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Materials Requirement Planning - Coggle Diagram
Materials Requirement Planning
inventory management system completely operated digitally through a wide variety of computer-based platforms.
exclusively designed to improve the inventory efficiency of a business by estimating quantities of raw material and scheduling timely deliveries.
helps businesses maintain low inventory levels by controlling manufacturing, purchasing, and delivery activities.
A systematic approach to production planning, scheduling, and inventory control. It is designed to manage manufacturing processes by ensuring that materials and components are available when needed, minimizing inventory levels, and optimizing production efficiency
Before MRP, manual inventory planning exists, such as:
period order quantity (POQ)
helps determine the optimal order quantity to meet the net requirements for a
specific number of periods
to minimize inventory and ordering/storage costs
POQ = Net Requirements for the Period/No. Of Periods
economic order quantity (EOQ)
used to determine the optimal order quantity that minimizes the total costs associated with ordering and holding inventory (holding costs, shortage costs, and order costs).
Formula: sqrt (2DS/H)
Goal inventory management
Minimizing costs and maximizing efficiency
Right amount or quantity of products at the right time
Input to MRP
Master production schedule
primarily a summary of the delivery dates and quantities of each product with due consideration to the lead times
driver of the MRP.
The summary of the time needed to make these materials available is the lead-time.
Production time + time needed to make product available = lead time
Bill of materials (BOM)
Involves the components and their quantities.
types of BOMs
Single-level BOM: list down one level down the requirements, materials needed to manufacture the product
Indented BOM: lists down all the products brought down or indented at the same level within the product structure to include their quantities.
The BOM requires a part number, which identifies uniquely each component, or material that is in use by the organization.
This part number must be unique for each material.
In BOM record the first column is part number (coded number)
In manufacturing company, they uniquely code their materials using numbers or letters
Inventory Record
MRP requires very accurate real time inventory records that indicate exact quantities of materials and their precise locations (warehouse etc).
The inventory includes:
the materials on hand (raw + packaging materials)
on order with suppliers
quantities previously committed to specific products
demands
inclusion sales
Steps in MRP Preparation
Aggregation
The products included in the master production plan (MPP) that fall within the tie fence set are picked out.
Their materials requirements are looked into and the different individual materials or components present in their respective BOM are listed.
Bill of Materials Explosion
The materials of the different products and their total quantity requirements are added up to come out with a single amount
Common materials are then grouped. The quantity required for each material is summarized. This is repeated until all the listed materials from 2.0 (previous bullet) are accounted for.
Verification
Identified shortages are then sorted out. Purchase orders are placed on these items to fill up requirements. The lead time and order quantities are taken into consideration when orders are placed to ensure timely arrival of the materials
In cases where there is an oversupply of materials, the Planner can arrange the deferment of delivery or if the supplier would permit for the cancellation of the order.
Primary of Objectives of MRP
To ensure that raw materials are readily available fot production and products are readily available for delivery to consumers
Importance of MRP
gives businesses visibility into the inventory requirements needed to meet demand, helping businesses optimize inventory levels and production schedules. without this insight, companies have limited visibility and responsiveness, which can lead to:
ordering too much inventory which increases carrying costs and ties up more cash in inventory overhead
inability to meet demand because of insufficient raw materials, resulting in lost sales, canceled contracts and out-of-stocks
disruptions in the prodcution cycle, delayingsub-assembly build that result in increased production costs and decreased output
Data Needed for MRP Systems
end item
the MRP requires the used to describe what type of product is being created and its specific demand level
quantity
the system requires the user to input the amount of quantity needed to meet specific demand schedules
shelf-life
the amount of time that a product is able to remain in the warehouse is required for the planning aspect of an MRP system
inventory records
records of materials available for use, work in progress, and completed
planning data
restraints and direction, such as labor, machine standards, testing, technoques, and commands, are required to use the MRP system
bills of materials
the system required detailed accounts of materials and components used to make each of the products
ERP systems vs MRP systems
ERP
Provides financing, manufacturing, supply chain, purchasing, selling, and planning in one single system.
Integrated and provides multiple functions in one unit.
Does NOT combine with other software application since it operates as a whole
MRP
Designed to progressively increase inventory efficiency in a business through control of manufacturing, scheduling, and purchasing.
Solo system that is used for its extensive focus on providing few functions.
Can be easily combined with other inventory software
advantages of MRP
maintains low inventory level
reduction of associated costs through material planning
ensure capacity utilization
Extensively tracks every piece of inventory that comes in and goes out
Reduces cost of warehousing product
Increased organization throughout the business
Scheduled shipment and delivery of the product
disadvantages of MRP
Reliance on the precise input information
There are scheduling delays, wrong order quantities, and inefficient tracking if the information inputted inaccurately within the system
Requires intensive maintenance of robust databases
In order to use the system, proper training is required
The system is not cheap and requires a substantial capital investment
Garbage in, Garbage out
MRP challenges
Although using an MRP solution is a far better than using spreadsheets for supply planning, it’s only as good as the data put into it, the better a business understand anc documents its processes he better an MRP system can serve them
Make sure to input correct inventory availability, time to complete a subassembly, waste calculations, and lead-times from vendors.
MRP steps and processes
Identifying requirements to meet demand.
Checking inventory and allocating resources.
Scheduling production.
Identifying issues and making recommendations.
MRP and MPS schedule
The process begins with providing the necessary inputs to produce the MPS namely: demand, supply, and the target inventory/safety stock which is used to calculate the demand and supply schedule.
The MPS then serves as the input and the driver to the MRP alongside the inventory records and the bill of materials which are used to calculate the supply plan for finished goods and all levels of the BOM, ultimately resulting in a Material Requirements Plan.
We can derive the important information from the MRP to buy requisitions and orders, make planned and production orders, and transfer intra-location shipments to warehouses and customers.
who uses an MRP system
not limited to the conventional meaning of manufacturers
manufacturer is any organization that acquires components or materials and transforms them in some way to produce a different item that can be sold to customers. This could include:
Warehouses that package products or assemble collections of items into “kits” or combinations for resale as a unit
Warehouses that assemble custom configurations to order (stocking major units and optional add-ons and then putting the customized product together)
Service providers that assemble packages of documentation, device, consumables, ro other physical items they provide to customers/clients/patients
Office building management, hospitals, government building managers, managers- for managing supplies and equipment based on forecasted use
Restaurants that use a form of MRP to manage ingredients and supplies inventory and replenishment.
MRP Matrix
Net Requirements
Actual quantity to produce based on projected on hand and on-order quantity
Planned Orders Release
When order need to be placed to receive on time
Consider lead time
Gross Requirement
Derived from planned order released of the parent
Actual/estimated demand, in case of final product
Planned order receipts
Quantity, when orders need to be received
Consider lot sizing rule
Projected on hand
Current inventory, or anticipated inventory at the end of period
Lot-sizing in MRP
Lot-size is the quantity ordered/produced at one time
Large lots are preferred because:
Small lots are preferred because: