Why was it formulated? What are the kinds of MRP systems? What are the components of an MRP system? What is the bill of materials? What are types of BOM used? How do you compute net requirements in an MRP explosion?
What is an MRP system
MRP, or Material Requirements Planning, is a software-based system designed to streamline inventory management for manufacturers. It essentially helps you figure out what you need, how much of it you need, and when you need it to keep production running smoothly. Here's how MRP helps control inventory: ● Planning: MRP takes into account your existing inventory, bills of materials (which list all the components needed for each finished product), and sales forecasts to determine what materials you need to order and when. This prevents overstocking or stockouts. ● Scheduling: MRP creates a production schedule that factors in lead times for materials and ensures you have everything on hand when it's needed for assembly. This minimizes delays and keeps production flowing efficiently. ● Optimization: MRP helps you maintain optimal inventory levels. By analyzing your data, it can suggest reorder points to avoid running out of materials while also minimizing storage costs associated with excess inventory. Overall, MRP helps manufacturers strike a balance between having enough materials to meet production needs and avoiding excessive inventory holding costs. It ensures a smooth production flow and helps deliver finished products to customers on time.
Independent vs dependent demand
In the context of MRP (Material Requirements Planning), understanding the difference between independent and dependent demand is crucial for managing inventory effectively. Here's a breakdown: Independent Demand: ● This refers to the demand for finished products that are sold directly to customers. The demand for these items is not directly influenced by the demand for other products. ● Examples: bicycles, refrigerators, or smartphones. ● MRP doesn't directly calculate requirements for independent demand items. Their production or purchase is typically based on: ○ Sales forecasts: Predictions of future customer demand based on historical data, market trends, and marketing campaigns. ○ Customer orders: Confirmed orders received from customers. Dependent Demand: ● This refers to the demand for components, subassemblies, or raw materials that are used to produce finished products. The demand for these items is completely dependent on the production schedule of the finished products they go into.
1 ● Examples: screws for a bicycle, circuit boards for a refrigerator, or display panels for a smartphone. ● MRP is primarily used to calculate the requirements for dependent demand items. It considers: ○ Bill of Materials (BOM): A list that specifies the exact components and quantities needed to produce one unit of a finished product. ○ Production schedule for finished products: This tells MRP how many of each finished product need to be produced and by when. ○ Lead times: The time it takes to acquire or produce each dependent demand item. How MRP uses this distinction: ● MRP uses the production schedule and BOM for finished products (independent demand) to calculate the specific requirements for dependent demand items. It essentially breaks down the production plan into the individual components needed at each stage. ● This allows MRP to generate purchase orders or production orders for dependent demand items at the right time to ensure they are available for assembly when needed. By understanding this distinction, MRP avoids: ● Overstocking dependent demand items: You only order what's required for the planned production of finished goods. ● Stockouts of dependent items: MRP ensures components arrive on time to avoid production delays. Overall, MRP uses independent demand as the starting point to plan and optimize the dependent demand for all the components that make up the final product.
MRP Inputs and outputs
2 Source: chapter 13, Stevenson, operations management, 14 Ed
How do you run an MRP system
While the specific steps might vary depending on the MRP software you use, here's a general breakdown of the process for running an MRP: 1. Setting Up the System: ● Master Data: Ensure your system has accurate data on all the items you manufacture or purchase, including finished products (independent demand) and components (dependent demand). This includes information like item descriptions, units of measure, lead times, and safety stock levels.
3 ● Bills of Materials (BOM): These define the components and quantities needed for each finished product. They should be accurate and up-to-date within the MRP system. ● Planning Parameters: Set parameters like planning horizon (future time period considered), lot sizing methods (how much to order at once), and scheduling rules (how to sequence production). 2. Running the MRP: ● Demand Input: Enter or update your sales forecasts or confirmed customer orders for finished products (independent demand). ● MRP Calculation: The MRP software uses the demand data, BOMs, and planning parameters to calculate the dependent demand for components and raw materials. This includes: ○ Net Requirements: The actual amount of each component needed after considering existing inventory and planned receipts (purchase orders or production orders already placed). ○ Planned Orders: MRP generates recommendations for purchase orders or internal production orders for components, specifying the quantity and desired delivery/completion date. 3. Analyzing and Releasing Orders: ● Review Results: Analyze the MRP output, including planned orders and potential stockouts or excess inventory situations. ● Adjustments: You may need to adjust reorder points, lot sizes, or planned orders based on your specific needs or constraints. ● Order Release: Approve and release valid purchase orders to suppliers or production orders internally for the required components. 4. Monitoring and Updating: ● Monitoring: Continuously monitor inventory levels, order fulfillment, and production progress. ● Updates: As you receive materials or complete production orders, update the MRP system to reflect changes in inventory and adjust future plans as needed. Additional Notes: ● MRP is typically run periodically (e.g., weekly or monthly) to reflect changes in demand and inventory. ● Some MRP systems offer different planning modes (like regenerate or re-plan) that control how much data is recalculated during each run. ● MRP is most effective when integrated with other systems like Enterprise Resource Planning (ERP) that manage other aspects of the production process. By following these steps and keeping your data accurate, you can leverage MRP to optimize your inventory levels, production scheduling, and overall manufacturing efficiency.
Single level bill of materials Multi level bill of materials
4 Bill of Materials Example
Source: chapter 13, Stevenson, operations management, 14 Ed
Simple example Consider a sandwich (L0)
5 Assume it has a BOM and L1 components are bread slice(2 nos), cheese slice(1 nos), butter(½ tablespoon)
Table form of BOM
L0 Sandwich 1 Nos
L1 Bread slice 2 Nos
L1 Cheese slice 1 Nos
L1 butter ½ tbsp
Tree form of BOM
L Sandwich (1 nos)
L1 Bread Slice (2 Cheese slice (1 Butter (½ tbsp)
Example calculations Sandwich (nos) 50 75 30 100
Bread Slice (nos) 100
Cheese slice (nos) 50
Butter (tbsp) 25
How inventory affects the calculations (gross vs net demand)
Can you calculate the net demands now? Try the full MRP for the following problem Sandwich Demand over next 7 days 1 2 3 4 5 6 7
200 100 400 300 200 400 300
Stock on hand today
Stock on hand Lead time (days)
Sandwich 100 nos –
Bread Slice 300 nos 2 days
Cheese slice 200 nos 1 day
Butter 200 tbsp 1 day
While we work out the problem, we go step by step from top to bottom, one by one only. Each time we reduce the inventory value to arrive at the net demand for each material at each level
Can you recompute the above problem assuming that the following minimum procurement batch sizes prevail in the supplier network Bread slice - 500 nos, cheese slice - 300 nos, butter - 200 tbsp
Analisis Tingkat Kepuasan Pelanggan Dilihat Dari Dimensi Kualitas Pelayanan Dan Harga Pt. Garuda Indonesia Airlines (Persero), TBK Kantor Cabang Semarang
Analisis Tingkat Kepuasan Pelanggan Dilihat Dari Dimensi Kualitas Pelayanan Dan Harga Pt. Garuda Indonesia Airlines (Persero), TBK Kantor Cabang Semarang
