Material Requirement Planning (MRP)

What is MRP?
Computerized Inventory Control Production Planning System Management Information System Manufacturing Control 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 Component Shortages Improve Customer Service Improve Productivity Simplified and Accurate Scheduling Improve Production Schedules Reduce Manufacturing Cost Reduce Lead Times Less Scrap and Rework Higher Production Quality

What can MRP do?

Improve Communication Improve Plant Efficiency Reduction in Excess Inventory Improve Supply Schedules Improve Calculation of Material Requirements Improve Competitive Position

Dependent/independent demand

Three Basic Steps of MRP

Identifying Requirements Running MRP Creating the Suggestions Firming the Suggestions to release the orders

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 Structure File Master Production Schedule Inventory Master File

Material Requirements Planning

Manufacturing Orders

Purchase Orders

Various Reports

MRP Inputs
Product Structure File Master Production Schedule Inventory Master File

Product Structure File

Bill of Materials
Product Structure Record
Clipboard

Level 0

Press
board (1)

Clip Assembly (1)

Rivets (2)

Level 1

Top Clip (1)

Bottom Clip (1)

Pivot (1)

Spring (1)

Level 2

Master Production Schedule

Schedule of Finished Products Represents Production, not Demand Combination of Customer Orders and Demand Forecasts What Needs to be Produced
PERIOD

MPS ITEM

Clipboard Lapdesk Lapboard Pencil Case

85 0 75 125

95 50 120 125

120 0 47 125

100 50 20 125

100 0 17 125

Inventory Master File

On-Hand Quantities On-Order Quantities Lot Sizes Safety Stock Lead Time Past-Usage Figures

MRP Process
Schedules the Production of all items using an MRP Matrix
MRP Matrix
Item: Lot Size: Low-Level Code: Lead Time: PD 1 2 3 4 5

Gross Requirements Scheduled Receipts Projected on Hand

Net Requirements
Planned Order Receipts Planned Order Releases

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

Product
Product Structure Record Clipboard Pressboard (1) Clip Assy (1) Rivets (2) Level 0 Level 1

Product
ITEM: CLIPBOARD LOT SIZE: L4L LLC: 0 LT: 1 1 2 PERIOD 3 4 5

Gross Requirements Scheduled Receipts Projected on Hand Net Requirements Planned Order Receipts 25

85 175

95

120

100

100

Planned Order Releases

Product
ITEM: CLIPBOARD LOT SIZE: L4L LLC: 0 LT: 1 1 2 PERIOD 3 4 5

Gross Requirements Scheduled Receipts Projected on Hand Net Requirements Planned Order Receipts 25

85 175 115 0

95

120

100

100

Planned Order Releases

(25 + 175) = 200 units available (200 - 85) = 115 on hand at the end of Period 1

Product
ITEM: CLIPBOARD LOT SIZE: L4L LLC: 0 LT: 1 1 2 PERIOD 3 4 5

Gross Requirements Scheduled Receipts Projected on Hand Net Requirements Planned Order Receipts 25

85 175 115 0

95 20 0

120

100

100

Planned Order Releases

115 units available (115 - 85) = 20 on hand at the end of Period 2

Product
ITEM: CLIPBOARD LOT SIZE: L4L LLC: 0 LT: 1 1 2 PERIOD 3 4 5

Gross Requirements Scheduled Receipts Projected on Hand 25

85 175 115

95 20

120 0

100

100

Net Requirements
Planned Order Receipts Planned Order Releases

0
100

100
100

20 units available (20 - 120) = -100 100 additional Clipboards are required Order must be placed in Period 2 to be received in Period 3

Product
ITEM: CLIPBOARD LOT SIZE: L4L LLC: 0 LT: 1 1 2 PERIOD 3 4 5

Gross Requirements Scheduled Receipts Projected on Hand Net Requirements Planned Order Receipts 25

85 175 115 0

95 20 0

120 0 100 100

100 0 100 100

100 0 100 100

Planned Order Releases

100

100

100

Following the same logic Gross Requirements in Periods 4 and 5 develop Net Requirements, Planned Order Receipts, and Planned Order Releases

Product
ITEM: LAPDESK LOT SIZE: MULT 50 Gross Requirements Scheduled Receipts Projected on Hand 20 LLC: 0 LT: 1 1 0 2 60 PERIOD 3 0 4 60 5 0

Net Requirements
Planned Order Receipts Planned Order Releases

Product
ITEM: LAPDESK LOT SIZE: MULT 50 LLC: 0 LT: 1 1 2 PERIOD 3 4 5

Gross Requirements Scheduled Receipts Projected on Hand 20

0 20

60 10

0 10

60 0

0 0

Net Requirements
Planned Order Receipts Planned Order Releases

0
50

40
50 50

50
50

Following the same logic, the Lapdesk MRP matrix is completed as shown

School Mate Products

Planned Order Report PERIOD ITEM Clipboard Lap desk 1 2 100 50 3 100 50 4 100 5

MRP Outputs
Manufacturing Orders Purchasing Orders Various Reports

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