Research paper

on

MATERIAL
REQUIREMENT
PLANNING

SUBMITTED BY: GROUP 3

SUBMITTED TO:
PROF LOKESH VIJAYVARGY
Jaipuria Institute of Management,
Jaipur
ABSTRACT

Purpose:-

This research paper may help the United Electric Equipment Company Ltd. to reduce the cost and
produce more through the MRP, as it would help to make the better judgment about the resource
maximization of the company. Although it is not used easily because of it complexity, it is possible to
conduct MRP by hand as well. And there are many other software available in the market for solving
MRP.

Methodology/ design/ approach:-

This research has been conducted by collecting a data from a company related to there material
requirement. Following data is collected from the company:-

1. Composition of finished goods

2. Lead time

3. Item master file

4. Annual demand

5. Ordering cost

6. Caring cost

7. Handling cost

MS EXCEL is used for solving MRP.

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INTRODUCTION
The nature of the problem and techniques, related to planning, scheduling and control varies substantially
from high volume continues to relatively low volume intermittent production system. Although both the
system may be producing finished product for the inventory, the periodic nature of production of
intermittent system result in an immensely more complex detailed scheduling problem. The nature of
forecasting and planning production lot size is unique because of the dependent nature of demand for
parts and components. Their demand is “Dependent” on Production Schedule of primary and finished
product, which in turn are dependent on market demand. The dependent demand implies that the process
of determining how many items are needed and when they are needed is simply computed from how the
end product is designed and production process is goes through. This contract with “Independent”
demand items which must be forecast. The term independence implies that there is distinct separate
demand for the item that is, it faces its own market, and determine the size of that market require a
regular forecasting model.

The general inventory control policies are means for the management of inventory of independent
demand and the management of dependent demand is carried out by “MATERIAL REQUIREMENT
PLANNING”

MRP is a computer based production planning and inventory control system. It is also known as “time
phased requirement planning”. MRP is concerned with both production scheduling and inventory
control of dependent demand in conjunction with end item demand. MRP provides a precise scheduling
system, an efficient material control system, and rescheduling mechanism for revising plans as change
occurs. MRP keeps inventory level at minimum while assuring that required material are available when
needed.

The main objective of MRP system is:-

i. Ensure the availability of material, component and product for planned production and for
customer delivery
ii. Maintain the lowest possible level of inventory
iii. Plan manufacturing activities, delivery schedule and purchasing activities

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The main purpose of MRP system, therefore, may be briefly expanded as follows:
 Inventory: Order the right part

Order in right quantity

Order at right time

Priorities: Order with the right due date

Keep the due date Valid

Capacity: Plan for complete load

Plan an accurate load

Plan for adequate time to view

Future load

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LITERATURE

MRP was pioneered in the 1970’s with the work of Orlicky. Later evolved or became part of
Integrated to Manufacturing Resource Planning systems. Material Requirements Planning is a time
phased priority-planning technique that calculates material requirements and schedules supply to meet
demand across all products and parts in one or more plants.

Information Technology plays a major role in designing and implementing Material

Requirements Planning systems and processes as it provides information about
manufacturing needs (linked with customer demand) as well as information about inventory
levels. MRP techniques focus on optimizing inventory. MRP techniques are used to explode
bills of material, to calculate net material requirements and plan future production.

What is Material Requirements Planning?

The globalization of the economy and the liberalization of the trade markets have formulated
new conditions in the market place which are characterized by instability and intensive
competition in the business environment. Competition is continuously increasing with respect
to price, quality and selection, service and promptness of delivery. Removal of barriers,
international cooperation, technological innovations cause competition to intensify. In terms
of manufacturing emphasis is placed on reducing cost while improving quality. In addition,
other factors such as timely delivery of the product become critical techniques.

• MRP is a systematic planning-and-control methodology for production and inventory.

• Specifically, it is a procedure for planning and controlling the raw material, purchased parts, and
work in progress (WIP) inventories required in manufacturing a product.

• MRP is designed to answer three questions: what is needed, how much is needed, and when is it
needed.

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A key question to a MRP process is the number of times a company replenishes inventory within a year.
There are accounts of inventory annual turnover ratios of greater than 100, mainly reported by Japanese
companies. One can readily realize that the a high inventory ratio is likely to be conducive to lowering
production cost since less capital is tied up to unused inventory.
MRP systems use four pieces of information to determine what material should be ordered
and when
o The master production schedule, which describes when each product is scheduled to be
Manufactured
o Bill of materials, which lists exactly the parts or materials required to make each product
o Production cycle times and material needs at each stage of the production cycle time
o Supplier lead times.

The master schedule and bill of materials indicate what materials should be ordered; the
master schedule, production cycle times and supplier lead times then jointly determine when
orders should be placed.

The Master Production Schedule includes quantities of products to be produced at a given

time period. Quantities are included both at aggregate and detailed levels. Aggregate may
refer to monthly production and detailed may refer to weekly or daily production. The master
production schedule takes the form of a table in which rows represent products and columns
represent time components. Entries of the table map to units o each product to be produced at
a given time period.
Bill of Materials gives information about the product structure, i.e., parts and raw material
units necessary to manufacture one unit of the product of interest.

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CASE STUDY
United Electric Equipment Company Ltd. produces a line of electric meters installed in residential
buildings. Meters used on single-family homes are of two basic types for different voltage and amperage
ranges. (But here we are taken voltage meter for your study.)

In addition to complete meters, some parts are ordered from Ahmedabad and assembled all the parts in
Jaipur. Being certain that application of MRP could contribute to improving company’s cost
performance.

The structure of the study is presented in the below

Forecasting demand

Master Production Schedule

Structure of Study
Bill of Materials File

Item Master File

Running the MRP Program

The problem for the MRP system is to determine a production schedule that would identify each
item, the period it is needed, and the appropriate quantities. This schedule is then checked for
feasibility, and the schedule is modified if necessary.

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 1. Forecasting Annual demand

Month: January February March April May June

Demand: 6600 5940 6380 4400 5500 6380

Month: July August September October November December

Demand: 4400 5280 4840 3200 6600 6160

2. Master Production Schedule

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3. BILL OF MATERIAL
LEVEL 0

LEVEL 1

LEVEL 2

LEVEL 3

LEVEL 4

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4. ITEM MASTER FILE

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5. RUNNING MRP PROGRAM:- (1) L4L METHOD
LEVEL 4
 10 | P a g e
LEVEL 3
LEVEL 2
LEVEL 1
TOTAL COST in L4L Method:-

LEVELS COST
LEVEL 4 2588800
LEVEL 3 1508800
LEVEL 2 1444400
LEVEL 1 6600
TOTAL COST 5548600
2) MULTIPLE OF 1000
LEVEL 4
LEVEL 3
LEVEL 2
LEVEL 1
TOTAL COST in MULTIPLE OF 1000

LEVELS COST
LEVEL 4 8888800
LEVEL 3 4244800
LEVEL 2 2146400
LEVEL 1 5676600
TOTAL COST 20956600

CONCLUSION
As per the objective of our project we calculate MRP of company with 2 methods which is L4L and Multiple
methods. And we come out with the result that company should go for L4L method as the cost incurred in that
method is low (Rs 55, 48,600) than Multiple method (Rs 209, 56,600). This is optimal cost which we calculated
through MS EXCEL.

RECOMMENDATIONS
It is recommended that United Electric Equipment Company should continue their work with L4L method.

REFERENCES
• United Electric Company
• Production and Operation & Management, Kanishka Bedi
 GROUP 3 MEMBERS

• Amit Mathur: amintm@jimj.ac.in, 09929395345

• Ankur Jain: ankurjain@jimj.ac.in, 09829064508

• Apeksh Sharma: apekshs@jimj.ac.in, 09950191772

• Archana Yadav: archanay@jimj.ac.in, 09636977161

• Awadhesh Sharma: awadheshs@jimj.ac.in, 09571543721

• Jasspal Maan: jaspalk@jimj.ac.in, 09462206777

• Narendra Singh: narendras@jimj.ac.in, 09887303448

• Pankil Moolchandani: pankilm@jimj.ac.in, 09982228312