MATERIAL REQUIREMENTS PLANNING (MRP)

Learning Objectives:

Producing a product made of multiple components requires significant coordination to ensure that component parts are available when they are required for production. This segment examines how MRP can accomplish this coordination.

Contents:

Master Production Schedule

Material Requirements Planning

Links for production planning and control


Translating an Aggregate Plan into a Production and Ordering Schedule

Aggregate Plan (3-12 months ahead)

 

Master Production Schedule (1-3 months)

 

Material Requirements Plan (0-3 months)


MASTER PRODUCTION SCHEDULE (MPS)

- A detailed plan that states how many END ITEMS (the final product sold to the customer) will be available for sale or distribution during specific periods

- Short time frame: 1-3 months

Purposes of the Master Production Schedule:

What the Master Production Schedule is NOT:

Inputs To Mps

Constraints

         Capacity available

Output

An MPS showing end items available every month (or period) that is feasible with respect to demand and capacity.

At this point we know when we need units available so we can plan when to produce or order using MRP.


Material Requirements Planning (MRP)

A computerized system for managing dependent-demand inventory, scheduling replenishment orders, and meeting demand for end items as given in the Master Production Schedule.

Two basic characteristics of MRP:

  1. MRP derives demand for components, subassemblies, materials, etc., from demand for and production schedules of parent items.
  2. MRP offsets replenishment orders (purchase orders or production schedules) relative to the date when replenishment is needed.

           

Information Needed for MRP

Information Obtained from MRP

  • Demand for all products.
  • Lead times for all finished goods, components, parts and raw materials
  • Lot sizing policies for all parts
  • Opening inventory levels
  • Safety stock requirements
  • Any orders previously placed but which haven't arrived yet
  • Planned orders: replenishment orders to be released at a future time
  • Order release notice: notices to release planned orders
  • Action notices: notices to expedite, de-expedite, or cancel orders, or to change order quantities or due dates
  • Priority reports: information regarding which orders should be given priority
  • Inventory status information
  • Performance reports such as inactive items, actual lead times, late orders, etc.

 MRP Inputs

1.      Master Production Schedule

    1. Product Structure
    2. Inventory Levels

MRP Matrix download a sample MRP Matrix here and print two up to take to class.

Lot Sizing Choices in MRP

Lot sizing:

Determining the lot size (order quantity or production quantity) of an item

Static lot sizing rule:

Dynamic lot sizing rule:

Static Lot-sizing Rules

1. Fixed order quantity (FOQ)

2. Economic Order Quantity (EOQ)

Dynamic Lot-sizing Rules

1. Lot-for-Lot (L4L)

2. Periodic Order Quantity (POQ)


Example 1:

Completing MRP Tables

Objective:

The purpose of MRP is to schedule orders for end items and the components of those end items. We wish to determine when to release orders and how much to order.

Step 1

Begin with the end items. Complete one table at a time.

PRt = It-1 + SRt - GRt - It

Time of POR = Time of PR - L

Step 2

Schedule the components. If a component occurs at more than one level it is scheduled at the deepest level so that you will know all demand for parents of the component before you try to schedule the component.

Level 1 components:

The POR's for end items are scheduled as GR's for level 1 components. Any spare parts orders are scheduled as GR's also.

Repeat the process for all components.

For each component the gross requirements come from planned order releases for all direct parents of the component and from any orders for spare parts.

The final result will be planned orders (quantity and timing) for end products and all of their component which must be made in order to meet demand.

Example 2


Implementation of Materials Requirements Planning Systems

Favourable environments for MRP:

Some conditions which are less favourable for MRP

Process-focused environments:

Just-In-Time environments:

Other Types of MRP Systems

Closed-loop MRP:

MRP system that provides feedback to other stages of the production plan, such as the aggregate production plan, capacity plan, and Master Production Schedule.

Manufacturing Resource Planning (MRP II):

A planning system that uses all outputs of a MRP system to integrate production, marketing, and financial plans.

Distribution Resource Planning (DRP):

A time-phased stock replenishment technique for distribution networks based on MRP procedures and logic.


Links

Industry Week - View selected industry related articles in the Industry Week magazine by clicking on the magazines or by searching for a topic.


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