On Hand is the quantity of the item that is on hand at the beginning of period 1.
Lead time is the amount of time from when an order is placed to when it arrives. See page 278.
Lot Size - LFL means lot-for-lot, we order material only as it is needed. See page 282.
Lot size – with a quantity means the when an order is placed that quantity, or multiples of it, must be ordered. For example a case of 24 bottles of beer.
Safety Stock, the projected on hand can never fall below this number.
Based on the above, complete the MRP record for each item on the following page.
You should start at the top of the bill of material with item A. Then you should do the next level working left to right, so B and C. Then the next level, left to right. A is a parent item and B and C are children to A. D and E are children that go into the parent item C. The numbers after each item in the bill of material indicated the number of that item that goes into the parent. For example, 5 Ds go into each C. Remember, the planned order releases of the parent become the gross requirements of the child multiplied by the quantity of the child that go into the parent.
To complete the MRP (Material Requirements Planning) record for each item, you will need to follow the steps outlined below:
1. Start with item A, which is the top-level parent item in the bill of material.
2. Calculate the gross requirements for item A by multiplying the demand for item A (which is usually given) by the quantity of item A required for each parent item. For example, if the demand for item A is 100 and each parent item requires 2 As, the gross requirement for item A would be 100 * 2 = 200.
3. Determine the on-hand quantity for item A at the beginning of period 1. This is the quantity of item A that is already in stock or on hand before any orders are placed.
4. Calculate the net requirements for item A by subtracting the on-hand quantity from the gross requirements. Net requirements represent the additional quantity of item A that needs to be ordered or produced to meet the demand.
5. Based on the lead time (the amount of time from when an order is placed to when it arrives), determine when the order for item A needs to be placed to ensure that it arrives on time. This lead time information is usually provided and can be found on page 278.
6. Determine the lot size for item A. If the lot size is "LFL" (lot-for-lot), it means that you should order material only as it is needed. In this case, the order quantity for item A would be equal to the net requirements.
7. If the lot size includes a specific quantity, such as a case of 24 bottles of beer, it means that when an order is placed, that quantity or multiples of it must be ordered. In this case, round up the net requirements for item A to the nearest multiple of the specified lot size quantity.
8. Calculate the planned order releases for item A. Planned order releases represent the quantity and timing of orders to be placed for item A. This is usually the order quantity or lot size for item A multiplied by the number of orders needed to cover the net requirements over the planning horizon.
9. Repeat the above steps for the child items B and C, which are children to item A. Calculate their gross requirements, net requirements, determine their lot sizes, and calculate their planned order releases.
10. Proceed to the next level in the bill of material, working left to right. In this case, the next level includes items D and E, which are children of item C. Calculate their gross requirements, net requirements, determine their lot sizes, and calculate their planned order releases.
11. Continue this process for all the items in the bill of material, ensuring that you calculate the gross requirements, net requirements, lot sizes, and planned order releases for each item.
By following these steps and referring to the given information on page 278 for lead time and page 282 for lot size, you will be able to complete the MRP record for each item in the bill of material.