, as shown in the table below.

Need Need
Child Items Projected inventory
from the pen
(brute) of Liquid of
available at
availability Effective Acquisition
(Level 1) week 5
for week 5
BODY 1000 200 800
LOAD 1000 0 1000
TAMPA 1000 1500 0

With the repetition of this reasoning sequentially backwards in time, we arrive at a

general overview of the needs for the release of purchase orders and production.

This is the fundamental logic of the MRP system.

 Professor Nilson Ribeiro

MRP MECHANICS

BASIC MRP REGISTER

The basic record of the MRP is organized in the form of a matrix (rows and columns), like
exemplified below.

Each item has one and only one basic record in the MRP.

Everything related to this item, in terms of logistical movements and planning,

it consists of your basic registration.

Body Periods 1 2 3 4 5 6
yes Gross needs 1000 800 1000
Pen
Scheduled payments 200
Lote = 1
(minimum) Projected stock 800 800 0 1000 200 0 500
LT = 2 Receipt of planned orders 1000 800 500
ES = 0 Release of planned orders 1000 800 500

The columns of the basic record represent the planning periods. In MRP,
the planning horizon is divided into a finite number of periods, represented in the
columns of the record.

It is important to note that MRP does not treat time as a continuous variable, but as
a discrete variable. But, in practice, with the systems available today, it is possible to do
that these periods (known as time buckets) correspond to a
day, making the variable almost continuous.

An important convention is that, in the basic record, the present moment is always the
start of period 1.

Period 1 is the next planning period, period 2 is the following one, and so on.
in front, up to the end of the planning horizon.

The basic registration periods, therefore, represent future periods.

As time goes by (for example, when the period considered as period

1 in the past planning passes), the record eliminates this period and makes it so that the
period 1 of the next planning is to be considered period 2 in the planning
past.

To maintain a constant duration future planning horizon, each period

eliminated by the passage of time, a period is added to the end of the previous horizon, which
It was not considered in the previous planning.

In this way, the basic record of MRP undergoes the process of 'rolling' the planning.
 Professor Nilson Ribeiro

The lines of the basic record represent:

• Gross needs: need for item availability in each period, or

be, the expected outputs of the stock item.

• Scheduled receipts: arrivals of the item made available to stock at the beginning
of the corresponding period, for which the actions requesting this payment have already been
outlets.

• Projected available stock: quantity of the item in question that we expect,

be available in stock at the end of the period, after balancing the quantity of
item at the end of the previous period, plus the expected stock entries in the period,
less the expected stock exits during the period.

• Receipt of planned orders: quantity of the item that should be

available at the beginning of the corresponding period, considering the planned actions.

• Release of planned orders: the quantities of the item informed in this line
they refer to the releases or openings of planned orders at the beginning of the period to be
received as stated in the line of planned order receipts. The difference of
The period between these lines refers to the lead time.

There may be a difference in quantity between the lines 'order receipt'

"planned" and "release of planned orders" due to "production breakdown or rejects"
systemic that the process of obtaining the item loads.

For example, in a transformation process that systematically ruins 2% of the

parts, when the system is informed of this, will generate the line for 'order release'
"planned" with 2% more parts than the strictly necessary amount.

Fundamental parameters of MRP:

• Lead times

• Safety stocks

• Policies and lot sizes:

The example record above shows the strict calculation of the MRP. Only the
strictly necessary quantities are planned to arrive at the last moment
possible, in order to minimize stocks. It's not always like this, sometimes there are restrictions
in the logistical processes that must be respected and considered for the MRP calculation.

Fixed lots (or multiples): often, particularly for items purchased from a
fornecedor, a obtenção (compra) deve ocorrer em lotes fixos, por ex., caixas com
1000 units. Thus, the lines 'scheduled receipts', 'receipt
"planned orders" and "release of planned orders" will always be multiples
of this fixed batch.
 Prof. Nilson Ribeiro

In addition to the multiple lots, most commercial MRP systems allow defining
parameterize or customize

Minimum lot policy: indicates the minimum quantity to open an order,

allowing any amount of this level or higher.

Maximum lot policy: indicates a maximum lot quantity to be opened.

Used in cases where there is a physical volume restriction in the process, not being
production of quantities above the defined maximum is allowed.

Fixed period policy: the system calculates all needs over the course of
future periods, of defined duration, period by period, and focuses on the beginning
of these periods the planned receipts of the total calculated needs.
Used for situations where we want to have releases of periodic orders with
predefined periodicity.

Generation of needs in the 'child' items

"Child" items with more than one "parent" item

Low-level code in MRP

For greater efficiency of the MRP calculation algorithm, it is easy to see that a record
basic should only be calculated when all its "parent" items have already been
calculated.

In this way, all the lines of necessity for opening planned orders for the items
countries will then be calculated and, based on them, the complete line of gross needs
The item 'child' will be defined when it is calculated.

It happens that, sometimes, the same item appears at different levels of the same (or
of different product structures of an organization.

The LLC is a number assigned to all items that corresponds to the lowest number in
que o item aparece em qualquer estrutura de produto da organização.

The LLCs are defined periodically through a calculation routine run by

system administrator.

From the LLCs, the system calculates the records of the items, from the highest levels to the
lower, as follows:

Calculation of items that are at level 0 - calculates not all items, but only
those who are at level 0 and have LLC 0;
 Prof. Nilson Ribeiro

When all the items that are at level 0 and have LLC 0 are calculated, the system
level change to the following: level 1;
Calculation of items that are at level 1 - calculates not all items, but only
those who are at level 1 and have LLC 1;
When all items that are at level 1 and have LLC 1 are calculated, the system
level change to the following: level 2;
Calculation of the items that are at level 2 – ... (and so on until the last item of
last level to be calculated).

In this way, an item will only be calculated when it is at its highest level occurrence.
low and, therefore, when all of its parent items have already been calculated.

The importance of inventory data accuracy

The importance of product structure accuracy

Management by exceptions:

In MRP systems, management is conducted through information exchanged between the planner and
system.

The planner informs the system of the occurrences of reality (report), from the perspective of
future, of parametrization and of control.

The system, after processing, provides information to the planner in such a way that
allow decision-making about what, how much, when, and with what resources to produce and
to buy.

Meanwhile, in real manufacturing situations, the amount of information reported to the system
it is huge. This means that the system will check a large number of occurrences,
comparing them with those expected (or planned).

In many cases, there is a coincidence between what was planned and what occurred. About those, the planner
does not need to be informed.
It is about the occurrences that are not in line with what was planned that the planner will have to
focus your attention on observing and analyzing the consequences of the difference
identified between the planned and the actual and, possibly, take management actions to
minimize the effects of the difference.

Commercial MRP systems operate this logic based on providing information.

to the decision-maker (or planner) in a selective manner.

There are systems that allow, in fact, the parameterization of this process through filters.
 Professor Nilson Ribeiro

Bibliographic Reference:

Corrêa, H. L.; Gianesi, I. G. N.; Caon, M. – Planning, Programming, and Control of

Production – Atlas Publishing, 2001 (Chapters 2 and 3).