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
 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
 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
 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
• Manufacturing Orders
• Purchasing Orders
• Various Reports
 Hubbell Lighting Case
• Manufactures Industrial Lighting Products
• Good-Quality Products
• Poor at Meeting Due Dates
• Work is Specialized for Each Customer
• Job Shop Environment
• Complex Products
 Hubbell Lighting Case
Before MRP Implementation After MRP Implementation

• Less than 75% of orders • 97% of orders completed

completed on time on time
• 2% of orders completed
with 1 to 2 days after due
date
 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
 References
Russell, Roberta S., and Bernard W. Taylor III. Operations Management. 3rd
Edition: Prentice Hall, 2000

Grubbstrom, Robert W. Material Requirements Planning and Manufacturing

Resource Planning. 03/12/2002.
http://www.itbp.com/opsmanagement/iebm/material_requirements.htm.

Vormittag Associates, Inc. System 2000 MRP. 03/12/2002.

http://www.vaihome.com/s2000mrp.htm.

Inventory Solutions. What is MRP?. 03/12/2002.

http://www.inventorysolutions.org/def_mrp.htm.