Material Requirements Planning is a time phased priority-planning technique that calculates material requirements and schedules supply to meet demand across all products and parts in one or more plants.
Information Technology plays a major role in designing and implementing Material Requirements Planning systems and processes as it provides information about manufacturing needs (linked with customer demand) as well as information about inventory levels. MRP techniques focus on optimizing inventory. MRP techniques are used to explode bills of material, to calculate net material requirements and plan future production.
This report focuses on MRP and MRPII systems.MRPII stands for Manufacturing Resource Planning and represents an extension of MRP.MRPII points to computer based planning and scheduling designed to improve management’scontrol of manufacturing and its support functions. MRPII maps an extension of MRP tocapture all manufacturing requirements including materials, human resources, scheduling,etc.
Prior to MRP, and before computers dominated industry, reorder-point/reorder-quantity (ROP/ROQ) type methods like EOQ (Economic Order Quantity) had been used in manufacturing and inventory management. In 1964, Joseph Orlicky as a response to the TOYOTA Manufacturing Program, developed Material Requirements Planning (MRP). First company to use MRP was Black & Decker in 1964, with Dick Alban as project leader. In 1983 Oliver Wight developed MRP into manufacturing resource planning (MRP II). Orlicky's book is entitled The New Way of Life in Production and Inventory Management (1975). By 1975, MRP was implemented in 150 companies. This number had grown to about 8,000 by 1981. In the 1980s, Joe Orlicky's MRP evolved into Oliver Wight's manufacturing resource planning (MRP II) which brings master scheduling, rough-cut capacity planning, capacity requirements planning, S&OP in 1983 and other concepts to classical MRP. By 1989, about one third of the software industry was MRP II software sold to American industry ($1.2 billion worth of software).
What is Material Requirements Planning?
The globalization of the economy and the liberalization of the trade markets have formulated new conditions in the market place which are characterized by instability and intensive competition in the business environment. Competition is continuously increasing with respect to price, quality and selection, service and promptness of delivery. Removal of barriers, international cooperation, technological innovations cause competition to intensify. In terms of manufacturing emphasis is placed on reducing cost while improving quality. In addition, other factors such as timely delivery of the product become critical (this is captured by emphasis in Just in Time or JIT in short) techniques.
A key question to a MRP process is the number of times a company replenishes (or turns around) inventory within a year. There are accounts of inventory annual turnover ratios of greater than 100, mainly reported by Japanese companies. One can readily realize that the a high inventory ratio is likely to be conducive to lowering production cost since less capital is tied up to unused inventory.
MRP systems use three pieces of information to determine what material should be ordered and when:
* Master production schedule, which describes when each product is scheduled to be manufactured. * Bill of materials, which lists exactly the parts or materials required to make each product. * Inventory details for each item are prepared and it is fed as input.
The master schedule and bill of materials indicate what materials should be ordered; the master schedule, production cycle times and supplier lead times then jointly determine when orders should be placed.
1. Master Schedule
The Master Production Schedule includes quantities of products to be produced at a given time period. Quantities are included both...