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Material Requirement Planning

Material Requirement Planning MRP is a systematic planning-and-control methodology for production and inventory. Specifically, it is a procedure for planning and controlling the raw material, purchased parts, and work in progress (WIP) inventories required in manufacturing a product. MRP is designed to answer three questions: what is needed, how much is needed, and when is it needed.

Independent and Dependent Demand Inventory END PRODUCT Order Point Time LT LT LT COMPONENT OF END PRODUCT Order Point Time LT RAW MATERIAL Order Point Time LT

The Benefits of MRP Inventory reduction. Reduction in production & delivery time. Increased efficiency. Faster response to market changes. Improved labour & equipment utilization. Better inventory planning & scheduling. Reduced inventory levels without reduced customer service.

WHEN TO USE MRP? It is useful for….. Dependent Demand (table top, table leg). Discrete Demand (demand for leg at last). Complex Products (subassembly before final assembly). Assemble-to-Order (major assemblies & sub assemblies is done in advance).

Limitations of Order-point techniques… As each part in inventory is managed separately & independently of all others. So even though these techniques can provide extremely high service level for individual parts, the service level for combination of Parts (subassemblies) & for the complete end product can be low.

Overview of the MRP System Master Production Schedule Product Structure File Material Requirements Planning Item Master file Planned Order Release Work orders Purchase Orders Rescheduling notices

Information Needed for MRP Master Production Schedule (MPS), The Bill of Material (BOM), ingredients for the end product, Inventory Data, Balance on Hand (BOH), Scheduled receipts, Purchasing/Fabrication lead times.

MRP Inputs Master Production Schedule Product Structure File 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 LEVEL PRODUCT LEAD TIME Level 0 Two -drawer file cabinet Level 1 Case (1) 2 weeks Level 2 Drawer slide (4) 3 weeks Formed case (1) Level 3 Sheet steel (1) 4 weeks Drawers (2) 1 week Formed drawer (1) Handle (1) Support rollers (2) Sheet steel(1)

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.

Description Lot for lot method – generating the planned quantities in each period value by value directly from the net requirements in subsequent period, with no economic batching of orders, is called “the lot for lot method. Time phasing – the process of subtracting an item's lead time from its due date to determine when an order should be released. Time-phasing coordinates the quantity of parts and components held in inventory with assemble or final production needs as determined by the MPS.

Two important concepts Planned order releases at higher levels generate gross requirements at lower levels. Inventories of higher level subassemblies already include the necessary lower level components, and this fact is automatically allowed for by the net requirements calculation.

Regeneration vs. net change Complete replanning of requirements and update of inventory status for all items High data processing efficiency Usually initiated by weekly update of master schedule Net change Daily update based on inventory transactions More responsive to changing conditions Requires more discipline in file maintenance

Manufacturing Resource Planning (MRP II) Manufacturing Resource Planning (MRP II) is defined as a method for the effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units, financial planning in dollars, and has a simulation capability to answer "what-if" questions and extension of closed-loop MRP.

Performance Measurement Business Planning Objectives Top Management Planning Sales Planning Demands Production Planning Objectives Resources OK? No OMP F E D B A C K Yes Products Bills of Material Master Scheduling Materials Inventory Status Material Planning Routing Capacity Planning Capacity Planning OK? No Yes Parts Operations Management Execution Purchasing Hours Shop Floor Control Accountability Performance Measurement

Just-in-time (JIT) A highly coordinated processing system in which goods move through the system, and services are performed, just as they are needed. In short, the just-in-time inventory system is all about having “the right material, at the right time, at the right place, and in the right quantity ” without the safety net of Inventory, the implications of which are broad for the Implementers.