Foreign Trade University

ContentMRP overviewBenefits of MRPMRP applicationRequirements of an effective MRP systemMRP systemThe development of MRP- MRP II Manufacturing resources planning- ERP Enterprise resources planning

An Overview of MRPMRP is a computer-based information system designed to handle ordering and scheduling of dependent-demand inventories, e.g.: raw materials, component parts, and subassemblies

Dependent demand vs. independent demand!!!

An Overview of MRPDependent demand: demand for a higher-level item. E.g.: Tires, wheels, engines are demand for automobiles.

Independent demand: demand for finished products, which are not components of any items.E.g.: cars, trucks

Benefits of MRPAbility to keep track of material requirements: How many number of parts, components, and materials needed to produce each end item and whenA means of allocating production timeLow level of in-process inventories

MRP applicationApply for the typical manufacturing or assembly type of operation, where a number of products are made in batches using the same productive equipments

Industry typeExamplesExpected benefitsAssemble-to-stockCombines multiple component parts into a finished product, which is then stocked in inventory to satisfy customer demand. E.g.: watches, tools, appliancesHighFabricate-to-stockItems are manufactured by machine rather than assembled from parts. These are standard stock items carried in anticipation of customer demand. E.g.: piston rings, electrical switchesLowAssemble-to-orderA final assembly is made from standard options that customer chooses. E.g.: trucks, generators, motorsHighFabricate-to-orderItems are manufactured by machine to customer order. These are generally industrial orders. E.g.: bearings, gears, fastenersLowManufacturing-to-orderItems are fabricated or assembled completely to customer specification. E.g.: turbine generators, heavy machine toolsHighProcessIncludes industries such as foundries, rubber and plastics, specialty paper, chemicals paint, drug, food processorsMedium

Requirements of An Effective MRP systemA computer and necessary software programs;Accurate and up-to-date master schedules, bills of materials and inventory records;Integrity of file data.

MRP SystemIncludes 3 major sources:Master production scheduleBill of materialsInventory records

Answer 3 questions:What is needed?How much is needed?When is it needed?

MRP System MRP Input MRP ProcessingMRP Output

OrdersForecast

Designchange

ReceiptsWithdrawals

MRP InputIncludes: Master Production ScheduleBill of MaterialsInventory Records

MRP InputMaster Production ScheduleAre made by:- Demand from the known customers- Forecast demand

=>Questions: Which end items are to be produced; When these are needed; And in what quantities?

MRP InputMaster Production ScheduleThe schedule indicates that 100 units of X will be needed at the start of week 8

X12345678Quantity(units)100

MRP InputBill of Materials (BOM)Called as Production Structure TreeContains a list of all assemblies, subassemblies, parts and raw materials that are needed to produce one unit of finished product.Level 0X

Level 1B(2)C(1)

Level 2E(4)D(3) G(2) F(2)

Level 3H (4) I (5)

MRP InputBill of Materials

Example: Determine the quantities of B, C, D, E, F, G, H and I needed to assemble one unit of X

Answer:

MRP InputInventory RecordsInformation on the status of each item by time periodGross requirements, scheduled receipts, expected amount on hand;Details for each item: supplier, lead time, lot size;Changes due to stock receipts and withdrawals, canceled orders=> Must be accurate and up-dated

Inventory Status Record for an Item in Inventory

Item master data segmentPart No.DescriptionLead timeStd. CostSafety StockOrder quantityClassSetupCycleLast year's usageScrap allowanceCutting dataPointersEtc.Inventory status segmentAllocatedControl balancePeriod 1 2 3 4 5 6 7 8TotalsGross RequirementsScheduled receiptsProjected available balancePlanned order releasesSubsidiary data segmentOrder detailsPending actionCountersKeeping track

MRP ProcessingMRP Computer ProgramSteps to follow: Specify end item requirement by the master scheduleExplode them into time-phased requirement for assemblies, parts, and raw materials using the BOM offset by lead times;Determine net requirements in period t

MRP ProcessingStep 1: specify end item requirement

Step 2: Time-phased requirement

ItemXBCDEFGHIWeek132324211

X12345678Quantity(units)100

MRP ProcessingStep 2: Assembly Time chart

Week 1Week 2Week 3Week 4Week 5Week 6Week 7Week 8Procurement of HFabrication of DProcurement of ISubassembly BProcurement of EFinal assembly XProcurement of GSubassembly CFabrication of F

MRP Processing

Step 3: Determine net requirements in period t:

Net requirements in period t=Gross requirements in period t -Projected inventory in period t+Safety stock

MRP ProcessingStep 3: Determine net requirements in period t:Gross requirement: total expected demand for an item or raw material in a time periodProjected inventory: scheduled receipts at the beginning of a period plus available inventory from last period.Net requirements: actual amount needed in each time period.Planned-order releases: planned amount to order in each time periodPlanned-order receipts: quantity expected to be received by the beginning of the period in which it is shown

MRP OutputPrimary reports:Planned orders: amount and timing of future ordersOrder releases: authorization for executing planned ordersChanges: in date, quantity, cancellation, etc.Secondary reports:Performance-control reportsPlanning reportsException reports

ExampleA firm that produces wood shutters and bookcases has received two orders for shutters: one for 100 shutters and one for 150 shutters. The 100-unit order is due for delivery at the start of week 4 of the current schedule, and the 150-unit order is due for delivery at the start of week 8. Each shutter consists of two frames and four slatted wood sections, and its assembly takes 1 week. The wood sections are made by the firm, and fabrication takes 1 week. The frames are ordered, and lead time is 2 weeks. There is a scheduled receipt of 70 wood sections in week 1. Determine the size and timing of planned-order released necessary to meet delivery requirements under each of these conditions:Lot-for-lot orderingLot-size ordering with a lot size of 320 units for frames and 70 units for wood sections.

Development of MRPManufacturing resources planning (MRP II): planning production resources, that involves other functional areas of the firm in the planning process.

Enterprise resource planning (ERP): integration of standardized record- keeping, that allows different areas of an organization sharing information.

Exercise. An organisation produces X, which includes 3 parts A, B, and C and in particular quantity: 2 A, 1 B and 1 C. A is made from 1FB from 1D, 2E, 1G C from 2D and 2HD from 1FThe assembly time for each component and part is as followed:Unit X A B C D E F G HTime(weeks) 1 1 2 1 2 1 3 2 3Build up the master production schedule for X (required for delivery at the beginning of week 9)Make a production structure tree,Draw an assembly time chartThe organisation received an order of 300 X at the beginning of week 9, determine the net requirement of F and its planned-order released.