Material Requirements Planning (MRP)

Material Requirements Planning (MRP) Callerman and Heyl (1985): "MRP is a time phased order release system that under ideal circumstances schedules the order releases for needed demand inventory items so that the items arrive just as they are required"

If all the components for a batch of 50 widgets are required at the start of June and all the parts have a lead time of one month then the works orders and purchase orders must be released at the start of May. The MRP software will release all works and purchase orders from the parts list of each product the appropriate length of time before the requirement date for the specific order.

Part required date is when it must be available – depends on LT / schedule of what it is used for Part ordering date depends on above and its own lead time Depends upon the correct lead time being known.

Main Files used by MRP Bill of Materials (BOM) a list of all the purchased parts and raw materials required to manufacture a finished product. Broken down into sub assemblies which in turn require other purchased parts and raw materials. Master Production Schedule (MPS) "What and When" to manufacture. A list of customer orders and delivery dates along with projected demands. Inventory status file A record of the amount of stock and usually of stock transactions. Parts Master File / Item Master File Information relevant to ordering each part: standard batch sizes, lead time and any stock categorisation, suppliers and sometimes the routing information.

Other Files used by MRP Routing File / Process File For each manufactured item, gives the sequence of operations and work centres used, usually with standard times. Helps calculate date material is required to be available. Work Centre File Details about each work centre, such as costs, standard set up times, and time available on it (in cases where multiple shifts are worked on different machines). Tool File Stores details about tools, jigs etc which are required for particular operations. This allows the MRP to order tools required for a specific operation.

How MRP works

This procedure takes no account of the load on the factory generated by these orders, which tends to affect the actual lead time – in a busy factory, waiting times and therefore total lead times tend to increase.

One of the main causes of MRP failure is Data accuracy One of the main causes of MRP failure is "Inaccurate data, particularly BOM data and inventory data" Browne et al (1988)

Data Errors Incorrect BOM data (error in what items we require) causes the wrong gross requirements to be calculated.

Incorrect BOM Data If the Bill of Materials is incorrect then orders for the wrong parts will be issued. For assembly - parts which are not required have been manufactured / bought and usually - parts which are required have not been manufactured / bought Note that this would not be identified by the WIP tracking system and may not appear until assembly is due.

Incorrect inventory data (error in what we have) leads to the incorrect net requirements being calculated.

Data Errors Incorrect lead time Orders issued at the wrong time. This results in parts being completed late, which is a problem, or early which means excess stock.

Incorrect lead time data As the load on the factory increases, queue time increases Lead time allowed for becomes insufficient This means that parts begin to be completed late. What can you do…..?

Closed Loop MRP

Closed loop - Capacity Planning In addition to the above, uses the routing file to calculate the standard hours load required at each work centre. Iterates to achieve acceptable plan Monitors actual standard hours produced

Feeding back information Various means of work tracking are used to identify progress of each batch. (Name some?) Allows late work to be chased or "expedited" Also updates the system lead times with the last actual lead time for that item.

Feedback out of control In plants that are always very busy, this allows the lead time to get longer and longer. The level of WIP also increases which in turn leads to increased queuing. In order to ship the most urgent orders they must be expedited, thus obstructing and delaying other work.

Soon, only late work will have enough priority to be worked upon. The system can then never produce anything until it is late and the expeditors chase it. We have a system that only produces late work

Manufacturing Resource Planning (MRP II) Extends manufacturing data to include finance (etc) on same system. Wight (1981) (differences): "Technically it [MRP II] is not much different from closed loop MRP. It does include the financial numbers and a simulation capability. The technical differences are small compared to the real significant difference and that is the way management uses the system" MRP II systems can be used to simulate different strategies, to evaluate alternative scenarios.

ERP – Enterprise Requirements Planning Adds more integration – multiple sites, multiple currencies etc for global companies. 2. The name now being used to sell ordinary MRP

MRP System Operation, Calculating the Requirements Generates a list of all the requirements for sub assemblies and raw materials ("Gross requirements") Compares these requirements to available stock to calculate actual ("net") requirements. ("gross to net requirement calculation" or "netting off") Where stock is available, it is allocated to a job, so that it is no longer seen as available. Creates manufacturing orders to obtain manufactured parts, and purchase orders for bought-out parts and materials. Uses lead time to order items to be available when required.

Read downwards, row by row MRP Table Read downwards, row by row

Common parts Most MRP software will have a Re-order Point or Min Stock level that can be set for each item Allows the MRP to re-order according to usage rather than schedule This is a way of doing ROP, not really MRP

Uses of MRP Systems MRP systems are often used in batch or one of a kind production, where work is irregular and complex, benefitting from computerised calculations If the situation is simple MRP can be used for manufacturing as well as purchasing MRP logic (and/or ROP) may be used for purchasing together with other systems for manufacturing, such as Kanban

Reading Anything on MRP by… Wight, Browne, Parnaby, Burbidge