Material Requirement Planning (Mrp)

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Material Requirement Planning (MRP)


Material Requirements Planning (MRP)


Material Requirements Planning
• Materials requirements planning (MRP) is a means for determining the number of parts, components, and materials needed to produce a product • MRP provides time scheduling information specifying when each of the materials, parts, and components should be ordered or produced • Dependent demand drives MRP • MRP is a software system

Materials Requirements Planning (MRP)
• Computer based system • Explodes Master Schedule (MPS) into required amounts of raw materials and subassemblies to support MPS • Nets against current orders and inventories to develop production and purchased material ordering schedules


Evaluation of MRP
• Most beneficial to process-focused systems that have long processing times and complex multistage production steps • Lead times must be reliable • Must freeze MPS for some time before actual production • Difficult to implement 5

Objectives of MRP
• Improve customer service • Reduce inventory investment • Improve plant operating efficiency



Firm orders from known customers

Aggregate product plan

Forecasts of demand from random customers

Engineering design changes

Master production Schedule (MPS)

Inventory transactions

Bill of material file

Material planning (MRP computer program)

Inventory record file

Secondary reports
Primary reports Planned order schedule for inventory and production control Exception reports Planning reports Reports for performance control ©The McGraw-Hill Companies, Inc., 2004

Master Production Schedule (MPS) • Time-phased plan specifying how many and when the firm plans to build each end item Aggregate Plan Aggregate Plan (Product Groups) (Product Groups)

MPS (Specific End Items)

Terms used in MRP
• • • • • • • • • • Bill of Material File Bucket Capacity Requirement Planning Inventory Status File End Item Lumpy Demand Net Requirement Offsetting for lead time On-hand inventory Service Parts


Independent vs Dependent Demand


Common Use Items


Steps in MRP
1. 2. 3. 4. 5. 6. 7. 8. Bucketing Add service parts Part Explosion Offsetting Aggregation Netting Procurement Schedule Lot sizing


• Refers to the time periods used in MRP


Add Service Parts • Add service parts which are not included in MPS.


Part Explosion • Use BOM for Part Explosion


Offsetting Means displacing requirements by a period equal to the lead time of the product.


Aggregation Finding the gross requirement for each component / raw materials


Netting Modification of requirement by subtracting the amount of same materials in stock Net Req. = Gross Req. – [Inventory in hand - safety stock – inventory allotted to other users] 18

Procurement Schedule Advance by a lead time for final assembly


Lot Sizing


Outputs of MRP
• Planned order schedule - quantity of material to be ordered in each time period • Changes to planned orders - modifications to previous planned orders • Secondary outputs: – Exception reports – Performance reports – Planning reports 21

Primary MRP Reports
• Planned orders to be released at a future time • Order release notices to execute the planned orders • Changes in due dates of open orders due to rescheduling • Cancellations or suspensions of open orders due to cancellation or suspension of orders on the master production schedule • Inventory status data

Secondary MRP Reports
• Planning reports, for example, forecasting inventory requirements over a period of time • Performance reports used to determine agreement between actual and programmed usage and costs • Exception reports used to point out serious discrepancies, such as late or overdue orders

Evolutions in OM
1. 2. 3. 4. 5. EOQ MRP MRP II ERP SCM

Individual Assignment
(Not to be submitted)

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