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Materials requirements planning (MRP) is the logic for determining the number of parts,
components, and materials needed to produce a product. MRP provides time scheduling
information specifying when each of the materials, parts, and components should be ordered or
produced.MRP is both an inventory control and a scheduling technique. It consists of a series of
steps which start by determining what finished products are needed to meet the demand by time
periods and are completed with a schedule of the finished product components needed at each
assembly level for each time period.

Where to use MRP
MRP is the most useful scheduling technique for many industries engaged in fabricating and
assembling products like automobiles, tractor-trailer equipments, Rail coaches, etc.,
It is especially suitable for situations where one or all of the following conditions exist.
a) The final product is complex and made up of several levels of assemblies.
b) The final product is expensive.
c) The lead times for components and raw materials are relatively long.
d) The manufacturing cycle is long for the finished product.
e) Consolidation of requirements for several products is desirable so that economic lot sizes are

The MRP seeks to achieve the following objectives in a simultaneous manner:-
i) Ensure the availability of materials, components and products for planned production and for
customer delivery.
ii) Maintain the lowest possible levels of Inventory.
MRP systems are appropriate for dependent demand items. Dependent demand means the
demand for an item is directly related to or the result of demand for higher level items.

A flow diagram of how a typical MRP system may function is shown in fig 1

Fig 1 Flow diagram of how a typical MRP system

The main theme of MRP is getting the right materials to the right place at the right time.
Specific organizational objectives often associated with MRP design and implementation may be
identified among three main dimensions, namely: inventory, priorities and capacity.

Dimension: Objective specifics
- Order the right part
- Order the right quantity
- Order at the right time
- Order with the right due date
- Keep the due date valid
-Plan for a complete load
-Plan for an accurate load

Objectives of MRP should be identified with regard to inputs and outputs associated with it.
Inputs are delineated with master production schedule, bill of materials, etc.
Therefore, a clear specification of MRP objectives should be associated with a respectively clear
description of objectives of MRP inputs as well as MRP outputs.

Material requirements planning (MRP) is a production planning and inventory control system
used to manage manufacturing processes. Most MRP systems are software-based, while it is
possible to conduct MRP by hand as well. An MRP system is intended to simultaneously meet
three objectives:
Ensure materials are available for production and products are available for delivery to
Maintain the lowest possible material and product levels in store
Plan manufacturing activities, delivery schedules and purchasing activities.
Based on a master production schedule, a material requirements planning system:
Creates schedules identifying the specific parts and materials required to produce end items.
Determines exact unit numbers needed.
Determines the dates when orders for those materials should be released, based on lead times.
The basic functions of an MRP system include: inventory control, bill of material processing,
and elementary scheduling. MRP helps organizations to maintain low inventory levels. It is used
to plan manufacturing, purchasing and delivering activities."Manufacturing organizations,
whatever their products, face the same daily practical problem - that customers want products to
be available in a shorter time than it takes to make them. This means that some level of planning
is required."
Companies need to control the types and quantities of materials they purchase, plan which
products are to be produced and in what quantities and ensure that they are able to meet current
and future customer demand, all at the lowest possible cost. Making a bad decision in any of
these areas will make the company lose money

Firm orders
from known
of demand
from estimates
Bill of

Fig 2 material requirements planning
The three major inputs of an MRP system are
1. Master production schedule,
2. Inventory status records and
3. Product structure records.

Master production schedule
A master production schedule (MPS) is a plan for individual commodities to produce in each
time period such as production, staffing, inventory, etc. It is usually linked to manufacturing
where the plan indicates when and how much of each product will be demanded. This plan
quantifies significant processes, parts, and other resources in order to optimize production, to
identify bottlenecks, and to anticipate needs and completed goods. Since an MPS drives much
factory activity, its accuracy and viability dramatically affect profitability. Typical MPS's are
created by software with user tweaking. Due to software limitations, but especially the intense
work required by the "master production schedulers", schedules do not include every aspect of
production, but only key elements that have proven their control effectively, such as forecast
demand, production costs, inventory costs, lead time, working hours, capacity, inventory levels,
available storage, and parts supply. The choice of what to model varies among companies and
factories. The MPS translates the business plan, including forecast demand, into a production
plan using planned orders in a true multi-level optional component scheduling environment.
Using MPS helps avoid shortages, costly expediting, last minute scheduling, and inefficient
allocation of resources. Working with MPS allows businesses to consolidate planned parts,
produce master schedules and forecasts for any level of the bill of material (BOM) for any type
of part.
Inventory status records
The inventory status records contain the status of all items in inventory, including on hand
inventory and scheduled receipts. These records must be kept up to date, with each receipt,
disbursement, or withdrawal documented to maintain record integrity.MRP will determine from
the master production schedule and the product structure records the gross component
requirements; the gross component requirements will be reduced by the available inventory as
indicated in the inventory status records. A data file containing up-to-date information on the
status of every item, component, etc., controlled by the material requirements planning system.
This file contains the identification number, quantity in hand; safety stock level, quantity
allocated, and procurement lead time of every item.
Product structure records
The product structure records, also known as bill of material records (BOM), contain
information on every item or assembly required to produce end items. Information on each item,
such as part number, description, quantity per assembly, next higher assembly, lead times, and
quantity per end item, must be available. Each product structure record defines the relationship
of one component to its immediate parent item. It also includes quantity per assembly. The
quantity per assembly is the quantity of the component that is required to make one unit of the
parent item. A product structure record may contain fields for scrap factor, lead-time offset, and
other information. MRP is well suited for fabrication and / or assembly type operations. The term
Component in MRP refers to all items below the product level, including sub assemblies,
parts, raw materials, whether they are produced internally or obtained from suppliers.
A bill of material (BOM) is a list of all items, ingredients, or materials needed to produce
An end item or product. It shows how much of what materials are ended in what order to
Manufacture of product. It is through BOM that MRP successfully translates the master schedule
into gross requirements below the end item level.
A schematic representation of a product structure is shown in fig 3. The structure
Of product A defines the relationship among the various items that make up the product in terms
of levels as well as parent / component relationships.

The letters represent assemblies / sub-assemblies, and the numerical represent parts. Then
numbers in parentheses are the quantities required.
The flow diagram of MRP diagram of MRP inputs is given in fig4.

Fig 4.The flow diagram of MRP diagram of MRP inputs
The MRP system takes the master schedule for end items and determines the gross quantities of
components required from the product structure records. Gross requirements are obtained by
exploding the end item product structure record into its
lower level requirements.
A schematic of MRP outputs is contained in fig5.

Fig 5
Two basic purposes of planned orders are:
1. to generate the material requirement at the next lower level.
2. to project the capacity requirements.


STEP 1: Determine the Gross Requirement.
STEP 2: Determine the Nett Requirements.
(Net Requirements = Gross requirements Available Inventory.)
STEP 3: Develop the Master Schedule.
STEP 4: Explode the Bill of Materials.
STEP 5: Screen for ABC items.
STEP 6: Determine net requirements for an item.
STEP 7: Adjust requirements by Scrap or Shrinkage factor.
STEP 8: Schedule planned orders.
STEP 9: Explode the next level.
STEP 10: Aggregate Demands and Determine Order Quantity.
STEP 11: Write and place the planned orders.

MRP systems offer a number of potential benefits to manufacturing firms. Some of the main
benefits include helping production managers to minimize inventory levels and the associated
carrying costs, track material requirements, determine the most economical lot sizes for orders,
compute quantities needed as safety stock, allocate production time among various products, and
plan for future capacity needs. The information generated by MRP systems is useful in other
areas as well. There is a large range of people in a manufacturing company that may find the use
of information provided by an MRP system very helpful. Production planners are obvious users
of MRP, as are production managers, who must balance workloads across departments and make
decisions about scheduling work. Plant foremen, responsible for issuing work orders and
maintaining production schedules, also rely heavily on MRP output. Other users include
customer service representatives, who need to be able to provide projected delivery dates,
purchasing managers, and inventory managers.
MRP systems also have several potential drawbacks. First, MRP relies upon accurate input
information. If a small business has not maintained good inventory records or has not updated its
bills of materials with all relevant changes, it may encounter serious problems with the outputs of
its MRP system. The problems could range from missing parts and excessive order quantities to
schedule delays and missed delivery dates. At a minimum, an MRP system must have an
accurate master production schedule, good lead-time estimates, and current inventory records in
order to function effectively and produce useful information.
Another potential drawback associated with MRP is that the systems can be difficult, time
consuming, and costly to implement. Many businesses encounter resistance from employees
when they try to implement MRP. For example, employees who once got by with sloppy record
keeping may resent the discipline MRP requires. Or departments that became accustomed to
hoarding parts in case of inventory shortages might find it difficult to trust the system and let go
of that habit.

1. What are the key inputs to an MRP system?
2. The scope of MRP in manufacturing?
3. What do you mean by bill of materials structure?
4. Importance of EOQ in material requirement planning?
5. What are the objectives of MRP?
6. Explain material requirement planning in detail?
7. Why LOT sizing in MRP?
8. List different methods which are available to determine effective LOT size in MRP?
9. Write short not on MRP concept?
10. Explain benefits and drawbacks of MRP?