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  • Manufacturing Resources Planning (MRP/ MRP II)

     

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    Manufacturing Resources Planning (MRP/ MRP II) CONCEPTS

    DEFINITIONS
    Let us look at some MRP and MRP II related definitions from APICS (American Production and Inventory Control Society) Dictionary,
     
    Material Requirements Planning (MRP) A set of techniques that uses bill of material data, inventory data, and the master production schedule to calculate requirements for materials. It makes recommendations to release replenishment orders for material. Further, because it is time-phased, it makes recommendations to reschedule open orders when due dates and need dates are not in phase. Time-phased MRP begins with the items listed on the MPS and determines (1) the quantity of all components and materials required to fabricate those items and (2) the date that the components and material are required. Time-phased MRP is accomplished by exploding the bill of material, adjusting for inventory quantities on hand or on order, and offsetting the net requirements by the appropriate lead times.
     
    Manufacturing Resource Planning (MRP II) A method for the effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units, financial planning in dollars, and has a simulation capability to answer what-if questions. It is made up of a variety of processes, each linked together: business planning, production planning (sales and operations planning), master production scheduling, material requirements planning, capacity requirements planning, and the execution support systems for capacity and material. Output from these systems is integrated with financial reports such as the business plan, purchase commitment report, shipping budget, and inventory projections in dollars. Manufacturing resource planning is a direct outgrowth and extension of closed-loop MRP.
     
    Closed-loop MRP A system built around material requirements planning that includes the additional planning processes of production planning (sales and operations planning), master production scheduling, and capacity requirements planning. Once this planning phase is complete and the plans have been accepted as realistic and attainable, the execution processes come into play. These processes include the manufacturing control processes of input-output (capacity) measurement, detailed scheduling and dispatching, as well as anticipated delay reports from both the plant and suppliers, supplier scheduling, and so on. The term closed loop implies not only that each of these processes is included in the overall system, but also that feedback is provided by the execution processes so that the planning can be kept valid at all times.
     
    Business Planning The process of creating the business plan which is 1) A statement of long-range strategy and revenue, cost, and profit objectives usually accompanied by budgets, a projected balance sheet, and a cash flow (source and application of funds) statement. A business plan is usually stated in terms of dollars and grouped by product family. The business plan is then translated into synchronized tactical functional plans through the production planning process (or the sales and operations planning process). Although frequently stated in different terms (dollars versus units), these tactical plans should agree with each other and with the business plan. See: long-term planning, strategic plan. 2) A document consisting of the business details (organization, strategy, and financing tactics) prepared by an entrepreneur to plan for a new business.
     
    Production Planning A process to develop tactical plans based on setting the overall level of manufacturing output (production plan) and other activities to best satisfy the current planned levels of sales (sales plan or forecasts), while meeting general business objectives of profitability, productivity, competitive customer lead times, and so on, as expressed in the overall business plan. The sales and production capabilities are compared, and a business strategy that includes a sales plan, a production plan, budgets, pro forma financial statements, and supporting plans for materials and workforce requirements, and so on, is developed. One of its primary purposes is to establish production rates that will achieve management objective of satisfying customer demand by maintaining, raising, or lowering inventories or backlogs, while usually attempting to keep the workforce relatively stable. Because this plan affects many company functions, it is normally prepared with information from marketing and coordinated with the functions of manufacturing, sales, engineering, finance, materials, and so on.
     
    Master Production Scheduling A process to develop Master Production Schedule (MPS) which reflects the anticipated build schedule for those items assigned to the master scheduler. The master scheduler maintains this schedule, and in turn, it becomes a set of planning numbers that drives material requirements planning. It represents what the company plans to produce expressed in specific configurations, quantities, and dates. The master production schedule is not a sales item forecast that represents a statement of demand. The master production schedule must take into account the forecast, the production plan, and other important considerations such as backlog, availability of material, availability of capacity, and management policies and goals.
     
    Sales Forecast An estimate of future demand. A forecast can be constructed using quantitative methods, qualitative methods, or a combination of methods, and it can be based on extrinsic (external) or intrinsic (internal) factors. Various forecasting techniques attempt to predict one or more of the four components of demand: cyclical, random, seasonal, and trend.
     
    Capacity Planning The process of determining the amount of capacity required to produce in the future. This process may be performed at an aggregate or product-line level (resource requirements planning), at the master-scheduling level (rough-cut capacity planning), and at the material requirements planning level (capacity requirements planning).
     
    Resource Requirements Planning (RRP) Or Resource Planning Capacity planning conducted at the business plan level. The process of establishing, measuring, and adjusting limits or levels of long-range capacity. Resource Requirements Planning is normally based on the production plan but may be driven by higher level plans beyond the time horizon for the production plan (e.g., the business plan). It addresses those resources that take long periods of time to acquire. Resource planning decisions always require top management approval.
     
    Rough-Cut Capacity Planning (RCCP) The process of converting the master production schedule into requirements for key resources, often including labour, machinery, warehouse space, suppliers „¢ capabilities, and, in some cases, money. Comparison to available or demonstrated capacity is usually done for each key resource. This comparison assists the master scheduler in establishing a feasible master production schedule. Three approaches to performing RCCP are the bill of labour (resources, capacity) approach, the capacity planning using overall factors approach, and the resource profile approach.
     
    Capacity Requirements Planning (CRP) The function of establishing, measuring, and adjusting limits or levels of capacity. The term capacity requirements planning in this context refers to the process of determining in detail the amount of labour and machine resources required to accomplish the tasks of production. Open shop orders and planned orders in the MRP system are input to CRP, which through the use of parts routings and time standards translates these orders into hours of work by work centre by time period. Even though rough-cut capacity planning may indicate that sufficient capacity exists to execute the MPS, CRP may show that capacity is insufficient during specific time periods.
     
    Production Scheduling The process of developing the production schedule – A plan that authorizes the factory to manufacture a certain quantity of a specific item. It is usually initiated by the production planning department.
     
    Bill of Material (BOM) 1) -A listing of all the subassemblies, intermediates, parts, and raw materials that go into a parent assembly showing the quantity of each required to make an assembly. It is used in conjunction with the master production schedule to determine the items for which purchase requisitions and production orders must be released. A variety of display formats exist for bills of material, including the single-level bill of material, indented bill of material, modular (planning) bill of material, transient bill of material, matrix bill of material, and costed bill of material. 2) A list of all the materials needed to make one production run of a product, by a contract manufacturer, of piece parts/components for its customers. The bill of material may also be called the formula, recipe, or ingredients list in certain process industries.
     
    Distribution Requirements Planning (DRP) 1) The function of determining the need to replenish inventory at branch warehouses. A time-phased order point approach is used where the planned orders at the branch warehouse level are “exploded  via MRP logic to become gross requirements on the supplying source. In the case of multilevel distribution networks, this explosion process can continue down through the various levels of regional warehouses (master warehouse, factory warehouse, etc.) and become input to the master production schedule. Demand on the supplying sources is recognized as dependent and standard MRP logic applies. 2) More generally, replenishment inventory calculations, which may be based on other planning approaches such as period order quantities or “replace exactly what was used,  rather than being limited to the time-phased order point approach.

     

    MORE INFORMATION ON MRP AND MRP II

    Manufacturing Resources Planning (MRP II)

    Material Requirement Planning (MRP)

    Master Production Schedule

    Enterprise Resource Planning (ERP)

    Distribution Requirements Planning