Material Requirements Planning
What is Material Requirements Planning ?
Material requirements planning is a production planning, scheduling, and inventory control system used to manage manufacturing processes. Most Material requirements planning Systems are software-based, but it is possible to conduct Material requirements planning by hand as well.
Material requirements planning is a tool to deal with these problems. It provides answers for several questions:
- What items are required?
- How many are required?
- When are they required?.
How does an Material Requirements Planning Software work?
MRP system works backward from a production plan for finished goods to develop requirements for components and raw materials.Material requirements planning breaks down inventory requirements into planning periods so that production can be completed in a timely manner while inventory levels and related carrying costs are kept to a minimum.
Objective of Material Requirements Planning
Material requirement planning is processed which production planning and inventory control system, and its three objectives are as follows:
- To ensure that material and components are available for production, and final products are ready for dispatch.
- not only to maintain minimum inventory but also ensure right quantity of material is available at the right time to produce right quantity of final products.
- To ensure planning of all manufacturing processes, this scheduling of different job works as to minimize or remove any kind of idle time for machine and work.
When to use Material Requirements Planning
- Job Shop Production
- Complex Product
- Assemble To order Environments
- Discrete & Dependent Demand item.
What can MRP System Requirements Planning Do
- Reduce component shortage
- Reduced Inventory levels
- Reduce Purchasing Cost
- Improve Production Schedule
- Reduce manufacturing Cost
- Reduce lead times
- Higher Production quality
- Improve Productivity
- Simplified & accurate Scheduling
- Improve customer Service
- Improve Shipping Performance
- Improve Plant Efficiency
- Reduce Freight Cost
- Reduction in Excess inventory
- Reduce Overtime
- Improve Supply Schedule
- Improve Calculation of material requirement
Basic Step Of Material Requirements Planning
1] Identify Requirement
- Quantity on hand
- Quantity on Open Purchase Order
- Quantity in Planned for manufacturing
- Quantity Committed to Existing Orders
- Quantity Forecasted
2] Running MRP- Creating the Suggestion
- Critical Item
- Expedite Item
- Delay Item
3] Firming the Suggestion
- Manufacturing Order
- Purchasing Order
- Various Report
Need of Material Requirements Planning
MRP System breaks down inventory requirements into planning periods so that production can be completed in a timely manner while inventory level and related carrying costs are kept to a minimum. Implemented and used properly, it can help production managers plan for capacity needs and allocate production time.
Material Planner helps ensure that materials will be available in sufficient quantity and at the proper time for production to occur, without incurring excess costs by having the materials on hand too early
Benfits of Material Requirements Planning
- Ability to track material requirements
- Ability to evaluate capacity requirements
- Means of allocating production time
- Increased customer satisfaction due to meeting delivery schedules
- Faster response to market changes
- Improved labor and equipment utilization.
- Better inventory planning and scheduling
- Reduced inventories without reduced customer service
Function of Material Requirements Planning
- Inventory Arrangement and Control:
- Continual and effective flow and supply of materials:
- Material Quality Control:
- System Efficiency:
- Standardization and Generalization:
- Product Design and Development:
- Manufacturing and Purchase Decisions:
- Material Coding and Classification
- Estimation and Planning:
Application Of Material Requirements Planning
Material Requirement Planning applications are created to help your business commit accurate decision making in managing your inventory; as much as planning of your material purchases, handling of cost control, production scheduling, and analysis of sales requirements.An Material Requirement Planning system is used to simultaneously meet three main goals: Ensure material is available for production and finished goods are available for delivery to customers while minimizing inventory levels.
Advantages of Material Requirements Planning
- It helps in maintain minimum inventory levels.
- With minimum inventory levels, material planning also reduces associated costs.
- Material tracking becomes easy and ensures that economic order quantity is achieved for all lot orders.
- Material planning less capacity utilization and allocates correct time to products as per demand forecast.
Disadvantages of Material Requirements Planning
- Material planning is highly dependent on inputs it receives from other systems or department. If input information is not correct than output for material planning will also be incorrect.
- Material planning requires maintenance of robust database with all information pertaining inventory records, production schedule, etc. without which output again would be incorrect.
- Material planning system requires proper training for end users, as to get maximum out of the system.
- Material resource planning system requires substantial investment of time and capital.