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MATERIAL REQUIREMENT PLANNING

(MRP)
MN 4110
Mrs. P. S. T. Perera
Lecture # 12

Objectives
Define the term MRP
Discuss input, output, and the MRP process
Describe MRP11
Describe ERP

MRP Defined
MRP is a tool for determining the
number of parts, components, and
materials needed to produce a
product.
Provides time scheduling information specifying

when each of the materials, parts, and components


should be ordered or produced.
Dependent demand drives MRP.

Background History of MRP

MRP is a software system introduced


in late 1960s.
Before this concept, the material
planning was based on re-order
levels.
MRP improved the situation to
consider the customer orders and
forecast in planning.
The result is to minimize inventory
levels and shortages

Purposes of MRP
Control Inventory.

Order the right part.


Order in the right quantity.
Order at the right time.
Assign operating priorities.
Order with the right due date.
Keep the due date valid.
Plan capacity.
Plan for a complete load.
Plan accurate load.
Plan for an adequate time to view future load.
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MRP Input and Output


MRP is a technique that uses
BOM data quantity, lead time etc.
Inventory data on hand, buffer stock etc.
MPS data - demand

to calculate requirements for materials.


The outputs are
Recommendations to release replenish orders
Recommendations to reschedule open orders

(Exception messages)
The orders could be purchase orders,
manufacturing orders or transfer orders.

Bill of Materials (BOM) File


A Complete Product Description
Materials
Parts
Components
Manufacturing sequence
Modular BOM for sub assemblies

Product Structure
Clipboard

Top clip (1) Bottom clip (1)

Pivot (1)

Spring (1)

Rivets (2)
Finished clipboard

Pressboard (1)

Product Structure Tree


Clipboard

Pressboa
rd (1)

Top Clip
(1)

Level
0

Clip Assy
(1)

Bottom
Clip (1)

Rivet
s (2)

Pivo
t
(1)

Level
1

Sprin
g (1)

Level
2

Intended BOM List


LEVEL

0--1--2
--2
--2
-1-1-

BA
320

ITEM

UNIT OF MEASURE QUANTITY

Clipboard
Clip Assembly
Top Clip
Pivot
Spring
Rivet
Press Board

u
u
u
u
u
u
u

1
1
1
1
1
2
1

Inventory Data File


Each inventory item stored as a separate file
File

Items

On
Hand

Lead Time

Order Qty

Safety
Stock

Raw material A

200

4 weeks

75

100

Part X

120

2 weeks

75

100

Component Y

100

2 weeks

50

100

Raw material B

500

3 weeks

400

300

Pegging

Etc.

details to identify each parent item that


created the demand.

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Master Production Schedule


(MPS)
Time-phased plan specifying how many and
when the firm plans to build what end item.

Aggregate Plan
(Product Groups)

MPS
(Specific End Items)
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Master Production Schedule


(cont.)
Drives MRP process with a schedule of finished

products
Quantities represent production not demand
Quantities may consist of a combination of
customer orders and demand forecasts
Quantities represent what needs to be
produced, not what can be produced
Quantities represent end items that may or
may not be finished products

Master Production Schedule


(cont.)

MPS ITEM
Clipboard
Lapdesk
Lapboard
Pencil Case

BA
320

1
85
0
75
125

PERIOD
2
3
4
95
50
120
125

120
0
47
125

100
50
20
125

5
100
0
17
125

The Aggregate Plan and the


Master Production Schedule
Aggregate Production
Plan for Mattresses

Month

Mattress production

900

950

Master Production
Schedule for
Mattresses Model
1
Model 327
Model 538
Model 749

200

400
100

100
100

200

100

150

100
200

200

Actions Performed By MRP


Two types of actions performed by MRP:
Placing or releasing an order due on some future

date.
Revision of a previous action.
Time Periods
1
Requirements
Orders

10
10 10

10 10
10 10

MRP System
Based on MPS details, MRP system
Creates

schedules identifying the specific


parts and materials required to produce end
items.

Determines
Determines

exact unit numbers needed.

the dates when orders for those


materials should be released, based on lead
times.

17

18

Firm orders
from known
customers

Aggregate
product
plan

Forecasts
of demand
from random
customers

Engineering
design
changes

Master
production
schedule
(MPS)

Inventory
transactions

Bill of
material
file

Material
planning
(MRP)

Inventory
record
file
Reports

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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 re-scheduling.
Cancellations or suspensions of open
orders due to changes in MPS
Inventory status to show the stock levels

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Secondary MRP Reports


Planning reports - forecasting inventory

requirements over a period of time.


Performance reports - to determine

agreement between actual and programmed


usage / costs.
Exception reports - to point out serious

discrepancies (e.g. late or overdue orders)

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Sequence of Events in
MRP
Enter independent demands

Customer order, forecast, and/or safety stocks


Create MPS,

Develop a build schedule of what to build,


how many, and by when
Create RCCP

Test schedule for feasibility against plant


capacity for MPS items
Validate

Determine if RCCP is feasible, if not make


adjustments to MPS and re-run RCCP
MRP Generation

Enter Independent
Demand
Build MPS
Generate RCCP
Feasible
?

No

MRP Generation

Build detailed material requirements


Create CRP

Build infinite picture of labor and machine


resources required
Validate

Adjust as necessary if material and capacity


plans are inadequate start over at the MPS
Create the final production plan and
execute
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CRP Generation
Feasible
?
Execute Final Plan

No

Components of MRP
Items: Children of the parent
Demand: can be dependent (children to parent) or

independent (forecasts, orders)

Lead Time: predefined / fixed values (move, queue, setup,

run, transit, dock-to-stock, vendor)

Order Modifiers: Order minimums / multiples, lot size,

shrinkage, scrap

Bill of Material: low level codes determine order in which to

process item

Pegging: where is the demand coming from, why is this

product being built

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Advantages MRP
Reduced inventory.
Better customer service.
Better response to market demands.
Ability to change the master schedule.
Support managers to plan schedule before

actual release of orders.

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Disadvantages of MRP
MRP assumes infinite capacity (doesnt look at

resources constraints)
MRP generation can take more time / always in a
batch mode and therefore lacks the dynamics to
react to change
Lead time is assumed to be fixed and definable,
Use of forecasts has its weakness forecast are
wrong usually
MRP does not recognize job operation activity,
only the completion of units.
Lack of knowledge about MRP among the users.
Integration problems of MRP and JIT.
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MRP Terminology
Gross Requirements
Projected on-hand
Net requirements
Planned order receipt
Planned order release
Open order

Net
Gross
Inventory Scheduled Safety Inventory allocated

requirements
requirements on hand
receipts
stock
to other uses
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MRP Logic Example - 1


Given the product structure tree for A and the
lead time and demand information below, provide
a materials requirements plan that defines the
number of units of each component and when they
will be needed.
Product Structure Tree for Assembly A

A
B(4)
D(2)
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C(2)
E(1)

D(3)

F(2)

Lead Times
A 1 day
B 2 days
C 1 day
D 3 days
E 4 days
F 1 day
Demand
Day 10 50 A
Day 8
20 B (Spares)
Day 6
15 D (Spares)

First, the number of units of A are scheduled


backwards to allow for their lead time. So, in the
materials requirement plan below, we have to
place an order for 50 units of A in the 9th day to
receive them in the 10th day.
Day:
A Required
Order Placement

9
50

LT = 1 day

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10
50

Next, we need to start scheduling the components


that make up A. In the case of component B we
need 4 Bs for each A. Since we need 50 As, that
means 200 Bs. And again, we back the schedule up
for the necessary
22 days
Day:
1
3 of lead
4
5time.
6
7
8
9
A Required
Order Placement
B Required
Order Placement

20
20

LT = 2
A
B(4)

28

D(2)

D(3)

200

Spares
4x50=200

C(2)
E(1)

50
200

F(2)

10
50

Finally, repeating the process for all components, we


have the final materials requirements plan:

A
Part D: Day 6

B(4)
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D(2)

C(2)
E(1)

D(3)

40 + 15 spares

F(2)

Finally, repeating the process for all components, we


have the final materials requirements plan:
Day:
A
LT=1
B
LT=2
C
LT=1
D
LT=3
E
LT=4
F
LT=1

Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement

20

20

50
200

200
100

55
20

400

55

400

20

200

100
300

300

200
200
200

A
Part D: Day 6

B(4)
30

D(2)

C(2)
E(1)

D(3)

40 + 15 spares

F(2)

10
50

MRP Example - 2
Item
X
A
B
C
D

X
A(2)
C(3)

B(1)
C(2)

On-Hand Lead Time (Weeks)


50
2
75
3
25
1
10
2
20
2

D(5)

Requirements include 95 units (80 firm orders and 15 forecast)


of X in week 10 plus the following spares:
Spares

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1
A
B
C
D

7
10
15

9
12

10

32

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Closed Loop MRP


Production Planning
Master Production Scheduling
Material Requirements Planning
Capacity Requirements Planning

No
Feedback

Realistic?

Yes
Execute:
Capacity Plans
Material Plans

Feedback

MRP II Defined
Manufacturing Resource
Planning
A tool to support planning of all

resources of a manufacturing company


Made up of variety of functions linked
together:
Business planning
Sales and operations planning
Production planning
Master Production Schedules
Materials Requirements Planning
Capacity Requirements Planning and
Execution support system

Provides tools to top management in

making strategic decisions

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MRP II - Goal

Goal: Plan and monitor all resources of a

manufacturing firm (closed loop):


manufacturing
marketing
finance
engineering

Simulate the manufacturing system

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Components of MRP II
Includes all the elements of MRP
Use of existing load information

(Schedule)
Shop Calendar, Units of Capacity
(machine / people hours), routings
What-if capability
Scheduling Modifiers
Allow finite or infinite capacity planning
Forward and backward scheduling
Efficiency and utilization rates
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Sequence of Events of
MRP II
Supply a business plan
Supply a sales and operation plan

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which integrates customer-focused


marketing plans
Provide a production plan that
details the manufacturing output of
the plant,
Validate do the above three plans
agree with each other?
Create MPS, a schedule of what to
build, how many, and by when
MRP Generation, detailed materials
requirement
Create CRP, detailed amount of
labor and machine resources
Validate adjust as necessary if
material and capacity plans are
inadequate, start over at the MPS
Create the final production plan
and execute

Business Plan
Sales & Operation
Plan
Production Plan
Feasible
?

Build MPS
MRP Generation
CRP Generation
Feasible
?

Execute Final Plan


Performance
Analysis

F
E
E
D
B
A
C
K

Enterprise Resource Planning


(ERP) Systems
Enterprise Resource Planning Systems is a

computer system that integrates application


programs in accounting, sales, manufacturing,
and other functions in the firm
This integration is accomplished through a
database shared by all the application
programs
Software that organizes and manages a
companys business processes by
sharing information across functional areas
integrating business processes
facilitating customer interaction
providing benefit to global companies

ERP Modules

Selected Enterprise Software


Vendors