Material requirements planning (MRP) is a production planning, scheduling, and inventory control system used to manage manufacturing processes. Most MRP systems are software-based, but it is possible to conduct MRP by hand as well. ... Plan manufacturing activities, delivery schedules and purchasing activities.

1. MATERIAL REQUIREMENT PLANNING
(MRP)
Industrial Engineering and Management

2. LIST OF TOPICS TO BE COVERED
• Introduction
– Objectives
– Functions
– MRP logic
– Management information from MRP
– Lot sizing consideration
• Manufacturing resource planning
• Capacity requirement planning (CRP)
• Bill of Materials

3. OBJECTIVES
• Material requirements planning (MRP) is a production planning,
scheduling, and inventory control system used to manage
manufacturing processes. Most MRP systems are software-based,
but it is possible to conduct MRP by hand as well.
• An MRP system is intended to simultaneously meet three
objectives:
– Ensure materials are available for production and products are available for
delivery to customers.
– Maintain the lowest possible material and product levels in store
– Plan manufacturing activities, delivery schedules and purchasing activities.

4. FUNCTIONS
• The basic functions of an MRP system include:
– inventory control
– bill of material processing
– elementary scheduling.
• MRP helps organizations to maintain low inventory levels.
• It is used to plan manufacturing, purchasing and delivering
activities.

5. LOGIC
• The concept is straight forward
• The large volume of data to be processed makes it
complicated
• MRP is a sub set of inventory control
• It is an effective system for minimizing unnecessary investment
on inventory
• The sheer volume of data to be processed makes it impossible
to carry out processing without a digital computer

6. INPUTS TO MRP
• MRP converts MPS into a detailed schedule for raw materials
and components
• MRP operates on data contained in the MPS which is the basic
input
• Further there are two more inputs
– The BOM which defines product structure
– The inventory record file

7. MRP OUTPUT REPORTS
There are two outputs and a variety of messages/reports:
• Output 1 is the "Recommended Production Schedule." This lays out a detailed
schedule of the required minimum start and completion dates, with quantities,
for each step of the Routing and Bill Of Material required to satisfy the demand
from the master production schedule (MPS).
• Output 2 is the "Recommended Purchasing Schedule." This lays out both the
dates on which the purchased items should be received into the facility and the
dates on which the purchase orders or blanket order release should occur in
order to match the production schedules.
Messages and reports:
• Purchase orders. An order to a supplier to provide materials.
• Reschedule notices. These recommend cancelling, increasing, delaying or
speeding up existing orders.

9. TERMINOLOGIES
• Item – name or number for the item being scheduled
• Lot Size – order multiples of quantity
• Lead Time – the time from when an order is placed to when it
is received
• Projected on Hand – expected ending inventory

10. LOT SIZING IN MRP
• Rules are used to change the frequency of replenishment
orders (refill stocks) & set the quantity of each order (balance
holding & ordering costs to reduce total costs)
• Common rules:
– Fixed Order Quantity (FOQ)
– Lot-for-Lot (L4L)
– Periodic Order Quantity (POQ)

11. LOT SIZE CONSIDERATIONS
• Lot-for-Lot ordering (LFL): The order or run size is set equal to the
demand for that period.
• Economic Order Quantity (EOQ): Can lead to minimum costs if usage of
item is fairly uniform.
• Fixed Order Quantity (FOQ): Each time an order is placed, quantity
remains same.
• Fixed Period Requirements (FPR): Order a supply for a given number of
periods each time.
• Least Total Cost: Order the quantity that minimizes the total set-up and
carrying cost during the planning horizon.
• Periodic ordering quantity (POQ): Lot size is equal to total requirement
of number of periods which is constant. Here lot size is varying and time
between replenishment order is fixed.

12. MASTER PRODUCTION SCHEDULE
• A master production schedule (MPS) is a plan for individual
commodities to be produced in each time period such as
production, staffing, inventory, etc. It indicates when and how
much of each product will be demanded.
• This plan quantifies significant processes, parts, and other
resources in order to optimize production, to identify
bottlenecks, and to anticipate needs and completed goods.
Since an MPS drives much factory activity, its accuracy and
viability dramatically affect profitability.

13. • By using many variables as inputs the MPS will generate a set
of outputs used for decision making.
• Inputs may include forecast demand, production costs,
inventory money, customer needs, inventory progress, supply,
lot size, production lead time, and capacity.
• Outputs may include amounts to be produced, staffing levels,
quantity available to promise, and projected available balance.
• Outputs are then used to create a Material Requirements
Planning (MRP) schedule.

14. BILL OF MATERIALS
• A listing of all the subassemblies, intermediates, parts, and raw
materials that go into a parent assembly showing the quantity
of each required to make an assembly.
• Basically, a bill of material (BOM) is a complete list of the
components making up an object or assembly.
• BOM is a product tree structure diagram which list out all the
parts and components that go into making the product in a
hieratical manner.

15. BENEFITS OF MRP
• Increased customer satisfaction due to meeting delivery
schedules
• Faster response to market changes
• Improved labor & equipment utilization
• Better inventory planning & scheduling
• Reduced inventory levels without reduced customer service

16. MRP II: MANUFACTURING RESOURCE PLANNING
It 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 cost, and has
a simulation capability to answer "what-if" questions and
extension of closed-loop MRP. Material requirements are
essential for the use of MRP II. MRP II integrates many areas of
the manufacturing enterprise into a single entity for planning
and control purposes.

17. BENEFITS OF MRP II
• Better control of inventories
• Improved scheduling
• Productive relationships with suppliers
• Good system at simulation and help answer ‘what-if’ questions
• A more precise decision making tool

18. CAPACITY REQUIREMENTS PLANNING
• Capacity planning is the process of determining the resources required to meet the
priority plan and the method needed to make that capacity available.
• It is directly connected with MRP. It focuses on components and subassemblies,
therefore more detailed, complete and accurate.
• It is concerned with individual orders at individual work centers and calculates work
center loads and labour requirements for each time period at each work center.
• A tool for:
– determining capacity that is available and required.
– Avoid bottleneck work centers.
• Helping planners make the right decisions on scheduling before problems develop.
• Verifies that you have sufficient capacity available to meet the capacity requirements
for MRP plans.

19. EXAMPLE OF MRP
Hand Trolley
Bin (1) Handle Bar (2)
Mounting Base
(1)
Wheel
Assembly (2)
Wheel (1) Bearings (2)

20. QUESTION
A shipment of 800 wheel assemblies is scheduled to be received
at the beginning of week 2.
A shipment of 250 mounting base is scheduled to be received at
the beginning of week 3.
Complete the MRP for final assembly and all the parts.
Week 1 2 3 4 5 6 7 8
Demand 200 240 240 220

21. Part Order Quantity Lead Time
(Weeks)
Inventory on
Hand
Hand Trolley 350 1 220
Bin 400 2 250
Wheel Assembly 800 2 120
Handle Bars 850 2 105
Mounting Base 250 1 250
Wheel 600 2 300
Bearing 1500 2 200

22. MRP FOR HAND TROLLEY
Week 1 2 3 4 5 6 7 8
Projected
Requirement
200 240 240 220
Receipts 350 350
SOH (220) 20 20 20 130 130 240 240 20
POR 350 350
EOQ LT
350 1 week

23. MRP FOR BIN
Week 1 2 3 4 5 6 7 8
Projected
Requirement
350 350
Receipts 400 400
SOH (250) 250 250 300 300 350 350 350 350
POR 400 400
EOQ LT
400 2 weeks

24. MRP FOR WHEEL ASSEMBLY
Week 1 2 3 4 5 6 7 8
Projected
Requirement
700 700
Receipts 800 800
SOH (120) 120 920 220 220 320 320 320 320
POR 800
EOQ LT
800 2 weeks

25. MRP FOR HANDLE BARS
Week 1 2 3 4 5 6 7 8
Projected
Requirement
700 700
Receipts 850 850
SOH (105) 105 105 255 255 405 405 405 405
POR 850 850
EOQ LT
850 2 weeks

26. MRP FOR MOUNTING BASE
Week 1 2 3 4 5 6 7 8
Projected
Requirement
350 350
Receipts 250 250
SOH (250) 250 250 150 150 50 50 50 50
POR 250
EOQ LT
250 1 week

27. MRP FOR WHEEL
Week 1 2 3 4 5 6 7 8
Projected
Requirement
800
Receipts 600
SOH (300) 300 300 100 100 100 100 100 100
POR 600
EOQ LT
600 2 weeks

28. MRP FOR BEARINGS
Week 1 2 3 4 5 6 7 8
Projected
Requirement
1600
Receipts 1500
SOH (200) 200 200 100 100 100 100 100 100
POR 1500
EOQ LT
1500 2 weeks

29. OUTPUT: IN ORDER TO SATISFY THE MPS
Part Planned Order Release
1 2 3 4 5 6 7 8
Hand Trolley 350 350
Bin 400 400
Wheel
Assembly
800
Handle Bars 850 850
Mounting
Base
250
Wheel 600
Bearing 1500