Material Requirement Planning (MRP)

MRP refers to the basic calculations used to determine components required from end item requirements. It also refers to a broader information system that uses the dependence relationship to plan and control manufacturing operations.

“Materials Requirement Planning (MRP) is a technique for determining the quantity and timing for the acquisition of dependent demand items needed to satisfy master production schedule requirements. ”

1. Objectives of MRP

1. Inventory reduction: MRP determines how many components are required when they are required in order to meet the master schedule. It helps to procure the materials/ components as and when needed and thus avoid excessive build up of inventory.
2. Reduction in the manufacturing and delivery lead times: MRP identifies materials and component quantities, timings when they are needed, availabilities and procurements and actions required to meet delivery deadlines. MRP helps to avoid delays in production and priorities production activities by putting due dates on customer job order.
3. Realistic delivery commitments: By using MRP, production can give marketing timely information about likely delivery times to prospective customers.
4. Increased efficiency: MRP provides a close coordination among various work centres and hence help to achieve uninterrupted flow of materials through the production line. This increases the efficiency of production system.

2. MRP System

The inputs to the MRP system are: (1) A master production schedule, (2) An inventory status file and (3) Bill of materials (BOM).

Using these three information sources, the MRP processing logic (computer programme) provides three kinds of information (output) for each product component: order release requirements, order rescheduling and planned orders.

1. Master Production Schedule (MPS)

MPS is a series of time phased quantities for each item that a company produces, indicating how many are to be produced and when. MPS is initially developed from firm customer orders or from forecasts of demand before MRP system begins to operate. The MRP system whatever the master schedule demands and translates MPS end items into specific component requirements. Many systems make a simulated trial run to determine whether the proposed master can be satisfied.

2. Inventory Status File

Every inventory item being planned must have an inventory status file which gives complete and up to date information on the on-hand quantities, gross requirements, scheduled receipts and planned order releases for an item. It also includes planning information such as lot sizes, lead times, safety stock levels and scrap allowances.

Source: KumarAnil, Suresh N. (2009), Production and operations management, New Age International Pvt Ltd; 2nd Ed. edition.