This document provides a comprehensive overview of Materials Requirements Planning (MRP) and Enterprise Resource Planning (ERP), detailing the processes, inputs, outputs, and benefits of MRP in manufacturing and service contexts. It emphasizes the importance of accurate inventory records, master schedules, and bills of materials for effective MRP operations. Additionally, it highlights the evolution of ERP from MRP, showcasing its application across various business domains and functions.

1. ASSIGNMENT OF OPERATIONS
MANAGEMENT
MRP & ERP

2. • Introduction, an overview of MRP, MRP inputs
• MRP inputs
• MRP processing MRP Outputs
• MRP in Services, Benefits & requirements of MRP
• ERP, Operations strategy
Presentation Outline

3. MRP
∙ Materials requirements planning (MRP) is determining the number of parts, components and
materials needed to produce a product.
∙ MRP provides time scheduling information specifying when each of materials , parts and components
should be ordered or produced.
∙ Demand for items that are subassemblies or component parts to be used in the production of finished
goods are called dependent on demand.
∙ Create schedule identifying the specific parts and materials required to produce end items.
∙ Determines exact unit numbers needed.
∙ Determines the dates when orders for those materials should be released, based on lead times.

4. An MRP system has three major sources of information (inputs):
1. Master schedule
2. Bill of materials
3. Inventory records
Master Schedule
▪ The master schedule also referred to as the master production schedule .
▪ It states which end items are to be produced, when these are needed and in what quantities.
▪ Based on estimates for product demand. i.e.,
MPS for Product X
Week number

5. Bill of Materials (BOM)
▪ It provides a list of materials and their quantities required to produce the end items.
▪ It contains the list of finished products, material needed for each finished product in units ,assembly structure,
I sub -assemblies, parts and materials.
▪ BOM is revised every time there is a change in product design or specification.

6. ▪ It provides a computerized record of each material, physically held in the system.
▪ There will be only one inventory status for individual material, even if it is used at different levels of production or in
different end products.
▪ It indicates material name, inventory on -hand (physically available) ,inventory on-order (ordered but yet to arrive),
customer order for items.
• MRP refers to computer-based planning and scheduling designed such that it can enhance the management control over
manufacturing and its ancillary functions. Some of the key terminologies associated with MRP (computerized) planning
forms are:
MRP PROCESSING
The Inventory Records

7. Gross requirements
These represent futuristic needs for
∙ raw materials
∙ part components
∙ subassemblies
∙ finished products by the end of the specified period.
These requirements are either derived from the master schedule for end items or from the combined requirements
of other items.
Scheduled receipts
These represent ordered materials from a
∙ vendor
∙ outstanding in-house shop
∙ include planned receipts as well.

8. to be received at the onset of the period. MRP forms indicate
∙ Quantity
∙ Projected time of receipt
∙ Include planned receipts as well.
On hand
On hand is the quantity of a product expected to exist at the end of the specified time period. This includes
amount retrieved from earlier period plus planned – scheduled receipts and ordered receipts minus gross
requirements.
Net requirements
These represent net amount required in a specified period, equivalent to the gross requirements minus
projected inventory from the earlier period coupled with scheduled receipts.

9. Planned order receipt
• These represent to-be-ordered materials from a vendor or in-house shop to-be-received at the onset of the period, or
are similar to a scheduled receipt.
Planned order release
• These represent the planned amount to be ordered in the adjusted time period through the lead time offset such that
the materials can be received on time.
• Upon the actual release of orders, the planned order releases are removed from the form, and the receipts generated
by them are altered to scheduled receipts.
• The MPS determines gross or projected requirements for finished items to the MRP system, which do not consider
inventory on hand or on order.
• The MRP computer program subsequently explodes the demands for finished items into requirements for part
components and materials by processing all major bills of materials on every single level.
• Thereafter, net requirements are measured by adjusting for current inventory and items ordered and recorded in the
inventory status file.
• Net requirements = Gross requirements – [On hand product quantity + Scheduled receipts]

10. There are two types of reports in MRP outputs:
❑ Primary Report
❑ Secondary Report
Primary Reports
Production & inventory planning & control are part of this report.
✔ Planned orders
Planned order report tells us about the planned orders that would be released in future date or during a given
interval of time.
✔ Order releases
Order releases notice to execute the planned orders.
✔ Order Changes Report
Changes in due date of open orders sue to rescheduling. Cancelations or suspensions of open orders due to
cancellation or suspension of orders on the master production schedule. Inventory status data.
MRP OUTPUTS

11. Secondary Reports
The secondary reports generated by MRP include:
✔ Performance control reports
Performance control reports, which are used to track problems like missed delivery dates and stock outs in order
to evaluate system performance.
✔ Planning reports
Planning reports which can be used in forecasting future
inventory requirements
✔ Exception reports
Exception reports which call managers' attention to
major problems like late orders or excessive scrap rates.

12. MRP IN SERVICES
MRP has applications in services as well as in manufacturing.
These applications may involve material goods that form a part of the product-service package, or they may
involve mainly service components.
EXAMPLE
An example of a product-service package is a food catering service, in instances that require preparing and
serving meals for large numbers of people.
To estimate quantities and costs of an order, the food manager would have to determine the quantities of
ingredients for each recipe on the menu which would than be combined with the number of each meal to be
prepared to obtain the materials requirements plan for the event.

13. BENEFITS OF MRP
MRP enables managers to easily determine the quantities of every component for a given order size,
to know when to release orders for each component, and to be alerted when items need attention.
Still other benefits include the following:
❑ Low levels of in-process inventories, due to an exact matching of supply to demand.
❑ The ability to keep track of material requirements.
❑ The ability to evaluate capacity requirements generated by a given master schedule.
❑ A means of allocating production time.
❑ The ability to easily determine inventory usage by backflushing

14. In order to implement and operate an effective MRP system, it is necessary to have:
❖ A computer and the necessary software programs to handle computation and maintain records.
❖ Accurate and up to date: A. Master schedules B. Bills of materials. C. Inventory records.
❖ Integrity of file data.
Some of the difficulties users have encountered with MRP
✔ Inaccuracies in inventory record files or bill-of-material files.
✔ Assumption of constant lead times.
✔ Products being produced differently from the bill of materials.
✔ Failure to alter a bill of materials. Inaccurate forecasts.
REQUIREMENTS OF MRP

15. Integration of financial, manufacturing, and human resources on a single computer system.
Enterprise resource planning (ERP) was the next step in an evolution that began with MRP and evolved into MRP II.
Like MRP II, it typically has an MRP core. ERP represents an
expanded effort to integrate standardized record keeping that will permit information sharing
among different areas of an organization in order to manage the system more effectively.
ERP software provides a system to capture and make data available in real time to decision
makers and other users throughout an organization.
It also provides a set of tools for planning and monitoring various business processes to achieve the goals of the
organization.
ERP systems are composed of a collection of integrated modules.
There are many modules to choose from, and different software vendors offer different but similar lists of modules.
ERP

16. Some are Industry specific, and others are general purpose. The modules relate to the functional areas of business
organizations.
For example, there are modules for accounting and finance, HR,
product planning, purchasing, inventory management, distribution, order tracking, finance, accounting & marketing.

17. ERP IN SERVICES
• Although ERP was initially developed for manufacturing, it now has a long list of service applications. These include
professional services, postal services, retail, banking, health care, higher education, engineering and construction
services, logistics services, and real estate management.
• In a manufacturing environment, ERP systems generally encompass the major as production planning and
scheduling, inventory management, product costing, and distribution.
• In a service environment, the major functions can differ from one service organization to another.
• For example, many universities use ERP systems; they typically are another to integrate and access student
information, course prerequisites, course schedules, room schedules, human resources, accounting, and financial
information.

18. THANK YOU