material requirement planning (mrp)

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What is MRP?Computerized Inventory Control

Production Planning SystemManagement Information System

Manufacturing Control System

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What is MRP? (contd)This is the most comprehensive approach to

manufacturing inventory and other dependents which demand an efficient inventory management system.

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The MRP system determines item-by-item, what is to be processed and when, as well as what is to be manufactured when.

This is based on order priorities and available capacities.

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When to use MRPJob Shop ProductionComplex ProductsAssemble-to-Order Environments

Discrete and Dependent Demand Items

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What can MRP do?Reduce Inventory

LevelsReduce Component

ShortagesImprove Shipping

PerformanceImprove Customer

ServiceImprove ProductivitySimplified and

Accurate Scheduling

Reduce Purchasing Cost

Improve Production Schedules

Reduce Manufacturing Cost

Reduce Lead TimesLess Scrap and

ReworkHigher Production

Quality6

What can MRP do?(contd)Improve

CommunicationImprove Plant

EfficiencyReduce Freight

CostReduction in

Excess Inventory

Reduce OvertimeImprove Supply

SchedulesImprove Calculation

of Material Requirements

Improve Competitive Position

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Three Basic Steps of MRPIdentifying RequirementsRunning MRP – Creating the Suggestions

Firming the Suggestions

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Step 1: Identifying the RequirementsQuantity on HandQuantity on Open Purchase OrderQuantity in/or Planned for Manufacturing

Quantity Committed to Existing Orders

Quantity Forecasted9

Step 1: Important InformationMRP is…..Company SensitiveLocation SensitiveDate Sensitive

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Step 2: Running MRP – Creating the SuggestionsCritical ItemsExpedite ItemsDelay Items

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Step 3: Firming the Suggestions

Manufacturing OrdersPurchasing OrdersVarious Reports

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Overview of the MRP System

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Product Structure

File

Master Production Schedule

Inventory Master File

Material Requirements

Planning

Manufacturing Orders

Purchase Orders

Various Reports

MRP InputsProduct Structure FileMaster Production Schedule

Inventory Master File

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Product Structure FileBill of Materials:

It is a materials list that provides information useful to reconstruct the manufacturing process. It is the master product definition that contains “as designed” information.

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Bill-of-Material Product Structure Tree

PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)

© 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-16

Bicycle(1)P/N 1000

Handle Bars (1)P/N 1001

Frame Assembly (1)P/N 1002

Wheels (2)P/N 1003

Frame (1)P/N 1004

Master Production ScheduleSchedule of Finished ProductsRepresents Production, not Demand

Combination of Customer Orders and Demand Forecasts

What Needs to be Produced

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Inventory Master FileOn-Hand QuantitiesOn-Order QuantitiesLot SizesSafety StockLead TimePast-Usage Figures

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MRP ProcessSchedules the Production of all items

using an MRP Matrix

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Item: Low-Level Code: Lot Size: Lead Time: PD 1 2 3 4 5Gross Requirements

Scheduled Receipts

Projected on Hand

Net Requirements

Planned Order Receipts

Planned Order Releases

MRP Matrix

Terms DefinedItem – name or number for the item

being scheduledLow-Level Code – the lowest level of

the item on the product structure fileLot Size – order multiples of quantityLead Time – the time from when an

order is placed to when it is receivedPD – Past Due Time Bucket, orders

behind schedule

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Terms DefinedGross Requirements – demand for an item

by time periodScheduled Receipts – material already

orderedProjected on Hand – expected ending

inventoryNet Requirements – number of items to be

provided and whenPlanned Order Receipts – net requirements

adjusted for lot sizePlanned Order Releases – planned order

receipts offset for lead times

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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

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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

PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)

© 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-24

Aggregate Production Plan

MarketingCustomerDemand

EngineeringDesign

Completion

ManagementReturn onInvestment

Capital

HumanResourcesManpowerPlanning

ProcurementSupplier

Performance

FinanceCash Flow

ProductionCapacityInventory

PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)

© 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-25

Production Plan

Execute MaterialPlans

Master ProductionSchedule

MaterialRequirements

Plan

CapacityRequirements

Plan

Execute CapacityPlans

Realistic??No

Yes

MRP OutputsManufacturing OrdersPurchasing OrdersVarious Reports

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Hubbell Lighting CaseManufactures Industrial Lighting ProductsGood-Quality ProductsPoor at Meeting Due DatesWork is Specialized for Each CustomerJob Shop EnvironmentComplex Products

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Hubbell Lighting CaseBefore MRP

Implementation

Less than 75% of orders completed on time

After MRP Implementation

97% of orders completed on time

2% of orders completed with 1 to 2 days after due date

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Summary of MRPMRP is a…..Computerized Inventory ControlProduction Planning Systemthat…..Schedules Component Items as Neededwhich will…..Track Inventory and…..Help you in many other aspects of

business

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