In the name of Allah the most merciful and compassionate

Assignment
Subject: Procurement Management

Topic: Material Requirement Planning

Lecturer: Professor Mohammad Bashir Dodyal

Prepared by: Ulfatullah Kotwal

Material Requirement Planning :
Material Requirements Planning The main
function of material requirements planning is to
ensure material availability, that is, to procure
the requirement quantities for in-house
production and sale on schedule. MRP helps
monitor the stocks and automatically generates
procurement proposals for Purchasing and
Production. This goal is achieved by using
different MRP methods that, in turn, include
different procedures.
Material Requirement Planning

It is occurred for Dependent demand Items.

 Three Steps of Material Requirement Planning

(MRP)

(1) Master Production Schedule (MPS)

(2) Inventory Record File

(3) BOM – Bill of Material

1 MPS ( Master Production Schedule)

Order Forecasting

What

When

Where

What Quantity
2 Inventory Record File

In hand
Schedule Received

Order Place

3 ‌BOM ( Bill of Material)

Product design
How to produce final Product.
Which items or components are
needed in different stages of
Production
Material Requirement Planning

Purchase Order
Material Plan

Work Order
Practical MPS ( Master Production Schedule

Schedule ( Month)
Final Product 1 2 3 4 5

Car 1 : 100 200 300 -- -- When ?

Car 2 : 230 500 600 -- --

Car 3 : 50 100 120 -- --

What ? What Qty ?

Practical Inventory Record File

Net Requirement = Gross – ( In hand + Transportation)

Gross = 1000 Units

In hand= 300 Units
Transportation=600 Units

Net Requirement = 1000 – ( 300 + 600)

= 1000 – (900)

= 100 Units
Practical Bill of Material ( BOM)

Final Product
A Product
A Level ‘0’

B=1
C=2
B C Level ‘1’ D=1
E=1
D
F=1
E F G Level ‘2’
G=2

G C Level ‘3’
 Order (E.O.Q)
Economic Order Quantity: Economic Order Quantity is the
quantity which is an entity orders to the suppliers. This order
quantity should be economical.

Example:
Table Method
Formula Method

EOQ : Order Cost = Storage Cost

Planning level for materials
(1)Order Level (Re-Order level)

(2) Maximum Stock level

(3) Minimum Stock Level

(4) Danger Level

(1)Order Level:

Maximum consumption x Lead Time

(2) Maximum stock level

Ordering Level – (Minimum consumption x Lead time) + E.O.Q

(3) Minimum stock Level

Ordering Point – ( Average daily consumption + lead time)

(4) Average daily consumption x Emergency time)

Example:
Maximum consumption 1000 units per day
Minimum consumption 800 units per day
Average consumption 900 units per day
Lead time 5 to 10 days
Average lead time 8 days
Emergency lead time 2 days
E.O.Q 25000 units

(1)Order level

Maximum consumption x Lead time

1000 units x 10 days
10000 units
(2) Maximum Level
Ordering level – ( Minimum consumption x Lead time) + E.O.Q

= 10000 – (800 x 5) + 25000

= 10000 – 4000 +25000

= 6000 + 25000

= 31000 units
(3) Minimum level
Ordering point – ( Average daily consumption + lead time)

= 10000 – ( 900 x 8)

= 10000 – 7200

= 2800 units

(4) Danger level

Average daily consumption x Emergency time
= 900 x 2

= 1800 units
Thanks