Material Requirement

Planning (MRP)
 What is MRP?
• Computerized Inventory Control
• Production Planning System
• Management Information System
.
• Manufacturing Control System
 When to use MRP
• Job Shop Production
• Complex Products
• Assemble-to-Order Environments
• Discrete and Dependent Demand Items
 What can MRP do?
• Reduce Inventory Levels • Improve Production
• Reduce Component Schedules
Shortages • Reduce Manufacturing
• Improve Customer Cost
Service • Reduce Lead Times
• Improve Productivity • Less Scrap and Rework
• Simplified and Accurate • Higher Production
Scheduling Quality
 What can MRP do?

• Improve • Improve Supply

Communication Schedules
• Improve Plant • Improve Calculation of
Efficiency Material Requirements
• Reduction in Excess • Improve Competitive
Inventory Position
Dependent/independent demand
Three Basic Steps of MRP
• Identifying Requirements
• Running MRP – Creating the
Suggestions
• Firming the Suggestions to
release the orders
 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
 Step 1: Important Information
MRP is…..
• Company Sensitive
• Location Sensitive
• Date Sensitive
 Step 2: Running MRP –
Creating the Suggestions
• Critical Items
• Expedite Items
• Delay Items
 Step 3: Firming the
Suggestions
• Manufacturing Orders
• Purchasing Orders
• Various Reports
 Overview of the MRP System
Product Master
Inventory
Structure Production
Master File
File Schedule

Material
Requirements
Planning

Manufacturing Purchase Various

Orders Orders Reports
 MRP Inputs
• Product Structure File
• Master Production Schedule
• Inventory Master File
 Product Structure File
• Bill of Materials
Product Structure Record

Clipboard
Level
0

Press Clip Rivets

board Assembly (2) Level
(1) (1)
1

Top Bottom Pivot Spring

Clip (1) Clip (1) (1) (1) Level
2
 Master Production Schedule
• Schedule of Finished Products
• Represents Production, not Demand
• Combination of Customer Orders and
Demand Forecasts
• What Needs to be Produced
PERIOD
MPS ITEM 1 2 3 4 5

Clipboard 85 95 120 100 100

Lapdesk 0 50 0 50 0
Lapboard 75 120 47 20 17
Pencil Case 125 125 125 125 125
 Inventory Master File
• On-Hand Quantities
• On-Order Quantities
• Lot Sizes
• Safety Stock
• Lead Time
• Past-Usage Figures
 MRP Process
• Schedules the Production of all items using
an MRP Matrix
MRP Matrix
Item: Low-Level Code: PD 1 2 3 4 5
Lot Size: Lead Time:

Gross Requirements
Scheduled Receipts
Projected on Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
 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
 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
 Product

Product Structure Record

Clipboard Level 0

Pressboard Clip Rivets

Ass’y Level 1
(1) (2)
(1)
 Product
ITEM: CLIPBOARD LLC: 0 PERIOD
LOT SIZE: L4L LT: 1 1 2 3 4 5

Gross Requirements 85 95 120 100 100

Scheduled Receipts 175
Projected on Hand 25
Net Requirements
Planned Order Receipts
Planned Order Releases
 Product
ITEM: CLIPBOARD LLC: 0 PERIOD
LOT SIZE: L4L LT: 1 1 2 3 4 5

Gross Requirements 85 95 120 100 100

Scheduled Receipts 175
Projected on Hand 25 115
Net Requirements 0
Planned Order Receipts
Planned Order Releases

(25 + 175) = 200 units available

(200 - 85) = 115 on hand at the end of Period 1
 Product
ITEM: CLIPBOARD LLC: 0 PERIOD
LOT SIZE: L4L LT: 1 1 2 3 4 5

Gross Requirements 85 95 120 100 100

Scheduled Receipts 175
Projected on Hand 25 115 20
Net Requirements 0 0
Planned Order Receipts
Planned Order Releases

115 units available

(115 - 85) = 20 on hand at the end of Period 2
 Product
ITEM: CLIPBOARD LLC: 0 PERIOD
LOT SIZE: L4L LT: 1 1 2 3 4 5

Gross Requirements 85 95 120 100 100

Scheduled Receipts 175
Projected on Hand 25 115 20 0
Net Requirements 0 0 100
Planned Order Receipts 100
Planned Order Releases 100
20 units available
(20 - 120) = -100 — 100 additional Clipboards are required
Order must be placed in Period 2 to be received in Period 3
 Product
ITEM: CLIPBOARD LLC: 0 PERIOD
LOT SIZE: L4L LT: 1 1 2 3 4 5

Gross Requirements 85 95 120 100 100

Scheduled Receipts 175
Projected on Hand 25 115 20 0 0 0
Net Requirements 0 0 100 100 100
Planned Order Receipts 100 100 100
Planned Order Releases 100 100 100

Following the same logic Gross Requirements in Periods 4 and 5 develop

Net Requirements, Planned Order Receipts, and Planned Order Releases
 Product
ITEM: LAPDESK LLC: 0 PERIOD
LOT SIZE: MULT 50 LT: 1 1 2 3 4 5
Gross Requirements 0 60 0 60 0
Scheduled Receipts
Projected on Hand 20
Net Requirements
Planned Order Receipts
Planned Order Releases
 Product
ITEM: LAPDESK LLC: 0 PERIOD
LOT SIZE: MULT 50 LT: 1 1 2 3 4 5

Gross Requirements 0 60 0 60 0
Scheduled Receipts
Projected on Hand 20 20 10 10 0 0
Net Requirements 0 40 50
Planned Order Receipts 50 50
Planned Order Releases 50 50

Following the same logic, the Lapdesk MRP matrix is

completed as shown
 School Mate Products

Planned Order Report

PERIOD
ITEM 1 2 3 4 5

Clipboard 100 100 100

Lap desk 50 50
 MRP Outputs
• Manufacturing Orders
• Purchasing Orders
• Various Reports
 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