1. The Material Requirements Planning Process

2. What is MRP? MRP answers the following questions:
What materials are required?
How many of the materials are required?
When are the materials required?

3. MRP Process Flowchart

4. Production Planning Process (Overview)
SIS
Forecasting
CO/PA
Sales & Operations Planning
Strategic Planning
Demand Management
Detailed Planning
MPS
MRP
Manufacturing Execution
Procurement Process
Order Settlement

5. MRP Problems (1) Too much inventory
Materials in stock that we cannot sell
Raw materials that we no longer need in the manufacturing process
Materials that have lost significant value
Expired materials

6. MRP Problems (2) Too little inventory Out of stock conditions
Backorder conditions

7. Cisco Case Purchased extra parts Did not accurately estimate demand
Did not forecast demand drop-off
Cisco wrote off $2.5 billion in inventory in 2001

8. MRP Data Dependencies Materials (Material masters)
Vendors (for acquisition)
Production (for estimates)
Warehouse (to get raw materials and store finished goods)

9. What Causes an MRP
Sales and operations planning estimates materials (finished goods) requirements
Sales quotation / orders
Demand management calculates the required raw materials to produce the finished goods
Final production proposals are generated which trigger production

10. MRP Master Data Bill of material is used to determine raw materials
Product routings are used to estimate production time

11. MRP (Types of Planning)
Consumption-based relies on historical consumption data
Reorder point planning
See figures 8.3 and 8.4
Forecast-based planning uses historical data and forecasted estimates
Time-phased planning is used when materials arrive on specific days of the week OFBiz will not do all of these

12. MRP Reorder Point Planning

13. Reorder Point Planning (Details)
When material is withdrawn, the reorder level is checked
Net requirements are then calculated
Available stock + firmed receipts (purchase orders, production orders)
If a shortage exists, calculate the procurement quantity according to material master lot sizing procedure
Procurement is then scheduled

14. MRP (Lot Size Data)
Lot size – The procedure used to determine the lot size (quantity produced)
Static lot-sizing
Fixed lot size (predetermined value)
Lot-for-lot (exact quantity required)
Period lot-sizing (combine requirements for multiple time periods)
Optimum lot-sizing (takes into account economic order quantity and economic production quantity)

15. MRP (Lot Size Data)
Minimum and Maximum Lot size contains the min and max amounts that can be made during a production run
Ordering costs are used in optimum lot sizing procedures
Rounding profiles used to round the lot size to a “deliverable quantity)

16. MRP (Scheduling) In-house production time
Only used when we are producing goods “in-house”
This comes from production
Planned delivery time is only used when material is procured externally
GR (Goods receipt) processing time

17. MRP (Net Requirements)
Safety stock
Desired
Minimum
Safety time ind. is used to enable safety stock calculations

18. MRP (Planning) Strategy group Make to stock Make to order
Sales order based consumption
Assemble to order
Similar to make to order
Assemble finished goods from prefabricated assemblies
There are others

19. MRP (Planning) Consumption mode
Backward or forward
Back. consumption per contains the number of workdays used for backward consumption
Forw. Consumption per contains the workdays for future consumption

20. MRP (BOM) BOM Selection Method Requirement Group
Determines which bill of material to use based on
Production version
Date
Order quantity
Requirement Group
Combine or display requirements individually

21. Forecasting (Introduction)
Caveat – Forecasts are always wrong
But some are more wrong than others
Accurate forecasts essential to manufacturing
Our goal is to match supply and demand
This is challenging for innovative products, fashions

22. Forecasting Models
Trend
Seasonal
Trend and seasonal
Constant