The concepts of MRP are relatively straight forward but they clearly require computers for implementation for large number of products. When there are many assembled products, perhaps with subassemblies, the number of parts involved can easily be in the thousands. Requirements generation, inventory control, time phasing of orders and capacity requirements all clearly need to be coordinated. This is a job for computers. MRP developed in the computer age for good reasons.
It is estimated that somewhat more than 1000 manufactures are using computerized MRP systems with excellent results. Some of the benefits are obvious. Think of changing schedules as a result of market shifts, changed promises to customers, orders, cancellations or others. A computerized MRP system can immediately reflect the effects of changed order quantities, cancellations, delayed material deliveries, and so on. A manager can change the master schedule and quickly see the effects on capacity, inventory status, or the ability of the system to meet promises to customers.
One of the important advantages is in capacity requirements adjustments. When planners examine work centre load reports, such as shown they can immediately see possibilities for work load smoothing . It may be possible to pull some demand forward to fill in slacks loads. Such actions may reduce idle time and may eliminate or reduce overtime.
The structure of MRP computer programs is shown. The master schedule drives the MRP program. The other inputs are product structures, bills of materials and inventory status. The outputs of the MRP program are open and planned orders, net requirements for parts and materials, load reports, and updated and projected inventory status. A variety of other reports can be generated to suit individual needs because the files are maintained so that they can be formulated in a variety of formats.
Manufacturing Resource Planning (MRP II)
MRP is an effective ordering method for dependent demand situations where the placement of an order or the start of a production batch for a part is determined by the timing and usage of the part in a subsequent stage of production. Since MRP decisions for production stage (what to manufacture, how many, and when) are coordinated with decisions for other stages, it is natural to extend MRP to include capacity planning, shop floor control, purchasing. This extended MRP is referred to as closed loop MRP.
In MRP II, financial and marketing functions are tied to the operations function. Since materials and production requirements for each stage of production are determined in MRP, these requirements are converted into dollars. We can then have, by each product group category, on-hand inventory in dollars, purchase requirements in dollars, an estimate of labour dollars, and budgets for each department for the planning horizon. In this way, production and finance people work together to ensure that the desired resources are made available to meet the production requirements for the final products.
MRP II also facilitates coordination with marketing. To begin with, sales forecasts are inputs to MRP as they are used to determine aggregate production plans and the master schedules for each product. The production planner and the marketing product manager then work together on a weekly basis to see whether changes in the master schedules are needed based on individual customer orders. These changes may include changes in order size, cancellations and the expediting or postponement of some orders. The marketing manager and the plant manager may meet monthly to updated sales forecasts and revise master schedules. Finally, the top managers from production, marketing, and finance together decide to product mix, aggregate production plans by families of products, requirements and pricing strategies.
MRP II therefore provides a convenient vehicle for coordinating the efforts of manufacturing, finance, marketing, engineering, and personnel departments towards the common business plan. Since MRP II is computerized, the managers can perform what it analyses to evaluate the implications of their decisions. For example, if the sales forecasts provided by marketing cannot be met with existing capacities, the financial and other implications of alternative decisions, such as subcontracting ,scheduling, overtime or second shifts, or postponing some customer orders, can be evaluated using the simulation capabilities of MRP II.
Another extension of MRP concepts is in planning distribution requirements for various central, regional and branch warehouses. This is called distribution resource planning (DRP). In simple terms, the idea of DRP is to coordinate the decisions at various distribution points in much the same way as MRP is used to coordinate decisions at different production stages.