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What is MRP?Computerized Inventory Control
Production Planning SystemManagement Information System
Manufacturing Control System
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What is MRP? (contd)This is the most comprehensive approach to
manufacturing inventory and other dependents which demand an efficient inventory management system.
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The MRP system determines item-by-item, what is to be processed and when, as well as what is to be manufactured when.
This is based on order priorities and available capacities.
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When to use MRPJob Shop ProductionComplex ProductsAssemble-to-Order Environments
Discrete and Dependent Demand Items
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What can MRP do?Reduce Inventory
LevelsReduce Component
ShortagesImprove Shipping
PerformanceImprove Customer
ServiceImprove ProductivitySimplified and
Accurate Scheduling
Reduce Purchasing Cost
Improve Production Schedules
Reduce Manufacturing Cost
Reduce Lead TimesLess Scrap and
ReworkHigher Production
Quality6
What can MRP do?(contd)Improve
CommunicationImprove Plant
EfficiencyReduce Freight
CostReduction in
Excess Inventory
Reduce OvertimeImprove Supply
SchedulesImprove Calculation
of Material Requirements
Improve Competitive Position
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Three Basic Steps of MRPIdentifying RequirementsRunning MRP – Creating the Suggestions
Firming the Suggestions
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Step 1: Identifying the RequirementsQuantity on HandQuantity on Open Purchase OrderQuantity in/or Planned for Manufacturing
Quantity Committed to Existing Orders
Quantity Forecasted9
Step 1: Important InformationMRP is…..Company SensitiveLocation SensitiveDate Sensitive
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Step 2: Running MRP – Creating the SuggestionsCritical ItemsExpedite ItemsDelay Items
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Step 3: Firming the Suggestions
Manufacturing OrdersPurchasing OrdersVarious Reports
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Overview of the MRP System
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Product Structure
File
Master Production Schedule
Inventory Master File
Material Requirements
Planning
Manufacturing Orders
Purchase Orders
Various Reports
MRP InputsProduct Structure FileMaster Production Schedule
Inventory Master File
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Product Structure FileBill of Materials:
It is a materials list that provides information useful to reconstruct the manufacturing process. It is the master product definition that contains “as designed” information.
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Bill-of-Material Product Structure Tree
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
© 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-16
Bicycle(1)P/N 1000
Handle Bars (1)P/N 1001
Frame Assembly (1)P/N 1002
Wheels (2)P/N 1003
Frame (1)P/N 1004
Master Production ScheduleSchedule of Finished ProductsRepresents Production, not Demand
Combination of Customer Orders and Demand Forecasts
What Needs to be Produced
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Inventory Master FileOn-Hand QuantitiesOn-Order QuantitiesLot SizesSafety StockLead TimePast-Usage Figures
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MRP ProcessSchedules the Production of all items
using an MRP Matrix
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Item: Low-Level Code: Lot Size: Lead Time: PD 1 2 3 4 5Gross Requirements
Scheduled Receipts
Projected on Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
MRP Matrix
Terms DefinedItem – name or number for the item
being scheduledLow-Level Code – the lowest level of
the item on the product structure fileLot Size – order multiples of quantityLead Time – the time from when an
order is placed to when it is receivedPD – Past Due Time Bucket, orders
behind schedule
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Terms DefinedGross Requirements – demand for an item
by time periodScheduled Receipts – material already
orderedProjected on Hand – expected ending
inventoryNet Requirements – number of items to be
provided and whenPlanned Order Receipts – net requirements
adjusted for lot sizePlanned Order Releases – planned order
receipts offset for lead times
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Item: A Low-Level Code: 1 Lot Size: 25 Lead Time: 1
PD 1 2 3 4 5
Gross Requirements 10 15 25 25 30
Scheduled Receipts 25
Projected on Hand 20
Net Requirements
Planned Order Receipts
Planned Order Releases
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Item: A Low-Level Code: 1 Lot Size: 25 min Lead Time: 1
PD 1 2 3 4 5
Gross Requirements 10 15 25 25 30
Scheduled Receipts 25
Projected on Hand 20 10 20 20 20 15
Net Requirements 5 5 10
Planned Order Receipts 25 25 25
Planned Order Releases 25 25 25 30 25
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
© 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-24
Aggregate Production Plan
MarketingCustomerDemand
EngineeringDesign
Completion
ManagementReturn onInvestment
Capital
HumanResourcesManpowerPlanning
ProcurementSupplier
Performance
FinanceCash Flow
ProductionCapacityInventory
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
© 2001 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458 14-25
Production Plan
Execute MaterialPlans
Master ProductionSchedule
MaterialRequirements
Plan
CapacityRequirements
Plan
Execute CapacityPlans
Realistic??No
Yes
MRP OutputsManufacturing OrdersPurchasing OrdersVarious Reports
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Hubbell Lighting CaseManufactures Industrial Lighting ProductsGood-Quality ProductsPoor at Meeting Due DatesWork is Specialized for Each CustomerJob Shop EnvironmentComplex Products
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Hubbell Lighting CaseBefore MRP
Implementation
Less than 75% of orders completed on time
After MRP Implementation
97% of orders completed on time
2% of orders completed with 1 to 2 days after due date
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Summary of MRPMRP is a…..Computerized Inventory ControlProduction Planning Systemthat…..Schedules Component Items as Neededwhich will…..Track Inventory and…..Help you in many other aspects of
business
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