Material Requirements Planning

Material Requirements Planning (MRP) Professor Ahmadi 1 Material Requirements Planning (MRP) MRP is a dependent demand technique that uses bill-of material, inventory, expected receipts, and a master production schedule to determine material requirement. 2 Inventory Classifications Inventory Process

stage Raw Material WIP Finished Goods Number & Value Demand Type Other A Items B Items C Items Independent Dependent

Maintenance Operating 3 MRP and The Production Planning Process Forecast & Firm Orders Aggregate Production Planning Material Requirements Planning Master Production Scheduling

Resource Availability No, modify CRP, MRP, or MPS Capacity Requirements Planning Realistic? Yes Shop Floor Schedules 4 MRP Benefits

Increased customer satisfaction due to meeting delivery schedules Faster response to market changes Improved labor & equipment utilization Better inventory planning & scheduling Reduced inventory levels without reduced customer service 6 Evaluation of MRP

Most beneficial to process-focused systems that have long processing times and complex multistage production steps Lead times must be reliable Difficult to implement 7 MRP and JIT MRP - a planning and scheduling technique with fixed lead times JIT - a way to move material expeditiously 8

MRP in Services Can be used when demand for service or service items is directly related to or derived from demand for other services restaurant - rolls required for each meal hospitals - implements for surgery etc. 9 Bill-of-Material List of components & quantities needed to make product Provides product structure (tree)

Parents: Items above given level Children: Items below given level Shows low-level coding Lowest level in structure item occurs Top level is 0; next level is 1 etc. 10 Example: Bill-of -Material for a Moped The following product structure diagram represents the bill of materials for a dualcarburetor Model 442 Moped. Level 0 Level 1 Level 2 MOPED

MOPED ENGINE ENGINE ASSEMBLY ASSEMBLY MOTOR MOTOR GAS GAS TANK TANK CARBURETOR CARBURETOR (2) (2) WHEEL

WHEEL ASSEMBLY ASSEMBLY (2) (2) HUB HUB ASSEMBLY ASSEMBLY FRAME FRAME TIRE TIRE 11 Requirements for Effective Use of Dependent Demand Inventory Models

Effective use of dependent demand inventory models requires that the operations manager know the: master production schedule specifications or bills-of-material inventory availability purchase orders outstanding lead times 12