MRP and MRP-II

MRP

Material requirements planning (MRP) is a production planning, scheduling, and inventory control
system used to manage manufacturing processes. Most MRP systems are software-based, but it is
possible to conduct MRP by hand as well.

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 material and product levels in store.
 Plan manufacturing activities, delivery schedules and purchasing activities.

MRP is especially suited to manufacturing settings where the demand of many of the components and
subassemblies depend on the demands of items that face external demands. Demands for end items
are independent. In contrast, demand for components used to manufacture end items depend on the
demands for the end items. The distinctions between independent and dependent demands are
important in classifying inventory items and in developing systems to manage items within each
demand classification. MRP systems were developed to cope better with dependent demand items.

The three major inputs of an MRP system are the master production schedule, the product structure
records, and the inventory status records. Without these basic inputs the MRP system cannot function.

The demand for end items is scheduled over a number of time periods and recorded on a master
production schedule (MPS). The master production schedule expresses how much of each item is
wanted and when it is wanted. The MPS is developed from forecasts and firm customer orders for end
items, safety stock requirements, and internal orders. MRP takes the master schedule for end items and
translates it into individual time-phased component requirements.

The product structure records, also known as bill of material records (BOM), contain information on
every item or assembly required to produce end items. Information on each item, such as part number,
description, quantity per assembly, next higher assembly, lead times, and quantity per end item, must
be available.

The inventory status records contain the status of all items in inventory, including on hand inventory
and scheduled receipts. These records must be kept up to date, with each receipt, disbursement, or
withdrawal documented to maintain record integrity. MRP will determine from the master production
schedule and the product structure records the gross component requirements; the gross component
requirements will be reduced by the available inventory as indicated in the inventory status records.

Overview of the MRP System

• It is a production planning process that starts from the demand for finished products and plans the
production step by step of subassemblies and parts.

• Materials Requirements Planning (MRP) is a set of techniques that takes the Master Production
Schedule and other information from inventory records and product structure records as inputs to
determine the requirements and schedule of timing for each item.

Purpose of MRP,,,,,,,,,Control inventory levels ,,,Assign operating priorities ,,,Plan capacity to load the
production system.

((((((((((((((((MRP and MRP-II 2))))))))))))))))))))))))))))))

((((((((((((((((MRP and MRP-II 3))))))))))))))))))))))))))))))

Problems with MRP systems:

The major problem with MRP systems is the integrity of the data. If there are any errors in the inventory
data, the bill of materials (commonly referred to as 'BOM') data, or the master production schedule, then
the outputted data will also be incorrect. Most vendors of this type of system recommend at least 99%
data integrity for the system to give useful results. Another major problem with MRP systems is the
requirement that the user specify how long it will take a factory to make a product from its component
parts (assuming 3 they are all available). Additionally, the system design also assumes that this "lead
time" in manufacturing will be the same each time the item is made, without regard to quantity being
made, or other items being made simultaneously in the factory. A manufacturer may have factories in
different cities or even countries. It is no good for an MRP system to say that we do not need to order
some material because we have plenty thousands of miles away. The overall ERP system needs to be
able to organize inventory and needs by individual factory, and intercommunicate needs in order to
enable each factory to redistribute components in order to serve the overall enterprise. This means that
other systems in the enterprise need to work properly both before implementing an MRP system, and
into the future. For example systems like variety reduction and engineering which makes sure that
product comes out right first time (without defects) must be in place. Production may be in progress for
some part, whose design gets changed, with customer orders in the system for both the old design, and
the new one, concurrently. The overall ERP system needs to have a system of coding parts such that
the MRP will correctly calculate needs and tracking for both versions. Parts must be booked into and
out of stores more regularly than the MRP calculations take place. Note, these other systems can well
be manual systems, but must interface to the MRP. For example, a 'walk around' stocktake done just
prior to the MRP calculations can be a practical solution for a small inventory

MRP Process

1.Exploding and Offsetting 2.Gross and Net Requirements 3.Releasing Orders 4.Low level Coding and
Netting

Exploding and Offsetting Lead time

It is the time needed to perform the process. It includes order preparation, queuing, processing moving
receiving and inspecting time as well as any expected delays. Exploding the requirements It is the
process of multiplying the requirements by usage quantity of each item and recording the appropriate
((((((((((((((((MRP and MRP-II 4))))))))))))))))))))))))))))))

requirements throughout the product tree. Offsetting It is a process of placing the exploded
requirements in their proper periods based on lead time.

Gross and Net Requirements Gross Requirement

 Gross requirements – Total expected demand of the product.

 Net Requirements - Actual amount needed in each time period.
 Net Requirements = Gross Requirement – available inventory
 Planned on hand - Expected inventory on hand at the beginning of each time period.
 Planned-order receipts - Quantity expected to received at the beginning of the period.
 Planned-order releases - Planned amount to order in each time period

Releasing Orders Releasing an order

It means authorization is given to buy the necessary material or to manufacturing of required

component. Scheduled Receipts :They are the orders placed on manufacturing or on a vendor and
represent a commitment to make or buy.

 Now, considering Scheduled Receipts,

Net Requirement = Gross Requirement – Scheduled Receipts – available inventory

Low level Coding and Netting

 Netting

It is a process in which any stock on hand is subtracted from the gross requirement determined through
explosion, giving the quantity of each item needed to manufacture the required finished products.

 Low Level Code

It is the lowest level on which a part resides in all bills of material. Low level codes are determined by
starting at lowest level of bill of material and working up, recording the level against the part. If part
exists on higher level, its existence on the lower level is already recorded.

Benefits of MRP

Keep inventory levels to a cost-effective minimum.

 Keeps track of inventory that is used.

  ((((((((((((((((MRP and MRP-II 5))))))))))))))))))))))))))))))
 Tracks the amount of material that is required.
 Set safety stock levels for emergencies.
 Determine the best lot sizes to fulfill orders.
 Set up production times among the separate manufacturing stages.
 Plan for future needs of raw.

Drawbacks of MRP

Inaccurate information can result in miss-planning, overstock, under-stock, or lack of appropriate

resources.

 The inaccurate master schedule will provide wrong lengths of time for production. Hence
affecting planning.
 MRP systems can be costly and time-consuming to set up.

MRP-II
  ((((((((((((((((MRP and MRP-II 6))))))))))))))))))))))))))))))

Manufacturing Resource Planning (MRP II) embeds additional procedures to address the shortcomings
of MRP. In addition, MRP II attempts to be an integrated manufacturing system by bringing together
other functional areas such as marketing and finance. The additional functions of MRP II include
forecasting, demand management, rough-cut capacity planning (RCCP), and capacity requirement
planning (CRP), scheduling dispatching rules, and input/output control. MRP II works within a hierarchy
that divides planning into long-range planning, medium range planning, and short-term control.

 Manufacturing resource planning (MRPII) is defined as a method for the effective planning of all
resources of a manufacturing company. Ideally, it addresses operational planning in units and
financial planning.
 This is not exclusively a software function, but a combination of people skills, dedication to data
base accuracy, and computer resources. It is a total company management concept for using
human resources which is used more productively.

Key functions and Features

MRP II is not a proprietary software system and can thus take many forms. It is almost
impossible to visualise an MRP II system that does not use a computer, but an MRP II system
can be based on either purchased / licensed or in-house software. Almost every MRP II system
is modular in construction. Characteristic basic modules in an MRP II system are: • Master
Production Scheduling (MPS) • Item Master Data (Technical Data) • Bill of Materials (BOM)
(Technical Data) • Production Resources Data (Manufacturing Technical Data) • Inventories &
Orders (Inventory Control) • Purchasing Management • Material Requirements Planning (MRP) •
Shop Floor Control (SFC) • Capacity planning or Capacity Requirements Planning (CRP) •
Standard Costing (Cost Control) • Cost Reporting / Management (Cost Control) • Distribution
Resource Planning (DRP)

Benefits of MRP II

More efficient use of resources ,Reduced inventories ,Less idle time fewer bottlenecks
,Better priority planning,Quicker production starts ,Schedule flexibility ,Improved customer
service ,Meet delivery dates ,Improved quality,Lower price possibility ,Improved employee
moral , Better ,management information

Disadvantages of MRP-II Error due to poor information ,Use of averages.

Difference between MRP and MRP II

Mrp Mrp ii
Stands for material requirements Stands for manufacturing resource
planning. planning.

Developed in 1970s. Developed in 1980s.

Widely used approach for production Provides an information that is useful
planning and scheduling in industry. to all functional areas and encourages
cross-functional interactions.
Aims at releasing and managing Aims to control relevant material
manufacturing orders and purchasing flows and production capacity while
requisitions. also taking into account the
relationship between these material
flows and the required capacity.
Mrp is simply about ensuring the It take care of all other aspects of a
materials which are available to job including ordering, tracking
manufacture a specific part in a inventory and ensuring capacity.
specific volume.
It takes inputs all in order to make Mrp ii uses additional data from
sure you have the right amount of accounting records and sales for
materials/labor/machinery on hand at further analysis and forecasting of
any given time to satisfy the market or manufacturing requirements
your company production goals.

((((((((((((((((MRP and MRP-II 7))))))))))))))))))))))))))))))