MATERIAL REQUIREMENT PLANNING (MRP)
MATERIAL REQUIREMENT PLANNING(MRP)MN 4110Mrs. P. S. T. Perera
Lecture # 12
ObjectivesDefine the term MRPDiscuss input, output, and the MRP processDescribe MRP11Describe ERP
MRP Defined3 MRP is a tool for determining the number of parts, components, and materials needed to produce a product.Provides time scheduling information specifying when each of the materials, parts, and components should be ordered or produced.Dependent demand drives MRP.
333 MRP is a software system introduced in late 1960s.Before this concept, the material planning was based on re-order levels. MRP improved the situation to consider the customer orders and forecast in planning. The result is to minimize inventory levels and shortagesBackground History of MRP4Purposes of MRP5Control Inventory.Order the right part.Order in the right quantity.Order at the right time.Assign operating priorities.Order with the right due date.Keep the due date valid.Plan capacity.Plan for a complete load.Plan accurate load.Plan for an adequate time to view future load.
MRP Input and Output6MRP is a technique that usesBOM data quantity, lead time etc.Inventory data on hand, buffer stock etc.MPS data - demandto calculate requirements for materials.The outputs are Recommendations to release replenish ordersRecommendations to reschedule open orders (Exception messages)The orders could be purchase orders, manufacturing orders or transfer orders.Bill of Materials (BOM) FileA Complete Product Description7 Materials Parts Components Manufacturing sequence Modular BOM for sub assembliesProduct StructureTop clip (1)Bottom clip (1)Pivot (1)Spring (1)Rivets (2)Finished clipboardPressboard (1)ClipboardProduct Structure TreeClipboardLevel 0Level 1Level 2Spring (1)Bottom Clip (1)Top Clip (1)Pivot (1)Rivets (2)Clip Assy (1)Pressboard (1)Intended BOM ListBA 3200 - - - -Clipboardu1- 1 - - -Clip Assemblyu1- - 2 - -Top Clipu1- - 2 - -Pivotu1- - 2 - -Springu1- 1 - - -Rivetu2- 1 - - -Press Boardu1LEVELITEMUNIT OF MEASUREQUANTITYInventory Data File11Each inventory item stored as a separate file
Pegging details to identify each parent item that created the demand.
FileItemsOn HandLead TimeOrder QtySafety StockEtc.1Raw material A2004 weeks751002Part X1202 weeks751003Component Y1002 weeks501004Raw material B5003 weeks400300Master Production Schedule (MPS)12Time-phased plan specifying how many and when the firm plans to build what end item. Aggregate Plan(Product Groups)MPS(Specific End Items)1288Master Production Schedule (cont.)Drives MRP process with a schedule of finished productsQuantities represent production not demandQuantities may consist of a combination of customer orders and demand forecastsQuantities represent what needs to be produced, not what can be producedQuantities represent end items that may or may not be finished products
Master Production Schedule (cont.)BA 320PERIODMPS ITEM12345
Clipboard8595120100100Lapdesk0500500Lapboard75120472017Pencil Case125125125125125Aggregate ProductionPlan for Mattresses
Master Production Schedule for Mattresses ModelThe Aggregate Plan and the Master Production ScheduleMonth12Mattress production90095012345678200400200100100100150100100200200Model 327Model 538Model 749Actions Performed By MRPTwo types of actions performed by MRP:Placing or releasing an order due on some future date. Revision of a previous action.
MRP System17Based on MPS details, MRP systemCreates schedules identifying the specific parts and materials required to produce end items.Determines exact unit numbers needed.Determines the dates when orders for those materials should be released, based on lead times. 171111Firm orders from knowncustomersForecastsof demand from randomcustomersAggregateproductplanMasterproductionschedule(MPS)Materialplanning(MRP)EngineeringdesignchangesBill ofmaterialfileInventorytransactionsInventoryrecordfileReports1818181212Primary MRP Reports19Planned orders to be released at a future time.Order release notices to execute the planned orders.Changes in due dates of open orders due to re-scheduling. Cancellations or suspensions of open orders due to changes in MPSInventory status to show the stock levels
Secondary MRP Reports20Planning reports - forecasting inventory requirements over a period of time.
Performance reports - to determine agreement between actual and programmed usage / costs.
Exception reports - to point out serious discrepancies (e.g. late or overdue orders)
Sequence of Events in MRP21Enter independent demandsCustomer order, forecast, and/or safety stocksCreate MPS, Develop a build schedule of what to build, how many, and by whenCreate RCCP Test schedule for feasibility against plant capacity for MPS itemsValidate Determine if RCCP is feasible, if not make adjustments to MPS and re-run RCCPMRP GenerationBuild detailed material requirementsCreate CRP Build infinite picture of labor and machine resources requiredValidateAdjust as necessary if material and capacity plans are inadequate start over at the MPSCreate the final production plan and execute NoBuild MPSGenerate RCCPFeasible?MRP GenerationCRP GenerationFeasible?NoEnter Independent DemandExecute Final PlanComponents of MRP22Items: Children of the parent
Demand: can be dependent (children to parent) or independent (forecasts, orders)
Lead Time: predefined / fixed values (move, queue, setup, run, transit, dock-to-stock, vendor)
Order Modifiers: Order minimums / multiples, lot size, shrinkage, scrap
Bill of Material: low level codes determine order in which to process item
Pegging: where is the demand coming from, why is this product being builtAdvantages MRP23Reduced inventory.Better customer service.Better response to market demands.Ability to change the master schedule.Support managers to plan schedule before actual release of orders.
Disadvantages of MRP24MRP assumes infinite capacity (doesnt look at resources constraints)MRP generation can take more time / always in a batch mode and therefore lacks the dynamics to react to changeLead time is assumed to be fixed and definable, Use of forecasts has its weakness forecast are wrong usuallyMRP does not recognize job operation activity, only the completion of units. Lack of knowledge about MRP among the users.Integration problems of MRP and JIT.
MRP Terminology25Gross RequirementsProjected on-handNet requirementsPlanned order receiptPlanned order releaseOpen order
251919MRP Logic Example - 126B(4)E(1)D(2)C(2)F(2)D(3)AProduct Structure Tree for Assembly ALead TimesA1 dayB 2 daysC1 dayD 3 daysE4 daysF1 dayDemandDay 10 50 ADay 8 20 B (Spares)Day 6 15 D (Spares)Given the product structure tree for A and the lead time and demand information below, provide a materials requirements plan that defines the number of units of each component and when they will be needed.2644LT = 1 day
First, the number of units of A are scheduled backwards to allow for their lead time. So, in the materials requirement plan below, we have to place an order for 50 units of A in the 9th day to receive them in the 10th day.272755Next, we need to start scheduling the components that make up A. In the case of component B we need 4 Bs for each A. Since we need 50 As, that means 200 Bs. And again, we back the schedule up for the necessary 2 days of lead time.
SparesLT = 2B(4)E(1)D(2)C(2)F(2)D(3)A4x50=200282866
B(4)E(1)D(2)C(2)F(2)D(3)A40 + 15 sparesPart D: Day 6Finally, repeating the process for all components, we have the final materials requirements plan:292977
B(4)E(1)D(2)C(2)F(2)D(3)A40 + 15 sparesPart D: Day 6Finally, repeating the process for all components, we have the final materials requirements plan:303077MRP Example - 231A(2)B(1)D(5)C(2)XC(3)
Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10 plus the following spares:
311818
32322121
33332121Closed Loop MRPProduction PlanningMaster Production SchedulingMaterial Requirements PlanningCapacity Requirements PlanningRealistic?NoFeedbackExecute:Capacity PlansMaterial PlansYesFeedbackMRP II DefinedManufacturing Resource Planning35A tool to support planning of all resources of a manufacturing companyMade up of variety of functions linked together:Business planningSales and operations planningProduction planningMaster Production SchedulesMaterials Requirements PlanningCapacity Requirements Planning and Execution support systemProvides tools to top management in making strategic decisionsMRP II - Goal36Goal: Plan and monitor all resources of a manufacturing firm (closed loop):manufacturingmarketingfinanceengineeringSimulate the manufacturing system 362323Components of MRP II37Includes all the elements of MRPUse of existing load information (Schedule)Shop Calendar, Units of Capacity (machine / people hours), routingsWhat-if capabilityScheduling ModifiersAllow finite or infinite capacity planningForward and backward schedulingEfficiency and utilization rates Sequence of Events of MRP II 38Supply a business planSupply a sales and operation plan which integrates customer-focused marketing plansProvide a production plan that details the manufacturing output of the plant, Validate do the above three plans agree with each other?Create MPS, a schedule of what to build, how many, and by whenMRP Generation, detailed materials requirementCreate CRP, detailed amount of labor and machine resourcesValidate adjust as necessary if material and capacity plans are inadequate, start over at the MPSCreate the final production plan and executeAnalyze performance via financial reportingSales & Operation PlanProduction PlanFeasible?Build MPS MRP GenerationFeasible ?Business PlanCRP GenerationExecute Final PlanPerformance AnalysisFEEDBACKEnterprise Resource Planning (ERP) SystemsEnterprise Resource Planning Systems is a computer system that integrates application programs in accounting, sales, manufacturing, and other functions in the firmThis integration is accomplished through a database shared by all the application programsSoftware that organizes and manages a companys business processes bysharing information across functional areasintegrating business processesfacilitating customer interactionproviding benefit to global companies
ERP Modules
Selected Enterprise Software Vendors
Sheet: Sheet1Sheet: Sheet2Sheet: Sheet3Sheet: Sheet4Sheet: Sheet5Sheet: Sheet6Sheet: Sheet7Sheet: Sheet8Sheet: Sheet9Sheet: Sheet10Sheet: Sheet11Sheet: Sheet12Sheet: Sheet13Sheet: Sheet14Sheet: Sheet15Sheet: Sheet16Day:ARequired50.0Order Placement50.0Sheet: Sheet1Sheet: Sheet2Sheet: Sheet3Sheet: Sheet4Sheet: Sheet5Sheet: Sheet6Sheet: Sheet7Sheet: Sheet8Sheet: Sheet9Sheet: Sheet10Sheet: Sheet11Sheet: Sheet12Sheet: Sheet13Sheet: Sheet14Sheet: Sheet15Sheet: Sheet16Day:ARequired50.0Order Placement50.0BRequired20.0200.0Order Placement0.00.00.00.00.020.0200.00.00.00.0Sheet1Day:12345678910ARequiredLT=1Order PlacementBRequiredLT=2Order PlacementCRequiredLT=1Order PlacementDRequiredLT=3Order PlacementERequiredLT=4Order PlacementFRequiredLT=1Order PlacementSpares12345678910B20CD15EF
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Sheet: Sheet1Sheet: Sheet2Sheet: Sheet3Sheet: Sheet4Sheet: Sheet5Sheet: Sheet6Sheet: Sheet7Sheet: Sheet8Sheet: Sheet9Sheet: Sheet10Sheet: Sheet11Sheet: Sheet12Sheet: Sheet13Sheet: Sheet14Sheet: Sheet15Sheet: Sheet16Day:ARequired50.0LT=1Order Placement50.0BRequired0.00.00.00.00.00.00.020.0200.00.0LT=2Order Placement0.00.00.00.00.020.0200.00.00.00.0CRequired0.00.00.00.00.00.00.00.0100.00.0LT=1Order Placement0.00.00.00.00.00.00.0100.00.0DRequired0.00.00.00.00.055.0400.0300.00.00.0LT=3Order Placement0.00.055.0400.0300.00.00.00.0ERequired0.00.00.00.00.020.0200.00.00.00.0LT=4Order Placement0.020.0200.00.00.00.00.0FRequired0.00.00.00.00.00.00.0200.00.00.0LT=1Order Placement0.00.00.00.00.00.0200.00.00.0SparesB20.0CD15.0EFSheet: Sheet1ItemOn-HandLead Time (Weeks)XABCDSheet: Sheet1Sheet: Sheet2Sheet: Sheet3Sheet: Sheet4Sheet: Sheet5Sheet: Sheet6Sheet: Sheet7Sheet: Sheet8Sheet: Sheet9Sheet: Sheet10Sheet: Sheet11Sheet: Sheet12Sheet: Sheet13Sheet: Sheet14Sheet: Sheet15Sheet: Sheet16Day:XRequired45.0LT=2Order Placement0.00.00.00.00.00.00.045.0ARequired0.00.00.00.00.00.00.090.012.00.0LT=3Order Placement0.00.00.00.090.012.00.0BRequired0.00.00.00.00.00.07.045.00.00.0LT=1Order Placement0.00.00.00.00.07.045.00.00.0CRequired0.00.00.00.0270.050.090.010.00.00.0LT=2Order Placement0.00.0270.050.090.010.00.00.0DRequiredLT=2Order PlacementSparesA12.0B7.0C10.0D15.0Sheet1Week:12345678910XGross RequirementsLT=2On-Hand=50Net RequirementsPlanned Order ReceiptPlanned Order ReleaseAGross RequirementsLT=3On-Hand=75Net RequirementsPlanned Order ReceiptPlanned Order ReleaseBGross RequirementsLT=1On-Hand=25Net RequirementsPlanned Order ReceiptPlanned Order ReleaseCGross RequirementsLT=2On-Hand=10Net RequirementsPlanned Order ReceiptPlanned Order ReleaseDGross RequirementsLT=2On-Hand=20Net RequirementsPlanned Order ReceiptPlanned Order ReleaseSpares12345678910A12B7C10D15
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