DRP-MRP

1

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

Consists of a computer system & a manufacturing information system

Does production scheduling and materials planning

MRP systemMRP systems compute

• Net requirements for each inventory item• Time-phase them

• Determine their proper coverage

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

3

ObjectivesEnsure the availability of materials (components & products) for planned production and customer

deliveryMaintain the lowest possible inventory level

Plan • Manufacturing activities

• Delivery schedules• And purchasing activities

4

ScopeMRP System covers inbound logistical area

Key elements of MRP systemMaster Production Schedule

Bill of MaterialsInventory Status Files

MRP ProgramOutputs & Reports

Development First phase is called MRP I [Materials

Requirement Planning] Second phase is called MRP II [Manufacturing

Resources Planning]

5

MRP I [soft ware] is restricted to materials resource only

• Attempts to minimize inventories• Maintain adequate materials for production

process.MRP II includes all resources required in

planning and control of production

6

Process of MRP IMRPI starts with, customer’s demand

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

product

7

 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

8

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

Demand is dependent Purchasing dept., their suppliers and company’s own manufacturing system is

flexible enough to handle deliveries on weekly basis

Advantages of MRP I1. Improved business results [ROI, profits]

2. Improved manufacturing results3. Better manufacturing control

4. Less inventory

9

5. Time phased ordering of materials6. Less materials obsolescence

7. Higher reliability8. More responsiveness to market demand

9. Reduced production costsDisadvantages of MRP I

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

2. Stock out costs are more as safety stock protection is low

10

3. 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, marketing and logistics elements

• Entire set of activities involved in planning and control of production

• It consists of variety of functions like

• Production planning

11

• Resource requirements planning• Master production scheduling

• Materials requirement planning [MRP I]• Shop floor control

• Purchasing

12

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

13

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

14

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

DRP II covers all resources relevant to distribution

• Warehouse space• Man power levels

• Transport capacity [eg. trucks, rail cars]• Financial flows

15

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

16

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

17

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

18

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

19

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

20

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

21

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

22

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

23

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

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

24

DISTRIBUTION CENTER III

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

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

25

TO MRP SCHEDULE

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

26