Material Requirements

Planning
Amal Roy George
SMS CUSAT
 Material Requirements
Planning
 Materials requirements planning
(MRP) is the logic for determining
the number of parts, components,
and materials needed to produce a
product.
 Material requirements planning
(MRP) is a production planning
and inventory control system used
to manage Manufacturing processes.
 Material requirements
planning
 MRP provides time scheduling information specifying
when each of the materials, parts, and components
should be ordered or produced.
 Most MRP systems are software-based, while it is possible to
conduct MRP by hand as well.
 MRP will plan production so that the right materials are at
the right place at the right time. 
 MRP determines the latest possible time to product goods,
buy materials and add manufacturing value. 
 Proper Material Requirements Planning can keep cash in the
firm and still fulfill all production demands.   It is the single
most powerful tool in guiding inventory planning, purchase
management and production control.  MRP is easy to
operate and adds dramatically to profits.
 History
 Prior to MRP and before computers dominated the industry,
reorder-point/reorder-quantity (ROP/ROQ) type methods like
EOQ had been used in manufacturing and inventory
management.
 In the 1960s, Joseph Orlicky studied the TOYOTA Manufacturing
Program and developed Material Requirements Planning (MRP),
and Oliver Wight and George Plossl then developed MRP
into manufacturing resource planning (MRP II).
 Orlicky's book is entitled The New Way of Life in Production and
Inventory Management (1975).By 1975, MRP was implemented
in 150 companies. This number had grown to about 8,000 by
1981.
 In the 1980s, Joe Orlicky's MRP evolved into Oliver Wight's
manufacturing resource planning (MRP II) which brings master
scheduling, rough-cut capacity planning, capacity requirements
planning and other concepts to classical MRP.
 By 1989, about one third of the software industry was MRP II
software sold to American industry ($1.2 billion worth of
software).
MRP is a tool to deal with these problems. It
provides answers for several questions:

 What items are required?

 How many are required?
 When are they required?
MRP can be applied both to items
that are purchased from outside
suppliers and to sub-assemblies,
produced internally, that are
components of more complex items.
 An MRP system is intended to
simultaneously meet three
objectives:
 Ensure materials are available
for production and products are
available for delivery to customers.
 Maintain the lowest possible level of
inventory.
 Plan manufacturing activities,
delivery schedules and purchasing
activities.
 How Implementing or improving MRP
benefit your company:
 Reduced Inventory Levels
 Reduced Component Shortages
 Improved Shipping Performance
 Improved Customer Service
 Improved Productivity
 Simplified and Accurate Scheduling
 Reduced Purchasing Cost
 Improve Production Schedules
 Reduced Manufacturing Cost
 Reduced Lead Times
 Less Scrap and Rework
 Higher Production Quality
 Improved Communication
 Improved Plant Efficiency
 Reduced Freight Cost
 Reduction in Excess Inventory
 Reduced Overtime
 Improved Supply Schedules
 Improved Calculation of Material Requirements
 Improved Competitive Position
 MRP uses the following elements to plan optimal
inventory levels, purchases, production schedules and
more:

 Master Production Schedule (MPS)

 Bill of Materials (BOM)
 Quantity on Hand (QOH)
 Part Lead Times
 Sales Order Quantities / Due Dates
 Scrap Rate
 Purchase Order Quantities / Due
Dates
 Lot Sizing policies for All Parts
 Safety Stock Requirements
Material Requirements
Planning System
 Based on a master production schedule, a
material requirements planning system:
 Creates schedules 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.
 10

Firm orders Aggregate Forecasts

from known product of demand
customers plan from estimates

Master
Engineering
production Inventory
design
schedule transactions
changes
(MPS)

Bill of Material Inventory

material planning record
file (MRP) file

Reports
 Primary MRP Reports
 Planned orders to be released at a future
time.
 Order release notices to execute the
planned orders.
 Changes in due dates of open orders due to
rescheduling.
 Cancellations or suspensions of open
orders due to cancellation or suspension of
orders on the master production schedule.
 Inventory status data.
 Secondary MRP Reports
 Planning reports, for example,
forecasting inventory requirements over a
period of time.
 Performance reports used to determine
agreement between actual and
programmed usage and costs.
 Exception reports used to point out
serious discrepancies, such as late or
overdue orders.
Additional MRP Scheduling
Terminology
 Gross Requirements: needed during each period.
 Scheduled Receipts: Existing orders that arrive at beginning
of period.
 On-hand or available balance:
 (depending on software convention, could be at the beginning of
each period or end):
 Book: Inventory balance at end of each period.
 Net requirements: What is need to meet requirements and
safety stock.
 Planned order receipt: arrives at beginning of period.
 Planned order release: Addresses lead time.
MRP Examples
Closed Loop MRP
Production Planning
Master Production Scheduling
Material Requirements Planning
Capacity Requirements Planning

No
Realistic? Feedback
Feedback
Yes
Execute:
Capacity Plans
Material Plans
Problems with MRP systems
 First, MRP relies upon accurate input information. If a small
business has not maintained good inventory records or has not
updated its bills of materials with all relevant changes, it may
encounter serious problems with the outputs of its MRP system.
The problems could range from missing parts and excessive order
quantities to schedule delays and missed delivery dates.

 Another potential drawback associated with MRP is that the

systems can be difficult, time consuming, and costly to implement.
Many businesses encounter resistance from employees when they
try to implement MRP. For example, employees who once got by
with sloppy record keeping may resent the discipline MRP requires.
Or departments that became accustomed to hoarding parts in case
of inventory shortages might find it difficult to trust the system and
let go of that habit.
 References
 http://
en.wikipedia.org/wiki/Material_requir
ements_planning

 http://www.erp.com/
 http://
en.wikipedia.org/wiki/Enterprise_reso
urce_planning
THANK YOU!!