Session 28_29 Material Requirement Planning (MRP).pptx

OPERATIONS

1. Material Requirement Planning (MRP)

2. What is MRP? Computerized Inventory Control Production Planning System Management Information System Manufacturing Control System

3. When to use MRP Job Shop Production Complex Products Assemble-to-Order Environments Independent and Dependent Demand Items

4. 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

5. What can MRP do? 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

6. Three Basic Steps of MRP Identifying Requirements Running MRP – Creating the Suggestions Firming the Suggestions

7. 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

8. Step 1: Important Information MRP is….. Company Sensitive Location Sensitive Date Sensitive

9. Step 2: Running MRP – Creating the Suggestions Critical Items Expedite Items Delay Items

10. Step 3: Firming the Suggestions Manufacturing Orders Purchasing Orders Various Reports

11. Overview of the MRP System Product Structure File Master Production Schedule Inventory Master File Material Requirements Planning Manufacturing Orders Purchase Orders Various Reports

12. MRP Inputs Product Structure File Master Production Schedule Inventory Master File

13. Product Structure File Bill of Materials

14. Master Production Schedule Schedule of Finished Products Represents Production, not Demand Combination of Customer Orders and Demand Forecasts What Needs to be Produced

15. Inventory Master File On-Hand Quantities On-Order Quantities Lot Sizes Safety Stock Lead Time Past-Usage Figures

16. MRP Process Schedules the Production of all items using an 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 MRP Matrix

17. 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 Dues Time Bucket, orders behind schedule

18. 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

19. 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 Projected on Hand 20 Net Requirements Planned Order Receipts Planned Order Releases

20. 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 Projected on Hand 20 10 20 20 20 20 Net Requirements 5 5 10 Planned Order Receipts 25 25 25 Planned Order Releases 25 25 25 30 25 20 + 0 + 0 – 10 = 10 period 1 10 + 0 + 25 – 15 = 20 period 2 20 + 0 + 25 – 25 = 20 period 3 20 + 0 + 25 – 25 = 20 period 4 20 + 0 + 30 – 30 = 20 period 5

21. MRP Process…. For period 1 we first want to calculate the projected on hand. This is done by subtracting the gross requirements in period one from the sum of the scheduled receipts in period 1, projected on hand from the previous period, and the planned order releases from the (t-l) period where t is the current period and l is the lead time. So the projected on hand for period 1 is 20 minus 10. Kishore Kumar Morya PhD. SoM

22. MRP Process…. The planned order releases are in sizes of 25 so we have planned order release of 25 for period one. Period two we repeat the same process. Now in period 3 we need to calculate the net requirements along with the projected on hand. The projected on hand = ((20+25)-25) = 20. Kishore Kumar Morya PhD. SoM

23. MRP Processes…. The net requirements is calculated by subtracting the scheduled receipts (0) in the period plus the projected on hand in the previous period (20) from gross requirements (25) which equals 5. You want to repeat this process for all the periods. In the end the answer should be that orders should be released in periods 1,2,3,4, and 5 for quantities of 25,25,25,30, and 25 respectively. Kishore Kumar Morya PhD. SoM

24. MRP Outputs Manufacturing Orders Purchasing Orders Various Reports

25. MRP System Structure MRP system inputs MRP system outputs

26. Product Demand Sources Customers – specific orders placed by either external or internal customers Aggregate production plan – the firm’s strategy for meeting demand in the future, implemented through the master production schedule (MPS)

27. Bill of Materials (BOM)

28. BOM Example Product A – the end item Product A consists of 2 B and 3 C Product C consists of 2 F, 5 G, and 4 H Product B consists of 1 D and 4 E Production 3 units of product A 1 unit of A = 2 of B + 3 of C 1 of B = 1 *D + 4* E 2 of B = 2* D + 8 * E 1 of C = 2*F + 5*G + 4*H 3 of C = 6*F + 15*G+ 12*H 3 units of A = 6*B+9*C 6 of B = 6*D + 24*E 9 0f C = 18*F + 45*G+36*H

29. Alternate BOM Structures

30. BOM Hierarchy (Levels) Higher levels (Iower numbers) refer to end products. Lower levels (higher numbers) refer to components and raw materials.

31. Inventory Status Records Information about part availability Additional information that may be useful Basic information describing the item

32. MRP Explosion Process

33. MRP Explosion Process (Continued)