Material Requirement Planning (MRP)�

Material Requirement Planning (MRP)�

1. 1

2. What is MRP?
Computerized Inventory Control
Production Planning System
Management Information System
Manufacturing Control System
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3. 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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4. 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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5. When to use MRP
Job Shop Production
Complex Products
Assemble-to-Order Environments
Discrete and Dependent Demand
Items
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6. What can MRP do?
Reduce Inventory Levels
Reduce Component
Shortages
Improve Shipping
Performance
Improve Customer
Service
Improve Productivity
Simplified and Accurate
Scheduling
Reduce Purchasing Cost
Improve Production
Schedules
Reduce Manufacturing
Cost
Reduce Lead Times
Less Scrap and Rework
Higher Production
Quality
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7. What can MRP do?(contd)
Improve
Communication
Improve Plant
Efficiency
Reduce Freight Cost
Reduction in Excess
Inventory
Reduce Overtime
Improve Supply
Schedules
Improve Calculation of
Material Requirements
Improve Competitive
Position
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8. Three Basic Steps of MRP
Identifying Requirements
Running MRP – Creating the
Suggestions
Firming the Suggestions
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9. 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
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10. Step 1: Important Information
MRP is…..
Company Sensitive
Location Sensitive
Date Sensitive
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11. Step 2: Running MRP –
Creating the Suggestions
Critical Items
Expedite Items
Delay Items
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12. Step 3: Firming the Suggestions
Manufacturing Orders
Purchasing Orders
Various Reports
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13. Overview of the MRP System
13
Product
Structure
File
Master
Production
Schedule
Inventory
Master File
Material
Requirements
Planning
Manufacturing
Orders
Purchase
Orders
Various
Reports

14. MRP Inputs
Product Structure File
Master Production Schedule
Inventory Master File
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15. Product Structure File
Bill 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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16. 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

17. Master Production Schedule
Schedule of Finished Products
Represents Production, not Demand
Combination of Customer Orders and
Demand Forecasts
What Needs to be Produced
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18. Inventory Master File
On-Hand Quantities
On-Order Quantities
Lot Sizes
Safety Stock
Lead Time
Past-Usage Figures
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19. MRP Process
Schedules the Production of all items using an
MRP Matrix
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Item: Low-Level Code:
Lot Size: Lead Time:PD12345
Gross Requirements
Scheduled Receipts
Projected on Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
MRP Matrix

20. 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
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21. 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
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22. 22
Item: A Low-Level Code: 1
Lot Size: 25 Lead Time: 1
PD12345
Gross Requirements 1015252530
Scheduled Receipts 25
Projected on Hand 20
Net Requirements
Planned Order Receipts
Planned Order Releases

23. 23
Item: A Low-Level Code: 1
Lot Size: 25 min Lead Time: 1
PD12345
Gross Requirements 1015252530
Scheduled Receipts 25
Projected on Hand 201020202015
Net Requirements 5510
Planned Order Receipts 252525
Planned Order Releases 2525253025

24. 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
Marketing
Customer
Demand
Engineering
Design
Completion
Management
Return on
Investment
Capital
Human
Resources
Manpower
Planning
Procurement
Supplier
Performance
Finance
Cash Flow
Production
Capacity
Inventory

25. 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 Material
Plans
Master Production
Schedule
Material
Requirements
Plan
Capacity
Requirements
Plan
Execute Capacity
Plans
Realistic??
No
Yes

26. MRP Outputs
Manufacturing Orders
Purchasing Orders
Various Reports
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27. 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
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28. Hubbell Lighting Case
Before 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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29. 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
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