Material Requirement
Planning (MRP)
Contributors to MRP
• Gaurav Narula
• American Production and Inventory
Control Society
What is MRP?
• Computerized Inventory Control
• Production Planning System
• Management Information System
• Manufacturing Control System
Material Requirement Planning
• MRP is a systematic planning-and-control methodology
for production and inventory.
• Specifically, it is a procedure for planning and
controlling the raw material, purchased parts, and work
in progress (WIP) inventories required in manufacturing
a product.
• MRP is designed to answer three questions: what is
needed, how much is needed, and when is it needed.
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 Purchasing Cost
• Reduce Component • Improve Production
Shortages Schedules
• Improve Shipping • Reduce Manufacturing
Performance Cost
• Improve Customer • Reduce Lead Times
Service • Less Scrap and Rework
• Improve Productivity • Higher Production
• Simplified and Accurate Quality
Scheduling
What can MRP do?
• Improve • Reduce Overtime
Communication • Improve Supply
• Improve Plant Schedules
Efficiency • Improve Calculation of
• Reduce Freight Cost Material Requirements
• Reduction in Excess • Improve Competitive
Inventory 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 Master
Inventory
Structure Production
Master File
File Schedule
Material
Requirements
Planning
Manufacturing Purchase Various
Orders Orders Reports
MRP Inputs
• Product Structure File
• Master Production Schedule
• Inventory Master File
Product Structure File
• 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 Process
• Schedules the Production of all items using
an MRP Matrix
MRP Matrix
Item: Low-Level Code:
Lot Size: 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
Example of the MRP Process
Item: A Low-Level Code: 1
Lot Size: 25 Lead Time: 1
PD 1 2 3 4 5
Gross Requirements 10 15 25 25 30
Scheduled Receipts 25
Projected on Hand 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 2 3 4 5
Gross Requirements 10 15 25 25 30
Scheduled Receipts 25
Projected on Hand 20 10 20 20 20 15
Net Requirements 5 5 10
Planned Order Receipts 25 25 25
Planned Order Releases 25 25 25 30 25
MRP Outputs
• Manufacturing Orders
• Purchasing Orders
• Various Reports
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 After MRP Implementation
• Less than 75% of orders • 97% of orders completed
completed on time on time
• 2% of orders completed
with 1 to 2 days after due
date
Summary of MRP
MRP is a…..
• Computerized Inventory Control
• Production Planning System
that…..
• Schedules Component Items as Needed
which will…..
• Track Inventory and…..
• Help you in many other aspects of business
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.
