Material requirement planning

1. Material Requirement
Planning (MRP1)

2. What is MRP?
 Computerized Inventory Control
 Production Planning System
 Management Information System
 Manufacturing Control System

3. What is MRP? (cont)
 This is the most comprehensive approach to
manufacturing inventory and other dependents
which demand an efficient inventory management
system.

4. What is MRP do ?
 The MRP system determines item-by-item, what is to
be processed and when, as well as what is to be
manufactured when.
 This is based on order priorities and available
capacities.

5. When to use MRP
 Job Shop Production
 Complex Products
 Assemble-to-Order Environments
 Discrete and Dependent Demand Items

6. What can MRP do?
 Reduce Inventory Levels
 Reduce Component Shortages
 Improve Shipping Performance
 Improve Customer Service
 Improve Productivity
 Simplified and Accurate Scheduling
 Reduce Purchasing Cost
 Improve Production Schedules
 Reduce Manufacturing Cost
 Reduce Lead Times
 Less Scrap and Rework
 Higher Production Quality

7. What can MRP do?(contd)
 Improve Communication
 Improve Plant Efficiency
 Reduce Freight Cost
 Reduction in Excess Inventory
 Reduce Overtime
 Improve Supply Schedules
 Improve Calculation of Material Requirements
 Improve Competitive Position

8. Three Basic Steps of MRP
 Identifying Requirements
 Running MRP – Creating the Suggestions
 Firming the Suggestions

9. Step 1: Identifying the Requirements
 Quantity on Hand
 Quantity on Open Purchase Order
 Quantity in/or Planned for Manufacturing
 Quantity Committed to Existing Orders
 Quantity Forecasted

10. Step 1: Important Information
MRP is…..
 Company Sensitive
 Location Sensitive
 Date Sensitive

11. Step 2: Running MRP – Creating the
Suggestions
 Critical Items
 Expedite Items
 Delay Items

12. Step 3: Firming the Suggestions
 Manufacturing Orders
 Purchasing Orders
 Various Reports

13. Overview of the MRP System
Product
Structure
File
Master
Production
Schedule
Inventory
Master File
Material
Requirements
Planning
Manufacturin
g Orders
Purchase
Orders
Various
Reports

14. MRP Inputs
 Product Structure File
 Master Production Schedule
 Inventory Master File

15. 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.

16. Bill-of-Material
Product Structure Tree
Bicycle(1)
P/N 1000
Handle Bars (1)
P/N 1001
Frame Assembly
(1) P/N 1002
Wheels (2)
P/N 1003
Frame (1)
P/N 1004

17. Master Production Schedule
 Schedule of Finished Products
 Represents Production, not Demand
 Combination of Customer Orders and Demand
Forecasts
 What Needs to be Produced

18. Inventory Master File
 On-Hand Quantities
 On-Order Quantities
 Lot Sizes
 Safety Stock
 Lead Time
 Past-Usage Figures

19. MRP Process
Item:
Low-Level Code:
Lot Size:
Lead Time
PD 1 2 3 4 5
Gross
requirement
Scheduled
receipts
Projected on
hand
Net
requirements
Planned order
receipts
Planned order
releases

20. Terms Defined
 Item – name or number for the item being scheduled
 Low-Level Code – the lowest level of the item on the product
structure file
 Lot Size – order multiples of quantity
 Lead Time – the time from when an order is placed to when it is
received
 PD – Past Due Time Bucket, orders behind schedule

21. Terms Defined
 Gross Requirements – demand for an item by time period
 Scheduled Receipts – material already ordered
 Projected on Hand – expected ending inventory
 Net Requirements – number of items to be provided and when
 Planned Order Receipts – net requirements adjusted for lot size
 Planned Order Releases – planned order receipts offset for lead
times

22. Example of the MRP Process
Item:
PD 1 2 3 4 5
Gross
requirement 10 15 25 25 30
Scheduled
receipts 25
Projected
on hand 20
Net
requirement
s
Planned
order
receipts
Planned
order
releases

23. Example of the MRP Process
Item
PD 1 2 3 4 5
Gross
requiremen
t
10 15 25 25 30
Scheduled
receipts 25
Projected
on hand 20 10 20 20 20 15
Net
requiremen
ts
5 5 10
Planned
order
receipts
25 25 25
Planned
order
releases
25 25 25 30 25

24. Aggregate
Production Plan
Marketing
Customer
Demand
Engineering
Design
Completion
Management
Return on
Investment
Capital
Human
Resources
Manpower
Planning
Procurement
Supplier
Performance
Finance
Cash Flow
Production
Capacity
Inventory
Inputs to the Production Plan

25. Production Plan
Execute Material
Plans
Master Production
Schedule
Material
Requirements
Plan
Capacity
Requirements
Plan
Execute Capacity
Plans
Realistic??
No
Yes
The Planning
Process

26. MRP Outputs
Manufacturing Orders
Purchasing Orders
Various Reports

27. Hubbell Lighting Case
Before MRP Implementation
Less than 75% of orders completed on time
After MRP Implementation
97% of orders completed on time
2% of orders completed with 1 to 2 days
after due date

28. Summary of
MRP
MRP is a…..
Computerized Inventory Control
Production Planning System
that…..
Schedules Component Items as Needed
which will…..
Track Inventory and…..
Help you in many other aspects of business