Presented by: Sameer D Amale

MATERIAL REQUIREMENTS PLANNING

Definition: Material requirements planning (MRP) is a production planning and inventory control system used to manage manufacturing processes.

MRP is the common tool used for tracking dependent demand items

Determines quantity & timing of dependent demand items.

Determines how much and when to buy, how much to make and when to make

Objective:

Ensure materials are available for production and products are available for delivery to customers.

Maintain the lowest possible material and product levels in store

Plan manufacturing activities, delivery schedules and purchasing activities.

Goal is to accomplish the MPS – Master Production Schedule

Dependent Demand The demand for one item is related to the demand for

another item Component part to be used in the production of finished

goods.

Independent Demand When demand for one item is not related to the demand for

another item Independent demand is fairly stable once allowances are

made for seasonal variations.

LLA

B C

D E GF

Independent vs. Dependent Demand

Dependent Demand

Independent Demand

L (0)

L (1)

L (2)

MRP INPUTS1)The master production schedule:

States which end items to be produced, when they are needed, and in what quantities

The quantities are determined through customers order ,forecast & orders from warehouse.

For Eg: Master Production Schedule for end item X Week Number

ITEM X 1 2 3 4 5 6 7 8

Quantity 400 150

2) Bill of material

Contains list of all the assemblies , subassemblies ,parts raw materials needed to produce one unit of a finished Product.

Listing in the bill of materials is hierarchical.

It is represented through a product tree structure.

X (1)

A(1) C(1)

D(2)

B(1)

E(2) F(1)

J(2) K(1)

G(1) H(3) F(1)

J(2)

For Eg : Suppose we want to manufacture 100 units of X then What quantities of A B C D E F G H J K are required?

Product Structure for item X

100 100 100

100

400

100200200

200

100

200

300100

3) Inventory Records:

Gives complete and up to date information of on hand inventory, Gross requirement , Scheduled receipts and planned order release for the item

It also includes details such as lot sizes ,lead times, safety stocks.

Basically its job is to keep data about the projected use and receipts of each item and to determine amount of inventory available

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©The McGraw-Hill Companies, Inc., 2004

Firm orders from knowncustomers

Forecastsof demand

from randomcustomers

Aggregateproduct

plan

Bill ofmaterial

file

Engineeringdesign

changes

Inventoryrecord file

Inventorytransactions

Master productionSchedule (MPS)

Primary reportsSecondary reports

Planned order schedule for inventory and production control

Exception reportsPlanning reportsReports for performance control

Materialplanning

(MRP computer program)

Useful Formulae :

Net Requirement = (Gross Requirement) – (Inventory on hand) + ( Inventory on order )

On Hand Inventory over period ( t ) = on hand inventory over period (t-1) + (Scheduled receipt –Projected requirement )

MRP Lot-Sizing: Using Lot-for-Lot

MRP Lot-Sizing Problem: Using the EOQ

A(1)

B(2) C(1)

D(1)

E(2)F(3)E(2)

80 120

50

130

130

200 200

D(1) G(2)

390 195

Eg :Use MRP format to determine the order size for all item and when each order should be released.

Net Requirements Plan

Net Requirements Plan (cont.)

• Increased customer satisfaction due to meeting delivery schedules

• Faster response to market changes• Improved Labour & equipment utilization• Better inventory planning & scheduling• Reduced inventory levels without reduced

customer service

MRP Benefits

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