What is MRP?
• Computerized Inventory Control
• Production Planning System • Management Information System • Manufacturing Control System

When to use MRP
• Job Shop Production
• Complex Products • Assemble-to-Order Environments • Discrete and Dependent Demand Items

What can MRP do? • Reduce Inventory Levels • Reduce Component Shortages • Improve Shipping Performance • Improve Customer Service • Improve Productivity • Simplified and Accurate Scheduling • Reduce Purchasing Cost • Improve Production Schedules • Reduce Manufacturing Cost • Reduce Lead Times • Less Scrap and Rework • Higher Production Quality .

What can MRP do? • Improve Communication • Improve Plant Efficiency • Reduce Freight Cost • Reduction in Excess Inventory • Reduce Overtime • Improve Supply Schedules • Improve Calculation of Material Requirements • Improve Competitive Position .

Three Basic Steps of MRP • Identifying Requirements • Running MRP – Creating the Suggestions • Firming the Suggestions .

• Quantity on Hand • Quantity on Open Purchase Order • Quantity in/or Planned for Manufacturing • Quantity Committed to Existing Orders • Quantity Forecasted Step 1: Identifying the Requirements .

End item Raw material Component LT R LT Time R LTTime R LT Time Order point system with dependent demand MRP 8 .

Step 2: Running MRP – Creating the Suggestions • Critical Items • Expedite Items • Delay Items .

Step 3: Firming the Suggestions • Manufacturing Orders • Purchasing Orders • Various Reports .

Overview of the MRP System Product Structure File Master Production Schedule Inventory Master File Material Requirements Planning Manufacturing Orders Purchase Orders Various Reports .

MRP Inputs • Product Structure File • Master Production Schedule • Inventory Master File .

Product Structure File • The Product Structure File describes each parentcomponent relationship. using the following information: – – – Part number for the parent item Part number for the component Quantity of the component used in the parent item • Bill of Materials .

not Demand • Combination of Customer Orders and Demand Forecasts • What Needs to be Produced .Master Production Schedule • Schedule of Finished Products • Represents Production.

Inventory Master File • • • • • • On-Hand Quantities On-Order Quantities Lot Sizes Safety Stock Lead Time Past-Usage Figures .

MRP Outputs • Manufacturing Orders • Purchasing Orders • Various Reports .

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MRP Process • Schedules the Production of all items using an MRP Matrix MRP Matrix Item: Lot Size: Low-Level Code: Lead Time: PD 1 2 3 4 5 Gross Requirements Scheduled Receipts Projected on Hand Net Requirements Planned Order Receipts Planned Order Releases .

orders behind schedule .Terms Defined • Item – name or number for the item being scheduled • Low-Level Code – the lowest level of the item on the product structure file • Lot Size – order multiples of quantity • Lead Time – the time from when an order is placed to when it is received • PD – Past Due Time Bucket.

Terms Defined • Gross Requirements – demand for an item by time period • Scheduled Receipts – material already ordered • Projected on Hand – expected ending inventory • Net Requirements – number of items to be provided and when • Planned Order Receipts – net requirements adjusted for lot size • Planned Order Releases – planned order receipts offset for lead times .

Lot sizing techniques used in MRP systems • Lot-for-lot (L4L) – most used • Economic order quantity (EOQ) • Period order quantity (POQ) MRP 21 .

Planned order (Assume Ø LT) 1 35 35 2 10 10 3 4 40 40 5 6 20 20 7 5 5 8 9 Total 150 150 10 30 10 30 The L4L technique: Minimizes carrying costs Is certainly the best method for .xls MRP 22 .Lot-for-lot (L4L) example Period Net rqmts.expensive purchased items MRP1.highly discontinuous demand .

02 per period Annual demand. S = $100 Unit price.EOQ example Setup cost. HR = . C = $50 Holding costs.24 per annum HP = . Planned orders Remnants 1 35 58 23 13 13 2 10 3 4 40 58 31 31 11 6 5 6 20 7 5 8 10 58 54 24 24 9 30 10 MRP 23 . D = 200 Q = (2DS / CHR)1/2 = 58 Period Net rqmts.

4 = 3.5 (ordering interval) Period Net rqmts.4 (orders per year) 12 / 3. Planned orders 1 35 85 2 10 3 4 40 5 6 20 35 7 5 8 9 30 Total 150 10 30 MRP 24 . Compute EOQ to determine number of orders per year 2.Period order quantity example Technique: 1. Divide number of periods in one year by number of orders to get ordering interval EOQ = 58 Number of periods in one year = 12 D = 200 200 / 58 = 3.

Example of the MRP Process Item: A Lot Size: 25 Low-Level Code: 1 Lead Time: 1 PD 1 10 2 3 4 5 Gross Requirements Scheduled Receipts Projected on Hand 15 25 25 30 25 20 Net Requirements Planned Order Receipts Planned Order Releases .

Example of the MRP Process Item: A Low-Level Code: 1 Lot Size: 25 min Lead Time: 1 PD 1 10 2 3 4 5 Gross Requirements Scheduled Receipts Projected on Hand 15 25 25 30 25 20 10 20 20 20 15 Net Requirements Planned Order Receipts Planned Order Releases 5 5 10 25 25 25 25 25 25 30 25 .

Case Study .

Hubbell Lighting Case • • • • • • Manufactures Industrial Lighting Products Good-Quality Products Poor at Meeting Due Dates Work is Specialized for Each Customer Job Shop Environment Complex Products .

Hubbell Lighting Case Before MRP Implementation • Less than 75% of orders completed on time After MRP Implementation • 97% of orders completed on time • 2% of orders completed with 1 to 2 days after due date .

Vormittag Associates. 3rd Edition: Prentice Hall. 2000 Grubbstrom. Taylor III.htm. .inventorysolutions.org/def_mrp. 03/12/2002. Operations Management. http://www. System 2000 MRP.com/s2000mrp. Inventory Solutions. Robert W.htm. http://www. Material Requirements Planning and Manufacturing Resource Planning. Inc.vaihome. What is MRP?.htm.. 03/12/2002.com/opsmanagement/iebm/material_requirements. and Bernard W.References Russell. http://www. 03/12/2002. Roberta S.itbp.

Summary of MRP MRP is… – Computerized Inventory Control – Production Planning System… – Schedules Component Items as Needed which will… – Track Inventory and… – Help in many other aspects of business… .

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