Material Resource Planning (MRP) is a production planning and inventory control system that converts a master production schedule into detailed schedules for raw materials and parts. Its main objectives include inventory reduction, improved lead times, and ensuring materials are available for production, while its functions involve inventory control and scheduling. MRP outputs include planned orders and purchasing schedules, but it can face issues like inaccurate information leading to planning errors.

1. Prepared By
Mr. Nishant Agrawal
Material Resource Planning
METAS Adventist College (NEHU)

2. Material Resource Planning (MRP)
 It is a planning technique which converts master production schedule of end
products into detailed schedule for raw materials and parts used in those end
products.
 MPS is the plan that a company has developed for production, inventory,
staffing, etc.
 MRP is a means for determining the number of parts, components, and
materials needed to produce a product
 MRP is a production planning, scheduling, and inventory control system used
to manage manufacturing processes.

3. Objectives of MRP
 Inventory reduction:
Determines how many components are needed and when in order to meet MPS
 Reduction in production and delivery lead times : It helps to meet delivery
deadlines by coordinating inventories, procurement & production decision
 Realistic commitments : Improves customer satisfaction.
 Ensure materials are available for production and products are available
for delivery to customers.
 Maintain the lowest possible material and product levels in store
 Plan manufacturing activities, delivery schedules and purchasing activities.

4. Fundamental concepts of MRP
Independent demand:
Demand for the product is not directly related to demand for other items
Dependent demands:
Demand for the product is directly related to demand for some other
product.
Independent demand is demand originating outside the plant or
production system, while dependent demand is demand for components.

5. Functions of MRP
 The basic functions of an MRP system include:
 Inventory control, bill of material processing, and elementary scheduling.
 MRP helps organizations to maintain low inventory levels.
 Companies need to control the types and quantities of materials they purchase,
plan which products are to be produced and in what quantities and ensure that
they are able to meet current and future customer demand, all at the lowest
possible cost.
 Making a bad decision in any of these areas will make the company lose money.

6. Continue… A few examples are given below:
 If a company purchases insufficient quantities of an item used in manufacturing it
may be unable to meet contract obligations to supply products on time.
 If a company purchases excessive quantities of an item, money is wasted - the
excess quantity ties up cash while it remains as stock
 Beginning production of an order at the wrong time can cause customer deadlines
to be missed.
 MRP is a tool to deal with these problems. It provides answers for several
questions:
 What items are required?
 How many are required?
 When are they required?...

7. Inputs to MRP

8. MPS-example

9. Bill of Materials (BOM)
 A listing of all of the raw materials, parts, subassemblies, and
assemblies needed to produce one unit of a product .
 BOM Shows way a finished product or parent item is put together
from individual components.
 A BOM explains what to buy, how to buy and where to buy, and
includes instructions for how to assemble the product.
 A BOM may be used for communication between manufacturing
partners, or confined to a single manufacturing plant.

10. BOM example
A(2) B(1)
D(5)C(2)
X
C(3)

11. BOM example - cycle

12. Inventory Status File
 Detailed information regarding the quantity of each item, available in
hand, on order to be released, for use in various time periods.
 MRP system using inventory master file is used to determine the
quantity of material available for use in a given period.
 If sufficient items not available , the system includes the item on the
planned order release report.

13. MRP outputs
1. Work orders / Planned orders report
2. Order Release
3. Action Notices or Rescheduling Notices or order change

14. Planned orders report
 It helpful in preparing for the funds required for payment to
suppliers in future according to dates and order size.
 Ex. January is current month and finance manager wants to see
what quantities of raw material purchases have to be made in
March.
Order Release Report
 It gives information about planned order to be released on present
date. It helps purchase managers to release purchase order (PO) to
suppliers.
 Authorization for the execution of planned orders.

15. Order change report
 Open order are those which have been placed in the past,
and supplier of items in preparing for supplier to be made in
the company.
 which orders are to be released, revised and canceled
during the current time period.

16. Output of MRP
 There are two outputs and a variety of messages/reports:
 Output 1 is the "Recommended Production Schedule" which lays out a
detailed schedule of the required minimum start and completion dates,
with quantities, for each step of the Routing and Bill Of Material required to
satisfy the demand from the master production schedule (MPS).
 Output 2 is the "Recommended Purchasing Schedule". This lays out both
the dates that the purchased items should be received into the facility and the
dates that the purchase orders release should occur to match the production
schedules.

17. Benefits
 Keep inventory levels to a minimum.
 Keeps track of inventory that is used.
 Tracks the amount of material that is required.
 Set safety stock levels for emergencies.
 Plan for future needs of raw materials or components.

18. Drawbacks
 Inaccurate information can result in mis-planning , overstock,
under-stock, or lack of appropriate resources.
 The inaccurate master schedule will provide wrong lengths of
time for production . Hence affecting planning.
 MRP systems can be costly and time-consuming to set up

19. Learning Curve
 When a task is done more and more number of times, the time to complete
the task also gradually reduces with increased attempt to it.
 When number of units produced increase , direct labor hours required per unit
decreases for variety of reason:
 Workers become more and more skilled at that particular set of tasks.
 Improvement in production method
 Improvement in layout and flow take place
 Perhaps , some organization improvement also take place.

20. Learning Curve
 100% learning curve means that there is no
improvement possible

21. Continue…
 Interesting reason to note is that each time the number of units is
doubled , a constant percentage reduction results in average direct
labors hours per unit.
 Learning is expressed in terms of percentage.

22. Negotiating
 Negotiating is a key skill set in the Purchasing field. One of the goals of
Purchasing Agents is to acquire goods per the most advantageous terms of
the buying entity
 Purchasing Agents typically attempt to decrease costs while meeting the
Buyer's other requirements such as an on-time delivery, compliance to the
commercial terms and conditions
 That savings could exceed the annual budget of the department, which in
effect would pay the department's overhead - the employee's salaries,
computers, office space, etc.