Material Requirement Planning for better utilization of the inventory to make investment less on the buffer stocks or unproductive stocks

1. Material Requirement
Planning (MRP1)
Professor, Entrepreneur & Lawyer.
Puttu Guru Prasad,
M.Com. M.B.A., L.L.B., M.Phil. PGDFTM.
AP.SET., ICFAI TMF., (PhD) at JNTUK.
Senior Faculty for Management Science,
S&H Department, VVIT, Nambur, NSS P.O
My Blog: puttuguru.blogspot.in
93 94 96 98 98, 807 444 95 39,

2. Material
RequirementPlanning
(MRP1)

3. What is
MRP?
 Computerized Inventory Control
 Production Planning System
 Management Information System
 Manufacturing Control System

4. What is MRP?
(cont)
 This is the most comprehensive approach to
manufacturing inventory and other dependents
which demand an efficient inventory management
system.

5. What is MRP
do ?
 The MRP system determines item-by-item, what is to
be processed and when, as well as what is to be
manufactured when.
 This is based on order priorities and available
capacities.

6. When to use
MRP
 Job Shop Production
 Complex Products
 Assemble-to-Order Environments
 Discrete and Dependent Demand
Items

7. 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

8. What can MRP do?
(contd)
 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

9. Three Basic Steps of
MRP
 Identifying Requirements
 Running MRP – Creating the
Suggestions
 Firming the Suggestions

10. 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

11. Step 1: Important
InformationMRP is…..
 Company Sensitive
 Location Sensitive
 Date Sensitive

12. Step 2: Running MRP – Creating
theSuggestions
 Critical Items
 Expedite Items
 Delay Items

13. Step 3: Firming the
Suggestions
 Manufacturing Orders
 Purchasing Orders
 Various Reports

14. Overview of the MRP
System
Product
Structure
File
Master
Production
Schedule
Inventory
Master File
Material
Requirements
Planning
Manufacturin
g Orders
Purchase
Orders
Various
Reports

15. MRP
Inputs
 Product Structure File
 Master Production Schedule
 Inventory Master File

16. Product Structure
File
 Bill of Materials:
It is a materials list that provides information
useful to reconstruct the manufacturing
process. It is the master product definition
that contains “as designed” information.

17. Bill-of-Material
Product Structure
Tree
Bicycle(1)
P/N 1000
Handle Bars (1)
P/N 1001
Frame Assembly
(1) P/N 1002
Wheels (2)
P/N 1003
Frame (1)
P/N 1004

18. Master Production
Schedule
 Schedule of Finished Products
 Represents Production, not Demand
 Combination of Customer Orders and Demand
Forecasts
 What Needs to be Produced

19. Inventory Master
File
 On-Hand Quantities
 On-Order
Quantities
 Lot Sizes
 Safety Stock
 Lead Time
 Past-Usage Figures

20. MRP
ProcessItem:
Low-Level Code:
Lot Size: Lead
Time
PD 1 2 3 4 5
Gross
requirement
Scheduled
receipts
Projected on
hand
Net
requirements
Planned order
receipts
Planned order
releases

21. Terms
Defined Item – name or number for the item being Scheduled
 Low-Level Code – the lowest level of the item on the
productstructure 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

22. 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

23. Example of the MRP
ProcessItem:
PD 1 2 3 4 5
Gross
requiremen
t
10 15 25 25 30
Scheduled
receipts 25
Projected
on hand 20
Net
requiremen
t s
Planned
order
receipts
Planned
order
releases

24. Example of the MRP
ProcessItem
PD 1 2 3 4 5
Gross
requiremen
t
10 15 25 25 30
Scheduled
receipts 25
Projected
on hand 20 10 20 20 20 15
Net
requiremen
ts
5 5 10
Planned
order
receipts
25 25 25
Planned
order
releases
25 25 25 30 25

25. Aggregate
Production Plan
Marketing
Customer
Demand
Engineering
Design
Completion
Management
Return on
Investment
Capital
Human
Resources
Manpower
Planning
Procurement
Supplier
Performance
Finance
Cash Flow
Production
Capacity
Inventory
Inputs to the Production Plan

26. Production Plan
Execute Material
Plans
Master Production
Schedule
Material
Requirements Plan
Capacity
Requirements Plan
Execute Capacity
Plans
No Realistic??
Yes
The
PlanningProce
ss

27. MRP
Outputs
Manufacturing Orders
Purchasing Orders
Various Reports

28. 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

29. Summary
ofMRP
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