Material requirements planning with flexible bills-of-material

In conventional Material Requirements Planning (MRP), a Bills-of-Materials (BOM) for products is fixed. If time or quantity as stated in the Master Production Schedule (MPS) is not flexible for the final product, flexible BOM may be introduced to compensate for the inflexibility in the MPS. This paper addresses situations where a flexible BOM could be used to deal with unexpected shortages when using MRP to plan for requirements of dependent demand items. The requirements stated in the MPS are met in a timely manner by allowing the substitution of items for one another in the case of a shortage. A linear programming (LP) formulation is provided to help deal, if possible, with a shortage using the flexibility in the BOM. The LP model identifies a ‘mix’ of lower-level items that satisfy both the reality of shortages and ensure as small a deviation from the default BOM as possible. A detailed example in the food production environment is presented to explain how the flexible BOM concept may be applied.