Material Requirements Planning (MRP) Professor Ahmadi

Material Requirements Planning (MRP) MRP is a dependent demand technique that uses bill-of material, inventory, expected receipts, and a master production schedule to determine material requirement.

Inventory Classifications Process stage Demand Type Number & Value Other Raw Material WIP Finished Goods Independent Dependent A Items B Items C Items Maintenance Operating

MRP and The Production Planning Process Forecast & Firm Orders Material Requirements Planning Aggregate Production Resource Availability Master Scheduling Shop Floor Schedules Capacity Realistic? No, modify CRP, MRP, or MPS Yes

MRP Systems - Input and Output Inventory Purchasing Master Production Schedule Bill of Materials Material Requirements Planning System Status Planned Order & Other Reports Item Master Data

MRP Benefits Increased customer satisfaction due to meeting delivery schedules Faster response to market changes Improved labor & equipment utilization Better inventory planning & scheduling Reduced inventory levels without reduced customer service

Lead times must be reliable Difficult to implement Evaluation of MRP Most beneficial to process-focused systems that have long processing times and complex multistage production steps Lead times must be reliable Difficult to implement

MRP - a planning and scheduling technique with fixed lead times MRP and JIT MRP - a planning and scheduling technique with fixed lead times JIT - a way to move material expeditiously

MRP in Services Can be used when demand for service or service items is directly related to or derived from demand for other services restaurant - rolls required for each meal hospitals - implements for surgery etc.

List of components & quantities needed to make product Bill-of-Material List of components & quantities needed to make product Provides product structure (tree) Parents: Items above given level Children: Items below given level Shows low-level coding Lowest level in structure item occurs Top level is 0; next level is 1 etc.

Example: Bill-of -Material for a Moped The following product structure diagram represents the bill of materials for a dual-carburetor Model 442 Moped. MOPED Level 0 ENGINE ASSEMBLY GAS TANK WHEEL ASSEMBLY (2) FRAME Level 1 MOTOR CARBURETOR (2) HUB ASSEMBLY TIRE Level 2

Requirements for Effective Use of Dependent Demand Inventory Models Effective use of dependent demand inventory models requires that the operations manager know the: master production schedule specifications or bills-of-material inventory availability purchase orders outstanding lead times