MRP

MRP

Supply Chain Management Presentation

on

By: Hassan Ali (11IN53)

Assigned by: Dr. Anwaruddin Tanwri

Department of Industrial Engineering & Management

Mehran University of Engineering & Technology, Jamshoro

Outline

MRP HistoryIntroduction to MRPObjectives of MRPInputs/Requirements to MRPMRP ExampleBenefits of MRPDrawbacks of MRPIndustry Applications

History

Till early1960’s reorder point (ROP) systems was used by organizations.

A predefined level of components is used to Reorder.

Not actually when needed.

Results in high inventory.

In late 1960’s several production and planning software systems were made and MRP was one of them.

Materials requirements planning (MRP)

Computer-based information system for ordering and scheduling of dependent demand inventories (such as raw materials, component parts, and subassemblies that will be used in the production of a finished product).

It is a production planning process that starts from the demand for finished products (independent demand) and plans the production step by step of subassemblies and parts (dependent demand).

MRP is a means for determining the number of parts, components, and materials needed to produce a product.

MRP provides time scheduling information specifying when each of the materials, parts, and components should be ordered or produced.

Independent Demand v/s Dependent Demand

Independent Demand Dependent Demand

◦ Is the demand for finished products.

◦ Does not depend on the demand of other products.

◦ Needs to be forecasted.

◦ Is the demand derived from finished products.

◦ Is the demand for component parts based on the number of end items being produced and is managed by the MRP system.

Objectives of MRP

“getting the right materials to the right place at the right time”.

Thus, MRP is designed to answer three questions:

◦ what is needed?

◦ how much is needed?

◦ and when is it needed?

◦ The art of balancing supply and demand is critical to any organization.

◦ The MRP is a powerful planning tool that enables organization to satisfy customer requirements, while maintaining optimal inventory levels.

Overall View of the Inputs to a Standard MRP Program

and the Reports Generated by the Program

MRP

Master Productio

n Schedule

Bill of Materials

Inventory Record

files

Main inputs/Requirements to MRP

Master Production Schedule

• The MPS is a time-phased plan of finished products that will meet the demand on time, within the organization’s capacity.

• The master production schedule expresses, What we intend to make? How much we intend to make? When we intend to make?

• The CP checks to make sure the scheduled work load profile is feasible.

BOM (Bill of Materials)

• A list of subassemblies, components, and raw materials, and their respective quantities required to produce specific end items.

• The bill of Materials file contains the complete product description, listing materials, parts, and components but also the sequence in which the product is created.

• The BOM file is often called the product structure file or product tree because it shows how a product is put together. It contains the information to identify each item and the quantity used per unit of the item of which it is a part.

BOM Example

A(2) B(1)

D(5)C(2)

X

C(3)

Inventory records file

• Computerized record-keeping system for the inventory status of all subassemblies, components, and raw materials.

• The MRP program accesses the status segment of the file according to specific time periods. These files are accessed as needed during the program run.

Primary MRP Reports

• Planned orders to be released at a future time.

• Order release notices to execute the planned orders.

• Cancellations or suspensions of open orders due to cancellation or suspension of orders on the master production schedule.

• Inventory status data.

Secondary MRP Reports

• Planning reports, for example, forecasting inventory requirements over a period of time.

• Performance reports used to determine agreement between actual and programmed usage and costs.

• Exception reports used to point out serious discrepancies, such as late or overdue orders.

A(2) B(1)

D(5)C(2)

X

C(3)

Item On-Hand Lead Time (Weeks)X 50 2A 75 3B 25 1C 10 2D 20 2

Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10

Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10

MRP Example

A(2)

X

week 1 2 3 4 5 6 7 8 9 10X Gross requirements 95

LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50

On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90

LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75

On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45


On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40

LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10

On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100

LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20

On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80

It takes 2 A’s for each X

It takes 2 A’s for each X

Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95











B(1)A(2)

X

It takes 1 B for each X

It takes 1 B for each X

A(2) B(1)

X

C(3)












It takes 3 C’s for each A

It takes 3 C’s for each A

A(2) B(1)

C(2)

X

C(3)












It takes 2 C’s for each B

It takes 2 C’s for each B

A(2) B(1)

D(5)C(2)

X

C(3)












It takes 5 D’s for each B

It takes 5 D’s for each B

MRP 21

Safety stocks in MRP systems Need for safety stocks:

Variations in demand due to end-item forecast errors and inventory errors

Variations in supply – both lead-times and quantities

Since demand is not random, traditional statistical techniques do not apply.

Options to provide safety factors: Fixed quantity buffer stocks Safety lead-time Increase gross requirements

MRP 22

Safety stocks in MRP systems (cont.)

Fixed quantity buffer stocks Good rule of thumb: Set buffer = max. demand

likely in a single period Never generate order solely to replenish buffer

stocks

Safety time method Simply order early Distorts LTs and priorities Better than buffer stocks for items with infrequent

demand Also better for purchases outside company

Increase in gross requirements Should be done at end item level only so that Components available in matched sets Safety stocks are not duplicated at different levels

Benefits of MRP

To minimize inventory levels. To minimize the associated carrying costs. Track material requirements. Compute quantities needed as safety stock. Allocate production time among various products.Plan for future capacity needs.More competitive pricing.Lower selling price. Improved customer service.Faster response to market demands. Increased flexibility to change the master

schedule.Reduced setup and tear-down costs.Reduced idle time.

Drawbacks Of MRP

It relies upon accurate input information.

Wrong inputs may results in missing parts and excessive order quantities.

It is time consuming.

It is costly to implement

Industry Application and Expected Results

Thank You

MRP

Engineering

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