Material Requirement Planning
(MRP-1)
Material Requirement Planning
(MRP-1)
Introduction of MRP in 1960’s by
Dr Joseph Orlicky.
Definition :
MRP is a software based production, planning and
inventory control system used to manage the
manufacturing process.
It is a computer based system in which the given
Master Schedule is exploded with Bills Of Material,
into the required amount of raw material, parts and
subassemblies needed top produce the final products in
each tome period of say a week or month (called as
“Buckets”)
MRP 1 - Functions
Forecasting
Order, Planning and Control
Priority Planning and Control
Planning Capacity Requirement and
Development of Broad Business
Plans
Objectives
Ensure The Availability of Material
Components and Products For Planned
Production and Customer Delivery.
Maintain The Lowest Possible Inventory
Level.
Plan Manufacturing Activities, Delivery
Schedules and Purchasing Activities.
Material Requirements Planning MRP1
Master
Customer orders Production Demand forecast
Schedule
Inventory records
Bill of materials MRP
Material
requirement
planning
Works orders
Purchase orders
Material plans
Key Elements Of MRP 1
Demand Forecasting:-
It is the quantity demanded per year or per unit
time which indirectly helps in knowing quantity
to be supplied.
Master Production Schedule (MPS):-
MPS is a series of time phased quantities for
each item that a company manufactures. It
gives the details of the products to be
manufactured over the given space of time. -
Bills Of Material (BOM):-
BOM is the document generated at
design stage. It gives the details of the
structure of the product by dividing
the final assembly into major
assemblies and sub-assemblies. BOM
provides details such as part name,
part no., description, quantity required
material, etc.
Inventory Status File (ISF):-
ISF reports the inventory on hand. It
allows the company to subtract existing
inventory from gross requirements, so net
requirements can be ordered. The ISF
also reports on safety stock needs and
lead times for each item.
MRP Program:-
This is a computer software programme.
First, it explodes the finish product’s
demand into gross requirement for parts.
Second, the package determines net
requirements based on the ISF. Third, it
place orders to meet the net quantities
needed and lead times.
Outputs And Reports:-
The MRP 1 package generates many
reports such as action notices, priority
reports, inventory status information.
Advantages of MRP 1
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.
Manufacturing Requirement
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.
MRP
• Manufacturing-centric/Push mgt.
• Master production schedule
• Final production schedule
• Inventory management
• Bill of materials
• Gross requirement generation
• Net requirement generation
• Reorder point calculation
• Automatic replenishment
MRP I I
• Capacity requirement. planning
• Production control
• Marketing interface
• Accounting interface
• Financial interface
• Personnel interface
• Supplier interface
• Customer interface
Major Developments From
MRP
Feedback
Allocating reserves
Matching the requirements
Software extension programmers
Data accuracy
Significant Payback Achieved
By Coca-cola
Coca Cola: "Always" Class A MRP
II
Inventory levels: down
Productivity: up
Customer delivery performance: improved
Supplier delivery performance: better
Business Processes: improved
Data integrity: high
Cost of goods: down
Team Spirit: high
Benefits In Different
Levels
For Management
An accurate, consistent and effective
way to run the whole business
The ability to manage orderly growth
The ability to cope with difficult
economic conditions
For Management Information
Quicker, better information on which
to base decisions
Consistent information at all levels, in
all departments
Accurate records for internal and
external use
For Sales / Marketing
Improved on-time deliveries to
customers
Faster, more accurate delivery
promising
Improved responsiveness to customer
needs
For Production
Improved productivity and resource
utilization
Increased through output
Better reliability of production plans
For Materials Management
Better control of inventories
Improved scheduling
Productive relationships with suppliers
For Design / Engineering
Improved design control
Better quality and quality control
For Financial and Costing
Reduced working capital for inventory
Improved cash flow through quicker
deliveries
Accurate inventory records
Timely and valid cost and profitability
information
For And Against
MRPII
FOR
Long term planning tool for complex products
Can give accurate completion date at time of order
Fits in with conventional accounting
Progress of manufacture available at all times
Inventory size available at all times
Control of work orders and changes is tight
Many types of software available
Against
File/database accuracy must be maintained
Inventory accuracy is vital (99% accuracy is a typical
requirement)
Highly computer based
Does not affect quality management, line balancing, or
other production management issues
Inflexible and relies on forecast. Temptation exists to
over-ride and go manual
Distribution Requirements
Planning (DRP – I)
Distribution Requirements
Planning (DRP I)
DRP is the application of MRP principles
to the distribution environment. It
integrates the, special needs of
distribution. It is a dynamic model which
looks at a time-phased plan of events that
affect inventory.
What is DRP?
DRP provides the basis for integrating
supply chain inventory information and
physical distribution activities with the
Manufacturing Planning and Control
system.
What is DRP?
Managing the flow of materials between
firms, warehouses, distribution centers.
DRP helps manage these material flows.
Just like MRP did in Manufacturing.
Links firms in the supply chain by
providing planning records that carry
demand information from receiving
points to supply points and vice versa.
DRP Menu Items
Component Description Purpose in DRP
Material Master Creates stock items and controlling
elements of items, locations and
policies that are used in the deployment
process.
Inventory Management Tracks inventory availability in all
stock categories and supply and
demand for an [Link] allows for the
physical movement of inventory.
Sales Planning, Forecasting and Creates forecasts of customer demand
Demand Management which results in the creation of
independent requirements at the
distribution [Link] independent
requirements are later consumed by
actual customer orders.
Purchasing Creates quota arrangements that control
the supply relationships in the network.
Materials Requirements Planning Determines net supply and demand
resulting in a proposal for the transfer
of inventory from the plant to the
distribution center.
Marketing Benefits
Increases service level and decrease
customer complaints.
Improve inventory coordination.
Enhances ability to offer customer a
coordinated inventory management
service.
Logistical Benefits
Reduces freight costs.
Reduces inventory level.
Decreases warehousing space.
Reduces customer freight cost.
Enhances budgeting capitability.
Constraints of DRP
Inventory planning systems require
accurate and coordinated forecasts for
each distribution center.
Integrated planning is subject to system
nervousness and frequent rescheduling,
because of production breakdowns and
delivery delays.
DRP is not the universal solution for
inventory management.
Distribution Resource planning
(DRP-II)
Distribution Resource planning
Distribution resource planning [DRP II] is an
extension of DRP [Link] resource
planning applies the time phased logic of DRP I
to replenish inventories in multi echelon
warehousing [Link] resources
planning extends DRP I to include the planning
of key resources in a distribution system –
warehouse space, equipments, labors, transport
capacity [e.g trucks,rail cars] and financial
flows
Objectives Of DRP II
The objective of Distribution Resource Planning
are,
To improve customer service levels by anticipating
customer demand at distribution centers and providing
finished products at the correct location when customer
needs arise.
To provide an accurate requirements plan for
manufacturing.
To optimize the distribution of available stock in the
distribution network using the deployment function.
DRP II Provides a framework
Distribution resource planning provides a framework for
determining the need to replenish inventory by:
Linking market requirements with manufacturing and
demand management.
Relating current inventory positions and demand
forecasts to production scheduling.
Matching material supply to manufacturing demand,
and customer demand to product supply.
Factors needed for Implementing
DRP II
Before the use of DRP for planning and deployment,
we must set up a distribution network. A distribution
network represents possible delivery relationships
between the supplying plants and the distribution
centers. DRP entails planning the supply chain from
sales planning through delivery to the distribution
centers, assuming there are sales orders or that sales
forecasts are available. The primary aim of planning is
to determine the quantities required on specific
dates,including the lead times of the distribution lanes.
The distribution network defines the normal supply
method for execution.
CUSTOMERS
DISTRIBUTION DISTRIBUTION DISTRIBUTION DISTRIBUTION
CENTER CENTER CENTER CENTER
DISTRIBUTION DISTRIBUTION
CENTER CENTER
REGIONAL
WAREHOUSE REGIONAL
WAREHOUSE
PLANT WAREHOUSE
FINAL ASSMEBLY
(MANUFACTURING)
SUB ASSEMBLY B SUB ASSEMBLY C SUB ASSEMBLY D
SUB ASSEMBLY A PART C PART D PART E
PART A PART B
RAW MATERIALS
Difference between DRP and MRP
MRP DRP
Scope Inbound logistics Outbound logistics
Guiding factor Guided by production Guided by customer
schedules demand
Control of the firm Under control of the Not under control of
firm the firm
Demand situation Operates in dependant Operates in
demand situation independent demand
situation
Area of operation & Coordinates scheduling Coordinates demand
coordination & integration of between outlets &
materials into finished supply sources
goods
Stage of functioning Controls inventory Controls inventory
until manufacturing & after manufacturing &
assembly is complete assembly of finished
goods
Planning availability of Raw materials Market[retailers] &
stock at? stores,conversion process warehouses
& finished goods store
