Material Requirement

Planning (MRP)
What is MRP?
What is MRP?
➢ Computerized Inventory
Control
➢ Production Planning System
➢ Management Information
System
➢ Manufacturing Control
System
How MRP Works?
The theme of MRP is getting the right
component parts and materials to right place
at right time.
It decides on three needs:-
1. What is needed?
2. How much is needed?
3. When is it needed by?
Why Is MRP important?
➢ A Material Requirements Planning (MRP) system
accelerates the manufacturing production
process by determining what raw materials,
components and subassemblies are needed,
and when to assemble the finished goods,
based on demand and bill of materials (BOM).

➢ MRP gives businesses visibility into the

inventory requirements needed to meet demand,
helping your business optimize inventory levels
and production schedules
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 ➢ Reduce Overtime
Communication ➢ Improve Supply
➢ Improve Plant Schedules
Efficiency ➢ Improve Calculation
➢ Reduce Freight Cost of Material
➢ Reduction in Excess Requirements
Inventory ➢ Improve Competitive
Position
Three Basic Steps of
MRP
➢ IdentifyingRequirements
➢ Running MRP – Creating
the Suggestions
➢ Firming the Suggestions
Objectives Of MRP

1. To ensure that raw materials are readily

available for production and products are
readily available for delivery to consumers.
2. To sustain the lowest raw materials and
finished product levels in store.
3. To organize manufacturing, delivery
schedules, and purchasing activities.
Step 1: Identifying the
Requirements
➢ Quantity on Hand
➢ Quantity on Open Purchase
Order
➢ Quantity in/or Planned for
Manufacturing
➢ Quantity Committed to Existing
Orders
➢ Quantity Forecasted
 Step 1: Important
Information
MRP is…..
➢ Company Sensitive
➢ Location Sensitive
➢ Date Sensitive
Step 2: Running MRP –
Creating the
Suggestions
➢ CriticalItems
➢ Expedite Items
➢ Delay Items
Step 3: Firming the
Suggestions

➢ Manufacturing Orders
➢ Purchasing Orders
➢ Various Reports
Overview of the MRP System
Product Master
Inventory
Structure Production
Master File
File Schedule

Material
Requirements
Planning

Manufacturing Purchase Various

Orders Orders Reports
MRP Inputs and Outputs
MRP Inputs
➢ Product Structure File
➢ Master Production Schedule
➢ Inventory Master File
MRP STRUCTURE
Master Production Schedule

➢ Drives MRP process with a schedule of finished

products
➢ Quantities represent production not demand
➢ Quantities may consist of a combination of customer
orders & demand forecasts
➢ Quantities represent what needs to be produced, not
what can be produced
Master Production Schedule
Product Structure
File
➢ Bill of Materials
Master Production
Schedule
➢ Schedule of Finished Products
➢ Represents Production, not
Demand
➢ Combination of Customer
Orders and Demand
Forecasts
➢ What Needs to be Produced
Inventory Master File
➢ On-Hand Quantities
➢ On-Order Quantities
➢ Lot Sizes
➢ Safety Stock
➢ Lead Time
➢ Past-Usage Figures
MRP STEPS AND PROCESSES
MRP Steps and Processes

➢ The MRP process can be broken down into four major steps:

1. Identifying requirements to meet demand.

➢ The first step of the MRP process is identifying customer
demand and the requirements needed to meet it, which starts
with inputting customer orders and sales forecasts
➢ Using the bill of materials required for production, MRP then
disassembles demand into the individual components and
raw materials needed to complete the build while accounting
for any required sub-assemblies
MRP Steps and Processes

2. Checking inventory and allocating resources.

Utilizing the MRP to check demand against inventory and

allocating resources accordingly, you can see both what
items you have in stock and where they are—this is
especially important if you have inventory across several
locations. This also lets you see the status of items, which
gives visibility into items that are already allocated to
another build, as well as items not yet physically in the
warehouse that are in transit, or on order. The MRP then
moves inventory into the proper locations and prompts
reorder recommendations.
MRP Steps and Processes

3. Scheduling production.
 Using the master production schedule, the
system determines how much time and labour are
required to complete each step of each build and
when they need to happen so that the production
can occur without delay.

 The production schedule also identifies what

machinery and workstations are needed for each
step and generates the appropriate work orders,
purchase orders and transfer orders. If the build
requires subassemblies, the system considers
how much time each subassembly takes and
schedules them accordingly
MRP Steps and Processes

4. Identifying issues and making recommendations

 Finally, because the MRP links raw materials to work orders

and customer orders, it can automatically alert your team
when items are delayed and make recommendations for
existing orders: automatically moving production in or out,
performing what-if analyses, and generating exception
plans to complete the required builds.
MRP Process
 Schedules the Production of all items using an MRP Matrix

MRP Matrix
Item: Low-Level Code:
Lot Size: Lead Time: PD 1 2 3 4 5
Gross Requirements
Scheduled Receipts
Projected on Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
Data Needed for MRP Systems

 End Item: The MRP system requires the user

to describe what type of product is being
created and its specific demand level.
 Quantity: The system requires the user to
input the amount of quantity needed to meet
specific demand schedules.
 Shelf Life: The amount of time that a product
is able to remain in the warehouse is required
for the planning aspect of an MRP system.
Data Needed for MRP
Systems
➢ Inventory Records: Records of materials available for
use, work in progress, and completed.
➢ Planning Data: Restraints and directions, such as
labor, machine standards, testing, techniques, and
commands, are required to use the MRP system.
➢ Bills of Materials: The system requires detailed
accounts of materials and components used to make
each of the products.
➢ After inputting all the data throughout the system, it
can be run in a business.
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, orders behind
schedule
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
Example of the MRP
Process
Item: A Low-Level Code: 1
Lot Size: 25 Lead Time: 1
PD 1 2 3 4 5
Gross Requirements 10 15 25 25 30
Scheduled Receipts 25
Projected on Hand 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 2 3 4 5
Gross Requirements 10 15 25 25 30
Scheduled Receipts 25
Projected on Hand 20 10 20 20 20 15
Net Requirements 5 5 10
Planned Order Receipts 25 25 25
Planned Order Releases 25 25 25 30 25
MRP Outputs
➢ Purchase Orders
➢ Planned order schedules
➢ Manufacturing Orders
➢ Performance controlled reports
➢ Planning reports
➢ Exception reports
A Case study
➢ Manufactures Industrial Lighting
Products
➢ Good-Quality Products
➢ Poor at Meeting Due Dates
➢ Work is Specialized for Each Customer
➢ Job Shop Environment
➢ Complex Products
A CASE Case

Before MRP ➢ After MRP

Implementation Implementation

➢ Less than 75% of ➢ 97% of orders

orders completed on completed on time
time ➢ 2% of orders
completed with 1 to
2 days after due date
Advantages of MRP
➢ Maintains low inventory level
➢ Reduction of associated costs through material
planning
➢ Ensure capacity utilization.
➢ Extensively tracks every piece of inventory that
comes in and goes out
➢ Reduces cost of warehousing product
➢ Increased organization throughout the
business
➢ Scheduled shipment and delivery of the
product
➢ Plan for future capacity needed.
Disadvantages of MRP

➢ Reliance on the precise input information

➢ There are scheduling delays, wrong order
quantities, and inefficient tracking if the
information is inputted inaccurately within the
system
➢ Requires extensive maintenance of robust
databases
➢ In order to use the system, proper training is
required
➢ The system is not cheap and requires a substantial
capital investment
Summary of MRP
➢ MRP is a…..
➢ Computerized Inventory Control
➢ Production Planning System
➢ Schedules Component Items as Needed
➢ Track Inventory
➢ Help you in many other aspects of business