Netting and Time Phasing in Material Requirements Planning

Why it matters

Material requirements planning, MRP for short, determines how much of which part will be needed and when, through interlinked calculations. The demand for the finished product is converted into components with the usage quantities in the bill of materials. This is the gross requirement. When the available material in hand and the receipts confirmed up to the moment of need are deducted, the quantity that still has to be covered is found. The value of the calculation is that it makes purchasing and production needs visible together with their dates. On the other hand, a correct net quantity alone does not prove that the material has actually been secured or that production capacity is sufficient.

Availability matters as much as the stock count. Material set aside for quality reasons, allocated to another order or physically not found cannot be used as free stock. The date of a confirmed purchase order is also compared with the requirement date. Counting a quantity that will arrive after the need as if it closed today's gap is making a wrong delivery promise with a correct subtraction. The record therefore contains not only a quantity; the part identity, unit of measure, available date and status are held together. An uncertain receipt is not shown at the same confidence level as a verified one.

Time phasing is the backward offsetting of the net requirement. The lead time is subtracted from the date the receipt is needed to find the date the order must be started. This time may not consist only of processing on the machine; it may include the defined sum of supply, transport and acceptance conditions. Adding the same wait twice or leaving out the required acceptance time changes the result. The working calendar and the calendar duration must also be kept apart. A date found without knowing which days the duration counts cannot be accepted as an executable start date. The assumption behind the date calculation should be as visible as the quantity calculation.

The MRP calculation is decision support; it is not an assurance that fills in missing data by itself. A wrong bill-of-materials coefficient spreads to all lower levels. A start date that is already in the past cannot be solved by opening an order in the past. First, the feasible options with the material at hand, open orders and real capacity are examined. It must also be known for which components the shop-floor pull system generates orders; the same requirement is not released to production a second time. Netting, time phasing and release thus pass through separate checks. Even if the calculation is correct, a wrong decision at the boundary can create excess stock or a delivery gap. For the numerical scenarios in the lesson quizzes as well: This dataset was generated synthetically for training; it does not represent a real business, employee or customer study.

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