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Material Requirement

Planning

By

GROUP-8Debojit Roy H66Sritanu Das Mahapatra H57Abhisek Sahu H3Krishnakant Pandey H25

Biswajit Ghosh H12

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Material Requirement Planning

MRP is a systematic planningMRP is a systematic planning--andand--control methodologycontrol methodologyfor production and inventory.for production and inventory.

Specifically, it is a procedure for planning andSpecifically, it is a procedure for planning andcontrolling the raw material, purchased parts, and workcontrolling the raw material, purchased parts, and workin progress (WIP) inventories required in manufacturingin progress (WIP) inventories required in manufacturinga product.a product.

MRP is designed to answer three questions:MRP is designed to answer three questions: whatwhatisisneeded,needed, how muchhow much is needed, andis needed, and whenwhen is it needed.is it needed.

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END PRODUCT

COMPONENT OF END PRODUCT

RAW MATERIAL

Order Point

Time

LTLT

TimeLT

TimeLT

Independent and Dependent DemandInventory

Order Point

Order Point

LT

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The Benefits of MRPThe Benefits of MRP

Inventory reduction.Inventory reduction.

Reduction in production & delivery time.Reduction in production & delivery time.

Increased efficiency.Increased efficiency.

Faster response to market changes.Faster response to market changes.

Improved labour & equipment utilization.Improved labour & equipment utilization.

Better inventory planning & scheduling.Better inventory planning & scheduling.

Reduced inventory levels without reduced customerReduced inventory levels without reduced customer

service.service.

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WHENWHENT

OT

O USE MRP?USE MRP?

It is useful for..

Dependent Demand (table top, table leg).

Discrete Demand (demand for leg at last).

Complex Products (subassembly before final assembly).

Assemble-to-Order (major assemblies & sub assembliesis done in advance).

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Limitations of Order-point

techniques

As each part in inventory is managed separately &

independently of all others. So even though these

techniques can provide extremely high service level forindividual parts, the service level for combination of Parts

(subassemblies) & for the complete end product can be

low.

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Overview of the MRP System

MasterProductionSchedule

MaterialRequirements

Planning

ProductStructure

File

ItemMaster

file

PlannedOrder

Release

Workorders

PurchaseOrders

Reschedulingnotices

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Information Needed for MRP

It collects information through.

1.1. Master Production Schedule (MPS),Master Production Schedule (MPS),

2.2. The Bill of Material (BOM), ingredients for the endThe Bill of Material (BOM), ingredients for the endproduct,product,

3.3. Inventory Data,Inventory Data,

4.4. Balance on Hand (BOH),Balance on Hand (BOH),

5.5. Scheduled receipts,Scheduled receipts,

6.6. Purchasing/Fabrication lead times.Purchasing/Fabrication lead times.

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MRP Inputs

Master Production Schedule

Product Structure File Inventory Master File

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Product Structure File

Bill ofMaterials:

It is a materials list that providesinformation useful to reconstruct themanufacturing process. It is the masterproduct definition that contains asdesigned information

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Bill of materialBill of material

LEVELLEVEL PRODUCTPRODUCT LEAD TIMELEAD TIME

Level 0Level 0 TwoTwo --drawer filedrawer filecabinetcabinet

Level 1Level 1 Case (1)Case (1) 2 weeks2 weeks

Level 2Level 2 Drawer slide (4)Drawer slide (4) 3 weeks3 weeks

Formed case (1)Formed case (1) 2 weeks2 weeks

Level 3Level 3 Sheet steel (1)Sheet steel (1) 4 weeks4 weeks

Level 1Level 1 Drawers (2)Drawers (2) 1 week1 week

Level 2Level 2 Formed drawer (1)Formed drawer (1) 2 weeks2 weeks

Handle (1)Handle (1) 3 weeks3 weeks

Support rollers (2)Support rollers (2) 3 weeks3 weeks

Level 3Level 3 Sheet steel(1)Sheet steel(1) 4 weeks4 weeks

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Master Production Schedule

Schedule of Finished Products

Represents Production, not Demand

Combination of Customer Orders and Demand Forecasts

What Needs to be Produced

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Inventory Master File

On-Hand Quantities.

On-Order Quantities.

Lot Sizes.

Safety Stock.

Lead Time.

Past-Usage Figures.

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Product structure treeProduct structure tree

TwoTwo--Drawer File CabinetDrawer File CabinetLevel 0Level 0 Two drawer

File cabinet

Case(1)2 week

Drawers(2)1 week

Drawer slide(4)3 week

Formed case(1)2 week

Sheet steel(1)4 week

FormedDrawer(1)

2 weekHandle(1)

3 week

SupportRollers(2)3 week

Sheet steel(1)4week

Level 1Level 1

Level 2Level 2

Level 3Level 3

Level 0Level 0

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Drawer Subassembly Requirement

WEEKWEEK 11 22 33 44 55 66

GROSSGROSSREQUIREMENTSREQUIREMENTS

2020 3030 4040 1010 5050 6060

SCHEDULEDSCHEDULED

RECEIPTSR

ECEIPTS

00 00 00 00 00 00

BALANCE ON HANDBALANCE ON HAND9090

7070 4040 00 --1010 --5050 --6060

PLANNEDPLANNED--ORDERORDERRELEASERELEASE

00 00 1010 5050 6060 00

weekweek 11 22 33 44 55 66

quantityquantity 1010 1515 2020 55 2525 3030

MPS for two-drawer file cabinet

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Description

90 drawer subassemblies are currently in hand forrequirement in first 3 week.

Ending balance on hand = beginning BOH + scheduledreceipt gross requirement.

In week 4 negative inventory balance indicates a netrequirement for drawer subassemblies.

The net requirements will trigger planned-order releasesfor more drawer subassemblies in earlier period.

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Description

Lot for lot method generating the planned quantitiesin each period value by value directly from the netrequirements in subsequent period, with no economicbatching of orders, is called the lot for lot method.

Time phasing the process of subtracting an item'slead time from its due date to determine when an ordershould be released. Time-phasing coordinates the

quantity of parts and components held in inventory withassemble or final production needs as determined bythe MPS.

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SUPPORT ROLLER REQUIREMENTSWEEKWEEK 11 22 33 44 55 66

GROOS REQUIREMENTGROOS REQUIREMENT 00 00 2020 100100 120120 00

SCHEDULED RECEIPTSSCHEDULED RECEIPTS 00 4040 00 00 00 00

BALANCED ON HAND 60BALANCED ON HAND 60 6060 100100 8080 --2020 --120120 00

PLANNEDPLANNED--ORDERORDERRELEASERELEASE

2020 120120 00 00 00 00

week

quantity

1 2 3 4 5 6

0 0 10 50 60 0

Drawer subassemblies

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Two important conceptsTwo important concepts

Planned order releases at higher levels generate grossPlanned order releases at higher levels generate grossrequirements at lower levels.requirements at lower levels.

Inventories of higher level subassemblies alreadyInventories of higher level subassemblies alreadyinclude the necessary lower level components, and thisinclude the necessary lower level components, and thisfact is automatically allowed for by the net requirementsfact is automatically allowed for by the net requirementscalculation.calculation.

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Regeneration vs. net change

Regeneration

Complete replanning of requirements and update ofinventory status for all items

High data processing efficiency

Usually initiated by weekly update of master schedule

Net change

Daily update based on inventory transactions

More responsive to changing conditions

Requires more discipline in file maintenance

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Manufacturing Resource Planning

(MRP II)

Manufacturing Resource Planning (MRP II) is

defined as a method for the effective planning of allresources of a manufacturing company. Ideally, itaddresses operational planning in units, financialplanning in dollars, and has a simulation capability toanswer "what-if" questions and extension of closed-loopMRP.

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Business Planning

Sales Planning

Production Planning

ResourcesOK?

Master Scheduling

Material Planning

Capacity Planning

PlanningOK?

PerformanceMeasurement

Shop Floor Control

Purchasing

Objectives

Demands

Routing

Inventory Status

Bills of

Material

Products

Materials

Capacity

Parts

Hours

Accountability

Objectives

Top ManagementPlanning

OMP

OperationsManagement

Execution

Yes

No

No

Yes

FE

EDB

ACK

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Just-in-time (JIT)

A highly coordinated processing system in which goods

move through the system, and services are performed,

just as they are needed.

In short, the just-in-time inventory system is all about

having the right material, at the right time, at the right

place, and in the right quantity without the safety net of

Inventory, the implications of which are broad for theImplementers.

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History of JIT

The technique was first used by the Ford Motorcompany as described explicitly by Henry Fords MyLife and Work(1922)

The technique was subsequently adopted andpublicised by Toyota Motor Corporation of Japan as partof its Toyota Production System (TPS).

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Benefits of JIT

The benefits of JIT are listed below.The benefits of JIT are listed below.

Lower stock holding means a reduction in storage spaceLower stock holding means a reduction in storage spacewhich saves rent and insurance costswhich saves rent and insurance costs

As stock is only obtained when it is needed, lessAs stock is only obtained when it is needed, lessworking capital is tied up in stockworking capital is tied up in stock

There is less likelihood of stock perishing, becomingThere is less likelihood of stock perishing, becomingobsolete or out of dateobsolete or out of date

Avoids the buildAvoids the build--up of unsold finished product that canup of unsold finished product that can

occur with sudden changes in demandoccur with sudden changes in demand Less time is spent on checking and reLess time is spent on checking and re--working theworking the

product of others as the emphasis is on getting theproduct of others as the emphasis is on getting thework right first timework right first time

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Problems of JIT

There is little room for mistakes as minimal stock iskept for re-working faulty product.

Production is very reliant on suppliers and if stock is notdelivered on time, the whole production schedule can bedelayed .

There is no spare finished product available to meet

unexpected orders, because all product is made to meetactual orders however, JIT is a very responsivemethod of production.

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MRP vs. JIT

For a company which is small and just starting up I feel anFor a company which is small and just starting up I feel anMRP ordering system would be better suitedMRP ordering system would be better suited if youif youimplemented JIT then as a small company you would beimplemented JIT then as a small company you would betrying to break into a market, if the JIT system goes wrongtrying to break into a market, if the JIT system goes wrong(as I am sure we all agree this is very risky) then youll be un(as I am sure we all agree this is very risky) then youll be un--able to get your product on the shelves for customers to buyable to get your product on the shelves for customers to buyand if this happened on a regular occasion then yourand if this happened on a regular occasion then yourreputation from consumers wont be goodreputation from consumers wont be good which is criticalwhich is criticalfrom a new companies point of view.from a new companies point of view.

On the other handOn the other hand being a large reputable company with abeing a large reputable company with asolid reputation and brand image maybe the JIT systemsolid reputation and brand image maybe the JIT systemshould be implemented as this type of company will be able toshould be implemented as this type of company will be able toinvest at making this system a success, as JIT dramaticallyinvest at making this system a success, as JIT dramaticallyreduces cost and waste these savings will influence the pricereduces cost and waste these savings will influence the price

of the product in order to compete with other competitors.of the product in order to compete with other competitors.

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Summary

In the era of computer and IT, it is necessary to usenew technologies for fester growing organization. Anycompany wants to lead in the competetitive market by

introducing qualitative product with in a short period oftime. Like that in manufacturing organization MRPsystem helps to reduce the manufacturing time of aproduct by insuring the availability of materials forproduct assembly in the necessary quantities at therequired time. It also help to reduce raw materialpurchasing ,purchases parts & working processinventory. So MRP uses reducing inventory cost,reducing completion time of manufacturing withmaintaining quality. It provides customer, a greaterreturn value of their money.