Material Resource Planning

Material Requirement Planning

ByGROUP-8Debojit Roy – H66Sritanu Das Mahapatra – H57Abhisek Sahu – H3Krishnakant Pandey – H25Biswajit Ghosh – H12

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Material Requirement Planning

• MRP is a systematic planning-and-control methodology MRP is a systematic planning-and-control methodology for production and inventory.for production and inventory.

• Specifically, it is a procedure for planning and controlling Specifically, it is a procedure for planning and controlling the raw material, purchased parts, and work in progress the raw material, purchased parts, and work in progress (WIP) inventories required in manufacturing a product.(WIP) inventories required in manufacturing a product.

• MRP is designed to answer three questions: MRP is designed to answer three questions: whatwhat is is needed, needed, how muchhow much is needed, and is needed, and whenwhen is it needed. is it needed.

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END PRODUCT

COMPONENT OF END PRODUCT

RAW MATERIAL

Order Point

TimeLT LT

Time LT

TimeLT

Independent and Dependent Demand Inventory

Order Point

Order Point

LT

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The Benefits of MRPThe Benefits of MRP

• Inventory reduction.Inventory reduction.• Reduction in production & delivery time.Reduction in production & delivery time.• Increased efficiency.Increased efficiency.• Faster response to market changes.Faster response to market changes.• Improved labour & equipment utilization.Improved labour & equipment utilization.• Better inventory planning & scheduling.Better inventory planning & scheduling.• Reduced inventory levels without reduced customer Reduced inventory levels without reduced customer

service.service.

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WHEN WHEN TOTO USE MRP? USE MRP?

It is useful for…..

• Dependent Demand (table top, table leg).

• Discrete Demand (demand for leg at last).

• Complex Products (subassembly before final assembly).

• Assemble-to-Order (major assemblies & sub assemblies is done in advance).

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Limitations of Order-point techniques…

As each part in inventory is managed separately &independently of all others. So even though thesetechniques can provide extremely high service level forindividual parts, the service level for combination of Parts(subassemblies) & for the complete end product can below.

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Overview of the MRP SystemMaster

Production Schedule

MaterialRequirements

Planning

ProductStructure

File

ItemMaster

file

PlannedOrder

Release

Work orders

Purchase Orders

Rescheduling notices

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Information Needed for MRP

• It collects information through….

1.1. Master Production Schedule (MPS),Master Production Schedule (MPS),

2.2. The Bill of Material (BOM), ingredients for the end The Bill of Material (BOM), ingredients for the end product,product,

3.3. Inventory Data,Inventory Data,

4.4. Balance on Hand (BOH),Balance on Hand (BOH),

5.5. Scheduled receipts,Scheduled receipts,

6.6. Purchasing/Fabrication lead times.Purchasing/Fabrication lead times.

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MRP Inputs

• Master Production Schedule• Product Structure File• Inventory Master File

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Product Structure File

• Bill of Materials:

It is a materials list that provides information useful to reconstruct the manufacturing process. It is the master product definition that contains “as designed” information

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Bill of materialBill of material

LEVELLEVEL PRODUCTPRODUCT LEAD TIMELEAD TIME

Level 0Level 0 Two -drawer file Two -drawer file cabinetcabinet

Level 1Level 1 Case (1)Case (1) 2 weeks2 weeks

Level 2Level 2 Drawer slide (4)Drawer slide (4) 3 weeks3 weeks

Formed case (1)Formed case (1) 2 weeks2 weeks

Level 3Level 3 Sheet steel (1)Sheet steel (1) 4 weeks4 weeks

Level 1Level 1 Drawers (2)Drawers (2) 1 week1 week

Level 2Level 2 Formed drawer (1)Formed drawer (1) 2 weeks2 weeks

Handle (1)Handle (1) 3 weeks3 weeks

Support rollers (2)Support rollers (2) 3 weeks3 weeks

Level 3Level 3 Sheet steel(1)Sheet steel(1) 4 weeks4 weeks

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Master Production Schedule

• Schedule of Finished Products

• Represents Production, not Demand

• Combination of Customer Orders and Demand Forecasts

• What Needs to be Produced

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Inventory Master File

• On-Hand Quantities.

• On-Order Quantities.

• Lot Sizes.

• Safety Stock.

• Lead Time.

• Past-Usage Figures.

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Product structure treeProduct structure treeTwo-Drawer File CabinetTwo-Drawer File Cabinet

Level 0Level 0 Two drawerFile cabinet

Case(1)2 week

Drawers(2)1 week

Drawer slide(4)3 week

Formed case(1)2 week

Sheet steel(1)4 week

Formed Drawer(1)

2 week

Handle(1)3 week

SupportRollers(2)3 week

Sheet steel(1)4week

Level 1Level 1

Level 2Level 2

Level 3Level 3

Level 0Level 0

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Drawer Subassembly RequirementWEEKWEEK 11 22 33 44 55 66

GROSS GROSS REQUIREMENTSREQUIREMENTS

2020 3030 4040 1010 5050 6060

SCHEDULED SCHEDULED RECEIPTSRECEIPTS

00 00 00 00 00 00

BALANCE ON HAND BALANCE ON HAND 90 90

7070 4040 00 -10-10 -50-50 -60-60

PLANNED-ORDER PLANNED-ORDER RELEASERELEASE

00 00 1010 5050 6060 00

weekweek 11 22 33 44 55 66

quantityquantity 1010 1515 2020 55 2525 3030

MPS for two-drawer file cabinet

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Description

• 90 drawer subassemblies are currently in hand for requirement in first 3 week.

• Ending balance on hand = beginning BOH + scheduled receipt – gross requirement.

• In week 4 negative inventory balance indicates a net requirement for drawer subassemblies.

• The net requirements will trigger planned-order releases for more drawer subassemblies in earlier period.

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Description

• Lot for lot method – generating the planned quantities in each period value by value directly from the net requirements in subsequent period, with no economic batching of orders, is called “the lot for lot method.

• Time phasing – the process of subtracting an item's lead time from its due date to determine when an order should be released. Time-phasing coordinates the quantity of parts and components held in inventory with assemble or final production needs as determined by the MPS.

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SUPPORT ROLLER REQUIREMENTSWEEKWEEK 11 22 33 44 55 66

GROOS REQUIREMENTGROOS REQUIREMENT 00 00 2020 100100 120120 00

SCHEDULED RECEIPTSSCHEDULED RECEIPTS 00 4040 00 00 00 00

BALANCED ON HAND 60 BALANCED ON HAND 60

6060 100100 8080 -20-20 -120-120 00

PLANNED-ORDER PLANNED-ORDER RELEASERELEASE

2020 120120 00 00 00 00

week

quantity

1 2 3 4 5 6

0 0 10 50 60 0

Drawer subassemblies

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Two important conceptsTwo important concepts

• Planned order releases at higher levels generate gross Planned order releases at higher levels generate gross requirements at lower levels.requirements at lower levels.

• Inventories of higher level subassemblies already Inventories of higher level subassemblies already include the necessary lower level components, and this include the necessary lower level components, and this fact is automatically allowed for by the net fact is automatically allowed for by the net requirements calculation.requirements calculation.

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Regeneration vs. net change

• Regeneration• Complete replanning of requirements and update of

inventory status for all items

• High data processing efficiency

• Usually initiated by weekly update of master schedule

• Net change• Daily update based on inventory transactions

• More responsive to changing conditions

• Requires more discipline in file maintenance

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Manufacturing Resource Planning (MRP II)

• Manufacturing Resource Planning (MRP II) is defined as a method for the effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units, financial planning in dollars, and has a simulation capability to answer "what-if" questions and extension of closed-loop MRP.

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Business Planning

Sales Planning

Production Planning

ResourcesOK?

Master Scheduling

Material Planning

Capacity Planning

PlanningOK?

Performance Measurement

Shop Floor Control

Purchasing

Objectives

Demands

Routing

Inventory Status

Bills of Material Products

Materials

Capacity

Parts

Hours

Accountability

Objectives

Top ManagementPlanning

OMP

Operations Management

Execution

Yes

No

No

Yes

FEEDBACK

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Just-in-time (JIT)

A highly coordinated processing system in which goodsmove through the system, and services are performed,just as they are needed.

In short, the just-in-time inventory system is all abouthaving “the right material, at the right time, at the rightplace, and in the right quantity ” without the safety net ofInventory, the implications of which are broad for theImplementers.

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History of JIT

• The technique was first used by the Ford Motor company as described explicitly by Henry Ford’s My Life and Work (1922)

• The technique was subsequently adopted and publicised by Toyota Motor Corporation of Japan as part of its Toyota Production System (TPS).

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Benefits of JIT

The benefits of JIT are listed below.The benefits of JIT are listed below.• Lower stock holding means a reduction in storage space Lower stock holding means a reduction in storage space

which saves rent and insurance costs which saves rent and insurance costs • As stock is only obtained when it is needed, less As stock is only obtained when it is needed, less

working capital is tied up in stock working capital is tied up in stock • There is less likelihood of stock perishing, becoming There is less likelihood of stock perishing, becoming

obsolete or out of date obsolete or out of date • Avoids the build-up of unsold finished product that can Avoids the build-up of unsold finished product that can

occur with sudden changes in demand occur with sudden changes in demand • Less time is spent on checking and re-working the Less time is spent on checking and re-working the

product of others as the emphasis is on getting the work product of others as the emphasis is on getting the work right first timeright first time

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Problems of JIT

• There is little room for mistakes as minimal stock is kept for re-working faulty product.

• Production is very reliant on suppliers and if stock is not delivered on time, the whole production schedule can be delayed .

• There is no spare finished product available to meet unexpected orders, because all product is made to meet actual orders – however, JIT is a very responsive method of production.

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MRP vs. JIT

• For a company which is small and just starting up I feel an MRP For a company which is small and just starting up I feel an MRP ordering system would be better suited – if you implemented JIT ordering system would be better suited – if you implemented JIT then as a small company you would be trying to break into a then as a small company you would be trying to break into a market, if the JIT system goes wrong (as I am sure we all agree market, if the JIT system goes wrong (as I am sure we all agree this is very risky) then you’ll be un-able to get your product on this is very risky) then you’ll be un-able to get your product on the shelves for customers to buy and if this happened on a the shelves for customers to buy and if this happened on a regular occasion then your reputation from consumers won’t be regular occasion then your reputation from consumers won’t be good – which is critical from a new companies point of view. good – which is critical from a new companies point of view.

• On the other hand – being a large reputable company with a solid On the other hand – being a large reputable company with a solid reputation and brand image maybe the JIT system should be reputation and brand image maybe the JIT system should be implemented as this type of company will be able to invest at implemented as this type of company will be able to invest at making this system a success, as JIT dramatically reduces cost making this system a success, as JIT dramatically reduces cost and waste these savings will influence the price of the product in and waste these savings will influence the price of the product in order to compete with other competitors.order to compete with other competitors.

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Summary

• In the era of computer and IT, it is necessary to use new technologies for fester growing organization. Any company wants to lead in the competetitive market by introducing qualitative product with in a short period of time. Like that in manufacturing organization MRP system helps to reduce the manufacturing time of a product by insuring the availability of materials for product assembly in the necessary quantities at the required time. It also help to reduce raw material purchasing ,purchases parts & working process inventory. So MRP uses reducing inventory cost, reducing completion time of manufacturing with maintaining quality. It provides customer, a greater return value of their money.