The basic function of MRP system includes inventory control, Bill of Material processing and elementary scheduling. MRP helps organizations to maintain effective inventory levels. It is used to plan manufacturing and purchasing of materials.
Companies need to control the types and quantities of materials they purchase, plan which products are to be produced and in what quantities and ensure that they are able to meet current and future customer demand, all at the lowest possible cost. Making a bad decision in any of these areas will make the company lose money. MRP answers the questions:
- What items are required?
- How many are required?
- When are they required?
MRP can be applied both to items that are purchased from outside suppliers and to sub-assemblies or manufactured items.
The data that must be considered include:
- The end item (or items) being created. This is sometimes called Independent Demand, or Level “0” on BOM.
- How much is required at a time.
- When the quantities are required to meet demand.
- Shelf life of stored materials.
- Inventory status records on quantity on hand and outstanding purchase orders.
- Bills of materials. Details of the materials, components and sub-assemblies required to make each product.
- Planning Data. This includes such items as Routings, Labour and Machine times, Economic order or production batch sizes, and Scrap Percentages.
There are two outputs and a variety of messages/reports:
- Output 1 is the “Recommended Production Schedule” which lays out a detailed schedule of the required minimum start and completion dates, with quantities, for each step of the Routing and Bill of Material required to satisfy the demand from theMaster Production Schedule (MPS).
- Output 2 is the “Recommended Purchasing Schedule”. This lays out both the dates that the purchased items should be received and the dates that thePurchase orders need to be instituted based on the supplier lead times.
A major drawback of MRP is that it takes no account of capacity in its calculations. This means it will give results that are impossible to implement due to manpower or machine or supplier capacity constraints. However this is largely dealt with by MRP II.
Generally, MRP II refers to a system with integrated financials. An MRP II system can include finite / infinite capacity planning. But, to be considered a true MRP II system must also include financials.
In the MRP II (or MRP2) concept, fluctuations in forecast data are taken into account by including simulation of the master production schedule, thus creating a long-term control. A more general feature of MRP2 is its extension to purchasing, to marketing and to finance (integration of all the function of the company), ERP has been the next step.
What is Master Production Schedule or MPS?
A Master Production Schedule or MPS is the plan that a company has developed for production, inventory, staffing, etc. It sets the quantity of each end item to be completed in each week of a short-range planning horizon. A Master Production Schedule is the master of all schedules. It is a plan for future production of end items.
The Master Production Schedule gives production, planning, purchasing, and top management the information needed to plan and control the manufacturing operation. The application ties overall business planning and forecasting to detail operations through the Master Production Schedule.
The Master Production Schedule will drive detailed material and production requirements in the Material Requirements Planning module.
The MPS is a statement of what the company expects to produce and purchase (i.e. quantity to be produced, staffing levels, dates, available to promise, projected balance).
The MPS translates the business plan, including forecast demand, into a production plan using planned orders. Using MPS helps avoid shortages, costly expediting, last minute scheduling, and inefficient allocation of resources. Working with MPS allows businesses to consolidate planned parts, produce master schedules and forecasts for any level of the Bill of Material (BOM) for any type of part.
A master production schedule may be necessary for organizations to synchronize their operations and become more efficient. An effective MPS ultimately will:
- Give production, planning, purchasing, and management the information to plan and control manufacturing.
- Tie overall business planning and forecasting to detail operations.
- Enable marketing to make legitimate delivery commitments to warehouses and customers.
- Increase the efficiency and accuracy of a company’s manufacturing
- Width of the“time bucket”
- Planning horizon
- Rolling plan
- Time fencing
- Schedule freezing