Q. What is Material Requirement Planning (MRP)? What is the difference between a gross requirements plan and a net requirements plan? Identify five specific requirements of an effective MRP system.
Material Requirements Planning (MRP) is a production planning and inventory control system used to manage manufacturing processes. It's a computer-based system designed to determine the "what," "when," and "how much" of materials required to produce a product. MRP's primary goal is to ensure that materials are available when needed, minimizing inventory costs while avoiding production delays due to material shortages. It operates on the principle of dependent demand, meaning that the demand for components is directly derived from the demand for the end product. MRP translates the master production schedule (MPS), which outlines the planned production of end products, into detailed schedules for all the necessary components. This includes calculating the exact quantities of each component required, the timing of their order releases, and when they should be received.
Key Inputs to MRP:
1. Master Production Schedule (MPS): The MPS is the driving force behind
MRP. It specifies the quantity and timing of end products to be produced over a
specific planning horizon. It's a statement of what the company plans to
produce, not a forecast of demand.
2. Bill of Materials (BOM): The BOM is a hierarchical
representation of all the components required to manufacture the end product. It
lists every part, subassembly, and assembly needed, along with the quantity of
each required to make one unit of the end product. It essentially defines the
product structure.
3. Inventory Records: Accurate and up-to-date inventory
records are crucial for MRP. These records contain information about the
current inventory levels of each item, including on-hand quantities, lead
times, safety stock, and any outstanding purchase orders.
MRP works by exploding the MPS through the BOM to determine
the requirements for all components. It then considers the available inventory
and outstanding orders to calculate the net material requirements. The process
involves the following steps:
1. Exploding the BOM: The MRP system explodes the BOM to
determine all the components needed to meet the MPS. This involves working down
the BOM hierarchy, identifying all the parts, subassemblies, and assemblies
required at each level.
2. Netting Requirements: The system calculates the net
requirements for each component by subtracting the available inventory (on-hand
plus scheduled receipts) from the gross requirements (derived from the MPS and
BOM).
3. Offsetting for Lead Times: The system then offsets the net requirements
by the lead time for each component. Lead time is the time it takes to procure
or manufacture a component. This determines when orders need to be released to
ensure that materials are available when needed.
4. Creating Planned Orders: The system generates planned orders
for each component, specifying the quantity and timing of the order releases.
5. Order Release: Planned orders are then released,
authorizing purchasing or production to begin.
Gross Requirements Plan vs. Net Requirements Plan:
The distinction between a gross requirements plan and a net
requirements plan is fundamental to understanding MRP.
- Gross
Requirements Plan:
This is a schedule that shows the total demand for each component during
each period, without considering any inventory that might already
be on hand or on order. It's a raw calculation of what's needed based on
the MPS and BOM. Think of it as the "total demand" for each
item.
- Net
Requirements Plan:
This is a schedule that shows the actual amount of each component that
needs to be ordered or produced in each period, after taking into
account the available inventory and any scheduled receipts. It's the
"actual need" after considering what's already available. The
net requirement is calculated as:
- Net
Requirements = Gross Requirements - (On-Hand Inventory + Scheduled
Receipts)
The net requirements plan is the actionable plan used to
place orders or initiate production. It represents the true need for each
component, minimizing unnecessary inventory and ensuring that materials are
available when required.
Five Specific Requirements of an Effective MRP System:
An effective MRP system needs to be accurate, timely, and
integrated to function correctly. Here are five specific requirements:
1. Accurate and Up-to-Date Data: The foundation of a successful MRP
system is accurate data. This includes the MPS, BOM, and inventory records. Inaccurate
data will lead to incorrect calculations, resulting in either shortages or
excess inventory. The BOM must accurately reflect the product structure, the
MPS must be realistic and achievable, and inventory records must be
continuously updated to reflect actual stock levels, receipts, and issues. Data
integrity is paramount.
2. Comprehensive Bill of Materials
(BOM):
The BOM must be complete and accurate, listing every component required to
manufacture the end product. It must also correctly represent the relationships
between the components, showing how they are assembled into subassemblies and
ultimately into the final product. Any omissions or errors in the BOM will lead
to incorrect material requirements calculations.
3. Realistic Master Production Schedule
(MPS):
The MPS must be a realistic and achievable production plan. It should take into
account capacity constraints, available resources, and customer demand. An
overly optimistic MPS will lead to material shortages and production delays,
while a conservative MPS might result in lost sales opportunities. The MPS
should be regularly reviewed and updated to reflect changes in demand and
capacity.
4. Effective Inventory Management: Accurate inventory data is crucial.
The MRP system needs to track on-hand inventory, scheduled receipts
(outstanding purchase orders or production orders), and lead times for each
item. Effective inventory management practices, such as cycle counting and
regular stock checks, are essential to maintain data accuracy. The system
should also be able to handle safety stock calculations and track inventory
transactions in real time.
5. Integration with Other Systems: For maximum effectiveness, the MRP
system should be integrated with other business systems, such as purchasing,
production planning, finance, and accounting. This integration allows for seamless
data flow and facilitates better decision-making. For example, integrating MRP
with purchasing allows for automatic generation of purchase orders based on
material requirements. Integration with finance allows for accurate costing of
products and tracking of inventory value.
In addition to these five core requirements, other factors
contribute to MRP effectiveness. These include user training, system
maintenance, and ongoing review and improvement of the system. A
well-implemented and maintained MRP system can significantly improve
manufacturing efficiency, reduce inventory costs, and enhance customer
satisfaction.
0 comments:
Note: Only a member of this blog may post a comment.