material requirement planning


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Material Requirement Planning


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Presentation Transcript

Material Requirement Planning (MRP) :


Necessity of Materials Planning:

Necessity of Materials Planning Material Planning is necessary– to avoid over ordering on under-ordering of materials. To reduce unwanted expenses due to last minute ordering. To reduce capital locked up in excess inventory.

Independent and Dependent Demand:

Independent and Dependent Demand Independent Demand: Demand for final products. Dependent Demand: Demand fort items that are sub assemblies or component parts to be used in production of finished goods. Independent Demand A B(4) C(2) D(2) E(1) D(3) F(2) Dependent Demand

What is Material Requirements Planning (MRP)? :

What is Material Requirements Planning (MRP)? It is a production planning process that starts from the demand for finished products and plans the production step by step of subassemblies and parts. Materials Requirements Planning (MRP) is a set of techniques that takes the Master Production Schedule and other information from inventory records and product structure records as inputs to determine the requirements and schedule of timing for each item.

Where is MRP applicable? :

Where is MRP applicable? This inventory management system is appropriate for items that have a dependent demand . MRP is applicable for industries that offer a variety of finished products where the customer is allowed to choose among many different options. MRP is most appropriate when the manufacturing environment is complex and uncertain.

What Does MRP Do?:

What Does MRP Do? The main objective of MRP is to manage dependent demand items. MRP makes sure that dependent demand items on kept in stock. MRP maintains the optimal level of inventory that is most cost effective for a company. MRP is used to purchase new stock, deliver finished products, and plan the daily manufacturing processes.

MRP Inputs:

MRP Inputs Master Production Schedule (MPS) Bills of materials (BOM) Inventory status file Lead time

MRP Outputs:

MRP Outputs Primary reports Work orders Purchase orders Action notices or rescheduling notices Secondary reports Exception reports Planning reports Performance Control reports Inventory transaction

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MRP Inputs MRP Processing MRP Outputs Master schedule Bill of materials Inventory records MRP computer programs Changes Work orders Order release Exception reports Planning reports Performance- control reports Inventory transaction Primary reports Secondary reports

MRP Input - Bills of materials (BOM):

MRP Input - Bills of materials (BOM) A listing of all of the raw materials, parts, subassemblies, and assemblies needed to produce one unit of a product . BOM Shows way a finished product or parent item is put together from individual components . Parent item shown at highest level or level zero , Parts that go into parent item are called level 1 components and so on. Production planners explode BOM to determine the number, due dates, and order dates of subcomponents.

MRP Input - Bills of materials Example:

MRP Input - Bills of materials Example SR. NO. Part Name Part No. Material Qty 1 Sidewalk Special 001 - 1 2 Fiberglass board 0011 Fiberglass 1 3 Wheel assembly 0012 - 2 4 Wheel mount stand 00121 Plastic 2 5 Wheel 00122 Rubber 4 6 Locknut 00123 Steel 4 7 Spindle 00124 Steel 4

MRP Input - Master Production Schedule (MPS) :

MRP Input - Master Production Schedule (MPS) Based on actual customer orders and predicted demand Indicates when each ordered item will be produced in coming weeks, and in how much quantity. It is a plan specifying timing and quantity of production for each end item. MPS inputs come from sales and marketing . MPS covers about 1-3 months into the future.

MRP Input - Inventory Status File :

MRP Input - Inventory Status File Detailed information regarding the quantity of each item, available in hand, on order to be released, for use in various time periods. MRP system using inventory master file is used to determine the quantity of material available for use in a given period. If sufficient items not available , the system includes the item on the planned order release report . Also known as Inventory Master File

MRP Outputs:

MRP Outputs Primary reports Work orders / Planned orders - schedule indicating the amount and timing of future orders. Order Release - Authorization for the execution of planned orders. Action Notices or Rescheduling Notices - which orders are to be released, revised and canceled during the current time period

MRP Outputs:

MRP Outputs Secondary reports Performance control Reports – evaluate system operations . They aid in measuring deviations from plans, and also provide information to assess cost performance. Planning Reports – are useful to forecast future inventory requirements. Exception Reports – these help to find the major discrepancies such as late and overdue orders, excessive scrap rates, reporting errors, etc.

MRP Process:

MRP Process Exploding and Offsetting Gross and Net Requirements Releasing Orders Low level Coding and Netting

MRP Process 1 - Exploding and Offsetting:

MRP Process 1 - Exploding and Offsetting Lead time – it is the time needed to perform the process . It includes order preparation, queuing, processing moving receiving and inspecting time as well as any expected delays. Exploding the requirements – it is the process of multiplying the requirements by usage quantity of each item and recording the appropriate requirements throughout the product tree. Offsetting – it is a process of placing the exploded requirements in their proper periods based on lead time.

Material Requirements Planning Example:

Material Requirements Planning Example Component Lead Time Sidewalk Special - 1 week Fiberglass board - 3 weeks Wheel assembly - 1 week mount stand - 4 weeks Wheel - 1 week Locknut - 1 week Spindle - 2 weeks Component 1 st 2 nd 3 rd 4 th 5 th 6 th 7 th Sidewalk Specials Date needed 1 Boards Date needed 1 Order date 1 Wheel assembly Date needed 2 Order date 2 Wheels Date needed 4 Order date 4 Spindles Date needed 2 Order date 2 Mounting stands Date needed 2 Order date 2 Locknuts Date needed 4 Order date 4

MRP Process 2 - Gross and Net Requirements:

MRP Process 2 - Gross and Net Requirements Gross Requirement - Total expected demand of the product. Net Requirements - Actual amount needed in each time period. Net Requirements = Gross Requirement – available inventory Planned on hand - Expected inventory on hand at the beginning of each time period. Planned-order receipts - Quantity expected to received at the beginning of the period Planned-order releases - Planned amount to order in each time period.

MRP Process 3 - Releasing Orders:

MRP Process 3 - Releasing Orders Releasing an order – means authorization is given to buy the necessary material or to manufacturing of required component. Scheduled Receipts – are orders placed on manufacturing or on a vendor and represent a commitment to make or buy. Now, considering Scheduled Receipts, Net Requirement = Gross Requirement – Scheduled Receipts – available inventory

MRP Process 4 - Low level Coding and Netting:

MRP Process 4 - Low level Coding and Netting Netting – is a process in which any stock on hand is subtracted from the gross requirement determined through explosion, giving the quantity of each item needed to manufacture the required finished products. Low Level Code – is the lowest level on which a part resides in all bills of material. Low level codes are determined by starting at lowest level of bill of material and working up, recording the level against the part. If part exists on higher level, its existence on the lower level is already recorded.

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Time buckets - The column in an inventory record that represents a unit of time. It may be in days or weeks. Action bucket - The current time period. Action notices - Output from the MRP system identifying the need for an action, to avoid future problem. Planning Horizon – is the total number of periods in a record.

MRP example with Lead Time=2 and 1 level:

MRP example with Lead Time=2 and 1 level Periods (in weeks) 0 1 2 3 Gross requirements 35 Scheduled receipts 20 Projected on hand 10 10 30 Net requirements 5 Planned order receipts 5 Planned order releases 5 Inputs Outputs

Benefits of MRP:

Benefits of MRP Keep inventory levels to a cost-effective minimum . Keeps track of inventory that is used. Tracks the amount of material that is required . Set safety stock levels for emergencies. Determine the best lot sizes to fulfill orders. Set up production times among the separate manufacturing stages. Plan for future needs of raw materials .

Drawbacks of MRP:

Drawbacks of MRP Inaccurate information can result in mis-planning , overstock, under-stock, or lack of appropriate resources. The inaccurate master schedule will provide wrong lengths of time for production . Hence affecting planning. MRP systems can be costly and time-consuming to set up.

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