Material Requirement Planning (MRP-1)

Material Requirement Planning (MRP-1) Types Of Techniques PUSH MRP1 MRP2 DRP1 DRP2 PULL JIT KANBAN

HAPPY CUSTOMER. HAPPY SUPPLIER..

Major Problem
Dependent on Accurate Forecasting

Only Solution
Buy Just Enough Stock

Material Requirement Planning (MRP-1)

Introduction of MRP in 1960s 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.

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.
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Example of MPS
Forecast requires 10 desks in May Material Required 880 screws 40 handles 240 planks 10 tops and 40 legs 5.55 tubes of glue 1760 screws 80 handles 480 planks 20 tops and 80 legs 11.1 tubes of glue

20 desks in June

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.

Office Desk Oak Finish 4 drawers

4 drawers Require

Main Desk Requires

88 Metal Screws

4 Handles

24 Planks

1 top

4 legs

5/9 tube of glue

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 products 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.

Material Requirements Planning MRP1

Customer orders

Master Production Schedule

Demand forecast

Inventory records
Bill of materials

MRP
Material requirement planning Works orders

Purchase orders

Material plans

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: down Productivity: up Customer delivery performance: improved Supplier delivery performance: better Business Processes: improved Data integrity: high Cost of goods: down Team 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

FOR
Long 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

Against
File/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
Material Master

Purpose in DRP
Creates stock items and controlling elements of items, locations and policies that are used in the deployment process. Tracks inventory availability in all stock categories and supply and demand for an item.Also allows for the physical movement of inventory. 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. Creates quota arrangements that control the supply relationships in the network. Determines net supply and demand resulting in a proposal for the transfer of inventory from the plant to the distribution center.

Inventory Management

Sales Planning, Forecasting and Demand Management

Purchasing

Materials Requirements Planning

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

DISTRIBUTION CENTER DISTRIBUTION CENTER

REGIONAL WAREHOUSE

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 Scope Guiding factor Control of the firm Demand situation Inbound logistics Guided by production schedules Under control of the firm Operates in dependant demand situation Coordinates scheduling & integration of materials into finished goods Controls inventory until manufacturing & assembly is complete
Raw materials stores,conversion process & finished goods store

DRP Outbound logistics Guided by customer demand Not under control of the firm Operates in independent demand situation Coordinates demand between outlets & supply sources Controls inventory after manufacturing & assembly of finished goods Market[retailers] & warehouses

Area of operation & coordination

Stage of functioning

Planning availability of stock at?