Material requirement planning (MRP)

Material requirements planning or MRP is a computer-based inventory management technique designed to improve productivity for businesses. Companies use material requirements-planning systems to ensure that materials and components are available in the right quantities, and schedule their delivery time.

MRP is often considered to be a subset of inventory control. It is an effective tool for minimizing unnecessary inventory investment. Material requirement planning is also useful in production scheduling and purchasing of materials.

Functions of material requirement planning are-

  1. Control of the inventory levels,
  2. Assignment of priorities for components, depending upon their delivery dates, and
  3. determination of capacity requirements at a detailed level.

Inputs to Material requirement planning

MRP convert the master production schedule into a detailed schedule for raw materials and components. However, the master production schedule is one of the three sources of input data on which MRP relies. The other two inputs are – the Bill-of-material file and the inventory-record file.

Let’s discuss these three inputs in detail –

Master Production schedule

The master production schedule is based on an accurate estimation of demand for the firm’s product, together with a realistic assessment of its production capacity. It is a list of what end products are to be produced, how many of each product has to be produced, and when the products are likely to be ready for shipment.

Bill of material file

In order to compute the raw material and component required for the end product listed in the master production schedule product structure must be known. This is specified by the bill of materials, which is a list of component parts and sub-assemblies that make up each product. Putting all these assemblies together, we have the bill of materials file or BOM.

Inventory record file

It is mandatory in MRP to have accurate current data on inventory status. This is accomplished by utilising a computerized inventory system that maintains the inventory record file. An explanation of the lead time for the raw material, components and assemblies must be established in the inventory record file.

Process of Material requirement planning

The MRP process can be split into four basic steps:

  1. Estimating demand and the materials required to meet it. The initial step of the MRP process is figuring out customer demand and the requirements to meet it. Utilizing the bill of materials—which is simply a list of raw materials, assemblies, and components needed to manufacture an end product—MRP breaks down demand into specific raw materials and components.
  2. Check demand against inventory and allocate resources. This step involves checking demand against what you already have in inventory. Then MRP distributes resources accordingly. In other words, the MRP allocates inventory into the exact areas it is called for.
  3. Production scheduling. The next step in the process is simply to calculate the time and labor required to complete manufacturing. It also sets a deadline.
  4. Monitor the process. The final step of the process is simply to monitor it for any issues. The MRP can automatically alert managers for any delays and even suggest contingency plans in order to meet build deadlines.

MRP output reports

Material requirement planning generates a variety of output that can be used in planning and management of plant operations. These output includes-

Primary outputs

  1. Order release notice, to place order that have been planned in MRP process.
  2. Rescheduling or cancellation notices, showing rescheduling or cancellation of open orders because of a change in the master schedule.
  3. Reports on inventory status.

Secondary outputs

  1. Performance report of various types, indicating costs, item usage, actual versus planned lead time, etc..
  2. Expectation reports, showing deviation from schedule, orders that are overdue, scrap and so on.
  3. Inventory forecasts, indicating projected inventory levels in future periods.

There are several advantages to the MRP process, and Of course, there are also disadvantages to the MRP process.

Advantages of Material requirement planning process:

  • Assurance that materials and components will be available when needed
  • Minimized inventory levels and costs associated
  • Optimized inventory management
  • Reduced customer lead times
  • Increased manufacturing efficiency by using accurate production planning and scheduling to optimize the use of labor and equipment.
  • Increased labor productivity
  • Ensure capacity utilization
  • Increased overall customer satisfaction

Disadvantages of the MRP process:

  • MRP systems can often be difficult and expensive to implement.
  • Lack of flexibility when it comes to the production schedule.
  • Introduces the temptation to hold more inventory than needed.

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Sukanta Maiti

I am a Mechanical Engineer by profession, Blogger, and Youtuber by passion. I have been in the engineering field since 2014. I am passionate about sharing all my knowledge about engineering, management, and economics to my readers.

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