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MRP is concerned with both production scheduling and inventory control. It is a material control system that attempts to keep adequate inventory levels to assure that required materials are available when needed. MRP is not useful for job shops or for continuous processes that are tightly linked. MRP is applicable in situations of multiple items with complex bills of materials. • • 13 / 18 / 4 PPC OM-3503 .introduction • Material Requirements Planning (MRP) is a computerbased production planning and inventory control system.

2. 3. Ensure the availability of materials. Maintain the lowest possible level of inventory. and purchasing activities. components. and products for planned production and for customer delivery.Contd… The major objectives of an MRP system are to simultaneously: 1. 13 / 18 / 4 PPC OM-3503 . Plan manufacturing activities. delivery schedules.

These demands are called dependent demand. The demands for the components or subassemblies depend on those for the finished goods. These demands are called independent demand. Material Requirements Planning (MRP) is used for dependent demand and for both assembly and manufacturing If the finished product is composed of many components. MRP can be used to optimize the inventory costs.Contd… • The demands for the finished goods are obtained from forecasting. • • • 13 / 18 / 4 PPC OM-3503 .

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. • 13 / 18 / 4 PPC OM-3503 .• 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. Demand for end items are independent. In contrast.

Importance of an MRP System • • Without an MRP system: − Component is ordered at time A. the component is actually needed at time C. With an MRP system: − We shall see in this lesson that given the production schedule of the finished goods and some other information (see the next slide). C when the component will be required. it is possible to predict the exact time. So. the inventory holding cost incurred between time B and C is a wastage. 6 . R − So. − However. the component is received at time B. when the inventory level of the component hits reorder point. Order is placed carefully so that it is received at time C. not B.

and the inventory status records. 13 / 18 / 4 PPC OM-3503 . the product structure records.MAJOR INPUTS The three major inputs of an MRP system are the master production schedule. Without these basic inputs the MRP system cannot function.

5 .MRP Structure Data Files BOM Master production schedule Output Reports MRP by period report MRP by date report Lead times (Item master file) Planned order report Inventory data Material requirement planning programs (computer and software) Purchase advice Purchasing data Exception reports Order early or late or not needed Order quantity too small or too large Figure 14.

13 / 18 / 4 PPC OM-3503 .mps The demand for end items is scheduled over a number of time periods and recorded on a master production schedule (MPS). safety stock requirements. 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. and internal orders. MRP takes the master schedule for end items and translates it into individual time-phased component requirements.

also known as bill of material records (BOM). description. contain information on every item or assembly required to produce end items.BOM The product structure records. next higher assembly. 13 / 18 / 4 PPC OM-3503 . and quantity per end item. must be available. such as part number. Information on each item. lead times. quantity per assembly.

These records must be kept up to date. or withdrawal documented to maintain record integrity. with each receipt. including on hand inventory and scheduled receipts. disbursement. 13 / 18 / 4 PPC OM-3503 .Inventory status record The inventory status records contain the status of all items in inventory.

13 / 18 / 4 PPC OM-3503 . the gross component requirements will be reduced by the available inventory as indicated in the inventory status records.MRP will determine from the master production schedule and the product structure records the gross component requirements.

MRP Input and Output Orders Master Production Schedule Forecasts Bill of Materials file MRP computer program Inventory file To Production 13 / 18 / 4 Reports PPC OM-3503 To Purchasing .

Changes in due dates of open orders due to rescheduling. 13 / 18 / 4 PPC OM-3503 .Primary MRP Reports Planned orders to be released at a future time. Order release notices to execute the planned orders. Cancellations or suspensions of open orders due to cancellation or suspension of orders on the master production schedule. Inventory status data.

forecasting inventory requirements over a period of time. Exception reports used to point out serious discrepancies. Performance reports used to determine agreement between actual and programmed usage and costs. such as late or overdue orders.Secondary MRP Reports Planning reports. 13 / 18 / 4 PPC OM-3503 . for example.

Better response to customer orders Faster response to market changes Improved utilization of facilities and labor Reduced inventory levels .Benefits of MRP 1. 2. 3. 4.

purchase and production quantities may not be perfect Consideration of safety stock may be prudent Should be minimized and ultimately eliminated Typically built into projected on-hand inventory. . inventory records.Safety Stock BOMs.

THANK YOU 13 / 18 / 4 PPC OM-3503 .

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