Material Requirements Material Requirements PlanningPlanningAmal Roy George

SMS CUSAT

Material Requirements Material Requirements PlanningPlanning

Materials requirements planning (MRP) is the logic for determining the number of parts, components, and materials needed to produce a product.

Material requirements planning (MRP) is a production planning and inventory control system used to manage Manufacturing processes.

Material requirements Material requirements planningplanning

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

Most MRP systems are software-based, while it is possible to conduct MRP by hand as well.

MRP will plan production so that the right materials are at the right place at the right time. 

MRP determines the latest possible time to product goods, buy materials and add manufacturing value. 

Proper Material Requirements Planning can keep cash in the firm and still fulfill all production demands.   It is the single most powerful tool in guiding inventory planning, purchase management and production control.  MRP is easy to operate and adds dramatically to profits.

HistoryHistory

Prior to MRP and before computers dominated the industry, reorder-point/reorder-quantity (ROP/ROQ) type methods like EOQ had been used in manufacturing and inventory management.

In the 1960s, Joseph Orlicky studied the TOYOTA Manufacturing Program and developed Material Requirements Planning (MRP), and Oliver Wight and George Plossl then developed MRP into manufacturing resource planning (MRP II).

Orlicky's book is entitled The New Way of Life in Production and Inventory Management (1975).By 1975, MRP was implemented in 150 companies. This number had grown to about 8,000 by 1981.

In the 1980s, Joe Orlicky's MRP evolved into Oliver Wight's manufacturing resource planning (MRP II) which brings master scheduling, rough-cut capacity planning, capacity requirements planning and other concepts to classical MRP.

By 1989, about one third of the software industry was MRP II software sold to American industry ($1.2 billion worth of software).

MRP is a tool to deal with these problems. It MRP is a tool to deal with these problems. It provides answers for several questions:provides answers for several questions:

What items are required?How many are required?When are they required? MRP can be applied both to items that

are purchased from outside suppliers and to sub-assemblies, produced internally, that are components of more complex items.

An MRP system is intended to An MRP system is intended to simultaneously meet three simultaneously meet three

objectives:objectives:

Ensure materials are available for production and products are available for delivery to customers.

Maintain the lowest possible level of inventory.

Plan manufacturing activities, delivery schedules and purchasing activities.

How Implementing or improving MRP How Implementing or improving MRP benefit your company:benefit your company:

Reduced Inventory Levels Reduced Component Shortages Improved Shipping Performance Improved Customer Service Improved Productivity Simplified and Accurate Scheduling Reduced Purchasing Cost Improve Production Schedules Reduced Manufacturing Cost Reduced Lead Times Less Scrap and Rework Higher Production Quality Improved Communication Improved Plant Efficiency Reduced Freight Cost Reduction in Excess Inventory Reduced Overtime Improved Supply Schedules Improved Calculation of Material Requirements Improved Competitive Position

MRP uses the following elements to plan optimal MRP uses the following elements to plan optimal inventory levels, purchases, production schedules and inventory levels, purchases, production schedules and

more:more:

Master Production Schedule (MPS) Bill of Materials (BOM) Quantity on Hand (QOH) Part Lead Times Sales Order Quantities / Due Dates Scrap Rate Purchase Order Quantities / Due Dates Lot Sizing policies for All Parts Safety Stock Requirements

Material Requirements Material Requirements Planning SystemPlanning System

Based on a master production schedule, a material requirements planning system:Creates schedules identifying the

specific parts and materials required to produce end items.

Determines exact unit numbers needed.

Determines the dates when orders for those materials should be released, based on lead times.

Firm orders from knowncustomers

Forecastsof demand

from estimates

Aggregateproduct

plan

Masterproductionschedule

(MPS)

Materialplanning(MRP)

Engineeringdesign

changes

Bill ofmaterial

file

Inventorytransactions

Inventoryrecord

file

Reports

10

Primary MRP ReportsPrimary MRP Reports

Planned orders to be released at a future time.

Order release notices to execute the planned orders.

Changes in due dates of open orders due to rescheduling.

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

Inventory status data.

Secondary MRP ReportsSecondary 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.

Additional MRP Additional MRP Scheduling TerminologyScheduling Terminology

Gross Requirements: needed during each period.

Scheduled Receipts: Existing orders that arrive at beginning of period.

On-hand or available balance:

(depending on software convention, could be at the beginning of each period or end):

Book: Inventory balance at end of each period.

Net requirements: What is need to meet requirements and safety stock.

Planned order receipt: arrives at beginning of period.

Planned order release: Addresses lead time.

MRP ExamplesMRP Examples

Closed Loop MRPClosed Loop MRP

Production PlanningMaster Production SchedulingMaterial Requirements PlanningCapacity Requirements Planning

Realistic?No

Feedback

Execute:Capacity PlansMaterial Plans

Yes

Feedback

Problems with MRP systemsProblems with MRP systems

First, MRP relies upon accurate input information. If a small business has not maintained good inventory records or has not updated its bills of materials with all relevant changes, it may encounter serious problems with the outputs of its MRP system. The problems could range from missing parts and excessive order quantities to schedule delays and missed delivery dates.

Another potential drawback associated with MRP is that the systems can be difficult, time consuming, and costly to implement. Many businesses encounter resistance from employees when they try to implement MRP. For example, employees who once got by with sloppy record keeping may resent the discipline MRP requires. Or departments that became accustomed to hoarding parts in case of inventory shortages might find it difficult to trust the system and let go of that habit.

ReferencesReferences

http://en.wikipedia.org/wiki/Material_requirements_planning

http://www.erp.com/ http://

en.wikipedia.org/wiki/Enterprise_resource_planning

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