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Material Requirements Material Requirements Planning (MRP)Planning (MRP)

Professor Ahmadi

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Material Requirements Planning (MRP)Material Requirements Planning (MRP)

MRP is a MRP is a dependentdependent demand technique demand technique that uses bill-of material, inventory, that uses bill-of material, inventory, expected receipts, and a master expected receipts, and a master production schedule to determine production schedule to determine material requirement.material requirement.

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Inventory

Process stage

Demand Type

Number & Value Other

Raw Material WIP

Finished Goods

Independent Dependent

A Items B Items C Items

Maintenance Operating

Inventory ClassificationsInventory Classifications

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Forecast &Firm Orders

MaterialRequirements

Planning

AggregateProductionPlanning

ResourceAvailability

MasterProductionScheduling

ShopFloor

Schedules

CapacityRequirements

PlanningRealistic?

No, modify CRP, MRP, or MPS

Yes

MRP and The Production Planning ProcessMRP and The Production Planning Process

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Increased customer satisfaction due to Increased customer satisfaction due to meeting delivery schedules meeting delivery schedules

Faster response to market changesFaster response to market changes Improved labor & equipment utilizationImproved labor & equipment utilization Better inventory planning & schedulingBetter inventory planning & scheduling Reduced inventory levels without reduced Reduced inventory levels without reduced

customer servicecustomer service

MRP BenefitsMRP Benefits

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Evaluation of MRPEvaluation of MRP

Most beneficial to process-focused Most beneficial to process-focused systems that have long processing systems that have long processing times and complex multistage times and complex multistage production stepsproduction steps

Lead timesLead times must be reliable must be reliable Difficult to implementDifficult to implement

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MRP and JITMRP and JIT

MRP - a planning and scheduling technique with fixed lead times

JITJIT - a way to move material - a way to move material expeditiouslyexpeditiously

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MRP in ServicesMRP in Services

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

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List of components & quantities needed List of components & quantities needed to make product to make product

Provides product structure (tree)Provides product structure (tree)• Parents: Items above given levelParents: Items above given level• Children: Items below given levelChildren: Items below given level

Shows low-level codingShows low-level coding• Lowest level in structure item occursLowest level in structure item occurs• Top level is 0; next level is 1 etc.Top level is 0; next level is 1 etc.

Bill-of-MaterialBill-of-Material

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Example: Bill-of -Material for a MopedExample: Bill-of -Material for a Moped

The following product structure diagram The following product structure diagram represents the bill of materials for a dual-represents the bill of materials for a dual-carburetor Model 442 Moped.carburetor Model 442 Moped.

MOPEDMOPEDMOPEDMOPED

ENGINEENGINEASSEMBLYASSEMBLY

ENGINEENGINEASSEMBLYASSEMBLY

MOTORMOTORMOTORMOTOR CARBURETORCARBURETOR(2)(2)

CARBURETORCARBURETOR(2)(2)

GASGASTANKTANKGASGASTANKTANK

WHEELWHEELASSEMBLYASSEMBLY

(2)(2)

WHEELWHEELASSEMBLYASSEMBLY

(2)(2)

HUB HUB ASSEMBLYASSEMBLY

HUB HUB ASSEMBLYASSEMBLY TIRETIRETIRETIRE

FRAMEFRAMEFRAMEFRAME

Level 0Level 0

Level 1Level 1

Level 2Level 2

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Requirements for Effective Use of Requirements for Effective Use of Dependent DemandDependent Demand Inventory Models Inventory Models

Effective use of dependent demand Effective use of dependent demand inventory models requires that the inventory models requires that the operations manager know the:operations manager know the:• master production schedulemaster production schedule• specifications or bills-of-materialspecifications or bills-of-material• inventory availabilityinventory availability• purchase orders outstandingpurchase orders outstanding• lead timeslead times