Development of a Materials Requirements Planning (MRP

Development of a Materials Requirements Planning (MRP) Software.

V.O. Oladokun, Ph.D: and O.A. Olaitan, M.Sc.

Department of Industrial and Production Engineering, University of Ibadan, Ibadan, Nigeria.

E-mail [email protected] ,

ABSTRACT

Lack of affordable, efficient, and user friendlyinventory management tools, for adequateplanning has been identified as a major cause ofthe high inventory cost in many Nigerianmanufacturing firms. This study focuses on thedevelopment of a Materials RequirementsPlanning (MRP) that can be used by the localindustries for inventory management in a job shopmanufacturing environment. Four types of lot-sizing techniques were analyzed and MRPalgorithms developed for each of these lot-sizingtechniques A process of Bill of Materials (BOM)explosion was developed and incorporated. Anoverall flow chart of the MRP process sequencesand a graphical user interface (GUI) basedsoftware of the MRP process was developedusing Microsoft Visual basic. Evaluation tests ofthe software were carried out using variousproducts ranging from those with simple structureof single product to complex structure withmultiple products sharing common items. Thesoftware was shown to be user friendly and allowfor easy data input and output allowing forproduct structure to be saved and retrieved forfuture planning.

(KeywordS inventory, MRP. lot-sizing. software,planrunq)

INTRODUCTION

Materials Requirements Planning (MRP) is acomputer-based production planning andinventory control system which is concerned withboth production scheduling and inventory control.It is a material control system that attempts tokeep adequate inventory levels to assure thatrequired materials are available when needed.The main purpose of MRP software is to facilitatethe calculation of requirements of materials andtiming (Slack et al , 2001) by converting threeinputs, bill of material, inventory data and masterproduction schedule, into two main outputs

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namely planned order releases and reschedulenotices (Lunn and Neff, 1992). Thus it is atechnique for determining the quantity and timingfor the acquisition of dependent demand itemsneeded to satisfy master production schedulerequirements.

MRP has been of one the productivity tools usedby industries in the developed economies tocreate competitive advantage in the globaleconomy. It has played important roles ininventory management of manufacture ofcomplex industrial products (Schuster et al.,2000). For instance the number of MRP Systemsin use by American Industry grew from a handfulin the early 1960's to 150 in 1971. By 1981, thenumber of MRP Systems in the USA is reportedto have' risen to over 8,000 and by 1989 $1.2Billion worth of MRP software was sold to theAmerican Industry (Ozgur et al., 2006).

While computer based production and inventorysystems have been massively deployed todevelop the economies of the highly industrializednations, Nigeria and other developing nationshave not taken advantage these useful computer-based integrated manufacturing tools in herproduction systems (Ogendegbe et al., 2002;Oladokun et al., 2009; Charles-Owaba andOladokun, 2007).

There is the need to develop MRP Systems thatare tailored towards the peculiar environment ofthe Nigerian economy. Prevailing factors such asepileptic power supply can affect the deliverydates from suppliers; a company with a robustMRP can maneuver within such uncertainenvironment. The need for locally developedMRP Systems is therefore important. Theadoption of such locally developed industry-friendly MRP software that can suit the need ofsmall scale enterprises would help theseindustries to be able to confidently make deliverycommitments and satisfy them and also reducethe amount of resources tied down to inventory.

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MRP is generally applicable in situations ofmultiple items with complex bills of materials andis especially suited to manufacturing settingswhere the demands of many of the componentsand subassemblies depend on the demands ofitems that face external demands. Whiledemands for end items are independent thedemands for components used to manufactureend items depend on the demands of the enditems. The distinctions between independent anddependent demands are important in classifyinginventory items and in developing systems tomanage items within each demand classification(Starr, 1996)

Essentially, MRP systems were developed foreffective and efficient management of dependentdemand items. While MRP is not useful for jobshops or for continuous processes that are tightlylinked (Volman et al., 1997), the MRP system issuitable for products that do not satisfy the orderpoint policy (OPP) models, wherein the demandof the end product is independent or an endproduct orders may be placed periodically(Starr,1996).

MRP systems depend on information input fromother planning functions components. The MasterProduction Schedule (MPS) is a significant inputthat drives the MRP system. Primarily, MPSidentifies the quantity of the particular productsthat manufacturer is going to produce bycombining two independent demands namelycustomer orders and forecasted demand.Sources of MPS data include forecast, firmcustomer orders, safety stock requirement andinternal demands. In actual practice and in theproduction management literature the use offorecasting is generally an accepted input intomaster production scheduling (Campion, 1982)

Bill of Material (BOM) is another input of MRPsystem, which clarifies the structure of anindependent demand item (Slack et al., 2001).Another prerequisite for an effective MRP systemis a correct inventory status record The inventorystatus records contain the status of all items ininventory, including on hand inventory andscheduled receipts. These records must be keptup to date, with each receipt, disbursement, orwithdrawal documented to maintain recordintegrity.A key variable in MRP system design is theselection of lot-sizing rule (how much to order)based on the lead time. The problem of lot sizingis one of satisfying the requirements while trying

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to minimize holding and setup costs. There arebasically two major classes of lot sizingtechniques namely Static and Dynamic A staticlot-sizing rule orders the same quantity each timean order is placed and often generating higheraverage on-hand inventory for extra safety stock(Sternberqe and Napier, 1980).

Dynamic decision rule changes the order quantitywith each order such that each order is just largeenough to prevent shortages over a specifiedtime period by tying lot-size to grossrequirements, It generally causes instability withlower-level components unable to respondsufficiently fast to changes in requirements (Biggs1979; Lynn, 2006).

Vollman et al., (1997) recommend the use ofdifferent lot-sizing rules for different levels in theBOM, with Fixed Order Quantity (FOQ) for enditems, either FOQ or Lot For Lot (LOT) forintermediate levels, and Periodic Order Quantity(POQ) for the lowest levels so as to avoid thepropagation of the bullwhip effect to the lowestitems. This approach has been adopted in thiswork

METHODOLOGY

The methodology used in developing theproposed MRP software adopts the following 4components of the traditional (Mall, 2004) systemdevelopment methodology namely, 1) SystemAnalysis 2) System Development 3) SystemTesting, and 4) System Deployment.

System Analysis

This involves the analysis of how the variousinputs to the MRP are combined, The underliningrules for deriving the Order Releases, the lot-sizing algorithms and the compression techniquefor handling complexities of multi-occurring itemswere analyzed for 'programming Flow chartswere developed for the various instances of inputcombinations. The following notations have beenadopted

NOTATIONS

GRLT

Gross RequirementLead Time

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SROCLot SizePOQF.O.QLF.LM.O.QQPM(N.Rlc

Scheduled receiptOrder ReceiptLot Sizing TechniquePeriodic Order QuantityFixed Order QuantityLot for LotMultiple Order QuantityOrdered quantity of a F.O.QPeriod of a P.O.QOrdered quantity of a M.OQNet Requirement of Currentperiod CProjected On Hand in the period(C+1)Order release in previous period(C- LT)

Specification interface, MPS! Inventory Status!MRP output interface, Order Releases Outputand the Help file The design is done to ensurethe ease of verification and correction ofmistakes. The Object Oriented Programmingtechnique was used to avoid unnecessaryrepetition of procedures for those items that sharesimilar lot sizing technique. Microsoft Visual basic6.0 was adopted in developing the software whichis compatible with the Microsoft windowsoperating system.

For ease of future improvement andmaintainability comments on each block of codesare included. A help file, which explains to theuser on how to use the software and thelimitations of the software such as the maximumnumber of period, maximum number of productsand items it can be used in planning has beenincluded. It explains how to enter data in thevarious interfaces and how result can be read.The help file can be accessed by simply pressingthe F1 key. Refer to (Olaitan, 2008) full details ofthe codes.

The MRP processing logic analysis is assummarized in Figure 1 with associated flowchartshown Figure 2. The flowchart of the itemcompression logic is shown Figure3

(P.O.H)c.,

(O.Rlcu

System Development

System Development involves operationalizingthe process conceptualized in the precedingstage through the software interface developmentand algorithm coding The coding consists of setsof instructions that are executed by the programwhen the user clicks on a control. The MRPsoftware has all the interfaces combined in onescreen for ease of data input and result display.

The interfaces areinterface, 80M

SpecificationComponent

Step I: The user speci lies the panning horizun (number of periods) and the name of the product.Step 2: The user draws the product structure.Step 3 a: For each item starling with the end items the user enters the 1'011. SR. I.T and (II{ (lor end items)Step 4: Product structure Analysis is carried out. lur multiple occurring items Step 20 I. illustrated in figure? is adopted for the

M RP compression technique.

the MRPinterface,

Step 5: Starting from the end item. the lot si/.ing technique and the associated algorithm selected. Four lot sizing rules. thePeriodic Order Quantity (P.O.Q). the Fixed Order Quantity (F.O.Q). the Lot tor Lot (L.F.I.). and the Multiple OrderQuantity (M.O.Q) rules are available in the MRI' system.

Step 6: Obtain the GR of non end items from their direct parent by multiplying the Order Releases of the direct parents by thenumber of units of the child item that goes into the parent.

Step 7: If a component occurs more than once the Order Release arc added.Step 8: System displays the periodical Order Release lor each of the items. In cases where the Order Release falls before

planning period. it shows the number of weeks by which the order should be expedited in order to meet up with themaster production schedule.

Multi-Occurring Item Compression TechniqueStep 201: (Compression Technique) tor ,I multi-occurring item at a level. it is checked to know if it is at the lowest

level. If it is not the 1011est level the (G.R) only is calculated and added to the GR obtained at the higher levelwhere it occurs. At the 1011est pumt of occurrence. the ORs arc calculated using the accumulated GR.

Figure 1: MRP Processing Logic

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INPUTEnd Items

G.R, L.T., S.R, P.O.H, LotSize, No. of units.·

ComponentsL.T., S.R., P.O.H., Lot Size,

No. of units.~-----

IF P.O.QEnter value of P

G!.I£.I! I.• !.l:.lll!fikgw.r s m£!11.§.Pcrio...Q~

N.R ; G R - S.R-

PO"

Calculate NetRequirements for

all the PeriodsN.R ; G.R - S.R-

P.O."

B

Calculate NetRequjrements

PeriodicallyN.R; G.R - S.R-

P.O."

Calculate NetRcquirements

PeriodicallyN.R;G.R-S.R-

P.O."

NO O.R in L.T periodsbefore prescnt

period = oM, wheren is an integer thatmultiplies with M to

give the lowestmultiple of M that is

greater than N.R.

NO

Figure 2: MRP Processing Logic.


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A

Check numbor ofoccurrence of

item

Start level bylevel procossing

for oach itemchock

NI0---<

Calculate the G.R and addto previously calculatedG.R of similar items andcontinue until tho last is

roachod.

Calculate the G.Rand add toprovrcustv

calculated G.R ofsimilar items

Follow appropriatelot-sizinq technique tocalculate orderrcleases quantity andtiming from netrequirement

Figure 3: MRP Compression Process.

The MPS, weekly Gross Requirement, ProjectedOn Hand and Scheduled Receipt are the inputwhile the MRP output includes the OrderReleases and Order Receipts while Projected OnHand and Scheduled Receipt constitute theInventory Status file. After all the necessaryExplosion and Netting when Order Releases forall items have been determined a compilation ofall Order Releases can be displayed on thisInterface. It also shows the overdue orders whichmay need to be expedited.


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Systems Testing and Results

A critical step in the system developmentprocess, system testing and debugging, revolvesaround ascertaining the integrity of the systemoutput. System testing and debugging of softwarewas done to identify errors and possible areas ofimprovements in the software. The softwareaccuracy was tested using MRP computations forthree product types namely a bicycle structure, alawn mower, and a set of garments. The softwareoutputs were compared with results of manualcalculations to verify its accuracy in handlingsimple, complex one and multiple items under thefour lot sizing techniques.

1

~;,#;'jj'~'\Wli;rr~~

. .... ".

,,,,

I11-. _------~~ ..~'. :...

'" ••.•..,••t ~~.

·:t .•.,.""= .... :~::;~~5.:~:;,!J~.l'b.: _ps/ lUVCHUO''7HI.tuoV NTR'''Oldput ' ••ht.·r ••.•...••

••.•.•",t!,,'" H•• ',,,.

Figure 4: 'Interface for the Software.

Three issues were considered in determining thecomputational accuracy of the MRP software.Firstly, it was verified that the software correctlycarries out the level-by-Ievel computation of thematerial requirements and how Planned OrderReleases at one level affects the requirements atsuccessive lower levels.

Secondly it was confirmed that the time phasedOrder Releases are correctly determined basedon the recorded Lead Time and finally, it wasverified that the MRP processor has correctlyaggregated the Gross Requirements obtainedfrom the various parents into a single NetRequirement for component common to several

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parent products. Four Lot sizing technique builtinto the system were used. Specifically accuracyof explosion from parent to children was alsotested. The software was tested for userfriendliness.

CONCLUSIONS

The software, which is user friendly, was testedwith small scale locally made products and gaveaccurate results when verified with the manualmethod of calculation. It eradicates the difficultyand error liability associated with the manualmethod of computation. The software allows forthe drawing and visualization of product structureMost importantly the underlining algorithm is builtaround four commonly used lot-sizing techniquesWith the software local small scale manufacturingindustries can achieve reduction in inventories,increase the number of variety of products theyproduce and also make and satisfy deliverycommitments to their customers. Also thesuppliers of raw materials can be given ordernotices early enough for them to make up for thesupply.

REFERENCES

Biggs, J.R 1979. "Heuristic Lot-Sizing andSequencing Rules in a Multistage Productron-Inventory System". Decision Science. 1991-115

2. Campion, WM. 1982. "The Effect and Cost ofForecast Error Bias for Multiple-Stage Production-Inventory Systems" Decision Science. 13570-584.

3. Charles-Owaba, O.E. and V.O. Oladokun 2007."A Subtour-Free Set-Sequencing Algorithm BasedComputer Software for Solving the Machine Set-Up Problem" Nigerian Journal of EngineenngResearch and Development. 6(4)1-10.

4. Lunn, T. and S Neff. 1992. MRP. IntegratmgMaterial Requirement and Modern Business.Richard D. Irwin, Inc .. New York.

5. Lynn, A.F. 2006. "Material Requirement PlanningTinkertoy Lawn Mower Activity, Teaching Brief"Decision Sciences Journal of InnovativeEducation. 4(1).

6. Mall, R 2004. Fundamentals of SoftwareEngineering, Second Edition. Prentice-Hall ofIndia Private Limited New Delhi, India.


httpllwwvv.akamaiuniversity.us/PJST.htm

7. Ogedengbe, T.I ,S.B. Adejuyiqbe, and A.AAderoba 2002 "Adoption of Computer IntegratedManufacturinq in Nigeria". Nigerian Journal ofEnqineetinq Management 3(3) 10-17

8 Oladokun, VO, E.S. Eneyo, and O.E. Charles-Owaba 2009 "Solvinq the Machine Set-UpProblem A Case With a University ProductionWorkshop" Global Journal of Engineering andTechnology 2(2) 237 -242

9. Olaitan, 0 A 2008. "Development of a MaterialsRequirements Planning (MRP) Software ForManufacturing Industries" Unpublished B.ScProject in the Department Of Industrial andProduction Engineering, UniverSity Of Ibadan.

10. Ozgur, S, K. Serkan, Y Mustafa, and E.Suleyman ;WQ6 "Using ArtifleIElllf1t~ll1~ence inMatenal Requirement Planning (MRP)"Proceedings of 5th International Symposium onIntelligent Manufactunng Systems

11 Schuster, EW, S.J. Allen, and MP D'ltri.2000."Capacitated Materials Requirements Planningand its Application in the Process Industries"Journal of Business Logistics

12 Slack, N , S Chambers, and R Johnston. 2001Operation Management (3rd Edition) PeasonEducation Limited Essex, UK.

13. Starr, K.M 1996 Operation Management ASystems Approach Boyd & Fraser Chicago, IL.

14 Steinberqe S.J and HA Napier 1980. "OptimalMulti-Level Lot SIZing for Requirements PlanningSystems" Management SCI. 26.1258-1271

15. Vollman, TE, L.B. Berry, and D.C Whybark1997. Manufacturing Planning and ControlSystems (4 ed) Irwin/ McGraw-Hili New York,NY.

ABOUT THE AUTHORS

Dr. V.O. Oladokun, BSe (Ife), MSc, Ph.D.(Ibadan), is a Senior Lecturer in the Departmentof Industrial and Production Engineering,University of Ibadan He is the current Head ofthe Department Dr. Oladokun is a Member of theNigerian Society of Engineers and the NigerianInstitution of Engineering Management Hisresearch interest Includes production systemsmodelling and optimization

O.A Olaitan, earned his B.Sc. degree in Industrialand Production Engineering from the University ofIbadan, Nigeria and his M.Sc. in Computer Aided

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parent products Four Lot sizing technique builtinto the system were used. Specifically accuracyof explosion from parent to children was alsotested. The software was tested for userfriendliness.

CONCLUSIONS

The software, which is user friendly, was testedwith small scale locally made products and gaveaccurate results when verified with the manualmethod of calculation. It eradicates the difficultyand error liability associated with the manualmethod of computation. The software allows forthe drawing and visualization of product structure.Most importantly the underlining algorithm is builtaround four commonly used lot-sizing techniquesWith the software local small scale manufacturingindustries can achieve reduction in inventories,increase the number of variety of products theyproduce and also make and satisfy deliverycommitments to their customers Also thesuppliers of raw materials can be given ordernotices early enough for them to make up for thesupply.

REFERENCES

Biggs, J R. 1979. "Heuristic Lot-Sizing andSequencing Rules in a Multistage Production-Inventory System". Decision Science. 1991-115

2. Campion, W.M. 1982. "The Effect and Cost ofForecast Error Bias for Multiple-Stage Production-Inventory Systems" Decision Science 13 570-584.

3. Charles-Owaba, O.E. and V.O. Oladokun 2007."A Subtour-Free Set-Sequencing Algorithm BasedComputer Software for Solving the Machine Set-Up Problem" Nigerian Journal of EngineenngResearch and Development. 6(4) 1-10

4. Lunn, T. and S. Neff 1992. MRP. IntegralmgMaterial Requirement and Modern Business.Richard D. Irwin, Inc. New York.

5. Lynn, AF. 2006. "Material Requirement Plannin9Tinkertoy Lawn Mower Activity, Teaching Brief"Decision Sciences Journal of InnovativeEducation. 4( 1).

6. Mall, R. 2004. Fundamentals of SoftwareEngineering, Second Edition. Prentice-Hail ofIndia Private Limited New Deihl, India.


http://wwv;.akamaiuniversity.us/PJST.htm

7. Ogedengbe TI, S.B. Adejuyiqbe, and A.AAderoba 2002 "Adoption of Computer IntegratedManufacturing In Nigeria". Nigenan Journal ofEngineering Management 3(3)10-17

8. Oladokun, VO, E.S. Eneyo, and O.E. Charles-Owaba 2009. "Solving the Machine Set-UpProblem A Case with a universrty ProductionWorkshop" Global Journal of Engineering andTechnology 2(2)237-242

9 Olartan. O.A 2008. "Development of a MaterialsRequuernents Planning (MRP) Software ForManufacturing Industries" Unpublished B.ScProject in the Department Of Industrial andProduction Enqmeerinq, University Of Ibadan

10. Ozgur, S, K. Serkan, Y Mustafa, and ESuleyman 2006. "Using Artificial Intelligence inMatenal Requirement Planning (MRP)"Proceedings of 5th International Symposium onIntelligent Manufactunng Systems

11 Schuster, EW, S,J. Allen, and MP D'itri. 2000."Capacitated Materials Requirements Planningand its Application in the Process Industries"Journal of Business Logistics

12, Slack, N, S Chambers, and R. Johnston. 2001Operetion Management (3rd Edilion) PeasonEducation Limited Essex, UK

13. Starr, K.M. 1996 Operation Management ASystems Approach Boyd & Fraser Chicago, IL,

14 Sternberqe S.J and HA Napier. 1980 "OptimalMulti-Level Lot SIZlllg for Requirements PlanningSystems' Management Sci. 26.1258-1271

15. Vollman, TE, L.B. Berry, and D.C. Whybark1997. Manufactunng Planning and ControlSystems (4 ed.). Irwln/ McGraw-Hili New York,NY

ABOUT THE AUTHORS

Dr. V.O. Oladokun, BSe (Ife), MSc, Ph.D.(Ibadan), is a Senior Lecturer in the Departmentof Industrial and Production Engineering,University of Ibadan He is the current Head ofthe Department Dr, Oladokun is a Member of theNigerian Society of Engineers and the NigerianInstitution of Engineering Management Hisresearch interest includes production systemsmodelling and optimization

O.A Olaitan, earned his B.Sc. degree in Industrialand Production Engineering from the University ofIbadan, Nigeria and his M,Sc, in Computer Aided

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Mechanical and Manufacturing Engineenng atDublin City University. He currently pursuing hisPh.D. program

SUGGESTED CITATION

Oladokun. VO and OA Olaitan. 2012."Development of a Materials RequirementsPlanning (MRP) Software". Pacific Journal ofScience and Technology 13(1)351-357

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Development of a Materials Requirements Planning (MRP