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Chapter 4
Quantity
Ingredient NRG-A NRG-B
Oats (lb.) 300 250
Wheat germ (lb.) 50 50
98 Cinnamon (lb.) 5 5
Nutmeg (lb.) 2 2
Cloves (lb.) 1 1
Honey (gal.) 10 10
Canola oil (gal.) 7 7
Vit./min. powder (lb.) 5 5
Carob chips (lb.) 50
Raisins (lb.) 50
Protein powder (lb.) 50
Hazelnuts (lb.) 30
Dates (lb.) 70
Source Line: Course Technology/Cengage Learning.

FIGURE 4-16 The bill of material (BOM) for Fitter’s NRG bars

The BOM for Fitter’s NRG bars is fairly simple because all ingredients are mixed
together to form the dough; there are no intermediary steps. Many other products,
however, are produced by joining component parts into subassemblies that are then joined
to form the finished product. It is obviously more complicated to calculate the raw
material requirements for products with more complex BOMs.

Lead Times and Lot Sizing
The BOM can be used to calculate how much of each raw material is required to produce
a finished product. Determining the timing and quantity of purchase orders, however,
requires information on lead times and lot sizing.
For example, if a manufacturer orders a make-to-stock item, the lead time is the
cumulative time required for the supplier to receive and process the order, take the
material out of stock, package it, load it on a truck, and deliver it to the manufacturer. The
manufacturer might also include the time required to receive the material into its
warehouse (unloading the truck, inspecting the goods, and moving the goods into a storage
location).
Lot sizing refers to the process of determining production quantities (for raw
materials produced in-house) and order quantities (for purchased items). In Fitter’s case,
many raw materials can only be ordered from a supplier in certain bulk quantities. For
example, because Fitter uses large quantities of oats, the most cost-effective way to
purchase oats is in bulk hopper-truck quantities, which means that the material must be
ordered in 44,000-pound quantities. Wheat germ, however, is used in smaller quantities,
and to avoid having wheat germ become stale, Fitter orders it in 2,000-pound bulk
containers. Protein powder is packaged in 50-pound bags that are loaded 25 to a pallet, so
the most cost-effective way to order protein powder is by the pallet load (1,250 pounds).
Let’s look at the materials requirements planning process using oats, which have a
two-week lead time and must be ordered in hopper-truck quantities (multiples of 44,000
pounds). To determine when and how many pounds of oats should be ordered, we will

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