The document discusses material requirements planning (MRP), which is a production planning and inventory control system used to manage manufacturing processes. MRP determines item-by-item what needs to be produced and purchased, when, and in what quantities based on inputs like the master production schedule, bill of materials, and available inventory and capacities. The goal of MRP is to simultaneously meet objectives like ensuring availability of materials for production, maintaining low inventory levels, and planning manufacturing activities.

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2. *Computerized Inventory Control
*Production Planning System
*Management Information System
*Manufacturing Control System
*

3. *This is the most comprehensive approach to
manufacturing inventory and other dependents
which demand an efficient inventory management
system.
*

4. *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. An MRP system is intended to simultaneously
meet three objectives:
* Ensure materials and products are available for
production and delivery to customers.
*Maintain the lowest possible level of inventory.
*Plan manufacturing activities, delivery schedules and
purchasing activities

6. *Forecasting
*Order, Planning and Control
*Priority Planning and Control
*Planning Capacity Requirement and
Development of Broad Business Plans
*

7. *
Manufacturing organizations, whatever their
products, face the same daily practical
problem - that customers want products to be
available in a shorter time than it takes to
make them. This means that some level of
planning is required.

8. Making a bad decision in any of these areas will make the
company lose money. A few examples are given below:
* If a company purchases insufficient quantities of an item used in
manufacturing, or the wrong item, they may be unable to meet
contracts to supply products by the agreed date.
* If a company purchases excessive quantities of an item, money is
being wasted - the excess quantity ties up cash while it remains as
stock and may never even be used at all. This is a particularly
severe problem for food manufacturers and companies with very
short product life cycles. However, some purchased items will have a
minimum quantity that must be met, therefore, purchasing excess is
necessary.
* Beginning production of an order at the wrong time can cause
customer deadlines to be missed.

9. Independent demand: Demand for final products.
Dependent demand: Demand fort items that are subassemblies or component parts to
be used in production of finished goods.
A Independent Demand
B(4) C(2) Dependent Demand
D(2) E(1) D(3) F(2)
*
Independent demand is uncertain.
Dependent demand is certain.

10. *
* Reduce Inventory Levels * Reduce Purchasing Cost
* Reduce Component * Improve Production
Shortages Schedules
* Improve Shipping * Reduce Manufacturing Cost
Performance * Reduce Lead Times
* Improve Customer Service * Less Scrap and Rework
* Improve Productivity * Higher Production Quality
* Simplified and Accurate
Scheduling

11. *
* Improve Communication * Reduce Overtime
* Improve Plant Efficiency * Improve Supply Schedules
* Reduce Freight Cost * Improve Calculation of
* Reduction in Excess Material Requirements
Inventory * Improve Competitive
Position

12. *Identifying Requirements
*Running MRP – Creating the
Suggestions
*Firming the Suggestions
*

13. *
*Quantity on Hand
*Quantity on Open Purchase Order
*Quantity in/or Planned for Manufacturing
*Quantity Committed to Existing Orders
*Quantity Forecasted

14. *
*Company Sensitive
*Location Sensitive
*Date Sensitive

15. *
*Critical Items
*Expedite Items
*Delay Items

16. *Manufacturing Orders
*Purchasing Orders
*Various Reports
*

17. *
Master
Product Inventory
Production
Structure File Master File
Schedule
Material
Requirements
Planning
Manufacturing Purchase
Various Reports
Orders Orders

18. *
*Product Structure File
*Master Production Schedule
*Inventory Master File
18

19. *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.
*
19

21. *Schedule of Finished Products
*Represents Production, not Demand
*Combination of Customer Orders and
Demand Forecasts
*What Needs to be Produced
*
21

22. *
*On-Hand Quantities
*On-Order Quantities
*Lot Sizes
*Safety Stock
*Lead Time
*Past-Usage Figures

23. *
* Schedules the Production of all items using an MRP Matrix
MRP Matrix
Item: Low-Level Code:
Lot Size: Lead Time: PD 1 2 3 4 5
Gross Requirements
Scheduled Receipts
Projected on Hand
Net Requirements
Planned Order Receipts
Planned Order Releases

24. *
*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

25. *
*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

26. *
*Gross requirements: (Forecasted)Demand period by
period
*Net requirements(t)
=Gross requirements(t)-Projected inventory(t-1)
-Scheduled receipt(t)
*If Net requirement(t) > 0
set Planned order receipts(t)>=Net requirement(t)
26

27. *Planned-order receipts is the production planned
*Projected inventory(t)
=Projected inventory(t-1)+Scheduled receipt(t)
+Planned order receipts(t)-Gross requirements(t)
*Planned order release(t-LT)=Planned-order receipts(t)

28. *
Periods 0 1 2 3
Gross requirements 6 11 7 Inputs
Scheduled receipts 2 3 0
Projected on hand 10 6 0 0
Net requirements 0 2 7 Outputs
Planned order receipts 2 7
Planned order releases 2 7

29. *

30. *
*Safety Stock
*Not much for items with dependent demand
*Lot sizing
*Lot-for-lot ordering
*Economic order quantity
*Fixed-period ordering
*Part-period model

31. *
Periods 0 1 2 3
Gross requirements 6 11 9 Inputs
Scheduled receipts 2 3 0
Projected on hand 10 6 3 4
Net requirements 5 10 Outputs
Planned order receipts 5 10
Planned order releases 5 10

32. *
32

33. *
Marketing
Production Customer Finance
Capacity Demand Cash Flow
Inventory
Aggregate Human
Procurement Production Plan Resources
Supplier
Manpower
Performance
Planning
Management Engineering
Return on Design
Investment Completion
Capital

34. *
Production Plan Master Production
Schedule
Material
Requirements
Plan
Capacity
Requirements
Plan
No Realistic??
Yes
Execute Capacity
Plans
Execute Material
Plans

35. *Manufacturing Orders
*Purchasing Orders
*Various Reports
*

36. *
*Improved Business Results
*Improved Manufacturing Results
*More Accurate And Timely Information
*Less Inventory
*Less Materials Obsolescence
*Time Phased Ordering Of Materials
*Higher Reliability
*More Responsiveness To Market Demand
*Reduced Production Cost

37. * Increase In Material Acquisition Cost
* Higher Transportation Costs And Higher Unit Cost
* Potential Hazard Of A Production Slowdown Or Shutdown
* Use Of Standardized Software Packages
* Does not Take Into Account Plant Capacity And Distribution
Capacity
* High Stock-Out Costs.
*