Supply Chain Management

Materials Requirements Planning (MRP)

Supply Chain Management

Material Requirement Planning (MRP)
MRP determines the number of components and raw
material required and their build dates to complete a
given number of finished goods by a specific date.

Supply Chain Management

Production Planning Hierarchy
Firm orders
from known
customers

Aggregate
Product Plan

Engineering
design changes

Master
Production
Schedule
(MPS)

Bill of
Materials
(BOM) file

Material
Requirements
Planning
(MRP)

Reports

Forecast
of demand
from random
customers

Inventory
transactions

Inventory
records
file

Supply Chain Management

Materials Requirements Planning (MRP)
Computer based system
Explodes Master Schedule (MPS) into
required amounts of raw materials and
subassemblies to support MPS

Supply Chain Management

Material Requirements Planning
How much of an item is needed?

When is an item needed to complete

a specified number of units...

in a specified period of time?

Dependent demand drives MRP

Supply Chain Management

Objectives of MRP
Improve customer service
Reduce inventory investment
Improve plant operating efficiency

Supply Chain Management

Lot-Sizing in MRP

Lot-size is the quantity ordered/produced at

one time
Large lots are preferred because:

Changeovers cost less and capacity greater

Annual cost of purchase orders less
Price breaks and transportation breaks can be
utilized

Small lots are preferred because:

Lower inventory carrying cost

Reduced risk of obsolescence
Shorter cycle time to produce customer order

Supply Chain Management

Bill Of Material (BOM)
A list of components and raw material and
their respective quantities required to
produce specific end items.

Supply Chain Management

Manufacturing Resource Planning (MRP II)
Advanced MRP system that takes into
consideration the equipment capacities and
other resources that are associated with a
manufacturing facility.
Fundamental manufacturing equation of
MRP II is
What
What
What
What

are we going to make?

does it take to make it?
do we have?
do we have to get?

Supply Chain Management

MRP I to MRP II

MRP I simply exploded demand (MPS) into

required materials
MRP II became Manufacturing Resource Planning
which provides a closed-loop business
management system

Financial management
Shop floor control
Operations management
Simulation capability

Supply Chain Management

End of Topic