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MRP - Material Requirement Planning

MRP stands for material requirements planning . The name is reminiscent of the limited capabilities old MRPs which had little functionality... thumbnail 1 summary
MRP stands for material requirements planning. The name is reminiscent of the limited capabilities old MRPs which had little functionality beyond figuring out a schedule of raw material requirements. However, modern day MRP systems come along with various modules associated with many business functions from scheduling to accounting and to inventory control.

The first step of MRP is to look at the MPS and decide which, how many and when components are needed to meet MPS. This process is called MRP explosion. During the explosion MRP uses a network representation of product assembly called Bill of Materials (BOM). Suppose Tex-Bag is company in
manufacturing bags, then its BOM may look like Figure 2. According to the BOM a bag is made of two main parts: a body and a strap. A body is manufactured by sewing 12 zips on a leather body. A strap is made by attaching two hooks to the ends of a leather strap. Next to each operation, we also have its manufacturing lead time. Lead times should not be confused with actual processing times. Lead times include transportation and wait-in-queue times as well as processing times. For example, assembly of a strap to a body can be done in 5-6 minutes but the lead time can be a day mainly because of waiting. In summary, BOM is a diagram for representing parts used in assembly and manufacturing operations, and lead times of these operations.

Now suppose that we need to deliver 50 bags on Friday morning. Then we must have 50 bodies and 50 straps ready by Thursday morning, we obtain Thursday morning by backing up by 1 day assembly lead time.  To have 50 bodies on Thursday morning, we must have 50 leather bodies and 600 zips on Tuesday morning.
To have 50 straps on Thursday morning, we must have 50 straps and 100 hooks on Wednesday morning. One can continue by backing up in time by operation lead times while computing how many parts are needed for a certain number of assemblies. This process is called MRP explosion.

Once MRP explosion reaches the raw material level (leaves of the BOM tree), a schedule of how many parts are needed and at what dates becomes available. This schedule of raw material requirements is passed to Procurement department which orders raw materials form upstream companies in the supply chain. Raw material acquisition schedule becomes an MPS for those upstream companies. MRP explosion information helps to plan operations so that correct amount and type of inputs are ready for operations and enough time is allocated to operations. For discrete product manufacturers whose BOM has multiple levels, MRP explosion must be computerized. Computerization not only expedites the process but also disciplines it and avoids manual errors. Enterprise resource planning (ERP) applies MRP logic to SCs, over various production facilities of a firm or several firms.

MRP is the first conceptual representation that realized the underlying network structure in complex production systems. It provides a systematic and coordinated way to schedule a large number of items over this network. MRP is basically a specialized database system, so all advantages of database systems apply to MRP as well. MRP streamlines information; it quickly makes correct information available. Streamlining can foster standardization and further product development. For example, BOM is relevant for product developers because it usually is a starting point for design improvements. Many design improvements come as elimination or standardization of various parts. Suppose that Tex-Bag is also manufacturing suitcases and uses zips in the suitcases. If the design team can standardize zips (say their length) then the same zip can be used in bags and suitcases. Such a standardization decreases the complexity of processes; one fewer product to name, buy, store, transport. 

A major drawback of MRP is its failure to incorporate capacity restrictions appropriately during the planning process. MRP ¯rst makes the plan with explosion and then checks for if there is enough production capacity. If the capacity is enough, the plan is accepted. Otherwise, it has to be tweaked. MRP does not have the capability to allocate the scarce capacity to products.
Another drawback is self fulfilling prophecy of lead times in MRP. Determining assembly and production lead times is a tricky issue. MRP primarily aims to keep the production going on while efficiency is a taken as a secondary objective. Thus, it puts in ample slack time into lead times even for short operations. Later on, these long lead times become standard and short operations really take longer than they should. This can be explained with a industrial psychological point of view: Those expectations that are set low actually decreases the performance.

As a summary, we conclude that MRP is not the ultimate solution for production planning. It must be supported with some decision making mechanisms. Also MRP data and performance levels should be monitored closely to avoid self fulfilling prophecies. 


vmi said...

I think, in order to obtain the most benefit from MRP, implementation should be integrated with ERP system. Because standalone MRP requires reinput of data (from MPR to other systems).

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