Material Requirement Planning (MRP-1)

Material Requirement Planning (MRP-1)

Introduction of MRP in 1960’s by Dr Joseph Orlicky.

Definition :MRP is a software based production, planning

and inventory control system used to manage the manufacturing process.

It is a computer based system in which the given Master Schedule is exploded with Bills Of Material, into the required amount of raw material, parts and subassemblies needed top produce the final products in each tome period of say a week or month (called as “Buckets”)

MRP 1 - Functions

Forecasting

Order, Planning and Control

Priority Planning and Control

Planning Capacity Requirement and Development of Broad Business Plans

Objectives

Ensure The Availability of Material Components and Products For Planned Production and Customer Delivery.

Maintain The Lowest Possible Inventory Level.

Plan Manufacturing Activities, Delivery Schedules and Purchasing Activities.

Material Requirements Planning MRP1

MasterProductionSchedule

MRPMaterial

requirement planning

Material plans

Customer orders

Bill of materials

Purchase orders

Demand forecast

Inventory records

Works orders

Key Elements Of MRP 1

Demand Forecasting:-It is the quantity demanded per year or per unit time which indirectly helps in knowing quantity to be supplied.

Master Production Schedule (MPS):-MPS is a series of time phased quantities for each item that a company manufactures. It gives the details of the products to be manufactured over the given space of time. -

Bills Of Material (BOM):-BOM is the document generated at design stage. It gives the details of the structure of the product by dividing the final assembly into major assemblies and sub-assemblies. BOM provides details such as part name, part no., description, quantity required material, etc.

Inventory Status File (ISF):-

ISF reports the inventory on hand. It allows the company to subtract existing inventory from gross requirements, so net requirements can be ordered. The ISF also reports on safety stock needs and lead times for each item.

MRP Program:-This is a computer software programme. First, it explodes the finish product’s demand into gross requirement for parts. Second, the package determines net requirements based on the ISF. Third, it place orders to meet the net quantities needed and lead times.

Outputs And Reports:-

The MRP 1 package generates many reports such as action notices, priority reports, inventory status information.

Advantages of MRP 1

Improved Business Results

Improved Manufacturing Results

More Accurate And Timely Information

Less Inventory

Less Materials Obsolescence

Time Phased Ordering Of Materials

Higher Reliability

More Responsiveness To Market Demand

Reduced Production Cost

Disadvantages

Increase In Material Acquisition Cost

Higher Transportation Costs And Higher Unit Cost

Potential Hazard Of A Production Slowdown Or Shutdown

Use Of Standardized Software Packages

Does not Take Into Account Plant Capacity And Distribution Capacity

High Stock-Out Costs.

Manufacturing Requirement Planning(MRP II)

Manufacturing Resource Planning (MRP II) is defined as a method for the effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units, financial planning in dollars, and has a simulation capability to answer "what-if" questions and extension of closed-loop MRP.

MRP• Manufacturing-centric/Push mgt.• Master production schedule• Final production schedule• Inventory management• Bill of materials• Gross requirement generation• Net requirement generation• Reorder point calculation• Automatic replenishment

MRP I I• Capacity requirement. planning• Production control• Marketing interface• Accounting interface• Financial interface• Personnel interface• Supplier interface• Customer interface

Major Developments From MRP

Feedback

Allocating reserves

Matching the requirements

Software extension programmers

Data accuracy

Significant Payback Achieved By Coca-cola

Coca Cola: "Always" Class A MRP II

Inventory levels: downProductivity: upCustomer delivery performance: improvedSupplier delivery performance: betterBusiness Processes: improvedData integrity: highCost of goods: downTeam Spirit: high

Benefits In Different Levels

For Management

An accurate, consistent and effective way to run the whole business

The ability to manage orderly growth

The ability to cope with difficult economic conditions

For Management Information

Quicker, better information on which to base decisions

Consistent information at all levels, in all departments

Accurate records for internal and external use

For Sales / Marketing

Improved on-time deliveries to customers

Faster, more accurate delivery promising

Improved responsiveness to customer needs

For Production

Improved productivity and resource utilization

Increased through output

Better reliability of production plans

For Materials Management

Better control of inventories

Improved scheduling

Productive relationships with suppliers

For Design / Engineering

Improved design control

Better quality and quality control

For Financial and Costing

Reduced working capital for inventory

Improved cash flow through quicker deliveries

Accurate inventory records

Timely and valid cost and profitability information

For And Against MRPII

FORLong term planning tool for complex products

Can give accurate completion date at time of order

Fits in with conventional accounting

Progress of manufacture available at all times

Inventory size available at all times

Control of work orders and changes is tight

Many types of software available

AgainstFile/database accuracy must be maintained

Inventory accuracy is vital (99% accuracy is a typical requirement)

Highly computer based

Does not affect quality management, line balancing, or other production management issues

Inflexible and relies on forecast. Temptation exists to over-ride and go manual

Distribution Requirements Planning (DRP – I)

Distribution Requirements Planning (DRP I)

DRP is the application of MRP principles to the distribution environment. It integrates the, special needs of distribution. It is a dynamic model which looks at a time-phased plan of events that affect inventory.

What is DRP?

DRP provides the basis for integrating supply chain inventory information and physical distribution activities with the Manufacturing Planning and Control system.

What is DRP?

Managing the flow of materials between firms, warehouses, distribution centers.

DRP helps manage these material flows. Just like MRP did in Manufacturing.

Links firms in the supply chain by providing planning records that carry demand information from receiving points to supply points and vice versa.

DRP Menu Items Component Description Purpose in DRP

Material Master Creates stock items and controlling elements of items, locations and policies that are used in the deployment process.

Inventory Management Tracks inventory availability in all stock categories and supply and demand for an item.Also allows for the physical movement of inventory.

Sales Planning, Forecasting and Demand Management

Creates forecasts of customer demand which results in the creation of independent requirements at the distribution center.These independent requirements are later consumed by actual customer orders.

Purchasing Creates quota arrangements that control the supply relationships in the network.

Materials Requirements Planning Determines net supply and demand resulting in a proposal for the transfer of inventory from the plant to the distribution center.

Marketing Benefits

Increases service level and decrease customer complaints.

Improve inventory coordination.

Enhances ability to offer customer a coordinated inventory management service.

Logistical Benefits

Reduces freight costs.

Reduces inventory level.

Decreases warehousing space.

Reduces customer freight cost.

Enhances budgeting capitability.

Constraints of DRP

Inventory planning systems require accurate and coordinated forecasts for each distribution center. Integrated planning is subject to system nervousness and frequent rescheduling, because of production breakdowns and delivery delays. DRP is not the universal solution for inventory management.

Distribution Resource planning(DRP-II)

Distribution Resource planning

Distribution resource planning [DRP II] is an extension of DRP I.Distribution resource planning applies the time phased logic of DRP I to replenish inventories in multi echelon warehousing systems.Distribution resources planning extends DRP I to include the planning of key resources in a distribution system – warehouse space, equipments, labors, transport capacity [e.g trucks,rail cars] and financial flows

Objectives Of DRP II

The objective of Distribution Resource Planning are, To improve customer service levels by anticipating customer demand at distribution centers and providing finished products at the correct location when customer needs arise.

To provide an accurate requirements plan for manufacturing.

To optimize the distribution of available stock in the distribution network using the deployment function.

DRP II Provides a framework

Distribution resource planning provides a framework for determining the need to replenish inventory by:

Linking market requirements with manufacturing and demand management.

Relating current inventory positions and demand forecasts to production scheduling.

Matching material supply to manufacturing demand, and customer demand to product supply.

Factors needed for Implementing DRP II

Before the use of DRP for planning and deployment, we must set up a distribution network. A distribution network represents possible delivery relationships between the supplying plants and the distribution centers. DRP entails planning the supply chain from sales planning through delivery to the distribution centers, assuming there are sales orders or that sales forecasts are available. The primary aim of planning is to determine the quantities required on specific dates,including the lead times of the distribution lanes. The distribution network defines the normal supply method for execution.

CUSTOMERS

DISTRIBUTION CENTER

DISTRIBUTION CENTER

DISTRIBUTION CENTER

DISTRIBUTION CENTER

REGIONALWAREHOUSE

DISTRIBUTION CENTER

DISTRIBUTION CENTER

REGIONAL WAREHOUSE

PLANT WAREHOUSE

FINAL ASSMEBLY(MANUFACTURING)

SUB ASSEMBLY B SUB ASSEMBLY C SUB ASSEMBLY D

SUB ASSEMBLY A PART C PART D PART E

PART A PART B

RAW MATERIALS

Difference between DRP and MRP   MRP DRP

Scope Inbound logistics Outbound logistics

Guiding factor Guided by production schedules

Guided by customer demand

Control of the firm Under control of the firm

Not under control of the firm

Demand situation Operates in dependant demand situation

Operates in independent demand situation

Area of operation & coordination

Coordinates scheduling & integration of materials into finished goods

Coordinates demand between outlets & supply sources

Stage of functioning Controls inventory until manufacturing & assembly is complete

Controls inventory after manufacturing & assembly of finished goods

Planning availability of stock at?

Market[retailers] & warehouses

Raw materials stores,conversion process & finished goods store