Component Demand in an MRP System

In an MRP (Material Requirements Planning) system, component demand refers to the quantity of components or raw materials needed to fulfill the production requirements specified by the master production schedule (MPS). The MRP system calculates this demand by evaluating the production plan and determining the materials needed for each stage of production.

1. Forecasted Demand
- Forecasted demand refers to the estimated quantity of components that will be required in the future based on historical data, market trends, and other relevant factors.
- While forecasting is an important aspect of production planning, it is not the primary method for determining component demand in an MRP system.

2. Calculation by MRP System
- The MRP system derives component demand by analyzing the MPS, which provides information about the production schedule, including the quantities and timing of finished goods required.
- Based on the production plan, the MRP system breaks down the finished goods requirements into the necessary components and raw materials needed to produce them.
- It calculates the quantities of each component required by considering factors such as the bill of materials, lead times, inventory levels, and order quantities.
- The MRP system takes into account the timing of the production schedule, ensuring that components are available when needed and avoiding shortages or excess inventory.

3. Role of the Master Production Schedule
- The master production schedule (MPS) serves as the primary input to the MRP system.
- The MPS outlines the production plan, specifying the quantities of finished goods to be manufactured in each time period.
- It takes into account factors such as customer demand, sales forecasts, production capacity, and inventory levels.
- The MRP system uses the MPS as a basis for calculating the component demand, ensuring that the necessary materials are available to support the production schedule.

4. Ignoring Component Demand
- Ignoring component demand would undermine the effectiveness of an MRP system.
- Without considering the component requirements, it would be impossible to ensure that the necessary materials are available in the right quantities and at the right time.
- This could result in production delays, stockouts, excess inventory, increased costs, and customer dissatisfaction.

Therefore, the correct answer is option 'B' - Component demand is calculated by the MRP system from the master production schedule. The MRP system analyzes the MPS to determine the quantities of components needed for production, considering various factors to ensure efficient material planning and production scheduling.