Understanding Materials

Requirement Planning
(MRP)
REPORT
GUL FARAZ
 REPORT
A method to calculate the materials and machineries required to
assemble a product is what we call “Materials Requirement
Planning (MRP)”. MRP has 3 basic steps:
1. Keeping track of inventory on hand.
2. Keeping track of additional inventory needed.
3. Scheduling production and purchase.
Materials Requirement Planning (MRP) is usually done through
specially designed software to make sure that the right inventory
as well as right amount of inventory is available at the lowest
possible cost. It is really helpful in reducing costs and improves
productivity. It is also called “Reverse of Production Plan” in order
to create inventory requirements for components and raw
materials. Materials Requirement Planning (MRP) is extensively
used by companies and has unquestionably been one of the key
enablers in the evolution and widespread convenience of
affordable consumer goods and, thus, has raised the standard of
living in most countries. Without a way to automate the complex
designs and data management of MRP processes, it is doubtful
that discrete companies could have scaled up processes as
promptly as they have in the half century since MRP software
arrived.
Materials Requirement Planning (MRP) is designed to answer 3
questions:

 What is needed?
 How much is needed?
 When is it needed?
Further elaborating the 3 basic steps of MRP:
 Identifying Requirements – quantity on-hand, quantity on
open purchase order, quantity calculated, quantity intended
for production, quantity dedicated to current orders.
 Running MRP: Creating the Suggestions –
o Critical Time – Items of instant significance
o Expedite items – Items that need to be sped up
o Delay Items – Items that are not of vital significance
and can be postponed.
 Firming the suggestions – includes production of orders,
purchasing orders and various reports.
To estimate the required materials and the time of their need
during the manufacturing process, MRP collects and utilizes the
data from bill of materials (BOM), inventory data and the master
schedule plan. BOM is a list of all materials needed along with
their quantities each shown in a hierarchical parent-child
relationship with the final good as the parent at the top of the
hierarchy. The items in the BOM are either independent demand
or dependent demand. The finished good at the top of the
hierarchy is the independent demand while the raw materials
required to make that finished good are the dependent demands.
The independent demands are determined by the companies
taking into consideration the confirmed orders and learning the
market conditions, taking care of past sales to create forecast and
then finally deciding how many to make to meet the expected
demand.
Other than reduced costs and increase productivity, some other
benefits of MRP includes enhanced efficiency, advanced quality
goods, improved customer service, reduced inventory levels as
well as reduced developing budget.
Everything comes with limitations and MRP also has its
limitations. The list of the limitations of MRP is the necessity of
having expensive computer system along with the requirement of
accurate and up to date inputs. The reporting requirements are
extreme as well as the resistance from inside the company can
slow down the process too.
The main theme of MRP is “getting the right materials to the
right place at the right time”. The main objectives of MRP is to
make sure all the required materials for production is available
along with maintaining the lowest possible materials and product
levels in store as well as planning production duties, purchasing
duties and delivery schedule.
There are 3 main MRP Inputs:
1. Product Structure File – includes parts and components
required to build the project.
2. Master Production Schedule – includes plan of finished
products, symbolizes production and not demand,
combination of customer orders, demand predictions and
what needs to be produced.
3. Inventory Master File – includes On-Hand Quantities, On-
Order Quantities, Safety Stock, Lead Time and Past-Usage
Figures.
These inputs lead to the required outputs. Those outputs are:

 Producing Orders
 Purchasing Orders
  Various Reports
With the advancement of technology, system for elevating the
manufacturing process has entered a new era. The key driver of
industrial efficiency in the form of MRP came from the scientific
management theories including the tips and tricks for production
planning and control and enhancing the efficiency of material
management.

References:

https://collegelearners.com/books/introduction-to-materials-management-
pdf-free-download/

https://www.smartsheet.com/guide-to-material-requirements-planning

https://www.accessengineeringlibrary.com/content/book/9780071755634

https://www.proquest.com/openview/
743ec6e8088c99e2dbcf9d92ed431623/1?pq-origsite=gscholar&cbl=36911

http://yadda.icm.edu.pl/baztech/element/bwmeta1.element.baztech-
df4afcb0-0b2a-47b4-8460-7ba36312f345

http://ir.library.ui.edu.ng/handle/123456789/1889

https://searcherp.techtarget.com/definition/material-requirements-planning-
MRP

https://www.cips.org/knowledge/procurement-topics-and-skills/operations-
management/material-requirements-planning/

https://www.investopedia.com/terms/m/mrp.asp