Material Requirements Planning
(MRP) is software based production planning and inventory control system used to manage manufacturing processes. Although it is not common nowadays, it is possible to conduct MRP by hand as well. An MRP system is intended to simultaneously meet three objectives:
- Ensure materials and products are available for production and delivery to customers.
- Maintain the lowest possible level of inventory.
- Plan manufacturing activities, delivery schedules and purchasing activities
The scope of MRP in manufacturing: Manufacturing organizations, whatever their products, face the same daily practical problem - that customers want products to be available in a shorter time than it takes to make them. This means that some level of planning is required.
Companies need to control the types and quantities of materials they purchase, plan which products are to be produced and in what quantities and ensure that they are able to meet current and future customer demand, all at the lowest possible cost. Making a bad decision in any of these areas will make the company lose money. MRP is a tool to deal with these problems.
It provides answers for several questions:
- What items are required?
- How many are required?
- When are they required?
MRP can be applied both to items that are purchased from outside suppliers and to sub-assemblies, produced internally, that are components of more complex items. The data that must be considered include:
- The end item (or items) being created. This is sometimes called Independent demand or Level "0" on BOM (Bill of materials).
- How much is required at a time.
- When the quantities are required to meet demand.
- Shelf life of stored materials.
- Inventory status records.
- Records of net materials available for use already in stock (on hand) and materials on order from suppliers.
- Bills of materials. Details of the materials, components and subassemblies required to make each product.
- Planning Data. This includes all the restraints and directions to produce the end items.
Manufacturing resource planning II
MRP II is defined as a method for the effective planning of all resources of a manufacturing company. Ideally, it addresses perational planning in units, financial planning, and has a simulation capability to answer "what-if" questions and extension of closed-loop MRP.
This is not exclusively a software function, but the management of people skills, requiring a dedication to database accuracy, and sufficient computer resources. It is a total company management concept for using human and company resources more productively.
MRP II is not a proprietary software system and can thus take many forms. It is almost impossible to visualize an MRP II system that does not use a computer, but an MRP II system can be based on either purchased–licensed or in-house software. Almost every MRP II system is modular in construction.
Characteristic basic modules in an MRP II system are:
- Master production schedule (MPS)
- Item master data (technical data)
- Bill of materials (BOM) (technical data)
- Production resources data (manufacturing technical data)
- Inventories and orders (inventory control)
- Purchasing management
- Material requirements planning (MRP)
- Shop floor control (SFC)
- Capacity planning or capacity requirements planning (CRP)
- Standard costing (cost control) and frequently also Actual or IFO costing, and Weighted Average costing.
- Cost reporting / management (cost control)
Together with auxiliary systems such as:
- Business planning
- Lot traceability
- Contract management
- Tool management
- Engineering change control
- Configuration management
- Shop floor data collection
- Sales analysis and forecasting
- Finite capacity scheduling (FCS)
Related systems such as:
- General ledger
- Accounts payable (purchase ledger)
- Accounts receivable (sales ledger)
- Sales order management
- Distribution resource planning (DRP)
- Automated warehouse management
- Project management
- Technical records
- Computer-aided design/computer-aided manufacturing (CAD/CAM)
The MRP II system integrates these modules together so that they use common data and freely exchange information, in a model of how a manufacturing enterprise should and can operate. The MRP II approach is therefore very different from the "point solution" approach, where individual systems are deployed to help a company plan, control or manage a specific activity. MRP II is by definition fully integrated or at least fully interfaced.
MRP II systems can provide:
- Better control of inventories
- Improved scheduling
- Productive relationships with suppliers
For design / engineering:
- Improved design control
- Better quality and quality control
For financial and costing:
- Reduced working capital for inventory
- Improved cash flow through quicker deliveries
- Accurate inventory record