 A planning and scheduling technique used for

batch production of assembled items

 Computer-based information system that
translates master schedule requirements for end
items into time-phased requirements for
subassemblies, components and raw materials
 Demand for items that are subassemblies or component
parts to be used in the production of finished goods.
 The parts and materials that go into the production of
cars are examples of dependent demand because the
total quantity of parts and materials needed during a
time period is a function of the # of cars that will be
manufactured.
 Demand for finished cars is independent – a car is not a
component of another item.
 Once the independent demand is known, the dependent
demand can be determined.
 Independent demand is fairly stable once
allowances are made for seasonal variations
 Dependent demand can be sporadic where large
quantities are used at specific points in time with
little or no usage at other times.
 Due to these, independent demand items must be
carried on a continual basis but dependent
demand items need only be stocked prior to the
time they will be needed in the production
process.
Material Requirements Planning- computer-based
information system that translates master schedule
requirements for end items into time-phased
requirements for subassemblies, components and raw
materials, working backward from the due date using
lead times and other info to determine when and how
much to order.

 Requirements for end items are broken down by

planning periods so that ordering, fabrication and
assembly can be scheduled for timely completion while
inventory levels are kept reasonably low.
Designed to answer 3 questions:
 What is needed?

 How much is needed?

 When is it needed?

Has 3 Major Sources of Information

 Master Schedule

 Bill-of-Materials

 Inventory records
Master Schedule- one of the primary inputs of MRP;
states which end items are to be produced, when
these are needed and in what quantities.
Cumulative lead time- sum of the lead times that
sequential phases of a process require, from ordering
of parts or raw materials to completion of final
assembly.
 Example a total of 10 weeks of lead time is needed
from ordering parts & raw materials until final
assembly is completed. Lead times include move and
wait times in addition to set up and run times.
 Bill-of-Materials (BOM)- one of the primary inputs of
MRP; a listing of all of the raw materials, parts,
subassemblies and assemblies needed to produce one
unit of a product.
 The nature of this aspect of the BOM is clear when you
consider a product structure tree.

 Product Structure Tree- visual depiction of the

requirements in a bill of materials, where all components
are listed by levels.
 One of the primary inputs of MRP
 Includes information on the status of each item
by time period

=Gross requirements, scheduled receipts

Amount on hand, supplier, lead times, lot sizes
= Changes due to stock withdrawals, cancelled orders
and similar events are recorded in this file
 Must be accurate since can create problems when
incorrect quantities are on hand or expected delivery
times are not met.
 MRP Processing takes the end item requirements
specified by the master schedule and explodes
them into time-phased requirements for
assemblies, parts and raw materials using the
BOM offset by lead times
 For example, raw materials D, F must be ordered
at the start of the week 2, part H at the start of
week 5 in order to be available for delivery as
planned.
PRIMARY REPORTS- production and inventory
planning and control are part of primary reports
 Planned orders- schedule indicating the amount
and timing of future orders
 Order releases- Authorization for the execution
of planned orders
 Changes to planned orders- revisions of due
dates or order quantities or cancellation of
orders
SECONDARY REPORTS- performance control, planning and
exceptions belong to secondary reports.
 Performance-control reports- evaluate system operation;
aid managers by measuring deviations from plans,
including missed deliveries and providing information that
can be used to assess cost performance
 Planning reports- useful in forecasting future inventory
requirements; include purchase commitments and other
data that can be used to assess future material
requirements
 Exception reports- call attention to major discrepancies
such as late & overdue orders, excessive scrap rates,
reporting errors and requirements for nonexistent parts
MRP enables managers to easily determine the
quantities of every component for a given order
size, to know when the release orders for each
component and to be alerted when items need
attention.
Other benefits:
 Low levels of in-process inventories due to exact
matching of supply and demand
 Ability to track materials requirements
 Ability to evaluate capacity requirements
 Means of allocating production time
 Computer and necessary software
 Accurate and up-to-date
=Master schedules
=Bills of Materials
=Inventory records
 Integrity of data
*Accuracy is essential for a successful MRP
system since inaccuracies can lead to missing
parts to ordering too many/few of same items,
failure to stay on schedule
 Expanded approach to production resource
planning, involving other areas of a firm in the
planning process and enabling capacity
requirements planning
 with emphasis placed on integration
-Financial Planning
-Marketing
-Engineering
-Purchasing
-Manufacturing
 Integration of financial, manufacturing and
human resource on a single computer system
 Next step in an evolution that began with MPR
and evolved into MRP II
 Represents an expanded effort to integrate
standardized record keeping that will permit
information sharing among the different
functional areas in order to manage the system
more effectively.
 High initial cost
 High cost to maintain
 Future upgrades
 Training
 Integrate financial data
 Standardize manufacturing process
 Standardize HR information