Materials Requirements Planning

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Materials Requirements Planning

• Fun stuff

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Materials Management

• A plant organizing function that assures a
  predictable flow of components and other inputs
  through a transformation process.
• It coordinates the activities of both the
  internal and external factory
• What is needed When
• i.e. Inventory micro issues

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Development of MRP

• After WWII - DS
• Companies use quarterly ordering systems based on
  confirmed orders
• WWII boom settles down D S
• backlog of orders decreases
• quarterly systems become more based on forecasts
• In move from confirmed orders to forecasts,
  quarterly systems become less and less accurate
• Wight, others develop MRP
• takes forecasts, breaks them down via dependent
  demand into weekly schedules

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Prior to MRP

• Up to 1970s, extensive use of Q and P models
• why? Simple to use, limited information
  requirements, optional
• Why move to MRP?
• problems with Q and P models
• high levels of inventory
• high stockouts
• poor customer services
• Order launch Expedite

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Other Factors

• Major changes
• high cost of inventory
• increased availability of more powerful computers
• decreasing cost of computers
• MRP now supported by extensive body of software

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Dependent Demand

• Demand for components driven by the production
  schedule
• It is derived - not forecasted
• Consists of WIP and raw materials
• Lumpy- discrete, irregular quantities
• Concept of Parent/Component
• Time Bucket

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MRP and Dependent Demand

• Independent Demand
• Finished Goods
• independent demand in MPS
• Problem with Dependent Demand
• information generated
• challenge - generating 100 CSL
• past approach Q, P
• new approach - MRP

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Remember This?? MPS Principles

• The MPS must be in concert with the production
  plan
• The MPS must drive the entire materials
  management system
• Include all known requirements in the preparation
  of the MPS and the FAS
• Minimize the number of items needed to adequately
  express the MPS and the FAS

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What is the MPS?

• Plan showing availability
• Build schedule
• Stated in BoM terms

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Remember this?Keys to MPC

• A complete, current and accurate database
• one set of records
• high emphasis on data accuracy
• quick correction of error in db
• accessible to all who need data

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Issues Considered

• Capacity
• Maximum
• Effective
• Demonstrated
• Demand management
• Capacity management
• level
• chase
• mixed
• Requires coordination with marketing

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Nature of MRP
Level 0
Level 1
Level 2
Level 3

• Use forecast to predict required amount of level
  0 (end product)
• Use this number to determine number of lower
  level components needed (dependent demand)

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Implementation of MRP

• Forecast becomes gross requirements for MRP
  system
• Break down gross requirements into time buckets
• Calculate net requirements - difference between
  units required (i.e. gross requirements or
  derivation plus orders for that period) and units
  expected to be available in inventory

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Key inputs to MRP

• MPS - merges forecasts and production capacity
• BOM - gives components needed for each end
  product in terms of part numbers
• Inventory Records - must be accurate, as MRP uses
  this information as the basis of its
  calculations should design inventory system to
  ensure accuracy
• Order Status - use scheduled receipts to
  distinguish those orders that have actually been
  released
• Planned Lead Times - gives the when information

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Brunswick Motors

• Applying MRP to Inventory
• Planning Scheduling

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MRP Elements

• Gross Requirements
• On-Hand Inventory
• Allocations
• Scheduled Receipts
• Net Requirements
• Planned Order Releases
• Time-phasing
• Parent/Component

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MRP Elements

• Planning factors
• System nervousness
• Firm planning
• Explosion
• Time buckets
• Action bucket
• Rolling the Schedule
• Net Change vs. Regenerative MRP

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Advantages of MRP

• Forward looking when planning (visibility)
• Useful simulator
• Provides valid, credible priorities
• priorities reflect actual needs, not implied
  needs.
• Provides mangers with control over the execution
  system
• Forms basis for building credible, valid formal
  system

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MRP Works Best When...

• End Products are Standardized
• Batch Production
• End product is moderately complex
• The end product is assembled from a set of
  components and raw materials

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Limitations of MRP

• only looks at materials, ignores capacity, shop
  floor conditions
• requires user discipline
• requires accurate information/data
• requires valid MPS
• not appropriate for all areas
• high volume production
• projects

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Capacity Requirements Planning

• Wait a second - just because MRP says produce X,
  are we able to produce X?
• Need to evaluate the capacity to see if it can
  meet plan
• Need all of MRP information plus
• 1. How much capacity a process requires to make 1
  unit of a product
• 2. When does the process need the hours (time) of
  capacity

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Types of MRP Systems

• MRP
• Closed Loop MRP
• MRP II
• Distribution Requirements Planning
• DRP II
• Enterprise Requirement Planning

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Reports

• Master Schedule
• Indented Bill of Materials
• BOM - Item Requirements
• Scheduled Receipts
• Planned Orders

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ABC Analysis

• Which items are C items? B items?
• Which item should we order ahead furthest?
• Which should we spend the most time on?
• Spend time and effort on A B items
• carry small quantities
• review frequently

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ABC Analysis

• Manage C items by
• carrying inventories
• concentrating with a few suppliers
• stockless buying
• review infrequently