MATERIAL REQUIREMENT

PLANNING IN
MANUFACTURING INDUSTRY
MATERIAL REQUIREMENT PLANNING

 Material requirements planning (MRP) is a system for calculating the

materials and components needed to manufacture a product.
 An MRP system is intended to simultaneously meet three objectives:
1. Ensure materials are available for production and products are available
for delivery to customers.
2. Maintain the lowest possible material and product levels in store
3. Plan manufacturing activities, delivery schedules and purchasing activities.
WHAT DOES MRP DO ?

 Material Requirements Planning (MRP) calculates the total requirements

for sourcing and generates purchase requisitions with proposed dates to
meet the requirements
 Requirements are calculated based on demand (required material) & supply
(available material)

 Proposals must be converted into purchase orders to execute the plan

INPUTS TO MRP

 Demand of the product – Master planning schedule

 Bill of Materials (BOM)
 Inventory records
MASTER PLANNING
SCHEDULE (MPS)

• This is the schedule of the

quantity and timing of all
end products to be
produced over a specific
planning horizon
• MPS is developed from
customer’s orders or from
forecasts of demand or
both.
BILLS OF MATERIAL (BOM)

 A bill of material file, also known as product-structure file, is a computerized

file listing all finished products, the quantify of raw materials, parts, sub-
assemblies and assemblies in each product.
 The MRP program obtains information about the components needed to
make an end product from BOM file.
 The BOM has a series of levels, each of which represents a stage in the
manufacture of the end product. The highest level or zero level of BOM
represents the end product or the finished goods. The next lower level
might represent the sub-assemblies that are combined to make the final
assembly.
MRP EXPLOSION

 MRP Explosion uses the Bill of Materials (BOM).

 This lists how many, of what components, are needed for each item (part,
sub assembly, final assembly, finished product) of manufacture.
 Finished products is exploded to see how many items are required at the
final assembly stage.
INVENTORY STATUS

 File contains important information such as what items should be ordered

and orders should be released.
 The file gives the complete and up-to-date information on the hand
quantities, gross requirements, scheduled receipts and planned order
releases for the item.
 It also tells about lot sizes, lead times, safety stock level, etc.
OUTPUT OF MRP

 The main outputs from MRP include 3 primary reports and 3 secondary reports
 The primary reports consist of:
1. Planned order schedules
2. Order releases
3. Changes to planned orders
 The secondary reports consist of:
1. Performance control reports
2. Planning reports
3. Exception reports
MRP AT CRODA

BEFORE MRP
 Demand forecasting and planned orders were generated manually
 All planned orders are converted to process order using excel sheet in
spite of having SAP in the system
 Raw material planning was done manually in excel sheet in a meeting due
to which a lot of time and efforts were consumed.
 Forecasting were done for a shorter period of time.
 Inaccurate capacity utilization
Contd.

After MRP implementation

 MPS is run every alternate day capturing and updating all the new orders
 Product categorization is done based on the forecasting and past history.
Safety stocks are allocated based on the above information
 Forecasting is done for 6 months
 MRP is run twice in a week generating planned orders. Based on lot sizing
allocated to the product or category of the product scheduling is done to
generate process orders.
 Purchase orders are generated based on the lead time and quantity
automatically.
 Less manual work
BENEFITS OF MRP

 MRP will substantially reduce inventory investment in dependent demand items

while improving operational efficiency by removing the risk of shortages
associated with the EOQ
 MRP helps in generating purchase order and in case of any changes,
reschedule notices are also generated
 MRP plans orders for purchasing and shop scheduling for the quantity of items
that must be available in each time period to produce the end items.
 MRP can improve flow of work, thereby reducing intermittent delays and
reducing the manufacturing cycle time for the jobs.
 it improves the company’s ability to react to changes in customer orders,
improves customer services by helping production meet assembly dates and
helps to reduce delivery lead times.
LIMITATIONS OF MRP

 It assumes that lead times are known constants that are independent of the lot
size.
 It requires fixed routing for the items. It is not able to access and plan for the
use of alternate routings.
 The sequencing logic priorities order only by period or date. It provides no
priority for sequencing with in a period based on similar set-ups, tooling,
favoured customers, etc.
 It is time consuming process as it requires let of processing and analytical times.
This is achieved usually by lot of iterations.
 To make MRP system effective, an organization must have effective
communication system, motivated personnel, right leadership and an effective
computer system. It should also have support and commitment of the top
management.
THANK YOU