MRP
is a means for determining the number of parts, components & materials
needed to produce a product. Dependent demand drives MRP. Dependent demand
means that the demand for one item is related to the demand for another demand.
So,
MRP is a dependent demand technique that uses a bill of material, inventory,
expected receipts & master production schedule to determine material
requirements.
MRP
provides time scheduling information specifying when each of the materials,
parts & components should be produced/ordered.
It
is software based production planning & inventory control system used to
manage manufacturing processes.
Application of MRP/Benefits of MRP:
-
Low level of in process inventories.
-
Ability to track material requirements.
-
Ability to evaluate capacity
requirements.
-
Means of allocating production time.
-
It is most valuable in industries where
a number of products are made in batches using the same productive equipment.
Most valuable to companies involved in assembly operation and least valuable to
those in fabrication. Fabrication items
are manufactured by machine rather than assembled from parts.
Purposes
of MRP:
-
The main purpose of a basic MRP system
is to control the inventory level, assign operating priorities for items, and
plan capacity to load the production system.
-
The theme of MRP is getting the right
place at the right time.
Dependent
inventory model requirements or requirement for effective MRP:
Effective use of
dependent inventory model requires that the operations mangers know the
following:
1 1. Master Production Schedule (MPS)
Master
production schedule deals with the end products but if end item is quite
large/quite expensive. MPS may schedule
major subassemblies or components instead. MPS is time-phased plan specifying
what is to be made and when. It should be in accordance with production plan.
The production plan sets the overall level of output in broad terms (e.g. product
families, standard hours or dollar value). It also includes a variety of
inputs, including financial plans, customer demand, engineering capabilities
etc. The master production schedule is derived from the aggregate schedule.
Aggregate
production plan is established in gross terms such as families of products. The
master production schedules are established in terms of specific products.
Characteristics
of good master schedule:
-
Include all demand from product sales,
warehouse replenishment, spares and
inter-plant requirements.
-
Never loosed site of the aggregate plan.
-
Be involved with customer order
promising.
-
Be visible to all levels of management.
-
Identify and communicate all problems.
Time
fences :
Flexibility
within master production schedule depends upon several factors like:
production
lead time, commitment of parts and
components to a specific end item, amount of excess capacity, reluctance or
willingness of management to make changes. Time fences is defined as time
having some specified level of opportunity for the customer to make changes.
Frozen-No
schedule change allowed within this window.
Moderately
firm- Specific changes allowed within product group as long as parts are
available.
Flexible-
significant variation allowed as long as overall capacity requirements remain
at the same level.
2. Bills of materials (BOM)
BOM
is list of quantities of components, ingredients and materials required to make
a product. It is a file that contains complete product description listing but
only the materials, parts and components but also the sequence in which product
is created. It is one of major input of MRP program. BOM file is often called
the product structure file or product free because it shows how a product is
put together. It contains the information to identify each item and the
quantity used per unit of each product.BOM can be shown as follows:
Fig:
product tree structure for assembly
Items
above any level are called parents; items below any level are called
components/children.
Modular
bill of material:
BOM
may be organized are around product modules. Modules are not final products to
be sold but are components that can be produced and assembled into units. They
are often major components of final products or product options A modular bill
of material is the term for a buildable item that can be produced and stocked
as a subassembly. Many end items that are large and expensive are better
scheduled and controlled as modules.
Super
bills:
A
super bill of material includes items with fractional options. E.g 0.3 of part meaning 30 % of the units
produced contain that part and 70 % do not.
Modular
and super bills of materials are called planning bills of materials since they
simplify the planning process.
Low
level coding:
If
all identical parts occur at the same level for each product, the total no. of
parts and materials needed for a product can be computed easily. Low level coding of items is necessary when
identical items exist at various levels in the BOM. Low level coding means item
is coded at the lowest level at which it occurs.
3.
Accurate inventory records:
Good inventory
management is an absolute necessity for an MRP system to work. Experts suggest
at least 99% record accuracy for the MRP to work.
4.
Purchase order outstanding
Well managed purchasing
and inventory control departments should provide knowledge of purchase order
outstanding. When the purchase orders are executed records of those orders and
their scheduled delivery dates must be available to production department. Only
with good purchasing data can managers prepare a good production plan and
effectively execute MRP system.
5. Lead time for components
Once managers determine
when products are needed they need to determine when to acquire them. The time
required to acquire on item is known as lead time. In purchasing system lead
time is the time between recognition of the need for an order and receiving it.
In production system it is the order wait move, queue, setup and runtimes for
each component.
MRP system
-
The MRP closely interacts with master
schedule inventory record/status files, bill of materials and output reports.
MRP system works as
follows:
-
Orders for products are used to create a
master production schedule, which states the number of items to be produced
during specific time periods.
-
A bill of material identifies the
specific materials used to make each item and the correct quantities of each.
-
The inventory record files contain data
such as the no. of units on hand and an order.
-
These three sources master production
schedule, bill of material and inventory record file become the data source for
the MRP programs.
-
MRP program expands the production
schedule into a detailed order scheduling plan for the entire production
sequence.
Inputs
of MRP
·
Demand for products/ Master Production
Schedule
Product demand for end
item comes primarily from two main sources. The first is known customers who
have placed specific orders such as those generated by sales personnel, or from
interdepartmental transactions. These orders usually carry promised delivery
date. The second source is forecast demand. These are the normal independent
demand orders which are predicted using several forecasting techniques. In
addition to the demand for the end products customers also order specific parts
and components either as spare parts or for service and repair. These demands
are not usually part of MPS; instead they are fed directly into MRP program at
appropriate levels.
·
Inventory record files
MRP
system must update the inventory system. Inventory status file is a complete
documentation of inventory status containing each item in product structure
including items identification, on hand quantity, safety stock level, quantity
allocated and lead time of each item. In other words inventory status file
provides information about items to be ordered, quantity of items, time of
order release etc.
·
Inventory transaction file
The
inventory status file is kept up to date by posting inventory transactions as
they occur. These changes occur because of stock receipts and disbursements,
scrap losses, wrong parts, cancelled orders and so forth.
·
Bill of material already discussed.
MRP
Computer Processing
MRP
program operates using information from inventory records, master schedule and
bill of materials. Master schedule specifies a list of products needed in each
period. BOM specifies the detail description of the materials and parts needed
to make each product. Similarly the number of units of each product and
material currently on hand and an order are contained in the inventory file.
MRP
program works on the inventory file which is segmented into time periods. While
continually referring to BOM file to compute the quantities of each item
needed. The number of units of each item required is then corrected for on hand
amounts and the net requirements is offset (set back in time) to allow for the
lead time needed to obtain the material..
The
process of calculating the exact requirements for each item managed by the
system is often referred to as the explosion process.
Output of MRP
From the information
given availed by MRP program varieties of reports can be prepared. These
reports are usually classified as primary and secondary reports.
Primary reports: these
are the main reports used in inventory and production control. These reports
include the following matters:
i)
Planned order including quantities and
timing to be released at the future time.
ii)
Order release notice to execute planned
orders.
iii)
Changes in due date of open ordering due
to rescheduling.
iv)
Cancellations or suspensions of open
orders due to cancellation/suspension of orders on MPS.
v)
Inventory status data
Secondary reports
Following are different
secondary reports.
i)
Planning reports: these types of reports
are to be used for planning of future activities e. g. they are used in
forecasting inventory.
ii)
Performance reports: these are used for
the purpose of pointing out inactive items and determining the agreement
between actual and programmed item lead times and between actual and programmed
quantity usage and costs.
iii)
Exceptions reports: they point out
serious discrepancies such as errors, out of range situations, late or overdue
orders, excessive scrap.
Embedding
JIT to MRP (flow manufacturing)
MRP and JIT both have
their benefits. So the question now is can they work together successfully and
would one combine them.
Most major
manufacturing firms used MRP of the firms using MRP many in repetitive
manufacturing also use JIT techniques. Although JIT is best suited to
repetitive manufacturing, MRP is used in everything from custom job shop to assembly line production.
A challenge arises in
integrating the shop floor improvement approaches of JIT with an MRP based
planning and control system.
The MRP/JIT combination
creates what might be considered a hybrid manufacturing system.
The term flow
manufacturing is now being used by many software vendors to describe new
software modules that combine JIT and MRP logic.
An MRP system combined
with JIT can provide the best of both MRP & JIT.
MRP provides the plan
and an accurate picture of requirements; while JIT rapidly moves materials in
small batches, reducing work in process inventory.
Lot sizing in MRP systems
The
determination of lost size in an MRP system is a complicated and difficult
problem. Lot sizes are the part quantities issued in the planned order receipt
planned order release section of an MRP schedule. For parts produced in house,
lot sizes are the production quantities of batch size. For purchased parts,
these are the quantities ordered from the suppliers. Lot sizes generally meet
part requirement for one or more periods
Most
lot-sizing techniques deal with how to balance the step up or order costs and
holding cost associated with meeting the net requirements generated by the MRP
planning process. Many MRP system have options for computing lots sizes based
on some of the more commonly used techniques. It should be obvious, though,
that the uses of lot-sizing techniques increase the complexity in generating
MRP schedules. When fully exploded, the numbers of parts scheduled can be
enormous.
Four
types of lot-sizing techniques are lot-for-lot (L4L), economic order quantity (EOQ),least
total unit cost(LTC), and least unit cost(LUC).
Lot
for Lot (L4L)
It
is the most common technique. It:
·
Sets planned orders to exactly match the
net requirements.
·
Produces exactly what is needed each
week with none carried over into the future periods.
·
Minimizes the carrying cost
·
Does not consider set up cost or
capacity limitations.
The lot sizing
techniques used for MRP assume that part requirements are satisfied at the
start of the period. Holding cost are charged only to the ending inventory for
the period not for the average inventory as in case of EOQ. EOQ assumes the
parts are used continuously during the period. The logic for L4L says the
production quantity will exactly match the required quantity so there will be
no inventory left at the end. Without any inventory to carry over to the next
period there is zero holding cost.L4L causes high setup cost.
Economic order quantity (EOQ)
In EOQ model either
fairly constant demand must exist or safety stock must be kept to provide for
demand variability. The EOQ model uses an estimate of total annual demand, the
setup or order cost and the amount of holding cost. It assumes that part
requirement is satisfied at the start of the period. Holding cost is charged at
ending inventory. Lot sizes generated by EOQ do not always cover the entire
periods. It might provide requirement for say 4.6 periods.
Least total cost method (LTC)
The least total cost
method is a dynamic lot sizing technique that calculates the order quantity by
comparing the carrying cost and setup cost for various lot sizes and then
selects the lot in which these are most nearly equal.
Least unit cost (LUC)
LUC is a dynamic lot
sizing technique that adds ordering and inventory carrying cost for each trial
lot size and divides by the number of units in each lot size, picking the lot
size with lowest unit cost.
Limitations of both LTC
and LUC are that they are influenced by the length of the planning horizon.
Material Requirement Planning is a standard stock planning methodology that assists companies, primarily item-based manufacturers, in understanding stock requirements while managing market interest. MRP frameworks, which are subsets of store network the board frameworks, are used by businesses to properly work stock, plan production, and deliver the right item on time and budget.
ReplyDelete