Material Requirement Planning (MRP1)

What is MRP?

Computerized Inventory ControlProduction Planning SystemManagement Information SystemManufacturing Control System

What is MRP? (cont)

This is the most comprehensive approach to manufacturing inventory and other dependents which demand an efficient inventory management system.

What is MRP do ?

The MRP system determines item-by-item, what is to be processed and when, as well as what is to be manufactured when.

This is based on order priorities and available capacities.

When to use MRP

Job Shop Production Complex Products Assemble-to-Order Environments Discrete and Dependent Demand Items

What can MRP do? Reduce Inventory Levels Reduce Component Shortages Improve Shipping Performance Improve Customer Service Improve Productivity Simplified and Accurate Scheduling Reduce Purchasing Cost Improve Production Schedules Reduce Manufacturing Cost Reduce Lead Times Less Scrap and Rework Higher Production Quality

What can MRP do?(contd)

Improve Communication Improve Plant Efficiency Reduce Freight Cost Reduction in Excess Inventory Reduce Overtime Improve Supply Schedules Improve Calculation of Material Requirements Improve Competitive Position

Three Basic Steps of MRP

Identifying Requirements Running MRP – Creating the Suggestions Firming the Suggestions

Step 1: Identifying the Requirements

Quantity on Hand Quantity on Open Purchase Order Quantity in/or Planned for Manufacturing Quantity Committed to Existing Orders Quantity Forecasted

Step 1: Important InformationMRP is…..

Company Sensitive Location Sensitive Date Sensitive

Step 2: Running MRP – Creating the Suggestions

Critical ItemsExpedite ItemsDelay Items

Step 3: Firming the Suggestions

Manufacturing OrdersPurchasing OrdersVarious Reports

Overview of the MRP System

13

Product Structure

File

Master Production Schedule

Inventory Master File

Material Requirements

Planning

Manufacturing Orders

Purchase Orders

Various Reports

MRP Inputs

Product Structure File Master Production Schedule Inventory Master File

Product Structure File

Bill of Materials: It is a materials list that provides

information useful to reconstruct the manufacturing process. It is the master product definition that contains “as designed” information.

Bill-of-Material Product Structure Tree

Bicycle(1)P/N 1000

Handle Bars (1)P/N 1001

Frame Assembly (1) P/N 1002

Wheels (2)P/N 1003

Frame (1)P/N 1004

Master Production Schedule

Schedule of Finished Products Represents Production, not Demand Combination of Customer Orders and Demand

Forecasts What Needs to be Produced

Inventory Master File

On-Hand Quantities On-Order Quantities Lot Sizes Safety Stock Lead Time Past-Usage Figures

MRP ProcessItem: Low-Level Code: Lot Size: Lead Time

PD 1 2 3 4 5

Gross requirementScheduled receiptsProjected on handNet requirementsPlanned order receiptsPlanned order releases

Terms Defined

Item – name or number for the item being scheduled Low-Level Code – the lowest level of the item on the

product structure file Lot Size – order multiples of quantity Lead Time – the time from when an order is placed to

when it is received PD – Past Due Time Bucket, orders behind schedule

Terms Defined

Gross Requirements – demand for an item by time period

Scheduled Receipts – material already ordered Projected on Hand – expected ending inventory Net Requirements – number of items to be provided

and when Planned Order Receipts – net requirements adjusted

for lot size Planned Order Releases – planned order receipts

offset for lead times

Example of the MRP ProcessItem: PD 1 2 3 4 5Gross requirement

10 15 25 25 30

Scheduled receipts

25

Projected on hand

20

Net requirementsPlanned order receiptsPlanned order releases

Example of the MRP ProcessItem PD 1 2 3 4 5Gross requirement

10 15 25 25 30

Scheduled receipts

25

Projected on hand

20 10 20 20 20 15

Net requirements

5 5 10

Planned order receipts

25 25 25

Planned order releases

25 25 25 30 25

Aggregate Production Plan

MarketingCustomerDemand

EngineeringDesign

Completion

ManagementReturn onInvestment

Capital

HumanResourcesManpowerPlanning

ProcurementSupplier

Performance

FinanceCash Flow

ProductionCapacityInventory

Inputs to the Production Plan

Production Plan

Execute MaterialPlans

Master ProductionSchedule

MaterialRequirements

Plan

CapacityRequirements

Plan

Execute CapacityPlans

Realistic??No

Yes

The Planning Process

MRP OutputsManufacturing OrdersPurchasing OrdersVarious Reports

Hubbell Lighting Case

Before MRP Implementation

Less than 75% of orders completed on time

After MRP Implementation

97% of orders completed on time2% of orders completed with 1 to 2 days after due date

Summary of MRPMRP is a…..Computerized Inventory ControlProduction Planning Systemthat…..Schedules Component Items as Neededwhich will…..Track Inventory and…..Help you in many other aspects of business