Material Requirement Planning Kusdhianto Setiawan, SE, Siviløkonom Faculty of Economics – Gadjah Mada University

Objectives and Applicability of MRP MRP is a computerized inventory control and production planning system MRP is a computerized inventory control and production planning system MRP scheduled component items when they are needed – no earlier, no later MRP scheduled component items when they are needed – no earlier, no later When to use? When to use? dependent demand and discrete items dependent demand and discrete items complex products complex products job shops production job shops production assembly-to-order environment assembly-to-order environment

MRP Inputs The Master production schedule/MPS (master schedule), it specifies which end items or finished products a firm is to produce, how many are needed, and when they are needed driver of MRP process (figure 13.2) The Master production schedule/MPS (master schedule), it specifies which end items or finished products a firm is to produce, how many are needed, and when they are needed driver of MRP process (figure 13.2) Quantity represent production, not demand Quantity represent production, not demand Quantity consist of a combination of customer orders and demand forecast Quantity consist of a combination of customer orders and demand forecast The Product structure file, containt bill of materials for every item produced --- which component items need to be scheduled (figure 13.3) The Product structure file, containt bill of materials for every item produced --- which component items need to be scheduled (figure 13.3) Type of BOM: Type of BOM: Phantom Bill Phantom Bill Kit-Number/K-Bill Kit-Number/K-Bill Modular Bill of Material (Figure 13.4) Modular Bill of Material (Figure 13.4) The inventory master file,database of information on every item produced, ordered, or inventoried (Figure 13.3) The inventory master file,database of information on every item produced, ordered, or inventoried (Figure 13.3)

The MRP Process Netting: substracting on-hand quantities from gross requirements to produce net requirements Netting: substracting on-hand quantities from gross requirements to produce net requirements Lead Time Offsetting: substractiong an item’s lead time from its due date Lead Time Offsetting: substractiong an item’s lead time from its due date Explosion: determining requirements for lower level items. Explosion: determining requirements for lower level items. SEE EXAMPLE p SEE EXAMPLE p

MRP Outputs Purchase Order (PO) Purchase Order (PO) Work Order Work Order Reports; Planned Order Report, MRP Action Report Reports; Planned Order Report, MRP Action Report

Capacity Requirements Planning (CRP) It is a computerized system that projects the load from a given material plan onto the capacity of a system and identifies underloads and overloads --- Checking the feasibility of MRP ! It is a computerized system that projects the load from a given material plan onto the capacity of a system and identifies underloads and overloads --- Checking the feasibility of MRP ! How to level the load? How to level the load? Shifting requirements Shifting requirements Reducing requirements Reducing requirements Temporarily expanding capacity Temporarily expanding capacity

CRP Inputs The Planned Order Releases from MRP The Planned Order Releases from MRP Routing File --- which machines are required to complete an order from MRP plan, in what order, how long it takes... etc Routing File --- which machines are required to complete an order from MRP plan, in what order, how long it takes... etc Open order file --- which jobs have already been release to the shop but have not yet been completed Open order file --- which jobs have already been release to the shop but have not yet been completed CRP Output: Load Profile, compares released orders with work center capacity. CRP Output: Load Profile, compares released orders with work center capacity.

Some Definitions.... Capacity = Capacity = (no. machines or workers) x (no. shifts) x (utilization) x (efficiency) Utilization: the % of available working time that a worker spends working or a machine is running Utilization: the % of available working time that a worker spends working or a machine is running Efficiency: how well a machine or worker performs compared to a standard output level Efficiency: how well a machine or worker performs compared to a standard output level Load refers to the standard hours of work assigned to a facility Load refers to the standard hours of work assigned to a facility Load % = (Load/Capacity) x 100% Load % = (Load/Capacity) x 100%

Remedies for Under/Overload Remedies for Underloads Acquiring more work Acquiring more work Pulling Work ahead that is scheduled for later periods Pulling Work ahead that is scheduled for later periods Reducing normal capacity Reducing normal capacity Remedied for Overload Eliminating unnecessary requirements Eliminating unnecessary requirements Rerouting jobs to alternative machines or work centers Rerouting jobs to alternative machines or work centers Splitting lots between two or more machines Splitting lots between two or more machines Increasing normal capacity Increasing normal capacity Subcontracting Subcontracting Increasing the efficiency of the operation Increasing the efficiency of the operation Pushing work back to later time period Pushing work back to later time period Revising the master schedule Revising the master schedule

Manufacturing Resource Planning (MRP II) What does it include in its module? What does it include in its module? Forecasting Forecasting Customer order entry Customer order entry Production planning/master production schedulling (MPS) Production planning/master production schedulling (MPS) Product Structure/BOM Product Structure/BOM Inventory control Inventory control MRP MRP Capacity Planning Capacity Planning Shop Floor Control Shop Floor Control Purchasing Purchasing Accounting Accounting Financial Analysis Financial Analysis See Figure 13.8 See Figure 13.8

Problems with MRP MRP plans for material requirements first, capacity is afterthought --- too many manual adjustment are required, in some industries, the approach is wrong – constraints are difficult to relax... MRP plans for material requirements first, capacity is afterthought --- too many manual adjustment are required, in some industries, the approach is wrong – constraints are difficult to relax... Lead time in an MRP system is fixed Lead time in an MRP system is fixed The reporting requirements of MRP are excessive The reporting requirements of MRP are excessive

Others Softwares... ERP (Enterprise Resource Planning) ERP (Enterprise Resource Planning) SAP R/3 SAP R/3