Materials requirements planning

MATERIALS REQUIREMENTS

PLANNING http://www.slideshare.net/anandsubramaniam/lot-sizing-techniques

*What is MRP?

*Computerized Inventory Control

*Production Planning System

*Management Information System

*Manufacturing Control System

*What is MRP? (contd)

*This is the most comprehensive approach to manufacturing inventory and other dependents which demand an efficient inventory management system.

*The MRP system determines item-by-item, what is to be processed and when, as well as what is to be manufactured when.

*This is based on order priorities and available capacities.

An MRP system is intended to simultaneously meet three objectives:

* Ensure materials and products are available for production and delivery to customers.

*Maintain the lowest possible level of inventory.

*Plan manufacturing activities, delivery schedules and purchasing activities

*MRP Functions

*Forecasting

*Order, Planning and Control

*Priority Planning and Control

*Planning Capacity Requirement and Development of Broad Business Plans

*The scope of MRP in manufacturing:

Manufacturing organizations, whatever their products, face the same daily practical problem - that customers want products to be available in a shorter time than it takes to make

them. This means that some level of planning is required.

Making a bad decision in any of these areas will make the company lose money. A few examples are given below:

*If a company purchases insufficient quantities of an item used in manufacturing, or the wrong item, they may be unable to meet contracts to supply products by the agreed date.

*If a company purchases excessive quantities of an item, money is being wasted - the excess quantity ties up cash while it remains as stock and may never even be used at all. This is a particularly severe problem for food manufacturers and companies with very short product life cycles. However, some purchased items will have a minimum quantity that must be met, therefore, purchasing excess is necessary.

*Beginning production of an order at the wrong time can cause customer deadlines to be missed.

*Independent and

Dependent Demand

Independent Demand

A

B(4) C(2)

D(2) E(1) D(3) F(2)

Dependent Demand

Independent demand is uncertain. Dependent demand is certain.

Independent demand: Demand for final products.

Dependent demand: Demand fort items that are subassemblies or component parts to be used in production of finished goods.

*What can MRP do?

*Reduce Inventory Levels

*Reduce Component Shortages

*Improve Shipping Performance

*Improve Customer Service

*Improve Productivity

*Simplified and Accurate Scheduling

*Reduce Purchasing Cost

*Improve Production Schedules

*Reduce Manufacturing Cost

*Reduce Lead Times

*Less Scrap and Rework

*Higher Production Quality

*What can MRP do?

*Improve Communication

*Improve Plant Efficiency

*Reduce Freight Cost

*Reduction in Excess Inventory

*Reduce Overtime

*Improve Supply Schedules

*Improve Calculation of Material Requirements

*Improve Competitive Position

*Three Basic Steps of MRP

*Identifying Requirements

*Running MRP – Creating the Suggestions

*Firming the Suggestions

*Step 1: Identifying the Requirements*Quantity on Hand

*Quantity on Open Purchase Order

*Quantity in/or Planned for Manufacturing

*Quantity Committed to Existing Orders

*Quantity Forecasted

*Step 1: Important Information

MRP is…..*Company Sensitive

*Location Sensitive

*Date Sensitive

*Step 2: Running MRP – Creating

the Suggestions

*Critical Items

*Expedite Items

*Delay Items

*Step 3: Firming the

Suggestions

*Manufacturing Orders

*Purchasing Orders

*Various Reports

*Overview of the MRP System

Product Structure File

Master Production Schedule

Inventory Master File

Material Requirements

Planning

Manufacturing Orders

Purchase Orders

Various Reports

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*MRP Inputs*Product Structure File

*Master Production Schedule

*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.

*ASSEMBLY DIAGRAM

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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

*Inventory Master File

*On-Hand Quantities

*On-Order Quantities

*Lot Sizes

*Safety Stock

*Lead Time

*Past-Usage Figures

*MRP Process*Schedules the Production of all items using an MRP

Matrix

Item: Low-Level Code: Lot Size: Lead Time: PD 1 2 3 4 5Gross Requirements

Scheduled Receipts

Projected on Hand

Net Requirements

Planned Order Receipts

Planned Order Releases

MRP Matrix

*Terms Defined

*Item – name or number for the item being scheduled

*Low-Level Code – the lowest level of the item on the product structure file

*Lot Size – order multiples of quantity

*Lead Time – the time from when an order is placed to when it is received

*PD – Past Due Time Bucket, orders behind schedule

*Terms Defined

*Gross Requirements – demand for an item by time period*Scheduled Receipts – material already ordered*Projected on Hand – expected ending inventory*Net Requirements – number of items to be provided and when*Planned Order Receipts – net requirements adjusted for lot size*Planned Order Releases – planned order receipts offset for lead times

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*MRP Processing

*Gross requirements: (Forecasted)Demand period by period

*Net requirements(t)

=Gross requirements(t)-Projected inventory(t-1)

-Scheduled receipt(t)

*If Net requirement(t) > 0

set Planned order receipts(t)>=Net requirement(t)

*Planned-order receipts is the production planned

*Projected inventory(t)=Projected inventory(t-1)+Scheduled receipt(t)+Planned order receipts(t)-Gross requirements(t)

*Planned order release(t-LT)=Planned-order receipts(t)

*MRP example with LT=2 and 1 level

Periods 0 1 2 3

Gross requirements 6 11 7

Scheduled receipts 2 3 0

Projected on hand 10 6 0 0

Net requirements 0 2 7

Planned order receipts 2 7

Planned order releases 2 7

Inputs

Outputs

*Figure 13-8

*Other Considerations

*Safety Stock*Not much for items with dependent demand

*Lot sizing*Lot-for-lot ordering

*Economic order quantity

*Fixed-period ordering

*Part-period model

*MRP example with Lot size=5, LT=2 and 1 level

Periods 0 1 2 3Gross requirements 6 11 9Scheduled receipts 2 3 0

Projected on hand 10 6 3 4

Net requirements 5 10

Planned order receipts 5 10

Planned order releases 5 10

Inputs

Outputs

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*Figure 13-9

*Inputs to the Production Plan

Aggregate Production Plan

MarketingCustomerDemand

EngineeringDesign

Completion

ManagementReturn on

InvestmentCapital

HumanResourcesManpowerPlanning

ProcurementSupplier

Performance

FinanceCash Flow

ProductionCapacityInventory

*The Planning ProcessProduction Plan

Execute MaterialPlans

Master ProductionSchedule

MaterialRequirements

Plan

CapacityRequirements

Plan

Execute CapacityPlans

Realistic??No

Yes

*MRP Outputs

*Manufacturing Orders

*Purchasing Orders

*Various Reports

*Advantages of MRP

*Improved Business Results

*Improved Manufacturing Results

*More Accurate And Timely Information

*Less Inventory

*Less Materials Obsolescence

*Time Phased Ordering Of Materials

*Higher Reliability

*More Responsiveness To Market Demand

*Reduced Production Cost

*Disadvantages

*Increase In Material Acquisition Cost

*Higher Transportation Costs And Higher Unit Cost

*Potential Hazard Of A Production Slowdown Or Shutdown

*Use Of Standardized Software Packages

*Does not Take Into Account Plant Capacity And Distribution Capacity

*High Stock-Out Costs.