Material Requirement Planning Presentation

What is MRP?
Computerized Inventory Control

Production Planning System Management Information System Manufacturing Control System
When to use MRP

Job Shop Production
Complex Products Assemble-to-Order Environments Discrete and Dependent Demand Items
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
Quantity on Hand Quantity on Open Purchase Order Quantity in/or Planned for Manufacturing Quantity Committed to Existing Orders Quantity Forecasted
Step 1: Identifying the Requirements
End item
Raw material Component
LT
R LT Time
R LTTime
R LT Time
Order point system with dependent demand

MRP 8
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
MRP Inputs
Product Structure File Master Production Schedule Inventory Master File
Product Structure File

The Product Structure File describes each parentcomponent relationship, using the following information:
Part number for the parent item Part number for the component Quantity of the component used in the parent item
Bill of Materials
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 Outputs
Manufacturing Orders Purchasing Orders Various Reports
MRP Process
Schedules the Production of all items using an MRP Matrix
MRP Matrix
Item: Lot Size: Low-Level Code: Lead Time:
PD 1
2 3 4 5
Gross Requirements
Scheduled Receipts
Projected on Hand
Net Requirements
Planned Order Receipts

Planned Order Releases
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
Lot sizing techniques used in MRP systems

Lot-for-lot (L4L) most used
Economic order quantity (EOQ)

Period order quantity (POQ)
MRP
21
Lot-for-lot (L4L) example

Period Net rqmts. Planned order (Assume LT) 1 35 35 2 10 10 3 4 40 40 5 6 20 20 7 5 5 8 9 Total 150 150
10 30 10 30
The L4L technique: Minimizes carrying costs Is certainly the best method for - highly discontinuous demand - expensive purchased items MRP1.xls
MRP 22
EOQ example
Setup cost, S = $100 Unit price, C = $50 Holding costs, HR = .24 per annum HP = .02 per period Annual demand, D = 200 Q = (2DS / CHR)1/2 = 58
Period Net rqmts. Planned orders Remnants 1 35 58 23 13 13 2 10 3 4 40 58 31 31 11 6 5 6 20 7 5 8 10 58 54 24 24 9 30 10
MRP
23
Period order quantity example

Technique: 1. Compute EOQ to determine number of orders per year
2. Divide number of periods in one year by number of orders to get ordering interval EOQ = 58 Number of periods in one year = 12 D = 200 200 / 58 = 3.4 (orders per year) 12 / 3.4 = 3.5 (ordering interval) Period Net rqmts. Planned orders 1 35 85 2 10 3 4 40 5 6 20 35 7 5 8 9 30 Total 150
10 30
MRP
24
Example of the MRP Process

Item: A Lot Size: 25 Low-Level Code: 1 Lead Time: 1
PD
1 10
Gross Requirements Scheduled Receipts Projected on Hand
15 25 25 30 25
20
Net Requirements
Planned Order Receipts Planned Order Releases
Example of the MRP Process

Item: A Low-Level Code: 1 Lot Size: 25 min Lead Time: 1
PD
1 10
Gross Requirements Scheduled Receipts Projected on Hand
15 25 25 30 25
20
10
20 20 20 15
Net Requirements
Planned Order Receipts Planned Order Releases
10
25 25 25 25 25 25 30 25
Case Study
Hubbell Lighting Case

Manufactures Industrial Lighting Products Good-Quality Products Poor at Meeting Due Dates Work is Specialized for Each Customer Job Shop Environment Complex Products
Hubbell Lighting Case

Before MRP Implementation
Less than 75% of orders completed on time
After MRP Implementation

97% of orders completed on time 2% of orders completed with 1 to 2 days after due date
References
Russell, Roberta S., and Bernard W. Taylor III. Operations Management. 3rd Edition: Prentice Hall, 2000 Grubbstrom, Robert W. Material Requirements Planning and Manufacturing Resource Planning. 03/12/2002. http://www.itbp.com/opsmanagement/iebm/material_requirements.htm. Vormittag Associates, Inc. System 2000 MRP. 03/12/2002. http://www.vaihome.com/s2000mrp.htm. Inventory Solutions. What is MRP?. 03/12/2002. http://www.inventorysolutions.org/def_mrp.htm.
Summary of MRP
MRP is
Computerized Inventory Control Production Planning System Schedules Component Items as Needed which will Track Inventory and
Help in many other aspects of business

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What is MRP?

Computerized Inventory Control

When to use MRP

What can MRP do?

What can MRP do?

Three Basic Steps of MRP

Step 1: Identifying the Requirements

Raw material Component

Order point system with dependent demand

Step 2: Running MRP Creating the Suggestions

Step 3: Firming the Suggestions

Overview of the MRP System

Material Requirements Planning

Product Structure File

Master Production Schedule

Inventory Master File

Planned Order Receipts

Lot sizing techniques used in MRP systems

Economic order quantity (EOQ)

Lot-for-lot (L4L) example

Period order quantity example

Example of the MRP Process

Gross Requirements Scheduled Receipts Projected on Hand

Example of the MRP Process

Gross Requirements Scheduled Receipts Projected on Hand

Hubbell Lighting Case

Hubbell Lighting Case

After MRP Implementation

Help in many other aspects of business

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