6 DRP-MRP

04/08/23 1

MRP [Materials Requirement Plan]Popular concept in 1960&1970

Consists of a computer system & a manufacturing information system

Does production scheduling and materials plan MRP system

MRP systems compute net requirements for each inventory item, time-phase them, and

determine their proper coverage

04/08/23 2

SUB

ASSEMBLY II SUB ASSEMBLY II

SUB ASSEMBLY I

C2 C5 B2 A5 D5C3 D1 D2 D3 D4A1 A2 B1 C1 C4A3 A4

MAJOR ASSEMBLY

04/08/23 3

ObjectivesEnsure the availability of materials -components and products for planned production and customer

deliveryMaintain the lowest possible inventory level

Plan manufacturing activities, delivery schedules and purchasing activities

ProcessMRP starts with, customer’s demand

[independent demand] and explodes the time and need for components based on the demand for end

product

04/08/23 4

Scope: MRP System focuses on inbound logistical area

Key elements of MRP systemMaster Production Schedule

Bill of MaterialsInventory Status Files

MRP ProgramOutputs & Reports

Development First phase is called MRPI[Materials

Requirement Planning] and the second phase is called MRPII[Manufacturing Resources Planning]

04/08/23 5

MRP I is a computer based production and inventory control system [soft ware] that attempts

to minimize inventories while maintaining adequate materials for production process.

04/08/23 6

 Customers orders 

inventory transactions

 Forecasts

 Engineering changes

Inventory status file[finished items, WIP, planned orders

Master production schedule[which product to produce, in what quantity & when]

Bill of materials file[product structure and routing] 

MRP ISYSTEM

PLANNED SCHEDULES AND VARIOUS OTHER REPORTS

04/08/23 7

When does it get applied?The process follows an intermittent system

Demand is dependentPurchasing dept., their suppliers and company’s own manufacturing system is flexible enough to

handle deliveries on weekly basisAdvantages of MRP I

Improved business results[ROI, profits]Improved manufacturing resultsBetter manufacturing control

Less inventory

04/08/23 8

Time phased ordering of materials

Less materials obsolescence

Higher reliability

More responsiveness to market demand

Reduced production costs

Disadvantages of MRP I

Due to small lot purchases high material acquisition costs and high ordering costs

Stock out costs are more as safety stock protection is low

04/08/23 9

A limitation of software as adapting to specific situations is difficult. So modification of the

software is necessary MRP II

MRP I is updated and expanded to include financial and marketing and logistics elements.

MRP II includes entire set of activities involved in planning and control of production.It consists of a

variety of functions like production planning, resource requirements planning, master production scheduling, materials requirement planning[MRP

I], shop floor control and purchasing

04/08/23 10

Orders [production plan]

Bill of materials Inventory records

Material requirement planning [MRP]

Capacity requirement planning [CRP]

Realistic?

Execute capacity plans

Execute materials plan

yes

No

MRP II           

04/08/23 11

Benefits of MRP IIInventory reductions of one fourth to one third

Higher inventory turn overImproved consistency in on-time customer

deliveryReduction in purchasing costs due to less urgent

purchasesMinimization of workforce overtime

04/08/23 12

DRP is a technique of Distribution Management

DRP concept has evolved in two phases, DRPI (Distribution Requirement Planning) & DRP II

(Distribution Resources Planning) DRP I deals with inventory planning whereas

DRP II covers all resources relevant to distribution - warehouse space, man power levels,

transport capacity [eg. trucks, rail cars] and financial flows

04/08/23 13

DRP IApplicable to outbound logistics

Determination of inventory requirement at points of consumption for short spans of time Plan to move inventory in the distribution

channel in response to the above It is a time phased plan, dynamic and flexible

in natureCustomer dependent planning, depends on the

changing market environmentNot organization dependent

04/08/23 14

Coordination responsibility once the finished goods are produced

Planning is realistic as it is closer to real timeOverall inventory levels are low

Response time to real time market requirement is low

04/08/23 15

DRP IIDistribution Resource Planning [DRP II ]is an

extension of DRP IDRP II applies the time phased logic of DRP I

to replenish inventories in multi echelon warehousing systems

DRP II extends DRP I to include the planning of key resources in a distribution system –ware

house space, man power levels, transport capacity [eg. trucks, rail cars] and financial flows

04/08/23 16

As an extension of DRP I, DRP II uses the needs of distribution to drive the master schedule,

controlling the materials planning DRP PROCESS

Planning tool for DRP is scheduleSchedule for each SKU at each distribution

facility on daily, weekly or monthly basisIntegration of the above schedules and overall

requirement planning for the regional warehouse and central supply facility

04/08/23 17

Marketing benefits Increased service levels - improved OTD,

reduced Customer ComplaintsEffective new product introduction plans

Ability to anticipate shortagesImproved inventory coordination

Logistics benefitsReduced distribution costsReduced inventory levels

Decreased warehouse space requirement as inventory levels are lowLesser back orders

04/08/23 18

Improved inventory visibility & co-ord. between manufacturing and logistics

Constraints Needs accurate forecast

Sources of errors in the systemInaccuracy in forecast quantityInaccuracy in forecast locationInaccuracy in forecast time

Variable performance cycles System nervousness-frequent rescheduling

causing confusionUncertainty buffers

04/08/23 19

How does a DRP system work?Consider a distribution net work with three

distribution centers catering to the needs of the market

One central facility that supplies inventory to three distribution centers

Central facility is supplied by the production facility planned as per MRP

DRP modifies the MRP to the advantage of the organization

04/08/23 20

DRP & MRP LINKDISTRIBUTION CENTER ILEAD TIME IS 2 WEEKS, SAFETY STOCK IS 55, ORDER QUANTITY 500

WEEKS

DETAILS 0 1 2 3 4 5 6 7 8

WEEKLY REQ

- 50 50 60 70 80 70 60 50

STOCK 352 302 252 192 122 542 472 412 362

WHEN & HOW MUCH?

      500   500      

Order to Central Supply Facility

Arrival From Central Supply Facility

04/08/23 21

DISTRIBUTION CENTER IILEAD TIME IS 2 WEEKS, SAFETY STOCK IS 40, ORDER QUANTITY 150

WEEKS

DETAILS 0 1 2 3 4 5 6 7 8

WEEKLY REQ

- 20 25 15 20 30 25 15 30

STOCK 140 120 

95 

80 

60 180 135 145 110

WHEN & HOW MUCH?

      150   150      

Order to Central Supply Facility

Arrival from Central Supply Facility

04/08/23 22

LEAD TIME IS 2 WEEKS, SAFETY STOCK IS 115, ORDER QUANTITY 800

DISTRIBUTION CENTER III

WEEKS

DETAILS 0 1 2 3 4 5 6 7 8

WEEKLY REQ

- 115 115 120 120 125 125 125 120

STOCK 1020 

905 790 670 550 425 300 175 855

WHEN & HOW MUCH?

            800   800

Order to Central Supply Facility

Arrival from Central Supply Facility

04/08/23 23

TO MRP SCHEDULE

LEAD TIME IS 3 WEEKS, SAFETY STOCK IS 287, ORDER QUANTITY 2200

CENTRAL SUPPLY FACILITY

WEEKSDETAILS

0 1 2 3 4 5 6 7 8

WEEKLY REQ

- - - 650 - - 800 - -

STOCK 1250 1250 1250 600 600 600 2000 2000 2000

WHEN & HOW MUCH?

      2200     2200    

From I & II From III

FROM PRODUCTION

04/08/23 24