Shree Chanakya Education Societys

Indira Institute of Management

Pune

ASSIGNMENT ON

Material Requirement Planning (MRP)

Department of Operation Management

Submitted By
Praveen Mishra (Roll no.27)

Q.1 State whether Following Statements are true or False & Give reasons.

1) MRP is used where the final product is complex with several level assemblies.
ANS: False
Because MRP is related to material requirement hence it can be used with any product either it is
simple or complex.

It is not necessary to have final product complex and with several

assemblies.

2) Batch Production Industry can derive maximum benefit from MRP.

ANS: False
Because MRP can be used with any type of production i.e. batch production or Job Production so
both industry can get maximum benefit.

3)Master Production Schedule is not a forecast of demand but is a plan for Production.
ANS: True

4) Job lot producers and manufacturers of Capital goods benefit most from successful
MRP Implementation.
ANS: False.
Because in job lot production, we cannot forecast accurately as it is job type, hence for mass
production and batch production benefit most from successful MRP Implementation.

5)MRP is most suitable in planning material requirements for multi-components product

with lumpy demand.
ANS: False
Because if the demand is lumpy, then one cannot forecast about demand and hence it is not
suitable.

Q.III) what are the Critical factors in the Success of MRP implementation?

Implementation and success of material resourse planning dependent on following

factors:

Acceptability by top management about advantages and benefits

Proper training and participation of all workers and personnel

Precision and accuracy of input data for accurate and reliable results.

Q. II)Explain following with respect to MRP. With examples

1) Gross or Net requirement

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)

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)

Net requirements =Actual amount needed in each time period

2) Inventory Transactions file

To help you manage the complex recording and accounting functions that are involved in
maintaining an up-to-date inventory, you might need to record inventory movement between
branch/plants and between locations in a branch/plant. For example, you can use the issue
transaction to remove damaged or obsolete goods from the inventory. Occasionally, you might
need to adjust inventory for damaged items or discrepancies. Alternatively, you might use the
transfer transaction to move inventory from one branch/plant to another. After you move
inventory, the system adjusts the quantity balance for the item and creates the appropriate
general ledger (GL) entries for the transaction.
You can move inventory using these programs:

Inventory Issues
Inventory Adjustments
Inventory Transfers

When you issue inventory, you remove it from a location. When you adjust inventory, typically
you move it from one location to another to reconcile a discrepancy between the number of items
that are recorded at a location and the actual count. You might also adjust inventory out of a

location when it is damaged. When you transfer inventory, you move it from one location to
another.
How you enter transaction information depends on the item and the specific business
environment. For example, you can issue, adjust, or transfer items by entering quantity or cost
amount, or quantity and cost amount information. Entering transactions by the cost amount helps
you accommodate variances that are due to different costing methods that are used in different
branch/plants.

3) Master Schedule
The master schedule (MS) is a presentation of the demand, including the forecast and the
backlog (customer orders received), the master production schedule (the supply plan), the
projected on hand (POH) inventory, and the available-to-promise (ATP) quantity. The master
production schedule (MPS) is the primary output of the master scheduling process. The MPS
specifies the end items the organization anticipates manufacturing each period. Send items are
either final products or the items from which final assemblies (products) are made; as described
later in this section. Thus, the MPS is the plan for providing the supply to meet the demand. An
example of a master schedule only including the MPS and the backlog is shown in Table 1. This
example is developed further in the section

Table 1

A master schedule (MS) is a plan for individual commodities to produce in each time period such
as production, staffing, inventory, etc. It is usually linked to manufacturing where the plan
indicates when and how much of each product will be demanded. This plan quantifies significant
processes, parts, and other resources in order to optimize production, to identify bottlenecks, and
to anticipate needs and completed goods. Since an MS drives much factory activity, its accuracy
and viability dramatically affect profitability. Typical MS's are created by software with user
tweaking.
Due to software limitations, but especially the intense work required by the "master production
schedulers", schedules do not include every aspect of production, but only key elements that
have proven their control effectively, such as forecast demand, production costs, inventory costs,
lead time, working hours, capacity, inventory levels, available storage, and parts supply. The
choice of what to model varies among companies and factories. The MS is a statement of what
the company expects to produce and purchase (i.e. quantity to be produced, staffing levels, dates,
available to promise, and projected balance).
The MS translates the business plan, including forecast demand, into a production plan using
planned orders in a true multi-level optional component scheduling environment. Using MS
helps avoid shortages, costly expediting, last minute scheduling, and inefficient allocation of
resources. Working with MS allows businesses to consolidate planned parts, produce master
schedules and forecasts for any level of the Bill of Material (BOM) for any type of part

4) Item Master file

The item master file describes the attributes of a companys items, which include raw materials,
works-in-process, semi-finished goods, and finished goods. Some items recorded in the item
master file do not actually exist. We call these items phantoms. The number of attributes of an
item is very large, and we therefore find it useful to organize them into five groups: general
attributes, attributes for planning, attributes for inventory, attributes for inspection, and attributes
for costing.

A file of records relating to the products, components and raw materials of concern to the
manufacturing company, Each record will be keyed on the item's code and contain permanent or
relatively permanent data about the product in question - for example, its name, lead-time and
standard cost.A material planning and control system based on Material Requirements Planning
(MRP) database uses several key computer files.
Two files are commonly used to store part related data. Some data concerning parts will remain
the same, or very similar, from period to period, and these data are stored in the Item Master File.
Information on part status, which is more dynamic, is stored in the Subordinate Item Master File.
The item master file contains all the static data necessary to give a complete description of each
part. The data in the item master file are used for MRP, purchasing, costing, and so on. The data
on each consist of part number, part name, low-level code, unit of measure, engineering change
number, drawing reference, release date, planner code, order policy code, lead time, safety stock,
standard costs, and links to routing and bill of material (BOM) files. The subordinate item master
file contains data pertaining to current shop order numbers, time-phased scheduled receipt.

5) BOM & Routing

A bill of materials or Product structure (sometimes bill of material' or BOM) is a list of the
raw materials, sub-assemblies, intermediate assemblies, sub-components, parts and the quantities
of each needed to manufacture an end product. A BOM may be used for communication between
manufacturing partners, or confined to a single manufacturing plant.
A BOM can define products as they are designed (engineering bill of materials), as they are
ordered (sales bill of materials), as they are built (manufacturing bill of materials), or as they are
maintained (service bill of materials or pseudo bill of material). The different types of BOMs
depend on the business need and use for which they are intended. In process industries, the BOM
is also known as the formula, recipe, or ingredients list. In electronics, the BOM represents the
list of components used on the printed wiring board or printed circuit board. Once the design of
the circuit is completed, the BOM list is passed on to the PCB layout engineer as well as
component engineer who will procure the components required for the design.
Routing
Routing is the process of selecting best paths in a network. In the past, the term routing was also
used to mean forwarding network traffic among networks. However this latter function is much
better described as simply forwarding. Routing is performed for many kinds of networks,
including the telephone network (circuit switching), electronic data networks (such as
the Internet), and transportation networks. This article is concerned primarily with routing in
electronic data networks using packet switching technology.
In packet switching networks, routing directs packet forwarding (the transit of logically
addressed network packets from their source toward their ultimate destination) through

intermediate nodes. Intermediate nodes are typically network hardware devices such
as routers, bridges, gateways, firewalls, or switches. General-purpose computers can also
forward packets and perform routing, though they are not specialized hardware and may suffer
from limited performance. The routing process usually directs forwarding on the basis of routing
tables which maintain a record of the routes to various network destinations. Thus, constructing
routing tables, which are held in the router's memory, is very important for efficient routing.
Most routing algorithms use only one network path at a time. Multipathrouting techniques enable
the use of multiple alternativepaths.

VII. Illustrate MRP-I & II block diagrams. Explain the differences.

Material Requirement Planning is the scientific Technique for ordering and usage of material at
various levels of production and monitoring inventories. MRP is both inventory control and
Scheduling Technique.
MRP Uses: 1) Master Schedule for the end products. Master Schedule shows quantities of each
product to be produced in each period.
2) Product structure for determining requirements of sub-assemblies and components.
3) Procurement lead times and inventory status of products, sub-assemblies, parts and materials.

Three major Sources of information in MRP system are:

Master Production Schedule: The Master Production Schedule is developed from Customer
Orders or from Forecast of demands before the MRP system begins to operate. MPS is a list of
what end products to be produced, quantity of each product to be produced and its shipment
period. MPS can be weekly or monthly.
The Master Schedule must be based on accurate estimate of demand for the firms product by
considering its productive capacity.
Product demand used for Master Schedule can be separated into three categories. The first
consists of firms customer orders for specific products.
These orders have specific delivery promises made to customers. The Second is forecast demand
based on past demand, estimate provided by marketing staff and other sources. The third
category is demand for individual component parts which are used as repair parts and are stocked
by the firms service department.
Then Bill of Materials,
Inventory Status File: The MRP system must retain up-to-date record of inventory status of
each item in product structure. This file provides accurate information about the availability of
every item controlled by the MRP system. The delivery status file contains the identification
number, quantity on hand, safety stock, procurement lead time of every item.
MRP Processor logic: The MRP processor logic accepts the Master Schedules and determines
the components schedules for successively lower level items of the product structure. It
calculates how many items are required in each product structure and for each time period
typically one week
Manufacturing Resource Planning (MRP II)
MRP was restricted to only materials. There was also inclusion of more detailed production
system in terms of: On the shop floor, in dispatching and in detailed scheduling. So, the name
Material planning was not sufficient. Hence, the new name MRP II Manufacturing Resource
Planning came into existence.
MRP II is an integrated information system that goes beyond first generation MRP. It
synchronizes all aspects of business i.e. Marketing, Finance, Purchasing, Accounting and
engineering.
Production plan is prepared from business Plan .Production Plan gives quantity to be produced
for each production line on monthly basis for a period from 1 to 5 years. Production Plan is
prepared in consultation with other departments from
production plan rough cut capacity planning is done. If there is any problem changes are made in
production plan to adjust rough cut capacity from this the MPS is prepared. MPS specifies the
weekly quantities of specific products to be produced, this helps in MRP. The detailed capacity

requirement planning determines whether capacity is sufficient for producing specific products at
each work centers in scheduled time period. If no master schedule is revised preparation of
realistic master schedule execution starts. Purchase schedules and shop schedules are prepared
from these schedules work schedules, work loading, shop flow control and supplier follow up
activities are determined.
MRP takes into account only material while MRP II takes into account other subsystems of an
organization.

MRP II Block Diagram