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S L A I G R E IN T A NN M LA P

Y T R O B A R - AK : By CH ed A 6 t n NK - 4 e s A O: e Pr RIG L N M OL R

Q E R

R I U

T EN EM

introduction

Material Requirements Planning (MRP) is a computerbased production planning and inventory control system. MRP is concerned with both production scheduling and inventory control. It is a material control system that attempts to keep adequate inventory levels to assure that required materials are available when needed. MRP is applicable in situations of multiple items with complex bills of materials. MRP is not useful for job shops or for continuous processes that are tightly linked.

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Contd
The major objectives of an MRP system are to simultaneously:

1. Ensure the availability of materials, components, and products for planned production and for customer delivery,

2. Maintain the lowest possible level of inventory,

3. Plan manufacturing activities, delivery schedules, and purchasing activities.

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Contd

The demands for the finished goods are obtained from forecasting. These demands are called independent demand. The demands for the components or subassemblies depend on those for the finished goods. These demands are called dependent demand. Material Requirements Planning (MRP) is used for dependent demand and for both assembly and manufacturing If the finished product is composed of many components, MRP can be used to optimize the inventory costs.

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MRP is especially suited to manufacturing settings where the demand of many of the components and subassemblies depend on the demands of items that face external demands. Demand for end items are independent. In contrast, demand for components used to manufacture end items depend on the demands for the end items. The distinctions between independent and dependent demands are important in classifying inventory items and in developing systems to manage items within each demand classification. MRP systems were developed to cope better with dependent demand items.

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Importance of an MRP System

Without an MRP system: Component is ordered at time A, when the inventory level of the component hits reorder point, R So, the component is received at time B. However, the component is actually needed at time C, not B. So, the inventory holding cost incurred between time B and C is a wastage. With an MRP system: We shall see in this lesson that given the production schedule of the finished goods and some other information (see the next slide), it is possible to predict the exact time, C when the component will be required. Order is placed carefully so that it is received at time C.

MAJOR INPUTS
The three major inputs of an MRP system are the master production schedule, the product structure records, and the inventory status records. Without these basic inputs the MRP system cannot function.

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MRP Structure
Data Files BOM Master production schedule Output Reports
MRP by period report

MRP by date report

Lead times
(Item master file) Planned order report

Inventory data Material requirement planning programs (computer and software)

Purchase advice

Purchasing data

Exception reports Order early or late or not needed Order quantity too small or too large

Figure 14.5

mps
The demand for end items is scheduled over a number of time periods and recorded on a master production schedule (MPS). The master production schedule expresses how much of each item is wanted and when it is wanted. The MPS is developed from forecasts and firm customer orders for end items, safety stock requirements, and internal orders. MRP takes the master schedule for end items and translates it into individual time-phased component requirements.

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BOM
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.

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Inventory status record


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.

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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.

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MRP Input and Output

Orders

Master Production Schedule

Forecasts

Bill of Materials file

MRP computer program

Inventory file

To Production
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Reports PPC OM-3503

To Purchasing

Primary MRP Reports


Planned orders to be released at a future time. Order release notices to execute the planned orders. Changes in due dates of open orders due to rescheduling. Cancellations or suspensions of open orders due to cancellation or suspension of orders on the master production schedule. Inventory status data.
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Secondary MRP Reports


Planning reports, for example, forecasting inventory requirements over a period of time. Performance reports used to determine agreement between actual and programmed usage and costs. Exception reports used to point out serious discrepancies, such as late or overdue orders.

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Benefits of MRP

1. 2. 3. 4.

Better response to customer orders Faster response to market changes Improved utilization of facilities and labor Reduced inventory levels

Safety Stock
BOMs, inventory records, purchase and production quantities may not be perfect Consideration of safety stock may be prudent Should be minimized and ultimately eliminated Typically built into projected on-hand inventory.

THANK YOU

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