Major ProblemDependent on Accurate Forecasting Only Solution…Buy ‘Just Enough’ Stock
Material Requirement Planning (MRP-1) Introduction of MRP in 1960’s by Dr Joseph Orlicky. Definition : MRP is a software based production, planning and inventory control system used to manage the manufacturing process. It is a computer based system in which the given Master Schedule is exploded with Bills Of Material, into the required amount of raw material, parts and subassemblies needed top produce the final products in each tome period of say a week or month (called as “Buckets”)
MRP 1 - FunctionsForecastingOrder, Planning and ControlPriority Planning and ControlPlanning Capacity Requirement andDevelopment of Broad BusinessPlans
ObjectivesEnsure The Availability of MaterialComponents and Products For PlannedProduction and Customer Delivery.Maintain The Lowest Possible InventoryLevel.Plan Manufacturing Activities, DeliverySchedules and Purchasing Activities.
Key Elements Of MRP 1Demand Forecasting:-It is the quantity demanded per year or per unittime which indirectly helps in knowing quantityto be supplied.Master Production Schedule (MPS):-MPS is a series of time phased quantities foreach item that a company manufactures. Itgives the details of the products to bemanufactured over the given space of time. -
Example of MPSForecast requires Material Required 10 desks in May 880 screws 40 handles 240 planks 10 tops and 40 legs 5.55 tubes of glue 20 desks in June 1760 screws 80 handles 480 planks 20 tops and 80 legs 11.1 tubes of glue
Bills Of Material (BOM):-BOM is the document generated atdesign stage. It gives the details of thestructure of the product by dividingthe final assembly into majorassemblies and sub-assemblies. BOMprovides details such as part name,part no., description, quantity requiredmaterial, etc.
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Inventory Status File (ISF):-ISF reports the inventory on hand. Itallows the company to subtract existinginventory from gross requirements, so netrequirements can be ordered. The ISFalso reports on safety stock needs andlead times for each item.
MRP Program:-This is a computer software programme.First, it explodes the finish product’sdemand into gross requirement for parts.Second, the package determines netrequirements based on the ISF. Third, itplace orders to meet the net quantitiesneeded and lead times.
Material Requirements Planning MRP1 MasterCustomer orders Production Demand forecast Schedule Inventory recordsBill of materials MRP Material requirement planning Works ordersPurchase orders Material plans
Outputs And Reports:-The MRP 1 package generates manyreports such as action notices, priorityreports, inventory status information.
Advantages of MRP 1Improved Business ResultsImproved Manufacturing ResultsMore Accurate And Timely InformationLess InventoryLess Materials ObsolescenceTime Phased Ordering Of Materials
Higher ReliabilityMore Responsiveness To MarketDemandReduced Production Cost
DisadvantagesIncrease In Material Acquisition CostHigher Transportation Costs And HigherUnit CostPotential Hazard Of A ProductionSlowdown Or Shutdown
Use Of Standardized Software PackagesDoes not Take Into Account PlantCapacity And Distribution CapacityHigh Stock-Out Costs.
Manufacturing Resource Planning(MRP II) is defined as a method for theeffective planning of all resources of amanufacturing company. Ideally, itaddresses operational planning in units,financial planning in dollars, and has asimulation capability to answer "what-if"questions and extension of closed-loopMRP.
MRP• Manufacturing-centric/Push mgt.• Master production schedule• Final production schedule• Inventory management• Bill of materials• Gross requirement generation• Net requirement generation• Reorder point calculation• Automatic replenishment MRP I I• Capacity requirement. planning• Production control• Marketing interface• Accounting interface• Financial interface• Personnel interface• Supplier interface• Customer interface
Major Developments FromMRP Feedback Allocating reserves Matching the requirements Software extension programmers Data accuracy
FORLong term planning tool for complex productsCan give accurate completion date at time of orderFits in with conventional accountingProgress of manufacture available at all timesInventory size available at all timesControl of work orders and changes is tightMany types of software available
AgainstFile/database accuracy must be maintainedInventory accuracy is vital (99% accuracy is atypical requirement)Highly computer basedDoes not affect quality management, linebalancing, or other production management issuesInflexible and relies on forecast. Temptation existsto over-ride and go manual
Distribution RequirementsPlanning (DRP I) DRP is the application of MRP principles to the distribution environment. It integrates the, special needs of distribution. It is a dynamic model which looks at a time-phased plan of events that affect inventory.
What is DRP? DRP provides the basis for integrating supply chain inventory information and physical distribution activities with the Manufacturing Planning and Control system.
What is DRP? Managing the flow of materials between firms, warehouses, distribution centers. DRP helps manage these material flows. Just like MRP did in Manufacturing. Links firms in the supply chain by providing planning records that carry demand information from receiving points to supply points and vice versa.
DRP Menu ItemsComponent Description Purpose in DRPMaterial Master Creates stock items and controlling elements of items, locations and policies that are used in the deployment process.Inventory Management Tracks inventory availability in all stock categories and supply and demand for an item.Also allows for the physical movement of inventory.Sales Planning, Forecasting and Creates forecasts of customer demandDemand Management which results in the creation of independent requirements at the distribution center.These independent requirements are later consumed by actual customer orders.Purchasing Creates quota arrangements that control the supply relationships in the network.Materials Requirements Planning Determines net supply and demand resulting in a proposal for the transfer of inventory from the plant to the distribution center.
Marketing Benefits Increases service level and decrease customer complaints. Improve inventory coordination. Enhances ability to offer customer a coordinated inventory management service.
Constraints of DRP Inventory planning systems require accurate and coordinated forecasts for each distribution center. Integrated planning is subject to system nervousness and frequent rescheduling, because of production breakdowns and delivery delays. DRP is not the universal solution for inventory management.
Distribution Resource planning Distribution resource planning [DRP II] is an extension of DRP I.Distribution resource planning applies the time phased logic of DRP I to replenish inventories in multi echelon warehousing systems.Distribution resources planning extends DRP I to include the planning of key resources in a distribution system – warehouse space, equipments, labors, transport capacity [e.g trucks,rail cars] and financial flows
Objectives Of DRP IIThe objective of Distribution Resource Planning are, To improve customer service levels by anticipating customer demand at distribution centers and providing finished products at the correct location when customer needs arise. To provide an accurate requirements plan for manufacturing. To optimize the distribution of available stock in the distribution network using the deployment function.
DRP II Provides a frameworkDistribution resource planning provides a framework for determining the need to replenish inventory by: Linking market requirements with manufacturing and demand management. Relating current inventory positions and demand forecasts to production scheduling. Matching material supply to manufacturing demand, and customer demand to product supply.
Factors needed for ImplementingDRP II Before the use of DRP for planning and deployment, we must set up a distribution network. A distribution network represents possible delivery relationships between the supplying plants and the distribution centers. DRP entails planning the supply chain from sales planning through delivery to the distribution centers, assuming there are sales orders or that sales forecasts are available. The primary aim of planning is to determine the quantities required on specific dates,including the lead times of the distribution lanes. The distribution network defines the normal supply method for execution.
CUSTOMERSDISTRIBUTION DISTRIBUTION DISTRIBUTION DISTRIBUTION CENTER CENTER CENTER CENTER DISTRIBUTION DISTRIBUTION CENTER CENTER REGIONAL WAREHOUSE REGIONAL WAREHOUSE PLANT WAREHOUSE FINAL ASSMEBLY (MANUFACTURING) SUB ASSEMBLY B SUB ASSEMBLY C SUB ASSEMBLY D SUB ASSEMBLY A PART C PART D PART E PART A PART B RAW MATERIALS
Difference between DRP and MRP MRP DRP Scope Inbound logistics Outbound logistics Guiding factor Guided by production Guided by customer schedules demand Control of the firm Under control of the Not under control of firm the firm Demand situation Operates in dependant Operates in demand situation independent demand situation Area of operation & Coordinates scheduling Coordinates demand coordination & integration of between outlets & materials into finished supply sources goods Stage of functioning Controls inventory Controls inventory until manufacturing & after manufacturing & assembly is complete assembly of finished goods Planning availability of Raw materials Market[retailers] & stock at? stores,conversion process warehouses & finished goods store