Material Requirement Planning

Material Requirement Planning (MRP) and Enterprise Resource
Planning (ERP)
Material Requirements Planning (MRP) – a computer-based information system that

translates master schedule requirements for end times into time-phased requirements
for subassemblies, components, and raw materials.
The MRP is designed to answer three questions:
 What is needed?
 How much is needed?
 When is it needed?
Other MRP Considerations: Safety Stock
 Safety Stock
- Theoretically, MRP systems should not require safety stock
- Variability may necessitate the strategic use of safety stock
o A bottleneck process or one with varying scrap rates may cause
shortages in downstream operations
o Shortages may occur if orders are late or fabrication or assembly
times are longer than expected
o When lead times are variable, the concept of safety time is often
used
Safety time – Scheduling orders for arrival or completions
sufficiently ahead of their need so that the probability of shortage is
eliminated or significantly reduced.
Load reports – Department or work center reports that compare known and expected
future capacity requirements with projected capacity availability.
Enterprise Resource Planning (ERP)
 Accounting/Finance - a central component of most ERP systems. It

provides a range of financial reports, including general ledger, accounts
payable, accounts receivable, payroll, income statements, and balance
sheets.
 Marketing – Supports lead generation, target marketing, direct mail, and
sales
 Human Resources - maintains a complete data base of employee
information such as date of hire, salary, contact information, performance
evaluations, and other pertinent information.
 Purchasing – facilitates vendor selection, price negotiation, making
purchasing decisions, and bill payment
 Production planning – integrates information on forecasts, orders,
production capacity, on-hand inventory quantities, bills of material, work in
process, schedules, and production lead times.
 Inventory management - identifies inventory requirements, inventory
availability, replenishment rules, and inventory tracking
 Distribution – contains information on third-party shippers, shipping and
delivery schedules, delivery tracking
 Sales - information on orders, invoices, order tracking and shipping
 Supply Chain Management - facilitates supplier and customer
management, supply chain visibility, and event management.
Example of Material Requirement Planning
Suppose you have to manufacture 100 units of product A within eight weeks, where
product A requires one unit of product B and two units of product C, while product C
requires one unit of product D and two units of product E, respectively. In this example,
the requirements of each item for producing 100 units of product A can be easily
calculated: Req(B) = 100, Req(C) = 200, Req(D) = 200, Req(E) = 400.E
In addition, suppose that the lead times for the products are as follows: product A, four
weeks; product B, three weeks; product C, two weeks; product D and product E, one
week each. As the development lead-time for product A is four weeks, at the end of
week four, we must have products B and C available. Since product B has a three-week
lead time, we need to release product manufacturing before the end of the first week.
Similarly, product C needs to be released at the end of week two for production, while
products D and E need to be released at the end of week one for production. Based on
the product structure of A and the lead-time necessary to acquire each component, a
material requirements plan for product A has been developed. A parent item's planned
order releases are used to assess gross specifications for its component products.
Scheduled release dates for order are obtained simply by offsetting the lead times.
In the MRP method, the computations and steps needed are not complicated. They just
require fast arithmetic. The explosion of bill-of-materials must be handled with caution,
however. The product structure is what can become complicated, particularly when a
given component is used in different stages of a finished item's development.
Example of Enterprise Resource Planning

Oracle ERP is a software solution based on the cloud used to automate back office
processes and day-to-day business operations. It is a system software for business
management that covers financial management, management of the supply chain,
project management, accounting and procurement. Oracle ERP puts together business
processes to improve collaboration, enhance organization productivity and promote
data-driven decisions. Oracle is one of today's major players in the ERP industry.
Oracle ERP provides a comprehensive suite of apps that allow companies to make
informed business decisions while speeding up results and reducing costs.
Organizations are able to benefit from cloud technologies with Oracle ERP's cloud
solution to gain more time to value and improve scalability and development.
Compared to traditional on-site implementations, organizations are able to introduce

new features at a quicker and more efficient pace. By making documentation
manageable and more flexible, Oracle ERP supports companies. With improved
reporting functionality, without relying on an IT specialist or department, businesses can
easily identify data requests. The primary element for an effective ERP implementation
is finding the best accredited Oracle technology partner.
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REFERENCES:
 https://www.chetu.com/blogs/technical-perspectives/oracle-erp-modules.php
 http://www.columbia.edu/~gmg2/4000/pdf/lect_06.pdf

Material Requirement Planning

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Material Requirement Planning (MRP) and Enterprise Resource

Material Requirements Planning (MRP) – a computer-based information system that

The MRP is designed to answer three questions:

Enterprise Resource Planning (ERP)

 Accounting/Finance - a central component of most ERP systems. It

Example of Material Requirement Planning

Example of Enterprise Resource Planning

Compared to traditional on-site implementations, organizations are able to introduce

WORD COUNT: 811 words

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