MRP Material Requirements Planning Fundamentals 3 — Questions and Answers
Question 1: The Economic Order Quantity (EOQ) lot-sizing rule minimizes the sum of which two cost categories?
- Ordering costs and carrying costs (Correct answer)
- Setup costs and shortage costs
- Purchase price and transportation costs
- Labor costs and overhead costs
Correct answer: Ordering costs and carrying costs
EOQ balances ordering (or setup) costs against inventory carrying (holding) costs to find the most cost-effective order quantity.
Question 2: What is the effect of increasing safety stock levels in an MRP system?
- Reduces gross requirements
- Increases net requirements and planned order quantities (Correct answer)
- Eliminates the need for scheduled receipts
- Shortens the cumulative lead time
Correct answer: Increases net requirements and planned order quantities
Higher safety stock increases the projected on-hand target, which raises net requirements and therefore the planned order quantities generated by MRP.
Question 3: Which MRP output is used by purchasing to create purchase orders?
- Planned order releases for purchased items (Correct answer)
- Exception messages for internal work centers
- The projected on-hand inventory report
- The BOM structure report
Correct answer: Planned order releases for purchased items
Planned order releases for purchased items are the MRP output that triggers the creation of purchase orders to external suppliers.
Question 4: A 'pegging' report in MRP is used to:
- Assign lot numbers to inventory transactions
- Trace a component's demand back to its parent requirement (Correct answer)
- Calculate the reorder point for independent demand items
- Allocate capacity to planned production orders
Correct answer: Trace a component's demand back to its parent requirement
Pegging links a lower-level component requirement back through the BOM to the specific parent orders or customer demands that caused it.
Question 5: Low-level coding in a BOM ensures that MRP:
- Processes each component at the highest level it appears first
- Calculates requirements for a component after all its parents have been planned (Correct answer)
- Assigns the lowest possible cost to shared components
- Avoids duplicating planned orders for common parts
Correct answer: Calculates requirements for a component after all its parents have been planned
Low-level coding assigns each part a code equal to the lowest level it appears, ensuring MRP nets all parent demands before planning that component.
Question 6: What problem does 'nervousness' describe in an MRP system?
- The system's inability to handle large BOM structures
- Frequent and disruptive changes to planned orders caused by small demand fluctuations (Correct answer)
- Errors introduced by inaccurate inventory records
- Delays caused by long supplier lead times
Correct answer: Frequent and disruptive changes to planned orders caused by small demand fluctuations
MRP nervousness refers to the tendency of the system to generate large, cascading changes to the plan in response to even minor changes in demand or supply.
Question 7: Which technique is used to stabilize an MRP plan and reduce system nervousness?
- Increasing the planning horizon
- Implementing time fences on the MPS (Correct answer)
- Reducing the BOM levels
- Shortening supplier lead times
Correct answer: Implementing time fences on the MPS
Time fences restrict automatic changes to the MPS within a defined near-term window, preventing constant replanning and stabilizing downstream MRP schedules.
MRP Material Requirements Planning Fundamentals 3
The Economic Order Quantity (EOQ) lot-sizing rule minimizes the sum of which two cost categories?