Material Requirement

Planning (MRP)
 Contributors to MRP
• Gaurav Narula
• American Production and Inventory
Control Society
 What is MRP?
• Computerized Inventory Control
• Production Planning System
• Management Information System
• Manufacturing Control System
Material Requirements Planning
Defined
• Materials requirements planning (MRP) is a
means for determining the number of parts,
components, and materials needed to produce
a product
• MRP provides time scheduling information
specifying when each of the materials, parts,
and components should be ordered or
produced
• Dependent demand drives MRP
• MRP is a software 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 Purchasing Cost
• Reduce Component • Improve Production
Shortages Schedules
• Improve Shipping • Reduce Manufacturing
Performance Cost
• Improve Customer • Reduce Lead Times
Service • Less Scrap and Rework
• Improve Productivity • Higher Production
• Simplified and Accurate Quality
Scheduling
 What can MRP do?
• Improve • Reduce Overtime
Communication • Improve Supply
• Improve Plant Schedules
Efficiency • Improve Calculation of
• Reduce Freight Cost Material Requirements
• Reduction in Excess • Improve Competitive
Inventory Position
Three Basic Steps of MRP
• Identifying Requirements
• Running MRP – Creating the
Suggestions
• Firming the Suggestions
 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
• Critical Items
• 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
• Product Structure File
• Master Production Schedule
• Inventory Master File
 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
 Example of MRP Logic and Product
Structure Tree
Given
Giventhe
theproduct
productstructure
structuretree
treefor
for“A”
“A”and
andthe
thelead
leadtime
timeand
and
demand
demandinformation
informationbelow,
below,provide
provideaamaterials
materialsrequirements
requirements
plan
planthat
thatdefines
definesthe
thenumber
numberof ofunits
unitsof
ofeach
eachcomponent
componentandand
when
whenthey
theywill
willbe
beneeded
needed
Product Structure Tree for Assembly A Lead Times
A 1 day
A B 2 days
C 1 day
D 3 days
E 4 days
B(4) C(2) F 1 day

Total Unit Demand

Day 10 50 A
D(2) E(1) D(3) F(2) Day 8 20 B (Spares)
Day 6 15 D (Spares)
 First,
First, the
the number
number of of units
units of
of “A”
“A” are
are scheduled
scheduled
backwards
backwards to to allow
allow for
for their
their lead
lead time.
time. So,
So, in
in the
the
materials
materials requirement
requirement plan plan below,
below, wewe have
have to
to place
place
an
an order
order forfor 50
50 units
units of
of “A”
“A” on
on the
the 99th day
th
day to
to receive
receive
them
them onon day
day 10.
10.

Day: 1 2 3 4 5 6 7 8 9 10
A Required 50
Order Placement 50

LT = 1 day
 Next,
Next,we
weneed
needto
tostart
startscheduling
schedulingthe
thecomponents
componentsthat
thatmake
makeupup
“A”.
“A”. In
Inthe
thecase
caseof
ofcomponent
component“B”“B”we
weneed
need44B’s
B’sfor
foreach
eachA.
A.
Since
Sincewe
weneed
need50
50A’s,
A’s,that
thatmeans
means200
200B’s.
B’s. And
Andagain,
again,weweback
back
the
theschedule
scheduleupupfor
forthe
thenecessary
necessary22days
daysof
oflead
leadtime.
time.
Day: 1 2 3 4 5 6 7 8 9 10
A Required 50
Order Placement 50
B Required 20 200
Order Placement 20 200

LT = 2
Spares
A 4x50=200

B(4) C(2)

D(2) E(1) D(3) F(2)

 21
Finally,
Finally,repeating
repeatingthe
theprocess
processfor
forall
allcomponents,
components,we
wehave
havethe
the
final
finalmaterials
materialsrequirements
requirementsplan:
plan:
Day: 1 2 3 4 5 6 7 8 9 10
A Required 50
LT=1 Order Placement 50
B Required 20 200
LT=2 Order Placement 20 200
C Required 100
LT=1 Order Placement 100
D Required 55 400 300
LT=3 Order Placement 55 400 300
E Required 20 200
LT=4 Order Placement 20 200
F Required 200
LT=1 Order Placement 200

A
Part D: Day 6
B(4) C(2) 40 + 15 spares

D(2) E(1) D(3) F(2)

©The McGraw-Hill Companies, Inc., 2001
 Summary of MRP
MRP is a…..
• Computerized Inventory Control
• Production Planning System
that…..
• Schedules Component Items as Needed
which will…..
• Track Inventory and…..
• Help you in many other aspects of business