*The most important feature of MRP as compared with ordinary inventory control analysis is its time phasing feature.

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1 Itegrated Productio ad Ivetory Cotrol System MRP ad MRP II Framework of Maufacturig System Ivetory cotrol, productio schedulig, capacity plaig ad fiacial ad busiess decisios i a productio system are iterrelated. They ca be itegrated to share the iformatio developed i the same system Usig separate iformatio system developed by differet fuctios withi the same productio system is oe of the mai reaso for iefficiecies such as excess ivetory, shortage of a few critical compoets whe they are eeded, cash flow problems. A properly desiged itegrated system will ot oly prevet most of the above problems, but also have capabilities of lookig ahead to aswer various what if questios for the productio system. Questios such as what happes if the order for a give product is cacelled? or what will happe if a certai supplier fails to supply the material eeded o time? Two of these systems which are directly related to productio schedulig ad ivetory cotrol are: Material Requiremets Plaig (MRP) ad Maufacturig Resources Plaig (MRP II). *The demad was assumed to be dictated by the eviromet that maagemet had to cope with. This assumptio, however, is ot true i a maufacturig eviromet where the demad for elemets used i the fial product depeds o the demad forecasted for the product. *MRP is ofte cosidered to be a subset of ivetory cotrol while it is a effective tool for miimizig uecessary ivetory ivestmet, MRP is also useful i productio schedulig ad purchasig of materials. Time phasig *The most importat feature of MRP as compared with ordiary ivetory cotrol aalysis is its time phasig feature. *I classical ivetory aalysis it is usually determied how much to order to repleish ivetory which has bee used up (EOQ). *I MRP the timig of each ivetory actio is determied, ad the status of the system is calculated, for every period. Example: Week Demad

2 Classical ivetory:total demad 1900 O-had 800 Amout due by third week 500 Net requiremet = 600 MRP: approaches the problem by specifyig what happes to the system period by period. Week Requiremet Due to be Received O Had Net Requiremet Objective of MRP: 1. Improve customer service 2. Reduce ivetory ivestmets 3. Improve plat operatig efficiecy Basic cocepts of MRP: 1. Idepedet vs. depedet demad *Idepedet demad meas that demad for a product is urelated to demad for other items (e.g. ed products ad spare parts, etc.) these should forecasted. *Depedet demad meas that demad for the item is related directly to the demad for some other product (e.g. raw materials, subassemblies) these should ot be forecasted ad is determied by MRP techiques. 2. Lead time *The lead time for a job is the time that must be allowed to complete the job from start to fiish. -Orderig Lead Time: is the time required form iitiatio of purchase requisitio to receipt of the item from the veder.

3 -Mfg. Lead Time: is the time eeded to process the part through the sequece of machies specified o the route sheet. 3. Commo use items *A raw material may be used to produce more tha oe compoet type. *A give compoet may be used o more tha oe fial produce, etc. Iput to MRP: 1. Master Product Schedule: is a list of *What ed products are to be produced. *How may of each product is to be produced. *Whe the products are to be ready for shipmet. 2. Bill of Material (BOM) File *I material Requiremets Plaig the demad for compoet items is calculated rather tha forecast. These calculatios are made by multiplyig the values forecast for the ed product by the list of compoets used to produce oe uit of the ed product *BOM is a listig of compoet parts ad subassembly that make up each product. Subassemblies Sub-subassemblies Product Structure for Product P Modified Form of Product Structure for Product P

4 3. Ivetory Record File *A Computerized ivetory system is used to maitai items of master files icludig raw materials, compoets assemblies, BOM, etc. Structure of MRP System How MRP Works?

5 *A program is writte that computes how may of each compoet ad raw material are eeded by "explodig" the ed product requiremet ito successively lower levels i the product structure. Factors that must be cosidered i the MRP parts ad materials explosio: 1. Quatities that are i ivetory or scheduled for delivery i the ear future must be subtracted from gross requiremets to determie et requiremets for meetig the master. 2. Time to start assemblig the subassemblies ad compoets must be offset by their respective maufacturig lead-time. Raw material must be offset by orderig lead time. 3. Commo use items must be collected ad combied ito a sigle et requiremet for each item. Priciples of Material Requiremets Plaig 1. Time Buckets - The time uits, for which the material Requiremets Plaig is performed. The duratio of each time bucket depeds o the ature of the product a productio schedule. *Smaller time buckets provide greater accuracy but cost more i term of the volume of data to be processed. *Larger time buckets may create plaig problems. *Plaig horizo - a legth of time for which the plaig is performed. 2. Gross Requiremet - these are the requiremets that must be o had at specified times.

6 3. Scheduled Receipt - a part of the gross requiremet is met by scheduled receipts. These are parts for which orders have already bee released, ad they are due to arrive at a kow time. 4. Ivetory O Had - The amout of ivetory o had at the begiig of each period ca be calculated by the followig relatio, I I GR where I = ivetory o had at the begiig of period I-1 = ivetory o had at the begiig of period -1 SR-1 = scheduled receipt at period -1 GR-1 = gross requiremet at period -1 if I if I 1 1 GR GR Net Requiremet - is the amout required to meet that portio of the gross demad which is ot covered by the scheduled receipts ad ivetory o had.

7 NR GR GR I 0 if if GR I otherwise 0 I 0 wherenr = Net Requiremet for period 6. Plaed Order Release - The et requiremets row idicates the amout ad timig of the et requiremets. The order to iitiate the supply of these parts either by productio or purchase must be issued i advace to make sure they will be available whe eeded. *We adopt the covetio of assumig that the et requiremet is eeded at the middle of time periods. 7. Ecoomic Order Quatity - Sometimes releasig orders for quatities less tha some specified amout is ot feasible ecoomically or for other possible reasos.

8 MRP Tableau with Ecoomic Order Quatity 8. Safety Stock - is usually icluded whe there is ucertaity associated with the demad patter. Sometimes variatios of supply lies or productio systems may require safety stock at the compoet part level. I these situatios the safety stock ca be subtracted from the o-had ivetory.

9 Sources of Gross Requiremets *Master Schedule - shows the gross requiremets for the fial product for each time period. A Sample Master Schedule *With the help of the product structure diagram (BOM) the traslate the gross requiremets for the product to gross requiremets for the compoet parts

10 The Product Structure The relatio betwee the parts i two cosecutive levels of the product structure is ofte referred to as the paret-compoet relatioship. The gross requiremet for the compoet part is calculated from the et requiremets of the paret part. I these calculatios the et requiremet at each level becomes the gross requiremet for the items i the ext level. For compoet items which appear several times i the product structure, the gross requiremet is obtaied by addig up ball gross requiremets Determiatio of Gross Requiremets for Compoet Parts from the Fial Product

11 Closed Look MRP Plaig horizo spa: the legth of plaig horizo is very importat i desigig MRP system. Thus the plaig horizo must be log eough to allow eough time for plaig. O the other had, too log a plaig horizo ecessitates larger amouts of data processig. Further more, the loger the plaig horizo, the less reliable becomes the data about demad forecastig. Updatig the system: MRP systems are dyamic systems. Output of MRP systems: detailed ad time phased iformatio about the compoet items. Use of computers i MRP:MRP is primarily a iformatio ad a data processig system. Accommodatio of Chages Productio plas are subject to frequet chages both from exteral supply or demad requiremets ad from iteral factors that cotribute to or detract from maufacturig capabilities. A MRP system accommodates these chages through oe of the followig methods: Schedule regeeratio: Material requiremets are updated by literally throwig away the previous pla ad periodically re-explodig all ed-item requiremets, usually each week. I doig so, every bill of material must be retrieved, ad the ivetory status of every item must be recomputed. Net chage: Re-plaig cotiuously takes place i a et chage system. Oly affected parts of the master schedule must be exploded. Maufacturig Resources Plaig MRP II MRP II adds two importat features to closed loop MRP. 1. The first feature is to itegrate the fiacial system of the compay with its operatig system. A closed loop MRP ca itegrate the iformatio system eeded for operatig a productio system. Itegratig the closed loop MRP with the iformatio eeded for fiacial systems such as accoutig, marketig, ad purchasig will result i a more efficiet system. Most of the figures that are used by fiacial ad accoutig persoel are the same as those used by productio plaig ad schedulig people. The oly differece is that accoutig persoel put dollar values o uits. 2. The secod feature added to MRP by MRP II is a simulatio capability to evaluate the etire busiess ad productio system to aswer various what if questio. Software for MRP systems There have bee a cosiderable umber of commercially available software developed for MRP ad closed loop MRP. Software packages for MRP II are ot umerous but the umber is growig. Maufacturig software systems (Vermot) provides a report o computer software for MRP ad MRP II.