March 30, 2015

Material Requirements Planning - Review Notes for Chase et al. Book Chapter

Summary for Revision

When demand is dependent on multiple materials, managers use a concept known as materials requirements planning, or MRP, to determine demand for lower level items. MRP is a logical approach to determine the number of parts, components, and material needed to produce each end item. It also provides the time schedule specifying when each of these materials, parts, and components should be ordered or produced.

MRP has grown from planning materials to also planning for other organizational resources needed.

Bill of Materials gives the hierarchical details of finished product, main assemblies, sub assemblies, components and materials of a product.

From an organization's aggregate plan, the master production plan (MPS) is developed. The MPS is the time-phased plan specifying how many and when the firm plans to build each specific end item. Further down the MPS process is the MRP, which calculates and schedules all of the raw materials, parts, and supplies needed for production.

If customers give advance orders, management must specify a time fence, or period of time in which the customer can make changes in their order. Once this time has passed, the order becomes fixed. The MRP uses this fixed plan to create schedules to identify the parts and materials required to produce end items, the exact numbers needed, and the dates when orders for these materials should be released and be received or completed within the production cycle.

Today, computerized inventory systems for MRP control inventory levels, assign operating priorities for items, and plan capacity to load the production system. The goal of MRP is to get the correct materials to the right place at the right time.

The objectives of inventory management under an MRP system are to improve customer service, minimize inventory investment, and maximize production operating efficiency. The MRP interacts with the master production schedule, the bills of material file, and the inventory records file. Product demand data for MRP systems comes from two sources -- from customers who have placed firm orders and from forecasted or anticipated demand.

The bill of materials (BOM) file contains the complete product description listing the materials, parts, and components as well as the sequences in which the product is created. MRP outputs can take a variety of forms and can be classified as primary and secondary output reports. Capacity constraints can be determined using capacity requirements planning. An MRP program with a capacity requirements planning module allows rescheduling to try to level capacity through either backward or forward scheduling. The master schedule will try to level out the load so that requirements for work centers remain within the available capacity.

MRP II has expanded the role of MRP to include planning for staffing, facilities, and tools. Called manufacturing resource planning, it can plan and monitor all the resources of a manufacturing firm including manufacturing, marketing, finance, and engineering within a closed-loop system.

JIT is best suited to repetitive manufacturing. MRP is used in everything from custom job shops to assembly line production. The term flow manufacturing is now being used by many software vendors to describe new software modules that combine MRP and JIT logic.

MRP applications have many uses even in service organizations. But so far only a few service organizations have developed or implemented MRP. Many believe that it is a manufacturing tool.

Chapter Outline of

Richard B. Chase, F. Robert Jacobs, Nicholas J. Aquilano, Operations Management for Competitive Advantage, 10/e, McGraw-Hill Higher Education, 2004

Where MRP Can Be Used
A Simple MRP Example
Master Production Schedule
Time Fences
Material Requirements Planning (MRP) Systems
Purposes of MRP
Material Requirements Planning System Structure
Demand for Products
Bill of Materials File
Inventory Records File
MRP Computer Program
An Example Using MRP
Forecasting Demand
Developing a Master Production Schedule
Bill of Materials (Product Structure) File
Inventory Records (Item Master) File
Running the MRP Program
Improvements in the MRP System
Computing Work Center Load
Closed-Loop MRP
MRP II (Manufacturing Resource Planning)
Flow Manufacturing: Embedding JIT into MRP
Lot Sizing in MRP Systems
Economic Order Quantity
Least Total Cost
Least Unit Cost
Choosing the Best Lot Size


Originally posted in

Updated 30 March 2015, 10 Dec 2011

1 comment:

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