Material resource planning

Material Resource Planning (MRP)
Objectives of MRP
Fundamental concepts of MRP
Functions of MRP
Inputs to MRP
Master production schedule(MPS)
Bill of Materials (BOM)
Inventory Status File
MRP outputs
Learning Curve
Negotiating

1. Prepared By Mr. Nishant Agrawal Material Resource Planning METAS Adventist College (NEHU)

2. Material Resource Planning (MRP) It is a planning technique which converts master production schedule of end products into detailed schedule for raw materials and parts used in those end products. MPS is the plan that a company has developed for production, inventory, staffing, etc. MRP is a means for determining the number of parts, components, and materials needed to produce a product MRP is a production planning, scheduling, and inventory control system used to manage manufacturing processes.

3. Objectives of MRP Inventory reduction: Determines how many components are needed and when in order to meet MPS Reduction in production and delivery lead times : It helps to meet delivery deadlines by coordinating inventories, procurement & production decision Realistic commitments : Improves customer satisfaction. Ensure materials are available for production and products are available for delivery to customers. Maintain the lowest possible material and product levels in store Plan manufacturing activities, delivery schedules and purchasing activities.

4. Fundamental concepts of MRP Independent demand: Demand for the product is not directly related to demand for other items Dependent demands: Demand for the product is directly related to demand for some other product. Independent demand is demand originating outside the plant or production system, while dependent demand is demand for components.

5. Functions of MRP The basic functions of an MRP system include:  Inventory control, bill of material processing, and elementary scheduling. MRP helps organizations to maintain low inventory levels . Companies need to control the types and quantities of materials they purchase, plan which products are to be produced and in what quantities and ensure that they are able to meet current and future customer demand, all at the lowest possible cost.   Making a bad decision in any of these areas will make the company lose money.

6. Continue… A few examples are given below: If a company purchases insufficient quantities of an item used in manufacturing it may be unable to meet contract obligations to supply products on time. If a company purchases excessive quantities of an item, money is wasted - the excess quantity ties up cash while it remains as stock Beginning production of an order at the wrong time can cause customer deadlines to be missed. MRP is a tool to deal with these problems . It provides answers for several questions: What  items are required? How many  are required? When  are they required?...

7. Inputs to MRP

8. Master production schedule(MPS) A Master Production Schedule or MPS is the plan that a company has developed for production, inventory, staffing, etc A Master Production Schedule is the  master of all schedules. Based on actual customer orders and predicted demand. Indicates when each ordered item will be produced in coming weeks, and in how much quantity. It is a plan specifying timing and quantity of production for each end item. MPS inputs come from sales and marketing .

9. MPS-example

10. Bill of Materials (BOM) A listing of all of the raw materials, parts, subassemblies, and assemblies needed to produce one unit of a product . BOM Shows way a finished product or parent item is put together from individual components . A BOM explains what to buy, how to buy and where to buy, and includes instructions for how to assemble the product. A BOM may be used for communication between manufacturing partners, or confined to a single manufacturing plant.

11. BOM example A(2) B(1) D(5) C(2) X C(3)

12. BOM example - cycle

13. Inventory Status File Detailed information regarding the quantity of each item, available in hand, on order to be released, for use in various time periods . MRP system using inventory master file is used to determine the quantity of material available for use in a given period . If sufficient items not available , the system includes the item on the planned order release report.

14. MRP outputs 1. Work orders / Planned orders report 2. Order Release 3. Action Notices or Rescheduling Notices or order change

15. Planned orders report It helpful in preparing for the funds required for payment to suppliers in future according to dates and order size. Ex. January is current month and finance manager wants to see what quantities of raw material purchases have to be made in March. Order Release Report It gives information about planned order to be released on present date. It helps purchase managers to release purchase order (PO) to suppliers. Authorization for the execution of planned orders.

16. Order change report Open order are those which have been placed in the past, and supplier of items in preparing for supplier to be made in the company. which orders are to be released, revised and canceled during the current time period.

17. Output of MRP There are two outputs and a variety of messages/reports: Output 1 is the "Recommended Production Schedule " which lays out a detailed schedule of the required minimum start and completion dates, with quantities, for each step of the Routing and Bill Of Material required to satisfy the demand from the master production schedule (MPS). Output 2 is the "Recommended Purchasing Schedule". This lays out both the dates that the purchased items should be received into the facility  and  the dates that the purchase orders release should occur to match the production schedules.

18. Benefits Keep inventory levels to a minimum . Keeps track of inventory that is used. Tracks the amount of material that is required. Set safety stock levels for emergencies. Plan for future needs of raw  materials or components.

19. Drawbacks Inaccurate information can result in mis-planning , overstock, under-stock, or lack of appropriate resources . The inaccurate master schedule will provide wrong lengths of time for production . Hence affecting planning . MRP systems can be costly and time-consuming to set up

20. Learning Curve When a task is done more and more number of times, the time to complete the task also gradually reduces with increased attempt to it. When number of units produced increase , direct labor hours required per unit decreases for variety of reason: Workers become more and more skilled at that particular set of tasks. Improvement in production method Improvement in layout and flow take place Perhaps , some organization improvement also take place.

21. Learning Curve 100% learning curve means that there is no improvement possible

22. Continue… Interesting reason to note is that each time the number of units is doubled , a constant percentage reduction results in average direct labors hours per unit. Learning is expressed in terms of percentage.