6 DRP-MRP

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 coverage06/24/08 1

MAJOR ASSEMBLY

SUB SUB ASSEMBLY II ASSEMBLY I SUB ASSEMBLY II

A1 A2 B1

C1 C2 C3 D1 D2

A3 A4 C4 D3 D4

C5 B2 A5 D5

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Objectives Ensure the availability of materials -components and products for planned production and customer delivery Maintain the lowest possible inventory level Plan manufacturing activities, delivery schedules and purchasing activities Process MRP starts with, customers demand [independent demand] and explodes the time and need for components based on the demand for end product06/24/08 3

Scope: MRP System focuses on inbound logistical area Key elements of MRP system Master Production Schedule Bill of Materials Inventory Status Files MRP Program Outputs & Reports Development First phase is called MRPI[Materials Requirement Planning] and the second phase is called MRPII[Manufacturing Resources Planning]06/24/08 4

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.

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inventory transactions

Customers orders

Forecast s

Engineering changes

Inventory status file [finished items, WIP, planned orders

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

MRP I SYSTEM

Bill of materials file [product structure and routing]

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PLANNED SCHEDULES AND VARIOUS OTHER REPORTS

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When does it get applied? The process follows an intermittent system Demand is dependent Purchasing dept., their suppliers and companys own manufacturing system is flexible enough to handle deliveries on weekly basis Advantages of MRP I Improved business results[ROI, profits] Improved manufacturing results Better manufacturing control Less inventory06/24/08 7

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 low06/24/08 8

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 purchasing06/24/08 9

MRP II Orders [production plan] Bill of materials Inventory records

Material requirement planning [MRP] Capacity requirement planning [CRP] No Realistic? yes Execute capacity plans Execute materials plan06/24/08 10

Benefits of MRP II Inventory reductions of one fourth to one third Higher inventory turn over Improved consistency in on-time customer delivery Reduction in purchasing costs due to less urgent purchases Minimization of workforce overtime

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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 flows06/24/08 12

DRP I Applicable 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 nature Customer dependent planning, depends on the changing market environment Not organization dependent06/24/08 13

Coordination responsibility once the finished goods are produced Planning is realistic as it is closer to real time Overall inventory levels are low Response time to real time market requirement is low

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DRP II Distribution Resource Planning [DRP II ]is an extension of DRP I DRP 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

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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 schedule Schedule for each SKU at each distribution facility on daily, weekly or monthly basis Integration of the above schedules and overall requirement planning for the regional warehouse and central supply facility

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Marketing benefits Increased service levels - improved OTD, reduced Customer Complaints Effective new product introduction plans Ability to anticipate shortages Improved inventory coordination Logistics benefits Reduced distribution costs Reduced inventory levels Decreased warehouse space requirement as inventory levels are low Lesser back orders06/24/08 17

Improved inventory visibility & co-ord. between manufacturing and logistics Constraints Needs accurate forecast Sources of errors in the system Inaccuracy in forecast quantity Inaccuracy in forecast location Inaccuracy in forecast time Variable performance cycles System nervousness-frequent rescheduling causing confusion Uncertainty buffers06/24/08 18

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 organization06/24/08 19

DRP & MRP LINK DISTRIBUTION CENTER I LEAD TIME IS 2 WEEKS, SAFETY STOCK IS 55, ORDER QUANTITY 500 WEEKS DETAILS WEEKLY REQ STOCK WHEN & HOW MUCH? 0 1 50 2 50 3 60 4 70 5 80 6 70 7 60 8 50

352

302

252

192 500

122

542 500

472

412

362

Order to Central Supply Facility06/24/08

Arrival From Central Supply Facility20

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

DETAILS

0

1

2

3

4

5

6

7

8

WEEKLY REQ STOCK

-

20

25

15

20

30

25

15

30

140

120

95

80

60

180

135

145

110

WHEN & HOW MUCH?

150

150

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Order to Central Supply Facility

Arrival from Central Supply Facility21

DISTRIBUTION CENTER IIILEAD TIME IS 2 WEEKS, SAFETY STOCK IS 115, ORDER QUANTITY 800

DETAILSWEEKS

0 1020

1 115 905

2 115 790

3 120 670

4 120 550

5 125 425

6 125 300

7 125 175

8 120 855

WEEKLY REQ STOCK

WHEN & HOW MUCH?

800

800

Order to Central Supply Facility06/24/08

Arrival from Central Supply Facility22

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

From I & II3 4 5

From III6 7 8

WEEKS DETAILS WEEKLY REQ STOCK WHEN & HOW MUCH?

0

1

2

1250

1250

1250

650 600 2200

600

600

800 2000 2200

2000

2000

TO MRP SCHEDULE

FROM PRODUCTION

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