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MATERIAL REQUIREMENTS PLANNING

(MRP)
Computer-based information system for ordering
MATERIAL REQUIREMENTS PLANNING

and scheduling of dependent-demand inventories
Computer based information system that
(MRP)

translates master schedule requirements for end
items into time-phased requirements for
& subassemblies, components and raw materials
MRP SYSTEM MRP is designed to answer three question
what is needed? how much is needed? and when
is it needed?
Dependent demand drives MRP
MRP is a software system
Dependent demand Demand for items that are sub-
assemblies, parts or raw materials to be used in the
production of finished goods.
Independent demand finished products

MATERIAL REQUIREMENTS PLANNING MRP SYSTEM

(MRP) MRP Inputs MRP Processing MRP Outputs

Changes
In order to implement and operate effective MRP system, it
Order releases
is necessary to have : Master
Planned-order
A computer and the necessary software programs to
schedule
schedules
handle computations and maintain records Primary
Accurate and up-to-date
reports Exception reports

Master schedule Bill of Material

a) requirement Planning reports
materials planning Secondary
Bills of materials programs Performance-
b) reports control
(computer and
Inventory records
software) reports
c)

Integrity of data's
Inventory
Accuracy is absolutely necessary for successful MRP records Inventory
transaction
system

MRP INPUTS MASTER SCHEDULE

Master Production Schedule (MPS) States

which end items are to be produced, when they
are needed, and in what quantities
Bill of Materials (BOM) a listing of all of the
raw materials, parts, and sub-assemblies needed
to produce one unit of a product
Inventory Records includes information on the
status of an item during the planning horizon, eg.
quantity, supplier, order lead time, lot size
Master schedule: One of three primary inputs
in MRP; states which end items are to be
produced, when these are needed, and in
what quantities.
Cumulative lead time: The sum of the lead
times that sequential phases of a process
require, from ordering of parts or raw
materials to completion of final assembly.

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BILL-OF-MATERIALS PRODUCT STRUCTURE TREE

Bill of materials: One of the three primary

inputs of MRP; a listing of all of the raw
materials, parts, subassemblies, and
assemblies needed to produce one unit of
a product.
Product structure tree: Visual depiction of the
requirements in a bill of materials, where
all components are listed by levels.

ASSEMBLY TIME CHART

Assembly Time Chart showing material order points needed to meet MRP PROCESSING
scheduled availability of the end item
Processes the following for each time period:
Procurement of
raw material D Fabrication Gross requirements - Total expected demand for an item
of part E or raw material in a time period
Subassembly A Schedule receipts - Open orders scheduled to arrive from
Procurement of Final assembly vendors or else where in the pipeline
raw material F
Procurement of
and inspection Projected on hand - Expected amount of inventory that
part C will be on hand at the beginning of each time period
Procurement of Net requirements - The amount actual needed in each
part H
Subassembly B period
Planned-order receipts - Quantity expected to be the
Procurement of Fabrication
raw material I of part G received by the beginning of the period in which it is shown
Planned-order releases - Planned amount to order in
1 2 3 4 5 6 7 8 9 10 11
time period; planned order receipts offset by lead time
Order point Week number Available for
delivery

MRP OUTPUTS MRP OUTPUTS

Primary Reports Secondary Reports
Planned Orders schedule indicating the amount Performance-control reports Evaluation of
and timing of future orders system operation, including deviations from
Order Releases Authorization for the execution plans and cost information
of planned orders e.g., missed deliveries and stock outs
Changes revisions of due dates or order Planning reports Data useful for assessing
quantities, or cancellation of orders future material requirements
e.g., Purchase commitments
Exception Reports Data on major discrepancies
encountered
e.g., late and overdue orders, excessive scrap
rates, requirements for nonexistent parts

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ELEMENTS OF SUCCESS IN MRP BENEFITS OF MRP

Implementation planning Low levels of inventories and reduction in
Adequate computer support manufacturing lead time
Accurate data Ability to track material requirements hence
reducing shortages
Management support
Ability to evaluate capacity requirements
User knowledge
Means of allocating production time

PROBLEM ASSOCIATED WITH MRP

MRP Vs. MRP II
Assumption of constant lead time MRP II Manufacturing
Failure to alter bill of material when customizing Resource Planning
product
Forecast problem MRP Material
Requirements
Planning

MRP MATERIAL REQUIREMENTS PLANNING

Material Requirements Planning (MRP): MRP Inputs MRP Processing MRP Outputs
Computer-based information system for ordering Changes
and scheduling of dependent demand inventories. Order releases
Master
What to order schedule
Planned-order
When to order schedules
Primary
How much to order reports Exception reports
Bill of Planning reports
materials MRP computer Secondary
Performance-
programs reports
control
reports

Inventory
records Inventory
transaction

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MRP INPUTS: MASTER SCHEDULE
Master Production Schedule
which end items are to be produced,
when they are needed, and
in what quantities.
Sources of quantities: customer orders, forecasts,
orders from warehouses, and external demand.
MRP SECONDARY OUTPUTS
Performance-control reports
missed deliveries and stockouts, and
information for accessing cost performance.
Planning reports
purchase commitments and information for
future material requirements.
Exception reports
late and overdue orders, excessive scrap rates,
reporting errors, and nonexistent parts.
LONG-RANGE PLANNING
At the top of the hierarchy we have long-
range planning.
This involves three functions: resource
planning, aggregate planning, and
forecasting.
The length of the time horizon for long-range
planning ranges from around six months to
five years.
The frequency for replanning varies from
once per month, to once per year, with two to
four times per year being typical. The degree
of detail is typically at the part family level.
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MRP PRIMARY OUTPUTS
Planned orders - schedule indicating the amount
and timing of future orders.
Order releases - Authorization for the execution
of planned orders.
Changes to planned orders - revisions of due
dates or order quantities, or cancellations of
orders.
MANUFACTURING RESOURCE PLANNING
FORECASTING
The forecasting function seeks to predict
demands in the future.
Long-range forecasting is important to determine
the capacity, tooling, and personnel
requirements.
Short-term forecasting converts a long-range
forecast of part families to short-term forecasts of
individual end items.
Both kinds of forecasts are input to the
intermediate level function of demand
management.
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RESOURCE PLANNING
Resource planning is the process of
determining capacity requirements over
the long term.
Decisions such as whether to build a new
plant or to expand an existing one are
part of the capacity planning function.
An important output of resource planning
is available capacity over the long-term
planning horizon.
This information is fed as a parameter to
the aggregate planning function.
INTERMEDIATE PLANNING
Includes production planning functions:
demand management
rough-cut capacity planning
master production scheduling
material requirements planning
capacity requirements planning
ATP
Demand management is accomplished with a
technique known as available to promise
(ATP).
This feature allows the planner to know which
orders on the MPS are already committed and
which are available to promise to new customers.
ATP combined with a capacity-feasible MPS
facilitates negotiation of realistic due dates.
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AGGREGATE PLANNING
Aggregate planning is used to
determine levels of production, staffing,
inventory, overtime, and so on over the
long term.
The level of detail is typically by month
and for part families. For instance, the
aggregate planning function will
determine whether we build up
inventories in anticipation of increased
demand (from the forecasting function),
DEMAND MANAGEMENT
The process of converting the long-term
aggregate forecast to a detailed forecast
while tracking individual customer
orders is the function of demand
management.
The output of the demand management
module is a set of actual customer
orders plus a forecast of anticipated
orders. As time progresses, the
anticipated orders should be "consumed"
by actual orders.
MASTER PRODUCTION SCHEDULING
Master production scheduling takes the
demand forecast along with the firm orders
from the demand management module and,
using aggregate capacity limits, generates an
anticipated build schedule at the highest
level of planning detail.
These are the "demands" (i.e., part number,
quantity, and due date) used by MRP. Thus,
the master production schedule contains an
order quantity in each time bucket for every
item with independent demand, for every
planning date.
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RCCP
Rough-cut capacity planning (RCCP)
is used to provide a quick capacity check
of a few critical resources to ensure the
feasibility of the master production
schedule.
Although more detailed than aggregate
planning, RCCP is less detailed than
capacity requirements planning (CRP)
SHORT-TERM CONTROL
The plans generated in the long- and
intermediate-term planning functions are
implemented in the short-term control
modules, of
1. job release
2. job dispatching
3. input/output control
JOB DISPATCHING
The basic idea behind job dispatching is to
develop a rule for arranging a queue in front of
each workstation that will maintain due date
integrity while keeping machine utilization high
and manufacturing times low. Many rules have
been proposed for doing this.
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CRP
Capacity requirements planning (CRP)
provides a more detailed capacity check on
MRP-generated production plans than RCCP.
Necessary inputs include all planned order
releases, existing WIP positions, routing data,
as well as capacity and lead times for all
process centers.
JOB RELEASE
Job release converts planned order releases to
scheduled receipts.
One of the important functions of job release is
allocation.
When there are several high-level items that use
the same lower-level part, a conflict can arise
when there is an insufficient quantity on hand.
By allocating parts to one job or another, the job
release function can rationalize these conflicts.
INPUT/OUTPUT CONTROL
1. Monitor the WIP level in each process center.
2. If the WIP goes above a certain level, then the
current release rate is too high, so reduce it.
3. If it goes below a specified lower level, then the
current release rate is too low, so increase it.
4. If it stays between these control levels, the
release rate is correct for the current conditions.