6.2 Material Requirements Planning (MRP)

Material Requirements Planning (MRP) is a crucial tool for managing production and inventory. It ensures materials are available when needed while minimizing inventory costs. MRP links production plans with inventory control, improving efficiency and coordination across departments.

MRP systems use inputs like the master production schedule and bill of materials to calculate material requirements. The process involves breaking down end items, determining net requirements, and scheduling orders. Outputs include planned order releases and exception reports, guiding inventory management decisions.

Material Requirements Planning (MRP) Fundamentals

Purpose of material requirements planning

Top images from around the web for Purpose of material requirements planning

• 

  Supply Chain Integration | Levels & Barriers to Supply Chain Integration View original

  Is this image relevant?

• 

  Controlling the Supply Chain | Boundless Business View original

  Is this image relevant?

• 

  The Planning Cycle | Principles of Management View original

  Is this image relevant?

• 

  Supply Chain Integration | Levels & Barriers to Supply Chain Integration View original

  Is this image relevant?

• 

  Controlling the Supply Chain | Boundless Business View original

  Is this image relevant?

1 of 3

Top images from around the web for Purpose of material requirements planning

• 

  Supply Chain Integration | Levels & Barriers to Supply Chain Integration View original

  Is this image relevant?

• 

  Controlling the Supply Chain | Boundless Business View original

  Is this image relevant?

• 

  The Planning Cycle | Principles of Management View original

  Is this image relevant?

• 

  Supply Chain Integration | Levels & Barriers to Supply Chain Integration View original

  Is this image relevant?

• 

  Controlling the Supply Chain | Boundless Business View original

  Is this image relevant?

1 of 3

• MRP ensures materials and components availability for production while maintaining lowest possible inventory levels
• Implementing MRP improves production efficiency reduces inventory costs enhances customer service and coordinates departments better
• MRP links production plans with inventory control facilitates just-in-time (JIT) manufacturing in supply chain management

Components of MRP systems

• Essential inputs include master production schedule (MPS) bill of materials (BOM) and inventory records
• Core processes involve explosion (breaking down end items into components) netting (determining net requirements) lot sizing (grouping requirements into order quantities) and time phasing (scheduling order releases and due dates)
• Key outputs comprise planned order releases order rescheduling notices and exception reports

MRP Calculations and Analysis

Calculation of material requirements

• Gross requirements based on MPS and dependent demand (customer orders, forecasts)
• Net requirements determined by formula: $Net Requirements = Gross Requirements - On Hand Inventory - Scheduled Receipts$
• Lot sizing techniques include lot-for-lot economic order quantity (EOQ) and period order quantity (POQ)
• Lead time offsetting accounts for procurement or production lead times (raw materials, manufacturing processes)
• Safety stock considerations incorporate buffer inventory in calculations (unexpected demand fluctuations)

Interpretation of MRP reports

• MRP reports include material requirements exception and pegging reports
• Reports contain key information on order quantities dates and due dates
• Actions based on outputs involve releasing planned orders expediting existing orders and rescheduling orders
• Handling exceptions and discrepancies for stockouts excess inventory and late deliveries
• Continuous improvement of MRP system by refining input data accuracy and adjusting planning parameters (reorder points, safety stock levels)