Material Requirement Planning

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

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

3. 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) • Quantity represent production, not demand • 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) • Type of BOM: • Phantom Bill • Kit-Number/K-Bill • Modular Bill of Material (Figure 13.4) • The inventory master file,database of information on every item produced, ordered, or inventoried (Figure 13.3)

4. The MRP Process • 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 • Explosion: determining requirements for lower level items. • SEE EXAMPLE p.664-668

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

6. 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 ! • How to level the load? • Shifting requirements • Reducing requirements • Temporarily expanding capacity

7. CRP Inputs • 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 • 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.

8. Some Definitions.... • 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 • 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 % = (Load/Capacity) x 100%

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

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

11. 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... • Lead time in an MRP system is fixed • The reporting requirements of MRP are excessive

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