MRP concept, inputs and outputs

MRP is a computer-based planning system that converts the master production schedule of end products into time-phased requirements of the sub-assemblies, components and raw materials. It answers: what to order, how much, and when. It is used for dependent demand items (items whose demand depends on the end product), unlike reorder-point systems for independent demand.

Inputs

 Master Production  Bill of Materials  Inventory records
   Schedule (MPS)        (BOM)         (on hand, on order)
        \                 |                  /
         +--------> MRP LOGIC <-------------+
                       |
   Planned order releases | Reschedule notices | Reports

1. Master production schedule (MPS): quantity and date of each end product.
2. Bill of materials (BOM): product structure showing parts per unit at each level.
3. Inventory status file: on-hand stock, scheduled receipts, lead times, lot-size rules and safety stock.

Working

Gross requirements are exploded level by level; net requirements are found as gross minus (on hand + scheduled receipts); orders are planned and offset backward by the lead time.

Outputs

• Planned order releases (what to order and when).
• Order rescheduling notices (move earlier or later).
• Cancellation notices and exception reports.
• Inventory and performance reports.

Benefits

• Lower inventory and work-in-process.
• Better delivery performance and customer service.
• Fewer stock-outs and rush orders.
• Better use of labour and machines; realistic schedules.
• Quick response to change in MPS.

Applications

Assembly industries with many components and long lead times: machinery, automobiles, electronics, aircraft, furniture.