MRP & ERP

Material requirements planning (MRP) is a computer-based information system that translates the finished product requirements of master schedule into time-phased requirements for subassemblies, component parts, and raw materials, working backward from the due date using lead times and other information to determine when and how much to order.

MRP & ERP

MRP inputs

MRP Outputs

MRP Processing

Primary Reports

Production and inventory planning and control

MRP processing takes the end item requirements specified by the master schedule and “explodes” them into time-phased requirements for assemblies, parts, and raw materials using the bill of materials offset by lead times.

Changes

Customer

Orders

MRP processing combines the time phasing and “explosion” into a sequence of spreadsheet sections, where each section has the following format:

Changes to planned orders, including revisions of due dates or order quantities and cancellations of orders.

warehouses to build up seasonal inventories

The master schedule, also referred to as the master production schedule, states which end items are to be produced, when they are needed, and in what quantities.

Orders releases, authorizing the execution of planned orders

Gross requirement: The total expected demand for an item or raw material during each time period without regard to the amount on hand.

Scheduled receipts: Open orders (orders that have been placed and are scheduled to arrive from vendors or elsewhere in the pipeline by the beginning of the period).

Projected on hand: The expected amount of inventory that will be on hand at the beginning of each time period: scheduled receipts plus available inventory from last period.

Net requirements: The actual amount needed in each time period.

Planned-order receipts: The quantity expected to be received by the beginning of the period in which it is shown.

Planned-order releases: Indicates a planned amount to order in each time period; equals planned-order receipts offset by lead time.

Forecast

Planned orders, a schedule indicating the amount and timing of future orders

MRP II

Manufacturing resources planning (MRP II) Expanded approach to production resource planning, involving other areas of a firm in the planning process and enabling capacity requirements planning.

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BENEFITS AND REQUIREMENTS OF MRP

Benefits

MRP enables managers to easily determine the quantities of every component for a given order size, to know when to release orders for each component, and to be alerted when items need attention.

Still other benefits include the following:

1. Low levels of in-process inventories, due to an exact matching of supply to demand.

2. The ability to keep track of material requirements.

3. The ability to evaluate capacity requirements generated by a given master schedule.

4. A means of allocating production time.

5. The ability to easily determine inventory usage by backflushing.

Requirements

In order to implement and operate an effective MRP system, it is necessary to have

1. A computer and the necessary software programs to handle computations and maintain records.

2. Accurate and up-to-date

a. Master schedules

b. Bills of materials

c. Inventory records

3. Integrity of file data

Secondary Reports

Performance control,

planning and exceptions

Exception reports

Call attention to major discrepancies such as late and overdue orders, excessive scrap rates, reporting errors, and requirements for nonexistent parts

Design

changes

Planning reports

Bill of materials

MRP computer

programs

A bill of materials (BOM) contains a listing of all of the assembles, subassemblies, parts and raw materials that are needed to produce one unit of a finished product. Thus, each finished product has its own bill of materials.

Useful in forecasting future inventory requirements. They include purchase commitments and other data that can be used to assets future material requierements.

Performance-control

reports

Evaluate system operation. They aid managers by measuring deviations from plans, including missed deliveries and stockouts, and by providing information that can be used to assess cost performance.

scheduled

Receipts

Other considerations

Inventory records

Safety Stock (also called buffer stock) is a term used by logisticians to describe a level of extra stock that is maintained to mitigate risk of stockouts (shortfall in raw material or packaging) due to uncertainties in supply and demand.

changes due to

Inventory records refer to stored information on the status of each item by time period, called time buckets.

Withdrawals

Lot sizing

Determining a lot size to order or to produce is an important issue in inventory management for both independent-and dependent-demand items.

canceled orders &

similar events also are recorded in this file

Lot-for-Lot Ordering - the order or run size for each period is set equal to demand for the period

Economic Order Quantity Model - is a model that is used to calculate the optimal quantity that can be purchased or produced to minimize the cost of both the carrying inventory and the processing of purchase orders or production set-ups.

Fixed-Period Ordering - provided coverage for some predetermined number of periods.