Presentation on
Objectives
An MRP system is intended to simultaneously meet three objectives 1. Ensure materials and products are available for production and delivery to customers 2. Maintain the lowest possible level of inventory. 3. Plan manufacturing activities, delivery schedules and purchasing activities. A companys goals for an MRP system probably include reducing: WIP, Raw Material and Finished Goods Inventories
History of MRP
In the earlier days reorder-point/reorder-quantity (ROP/ROQ) type methods like EOQ had been used in manufacturing and inventory management. In the 1960s, Joseph Orlicky studied the TOYOTA Manufacturing Program and developed Material Requirements Planning (MRP)
Oliver Wight and George Plossl then developed MRP into manufacturing resource planning (MRP II).
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 and other concepts to classical MRP. By 1989, about one third of the software industry had MRP II software sold to American industry ($1.2 billion worth of software).
Lead times for all finished goods, Order release notice: notices to release components, parts and raw materials planned orders
Action notices: notices to expedite, deexpedite, or cancel orders, or to change order quantities or due dates
Inventory status information . Performance reports such as inactive items, actual lead times, late orders, etc
6.
Logic of MRP
The main purpose of Material Requirement Planning (MRP I) is to facilitate the calculation of requirements of materials and timing (Slack, 2001). To achieve this, it needs to covert three inputs namely bill of material, inventory data and master production schedule into two main outputs namely planned order releases and reschedule notices (Lunn, 1992).
Structure Of MRP
Bill of Material
Bill of Material (BOM) is another input of MRP system, which clarifies the structure of an independent demand item (Slack et al, 2001). Generally, there are three significant types of BOM namely single level, multi levels, and indented BOM. To sum up, bill of material enables MRP to identify that which part and how many of them is required for any particular item
Inventory Data
Inventory data facilitate MRP system identifying inventory status so as to calculate a net requirement (Slack et al, 2001). Generally, inventory data consist of three files as follows (Slack et al, 2001):
The item master file: In order to identify a particular part, the first element of the item master file is a unique part number, which is assigned to all components (Slack et al, 2001). item. The transaction file: This file, logically, calculate inventory levels by referring to all transactions such as receipts into stock. The location file: The location file facilitates the MRP system locating the location of any particular part (Slack et al, 2001).
Example
X
A(2)
B(1)
C(3)
Item X A B On Hand 50 75 25
C(2)
Lead Time ( Weeks ) 2 3 1
D(5)
C
D
10
20
2
2
X
Gross Requirements Scheduled Receipts Inventory On Hand Net Requirements Planned Order Receipts
Weeks
10 95
50
50
50
50
50
50
50
50
50
50
50 45
45
A
Gross Requirements Scheduled Receipts Inventory On Hand Net Requirements Planned Order Receipts 15 75 75 75 75 75 75 75 75 75 15 75 75 90
Benefits of MRP
If MRP is implemented correctly it has many benefits that will help improve productivity etc continuously. Here is a summary of the benefits below: Reduced Inventory with fewer (none) shortages Improved Customer Service Improved Direct Labour Productivity
"Manufacturing organizations, whatever their products, face the same daily practical problem - that customers want products to be available in a shorter time than it
takes to make them. This means that some level of planning is required.
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
Consumption-Based Planning
CBP uses past consumption data (historical data) to calculate future requirements with the help of the material forecast or static planning procedures. Consumption-based planning procedures have no reference to the master plan. The net requirements calculation is triggered when stock levels fall below a reorder point or by forecast requirements calculated from past consumption data. The advantage of this type of planning is that it is easy to use and you do not require extensive data.
The MRP procedures supported in consumption-based planning are: Reorder Point Planning : based on material consumption Forecast-Based Planning : using historical values and forecast values Time-Phased Planning: depending on a particular time cycle.
Extensions of MRP
Three major extensions of MRP are:
Closed loop MRP: consistent with the basic structure of MRP but in addition, it employs the use of feedback to improve the accuracy of the plan Materials Resource Planning (MRP II): It allows for the inventory data to be defined not as just units or quantities, but through the consideration of the additional resources incorporated in the units such as: labor hours, machine hours and accounts payable. Enterprise Resource Planning ERP:an integrated computer-based system used to manage internal and external resources, including tangible assets, financial resources, materials, and human resources