1. Materials Requirements Planning Manufacturing Resources Planning
(MRP I)
Manufacturing Resources Planning
(MRP II)

2. Manufacturing Systems History
1950’s Stock Replenishment using EBQ, ROL, ROQ, etc.
1960’s MRP - Forward planning of dependent demands.
1970’s MRP - Rescheduling to keep order dates valid.
JIT - Manufacturing in Japan.
1975’s Closed loop MRP with feedback.
OPT scheduling of bottlenecks.
1980’s MRP2/RDBMS JIT linkages.
1985’s Simulation and Factory Management's Systems.
1990’s Computer Integrated Manufacturing + Enterprise Integration
2000+ ERP, Extended Enterprise & Supply Chain Integration

3. Dependent Demand
When it is directly related to, or derives from, the demand for another inventory item or product
For example: Demand for a TV component is dependent upon the demands for TV sets
OR where demand is ‘derived’
For example: The demand for TV sets at the factory is determined by demand from the retailer which is derived from ultimate demand in the market place

4. Independent Demand When demand is unrelated to demand for other items.
Or When it is not a function of demand for other items.
In these cases we use Re-order point system OR Re-order cycle system

5. MRP Structure Master Production Schedule Bill of Materials
MRP Analysis
Stock
Status
Reports

6. MPS - Purposes Links production plans to day to day operations
Forms basis for managerial control
Basis for integration of activities
Demand management functions

7. Master Schedule for Product X
Output per week
Weeks into Future

8. Spare Parts Demand for Assembly A
Firm Orders
Forecast Orders
Order Quantity
Weeks into Future

9. Inputs into the MPS Master Production Schedule Known Orders Forecast
Deamnd
Key Capacity
Constraints
Sister Plant
Demand
Master
Production
Schedule
Inventory
Levels
R&D
Demand
Spares
Demand
Exhibition/
promotion
Requirements
Safety Stock
Requirements

10. Master Schedule with Variable Length Time Periods
Today
Future
MASTER SCHEDULE
Days
Weeks
Months
Quarters

11. Product Structure for chair
Level 0:
Finished
Product 4 1 1 2 2 1
Frame
* Back
Cushion
* Seat
Cushion
* Wood
End
Cross-piece
(Chair)
Level 1:
Sub-
assembly
0.45
1.4
0.6
0.5 3 3
0.7
0.55
2.2
* Webbing
Level 2:
Raw
Material
* Tube
* Fabric
* Foam
* Wood
* Fastener
Notes: * Indicates common item with settee. The number to the
left of each link shows the number/quantity of the lower -level
item needed in the manufacture of the higher-level item.

12. Bill Of Material - BOM
Maintains Parts and Structures used for Product definition in a manufacturing company
Parts in a BOM, include Assemblies, Sub-assemblies, parts, bought out items, and materials
Each part needs a unique identification - number, brief description, and other reference codes
The structure shows the relationships of one part with another
The BOM is not a parts list, but defines how a product is made
BOM is usually the first module to be installed

13. BOM Outputs SINGLE LEVEL BOM
Shows the structure of a BOM one level down.
MULTI LEVEL BOM
Shows the structure of a BOM through all levels.
INDENTED BOM
Where the part number within a multi level BOM is displaced by one digit for each level.
Assembly
Sub Assembly
Part
Sub Assembly
Part

14. Uses of BOM Product Definition Manufacturing Instructions
Engineering Change Control
Services Parts Support
Materials Procurement
Production Scheduling
Parts Kitting
Costing

15. Inventory Analysis Inventory classification by part or material type
Annual usage by quantity and value
Balance ‘on hand’ by quantity and value
Turnover ratio
Active inventory value (balance on hand not exceeding gross usage * unit cost)
Percent active inventory
Inactive inventory amount & value
Inventory valuations

16. Stock condition route for a part
Order
Goods
receiving
uninspected
Goods
receiving
inspected
Raw
Material
Store
Work in
Progress
Finished
Parts
Store
Free
Finished
Parts
Store
Allocated
Final
Assembly
Kitting
Dept
Dispatched

17. Work in Progress Stock Condition
Raw
Material
Store Op 1
Cast Op 2
Mill Op 3
Grind Op 4
Inspect Op 5
Paint Op 6
Inspect
Finished
Parts
Store

18. MRP LOGIC Master Production Schedule MRP explosion using BOM
Lower level gross requirements
Net requirements - netting out Inventory & scheduled receipts
Applying order policies
Order release dates obtained by off setting lead times
Planned / confirmed orders
Rescheduling

19. Definition of MRP Master Production Schedule (MPS) Bill of
Materials (BOM)
MRP Analysis
Inventory
Status Data
Release
Orders
Planned
Orders
Reschedule
Orders

20. MRP Basic MRP handles material aspects of production control
Simple MRP systems based on MPS, BOM, inventory records and material requirements
A number of software companies have developed inter-related files to provide a more complete picture
MRP I assumes that resources available are constant

21. MRP II called a closed loop system a ‘push’ system
Forecasts are generated at the outset and manufacturing plan developed to meet these demands
The plan then drives the manufacture through the issue of work orders

22. MRP II
Essentially a computerized database of parts, components, finished goods, WIP and requirements
Lead time and relationships between parts are held in a database
The computer then calculates the best way to meet the MPS (which is based on forecasts & firm orders etc.)

23. MRP2 - Manufacturing Modules
Production
Planning
Forecasts
Resource Requirement
Planning
Rough Cut
Capacity Planning
Master Production
Scheduling
Customer
Orders
Material Requirement
Planning
Capacity Requirement
Planning
Production Activity Control
Purchasing
Dispatching
Input/Output Control 7

24. MRP best suited to companies making discrete multi-component items
it provides mgt with an accurate record of inventory related activities
it enables mgt to make accurate predications and highlight problems
it enables optimisation of resources
inventory levels or lead times generally reduced
mgt commitment essential to make a positive impact

25. MRP II system works as follows:
MPS is drawn up (based on forecasts, orders etc.)
MPS is checked for feasibility in gross capacity terms (rough cut capacity planning).Once a feasible plan is agreed it is input into the materials requirements planning module
Material requirements are calculated and schedule of quantity and time determined
These requirements are then ‘exploded’ in the BOM file (which provides a breakdown of a product into its constituent parts)

26. MRP II system works as follows: contd..
Net requirements are then calculated by deducting available inventory from gross requirements.
In a closed loop system their capacity requirements would be checked against resource availability. (estimated capacity planning) with user able to decide on different variables such as lot sizes and start dates.
Finally works orders are fed into the live system where a schedule is calculated to take account of the day-to-day situation on the shop floor.

27. Materials Requirement Planning (MRP)
Assume currently week 1
Orders are:
Wk settees
Wk chairs
Wk replacement seat cushions
GR Gross requirements
NR Net requirements
OH On-hand stock
OD Orders Due
SS Safety Stock
PO Planned Orders/start

28. MRP example: For chair GR = 350 (wk 9) NR = GR - OH - OD + SS
Since lead time 1 wk, PO = 345 (wk 8)
For settees
GR = 200 (wk 8)
= = 190 (wk 8)
Since lead time 1 wk, PO = 190 (wk 7)

29. MRP example:
Cascading down to level 1 items, all items should be considered, but for the purposes of this illustration only cushions will be considered.
For back Cushions
GR 190 x 2 = 380 (wk 7)
(PO for 190 settees in wk 7, 2 back cushions/settee)
NR = = 335 (wk 7)
Since lead time 2 weeks, PO = 335 (wk 5)
GR = 345 (wk 8)
(PO for 345 chairs in wk 8)
NR = (wk 8)
Since Lead Time 2 wks, PO = 345 (wk 6)

30. MRP example: For seat cushions GR = 190 x 2 + 100 (wk 7)
(PO for 190 settees in wk 7, 2 seat cushions/settee
+ 100 replacement cushions)
NR = (wk 7)
Since lead time 2 weeks, PO = 435 (wk 5)
GR = 345 (wk 8)
(PO for 345 chairs in wk 8)
NR = = 345 (wk 8)
Since Lead Time 2 wks, PO = 345 (wk 6)

31. MRP 2 Modules MANUFACTURING BUSINESS/FINANCE Bill of Materials - BOM
Master Production Scheduling - MPS
Inventory - INV
Material Requirements Planning - MRP
Capacity Requirements Planning - CRP
Production Activity Control - PAC
Purchasing - PUR
System Control - SYS
BUSINESS/FINANCE
Order Processing - ORD
Costing & Cost Control - COST
Sales Ledger - SL
Purchase Ledger - PL
General/Nominal Ledger - NL
Financial Statements -FIN
Asset Management - AM
Payroll/Salaries- PAY

32. Advantages of MRP2 Reduced lead times
Inventory turnover increased, value of inventory reduced
Improved scheduling of purchased & made in items
On time deliveries improved
Greater throughput
Costs reduced

33. Summary
A tool enables managers to plan control a manufacturing business
A formal system for scheduling the needs of marketing, production and materials
A means of integrating management functions and their goals
The integrated planning tool for more advanced manufacturing technologies and CIM
A means of getting better results in business