Describe the role of ‘product structure’ in materials requirement planning.

The product structure, also known as the bill of materials (BOM), plays a fundamental role in Materials Requirement Planning (MRP) by providing a hierarchical representation of the components and subassemblies required to manufacture a finished product. The product structure serves as the foundation for MRP calculations, enabling organizations to accurately determine the materials needed for production, plan procurement activities, and schedule production orders. Here's a detailed look at the role of the product structure in MRP:

1. Hierarchy of Components:

   • The product structure organizes components and subassemblies into a hierarchical structure, with the finished product at the top and its constituent parts listed in a hierarchical order below.
   • Each level of the hierarchy represents a different level of assembly, from raw materials and purchased parts to subassemblies and finished products.
   • This hierarchical structure provides a clear understanding of how each component contributes to the final product, facilitating accurate planning and scheduling of material requirements.

2. Quantity Calculation:

   • MRP uses the product structure to calculate the total quantity of each component needed to fulfill production orders specified in the Master Production Schedule (MPS).
   • By analyzing the structure and quantities specified in the BOM, MRP determines the net requirements for each component by considering the demand for the finished product, existing inventory levels, and any scheduled receipts or open orders.
   • This calculation ensures that sufficient quantities of materials are available to support production activities while minimizing excess inventory and stockouts.

3. Multi-Level Explosion:

   • MRP performs a multi-level explosion of the product structure to determine the requirements for all levels of components and subassemblies.
   • Starting from the top-level finished product, MRP 'explodes' the BOM to calculate the requirements for each component at lower levels of the hierarchy.
   • This process continues recursively until the lowest level of components, such as raw materials or purchased parts, is reached.
   • By considering the dependencies and relationships between components at different levels of the product structure, MRP ensures comprehensive planning of material requirements across all levels of assembly.

4. Lead Time Consideration:

   • The product structure contains information about lead times associated with each component or subassembly, representing the time required for suppliers to deliver materials after an order is placed.
   • MRP considers lead times when generating procurement recommendations and production schedules to ensure that materials are available when needed to support production activities.
   • By incorporating lead times into the planning process, MRP helps organizations minimize production delays and optimize inventory levels.

5. Engineering Changes:

   • The product structure serves as a reference for managing engineering changes and revisions to product designs.
   • When changes occur, such as modifications to component specifications or additions/removals of components, the product structure is updated accordingly.
   • MRP uses the updated product structure to recalculate material requirements and adjust procurement plans to reflect the changes, ensuring that production remains aligned with the latest design specifications.

In summary, the product structure is a critical component of Materials Requirement Planning, providing a hierarchical representation of components and subassemblies essential for manufacturing finished products. By leveraging the information contained in the BOM, MRP accurately calculates material requirements, plans procurement activities, schedules production orders, and adapts to changes in product designs, enabling organizations to optimize inventory levels, minimize production delays, and efficiently manage their material resources.