Material Requirement Planning (MRP)
Contributors to MRP• Joseph Orlicky
• George Plossl
• Oliver Wight
• American Production and Inventory Control Society
What is MRP?• Computerized Inventory Control
• Production Planning System
• Management Information System
• Manufacturing Control System
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?• 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 Items
• Expedite Items
• Delay Items
Step 3: Firming the Suggestions
• Manufacturing Orders
• Purchasing Orders
• Various Reports
Overview of the MRP System
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
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 Process• Schedules the Production of all items using
an MRP Matrix
Item: Low-Level Code:
Lot Size: Lead Time: PD 1 2 3 4 5Gross Requirements
Scheduled Receipts
Projected on Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
MRP Matrix
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: A Low-Level Code: 1
Lot Size: 25 Lead Time: 1PD 1 2 3 4 5
Gross Requirements 10 15 25 25 30
Scheduled Receipts 25
Projected on Hand 20
Net Requirements
Planned Order Receipts
Planned Order Releases
Example of the MRP ProcessItem: A Low-Level Code: 1
Lot Size: 25 min Lead Time: 1PD 1 2 3 4 5
Gross Requirements 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
MRP Outputs• Manufacturing Orders
• Purchasing Orders
• Various Reports
Hubbell Lighting Case
• Manufactures Industrial Lighting Products
• Good-Quality Products
• Poor at Meeting Due Dates
• Work is Specialized for Each Customer
• Job Shop Environment
• Complex Products
Hubbell Lighting Case
Before MRP Implementation
• Less than 75% of orders completed on time
After MRP Implementation
• 97% of orders completed on time
• 2% of orders completed with 1 to 2 days after due date
Summary of MRPMRP is a…..• Computerized Inventory Control• Production Planning Systemthat…..• Schedules Component Items as Neededwhich will…..• Track Inventory and…..• Help you in many other aspects of business
ReferencesRussell, Roberta S., and Bernard W. Taylor III. Operations Management. 3rd
Edition: Prentice Hall, 2000
Grubbstrom, Robert W. Material Requirements Planning and Manufacturing Resource Planning. 03/12/2002. http://www.itbp.com/opsmanagement/iebm/material_requirements.htm.
Vormittag Associates, Inc. System 2000 MRP. 03/12/2002. http://www.vaihome.com/s2000mrp.htm.
Inventory Solutions. What is MRP?. 03/12/2002. http://www.inventorysolutions.org/def_mrp.htm.
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