Overview of Material Requisition Planning (MRP)

Overview

Computer-based information system for ordering and scheduling of dependent demand inventories (such as raw materials, component parts, and subassemblies that will be used in the production of a finished product).

It is a production planning process that starts from the demand for finished products (independent demand) and plans the production step by step of subassemblies and parts (dependent demand).

MRP is a means for determining the number of parts, components, and materials needed to produce a product.

MRP provides time scheduling information specifying when each of the materials, parts, and components should be ordered or produced.

Types of Demands

Independent Demand

• Is the demand derived from finished products.

• Is the demand for component parts based on the number of end items being produced and is managed by the MRP system.

• Is the demand for finished products.

• Does not depend on the demand of other products.

• Needs to be forecasted.

Dependent Demand

Objectives of MRP

“getting the right materials to the right place at the right time”.

Thus, MRP is designed to answer three questions:

1. What is needed ?

2. How much is needed ?

3. When is it needed ?

The art of balancing supply and demand is critical to any organization.

The MRP is a powerful planning tool that enables organization to satisfy customer requirements, while maintaining optimal inventory levels.

Overall View of the Inputs to a Standard MRP Program and the Reports Generated by the Program

Master Production Schedule (MPS)

Materials Requirement

Planning (MRP)

Inventory Records file

Bill of Materials file

Primary Output Reports

Planned Order Schedules for inventory and production

control

Secondary Output Reports

Exception Reports, Planning Report, Reports for

performance Control

Inventory Transaction

s

Engineering Change Orders

Aggregate Product Plan

Firm Orders from known Customers

Forecasts for Demands for

Random Customers

Main inputs/Requirements to MRP

MRP

Inventory Record

files

Bill of Materials

Master Productio

n Schedule

Safety stocks in MRP systems

Need for safety stocks:

Variations in demand due to end-item forecast errors and inventory errors

Variations in supply – both lead-times and quantities

Options to provide safety factors:

Fixed quantity buffer stocks

Safety lead-time

Increase gross requirements

Benefits of MRP

To minimize inventory levels.

To minimize the associated carrying costs.

Track material requirements.

Compute quantities needed as safety stock.

Allocate production time among various products.

Plan for future capacity needs.

More competitive pricing.

Lower selling price.

Improved customer service.

Faster response to market demands.

Increased flexibility to change the master schedule.

Reduced setup and tear-down costs.

Reduced idle time.

Drawbacks Of MRP

It relies upon accurate input information.

Wrong inputs may results in missing parts and excessive order quantities.

It is time consuming.

MRP- Engineering Prototype Planning Process

Engineering

Request from Engineering Department

Planning

Define Forecast SET

Define Forecast

Name

Define Master

Demand Schedule

(MDS)

Load MPS from MDS

Launch MRP

MRP Workbench

View Item Exception

Errors ?

Release Planned Orders

Check Item Setup

YES

NO

MRP- Consolidated MRP Process

Inventory 1

External Sales Order

Inventory 2 Inventory 3

ForecastsExternal

Sales Order

ForecastsExternal

Sales Order

Forecasts

Master Demand Schedule

Master Demand Schedule

Master Demand Schedule

Master Production Schedule

Master Production Schedule

Material Requirement

Planning

PR / Discrete Jobs/IRFor INV 1

PR / Discrete Jobs/IRFor INV 2

PR / Discrete Jobs/IRFor INV 3 PR: Purchase Req.

IR: Internal Req.

Exception

Items allocated across projects: items whose supply for one project has been allocated to the demand of a different project Items below safety stock: items for which demand, less supply, brings the projected quantity on hand to a negative level or below safety stock. Items that are over committed : items for which ATP is negative or below safety stock Items with a shortage: items whose quantity on hand is less than the sum of therequirements plus safety stock, within the exception time fence defined by the item’s planning exception set. Items with a shortage in a project: items whose demand exceeds supply with a project/task for an item. Items with excess inventory: items whose quantity on hand exceeds the total requirements against the item, within the exception time fence defined by the item’s planning exception set.

Items with excess inventory in a project: items whose supply exceeds demand with a project/task for an item. 

Exception

Items with expired lot: lots that expire within the planning horizon. Items with negative starting on hand: items with a negative onhand beginning balance. Items with no activity: items with no demand or supply in the current plan. Items with repetitive variance: items with suggested aggregate schedules that differ from current aggregate schedules by more than a user defined repetitive variance percentage, up to the exception date defined by the item’s planning exception set. Late order due to resource shortage: items that will cause a late order becausea resource required to manufacture the item is overloaded. Late supply pegged to forecast: items with shortages that prevent forecast demand from being met, caused by component shortages.

Late supply pegged to sales order: items with shortages that prevent sales order demand from being met, caused by component shortages. Orders to be cancelled: items with orders that the planning process recommends be cancelled. 

Exception

Orders to be rescheduled in: items with orders that the planning process recommends be rescheduled to an earlier date. Orders to be rescheduled out: items with orders that the planning process recommends be rescheduled to a later date. Orders with compression days: items with planned orders, discrete jobs and purchase orders that have compression days and need to be expedited.  

MRP v/s DRP

The MRP plan considers supply & demand in one Inventory Org.  If you have multiple Orgs it will consider the demands from and supplies to the other orgs, but you would have to run the plan at least twice to get all of the interactions between Org. 

DRP plan considers all of the links in the distribution chain within one plan so only one planning run is required to get all of the interactions included in the planning run. 

Company may want to treat each plan independently or may want to plan combinations of orgs together, or some mixture of these. 

  

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