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Material requirement planning
Chapter 30
Material requirement planning Chapter takeaways After completion of this chapter the reader would be able to 1. Distinguish between inventory control and material planning functions so as to perform them effectively. 2. Distinguish between independent demand and dependent demand. 3. Appreciate the need for the data and other inputs required for effective material planning. 4. Know the output reports that are to be prepared for management information. 5. Learn how to prepare the bill of materials as a necessary tool before starting to manufacture the final product. 6. Appreciate the drawbacks of material requirement planning (MRP) so as to develop perfect MRP systems.
30.1 Why material requirement planning? As seen in the previous chapters, the basic function of the production planning and control department is to plan the materials required for production either by procurement action or by transfer from the stores to the production shops—that is, to ensure the availability of the right material in the right quantity at the right place at the right time. Material requirement planning (MRP) is a tool for this computation for the production planning, scheduling, and inventory control functions. MRP converts the master production schedule (MPS) for end products into a detailed schedule for the raw material and components used in the end products. It deals with bringing in the right amount of raw material at the right time to support production and help manufacturing companies better manage their procurement of material to support manufacturing operations. The detail schedule identifies the quantities of each raw material and component item. It also tells when each item must be ordered and delivered to meet the MPS. MRP is often considered to be a subset of inventory control. It is an effective tool for minimizing unnecessary inventory investment, and MRP is also useful for production scheduling and purchasing of materials. Production Planning and Control. DOI: https://doi.org/10.1016/B978-0-12-818364-9.00030-5 Copyright © 2019 BSP Books Pvt. Ltd. Published by Elsevier Inc. All rights reserved.
429
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Production Planning and Control
MRP evolved during the 1960s from the traditional age-old technique of inventory control, and the following can be cited as the broad stages in which MRP-I and MRP-II evolved.
30.2 Material requirement planning versus scientific inventory management Note as cited in the synopsis that scientific inventory management and MRP should not be categorized as the same. The distinction between them lies in the fact that MRP computes all the materials required for the production of a product, whereas inventory control attempts to keep the overall stock at a minimum, as further illustrated by Table 30.1.
30.3 Evolution of material requirement planning G
G
G
G
G
G
The first step of inventory planning was through computations of the material requirement. In view of high buildup of inventories and the inventory cost, several inventory control tools were put into use, as explained in Chapter 29, Scientific inventory control. The material calculations have been refined into inventory control integrated MRP, which was implemented through the use of computers to perform the requirement of planning calculations. As a fourth step, MRP system began to incorporate priority planning based on MPS. The fifth step was closed-loop MRP, which not only plans the priorities but also provides feedback information by tying together the various functions of production planning and control relating to capacity planning, inventory management, and shop floor control. The sixth step involves a linkup between closed-loop MRP to the financial system, termed MRP-II, as explained in detail in Chapter 31, Manufacturing resource planning (MRP II).
30.4 History of material requirement planning The actual development of MRP over the years can be traced as follows: G G G
G
1964—Developed by Joseph Orlicky for Toyota Manufacturing Program 1964—Black & Decker was the first to use MRP 1975—Joseph Orlicky published his book Material Requirements Planning By 1975, MRP was implemented in 700 companies and to about 8000 by 1981
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TABLE 30.1 Material requirement planning (MRP) versus scientific inventory management. S. no.
MRP
Scientific inventory management
1
MRP is basically a process of identifying and arranging the material required for production
Scientific inventory management is basically a material stock control process
2
MRP computes all the materials required for the production of a particular product
Scientific inventory management determines the available materials and procures the required quantities when they are needed, typically by the supply chain, to make sure that inventory levels are where they should be based on parameters
3
MRP is a function of the production planning and control system for determining and ensuring the availability of materials required for the manufacturing process
Scientific inventory management is a function of the material planning and control, which in several cases is under the function of the material control or the material procurement (purchase) department
4
In other words, MRP is a process for determining what activities need to be taken, including the materials, for the smooth flow of the manufacturing process
Scientific inventory management makes sure that the materials required for the manufacturing are made available at the right time of the right specifications, in the right quantity and not more. It attempts to keep the overall stock at a minimum, without creating any shortage
5
The bill of materials is the basic reference document
Inventory code book is the basic reference document
6
The materials are product oriented. That is, they are listed according to the breakdown of the end product into its components
The materials are specification oriented, that is, they are listed according their classifications based on standards and specifications
7
For example, the spring and the spring cup would be listed together, as they belong to the same subassembly
The spring would be listed under the category of general supplies, whereas the spring cup would be listed under the category of components
8
The item is distinguished whether it is a major or a miner item in the subassembly
The item would be distinguished whether is falls into A, B, or C category
432 G
G
Production Planning and Control
1983—Oliver Wight developed MRP into manufacturing resource planning (MRP-II), which brings master scheduling, rough-cut capacity planning, capacity requirements planning, and other concepts to classical MRP in 1983 By 1989, software on MRP-II was developed
30.5 Definitions on material requirement planning Material requirements planning (MRP) is a computer-based inventory management system designed to assist production managers in scheduling and placing orders for items of dependent demand. Dependent demand items are components of finished goods—such as raw materials, component parts and subassemblies—for which the amount of inventory needed depends on the level of production of the final product. . . .. http://www.inc.com/encyclopedia Material requirement planning (MRP) is a computer-based information system designed to translate production plan for a specified number of finished products into requirements for component parts and raw materials working backward from the due date, using lead times and other information to determine when and how much to order. . . .. http://mcu.edu.tw/ Material requirements planning (MRP) is a production planning, scheduling, and inventory control system used to manage manufacturing processes. An MRP system is intended to simultaneously meet three objectives: G
Ensure materials are available for production and products are available for delivery to customers.
G
Maintain the lowest possible material and product levels in store
G
Plan manufacturing activities, delivery schedules and purchasing activities. . . . https://en.wikipedia.org Material requirements planning (MRP) is a Computerized ordering and scheduling system for manufacturing and fabrication industries, it uses bill of materials data, inventory data, and master production schedule to project what material is required, when, and in what quantity. MRP phases orders for dependent-demand items (such as raw materials, components, parts) over a period to synchronize flow of materials and in-process inventories with production schedules. It also computes and tracks effect of hundreds of variables such as new orders, changes in various capacities, overloaded production centers,
Material requirement planning Chapter | 30
433
shortages, and delays by suppliers, and feeds financial data into the accounting system. http://www.businessdictionary.com Materials Requirement Planning is one of the first software based integrated information systems designed to improve productivity for businesses. A material requirement planning (MRP) information system is a sales forecast-based system used to schedule raw material deliveries and quantities, given assumptions of machine and labor units required to fulfill a sales forecast. . . .. . .. http://www.investopedia.com/ Material requirements planning (MRP) is a type of planning focused on the management of processes in manufacturing industries. MRP looks at the availability of materials for production and other related metrics. . . .. https://www.techopedia.com Material requirements planning . . . Time-phased material requirements calculated using the BOM and inventory data in order to satisfy the MPS. http://www.boydcoatings.com/html/mrp_ Material Requirements Planning (MRP) is a process that utilizes bill of material information, a master schedule, and current inventory information to calculate net requirements for materials. . . . https://docs.oracle.com
30.6 Objectives of material requirement planning G
G G
Ensure materials are available for production and that products are available for delivery to customers. Maintain the lowest possible material and product levels in store. Plan manufacturing activities, delivery schedules, and purchasing activities.
30.7 The five major elements of material requirement planning 1. An integrated business operating process that links strategic plans and business plans to sales plans and operations plans 2. A people-driven process that is supported by a computer system 3. A formal resource planning process that involves all functions within a company 4. Defined responsibilities and performance measurements for all functions in a company
434
Production Planning and Control
5. Communications among all functions in a company as well as communications among all divisions and sister companies
30.8 Independent demand and dependent demand Independent demand is demand originating outside the plant or production system, like the sales of the original equipment manufacturers designated as level 0. Dependent demand is the demand for components that make up products like subassemblies or component parts to be used in production of finished goods designated as level I. Once the independent demand is known, the dependent demand can be determined and is given by the bill of materials (BOM), as explained in Section 30.11. These items are said to have dependent demand, which is based on the production quantity of the end product.
30.9 Data needed for material requirement planning Wikipedia lists the following input data as necessary for planning the material planning and procurement: G
G G G G
G
The end item or the final product being created by the company and designated as level 0. The materials for these components designated as level 1. The quantities and the time at which these are required to meet demand. Shelf life of the stored materials. Inventory status records, records of total materials available for use, including those in stock (on hand) plus materials on order from suppliers. Planning data, which includes all the restraints and directions to produce the end items. This includes such items as G Routing, G Labor and machine standards G Quality and testing standards G Pull/push and work cell commands G Lot size details, whether fixed lot size, lot-for-lot size, or economic order quantity G Scrap percentages G Other inputs
30.10 Reports based on material requirement planning The website http://www.uoguelph.ca suggests the following optimal outputs of MRP: 1. Planned orders: Schedule indicating the amount and timing of replenishment orders to be released at a future time.
Material requirement planning Chapter | 30
435
Master production schedule Bill of materials
Inventory data
Daily production report CIPMS
Critical material report
Purchasing data
Purchasing indents
Work in progress data
Bottleneck reporting
FIGURE 30.1 Outputs of MRP. MRP, Material requirement planning.
2. Order releases: Authorization for the execution of planned orders. Also issue of order release notices to release planned orders. 3. Action notices: Notices to expedite, de-expedite, or cancel orders, or to change order quantities or due dates. 4. Priority reports: Information regarding which orders should be given priority. 5. Inventory status information. 6. Performance reports, such as inactive items, actual lead times, late orders, etc. 7. Change reports for the revision of due dates or order quantities, or cancellations of orders. Fig. 30.1 further illustrates the reports and other outputs of MRP.
30.11 Bill of materials As explained in Section 30.8, the BOM is a comprehensive list of the raw materials, sub-assemblies, intermediate assemblies, subcomponents, parts, and the quantities of each, which are required to build or manufacture an end product. BOM generally originates at the development or the design department and specifies the relationship between the end product (independent demand) and the components (dependent demand). The BOM is also called backflushing, as explained in Section 30.12. It is an essential requirement when an organization is using an MRP system, which is used to calculate the cost of a product, as well as to order parts from suppliers. It also gives an estimate of scrap that will occur during the production process. It can be said to be the recipe and shopping list for creating a final product.
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Production Planning and Control
30.11.1 Bill of materials of a tramp oil remover As an illustration, the BOM for the manufacture of a tramp oil remover is given in Table 30.2. The tramp oil remover is a cost-effective gadget that can skim the tramp oil floating in cutting fluid sumps. It works on the principle that oil sticks onto the laminated wheels more than the water-based fluids. A specially laminated wheel with microgrooves turns slowly in the coolant tank so that the oil sticking to it gets raised to a higher level and scooped by wiper blades that bear against the wheel, into a separate container. Refer to Chapter 11, on cutting fluids in the book Maintenance Engineering and Management—Precepts and Practices by this author to make it easier to understand this gadget better. TABLE 30.2 Bill of materials. No.
Item
Specifications
Material
I
Chute assembly
1
Chute
Pressed component
MS oxidized
2
Wheel guide
Spot welded with chute
3
Fixing clamps
Spot welded with chute
3
Spacer bush
4
Screws
5
Nuts
II
Left side frame assembly (nonmotor side)
1
Frame
2
No. off 1 off 1 off 1 off
MS oxidized
2 off
MS oxidized
2 off
M5 3 40—CSK
MS—Zn Ptd.
2 off
M5
MS—Zn Ptd.
2 off
Pressed component
MS Oxidized
1 off
Screws
M3 3 6 CSK
MS—Zn Ptd.
2 off
3
Washers
M3
MS—Zn Ptd.
2 off
4
Nylon scraper
See below for details
Sub assy
1 off
III
Right side frame assembly (motor side)
1
Frame
Pressed component (symmetrically opposite to II-1, except with two extra holes for fixing motor base)
1 off MS oxidized
1 off
(Continued )
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TABLE 30.2 (Continued) No.
Item
Specifications
Material
No. off
2
Motor
As per required specification
Purchased
1 off
3
Gear box
As per required specification
Purchased
1 off
4
Acrylic wheel
300 mm diameter,12 mm bore
5
Nut
M12 3 5 mm thick
MS—Zn Ptd.
1 off
6
Nut with grub hole
M12 3 8 mm thick
MS—Zn Ptd.
1 off
7
Condenser
0.15 mFd/K, 400 V grade
8
Connector
three leads in either side
Bakelite
1 off
9
Screw
M3 3 6 CSK
MS—Zn Ptd.
1 off
10
Mains cable
5 A, twin wire, 2 m
1 off
11
Plug
5 A two pin
1 off
12
Screws
M3 3 6 CSK (for earthing)
MS—Zn Ptd.
2 off
13
Washers
M3
MS—Zn Ptd.
2 off
14
Nylon scraper
See below for details
Sub assy
1 off
IV
Nylon scraper assembly (except IV-1 and 2, which are symmetrically opposite, the rest are identical for left and right scrapers)
2off (1 each)
1
Top holder
Pressed component
MS Oxidized
1 off
2
Bottom holder
Pressed component
MS Oxidized
1 off
3
Nylon strip
150 3 35—3 mm thick
4
Screws
M3 3 25CSK
MS—Zn Ptd.
3 off
5
Nuts
M3
MS—Zn Ptd.
3 off
6
Plastic cups
15 mm outside diameter
Plastic
3 off
7
Compression springs
Per specification
Spring steel
2 off
1 off
1 off
2 off
438
Production Planning and Control
30.12 Benefits of material requirement planning 1. 2. 3. 4. 5.
It enables maintaining low levels of in-process inventories. It can track material requirements. It can evaluate capacity requirements. It is a means of allocating production time. It has the ability to easily determine inventory usage by backflushing, which refers to exploding an end item’s BOM to determine the quantities of the components that were used to make the item.
30.13 Drawbacks of material requirement planning 1. MRP relies very much on accurate forecasting and other input information. Without inventory records with correct and updated information, companies may encounter serious problems with the results of MRP. 2. Mistakes in MRP computation and maintenance of records would result in stock-outs in some cases and excessive order quantities in other cases. 3. Scheduled delivery dates would be missed. 4. MRP systems can be difficult, time consuming, and costly to implement. 5. Implementation of MRP may encounter resistance from employees when they are disciplined to maintain optimal MRP records.
30.14 Conclusion In this chapter, we have disntinguished between inventory control and MRP. In the next chapter, we shall distinguish between material requirement plannaing and manufacturing resourse planning. In general, material requitement planning is designated as MRP without a suffix, while manufacturing resource planning is designated as MRP-II. However, to avoid any confusion in the future chapters, we shall designate them as MRP-I and MRP-II, respectively.
Further reading 1. Eilon, S., 1962. Elements of Production Planning & Control, Macmillan, New York. 2. Kiran, D.R., 2017. Maintenance Engineering and Management—Precepts and Practices. BS Publications. 3. Kiran, D.R., 2016. Total Quality Management, An Integrated Approach. BS Publications. 4. Proceedings of the Workshop on Challenges in Production Planning and Control in the New Millennium, February 2000, IIPE and NIQR. 5. http://www.inc.com/encyclopedia/material-requirements-planning 6. http://www.uoguelph.ca 7. www.ifsworld.com
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Criteria questions (The figures in the bracket provide a clue to the answer.) 1. Outline the material planning techniques available as to direct and indirect materials. (30.1) 2. Define material requirement planning (MRP). (30.1) 3. Distinguish between MRP versus scientific inventory management. (30.2) 4. What are the merits and demerits of MRP? (30.12, 30.13) 5. Outline the history and development of MRP. (30.4) 6. What are the objectives of MRP? (30.6) 7. Distinguish between independent demand and dependent demand. (30.8) 8. What are the inputs for MRP? (30.9) 9. What are the informal prerequisites of an MRP system? (30.9) 10. Outline the reports prepared based on MRP. (30.10) 11. Outline the outputs of MRP. (30.10) 12. Why do we balance the conflicting objectives of minimizing cost and maximizing service levels in inventory models? 13. What is bill of materials? How does it assist inventory planning? (30.11)
Material requirement planning Chapter takeaways After completion of this chapter the reader would be able to 1. Distinguish between inventory control and material planning functions so as to perform them effectively. 2. Distinguish between independent demand and dependent demand. 3. Appreciate the need for the data and other inputs required for effective material planning. 4. Know the output reports that are to be prepared for management information. 5. Learn how to prepare the bill of materials as a necessary tool before starting to manufacture the final product. 6. Appreciate the drawbacks of material requirement planning (MRP) so as to develop perfect MRP systems.
30.1 Why material requirement planning? As seen in the previous chapters, the basic function of the production planning and control department is to plan the materials required for production either by procurement action or by transfer from the stores to the production shops—that is, to ensure the availability of the right material in the right quantity at the right place at the right time. Material requirement planning (MRP) is a tool for this computation for the production planning, scheduling, and inventory control functions. MRP converts the master production schedule (MPS) for end products into a detailed schedule for the raw material and components used in the end products. It deals with bringing in the right amount of raw material at the right time to support production and help manufacturing companies better manage their procurement of material to support manufacturing operations. The detail schedule identifies the quantities of each raw material and component item. It also tells when each item must be ordered and delivered to meet the MPS. MRP is often considered to be a subset of inventory control. It is an effective tool for minimizing unnecessary inventory investment, and MRP is also useful for production scheduling and purchasing of materials. Production Planning and Control. DOI: https://doi.org/10.1016/B978-0-12-818364-9.00030-5 Copyright © 2019 BSP Books Pvt. Ltd. Published by Elsevier Inc. All rights reserved.
429
430
Production Planning and Control
MRP evolved during the 1960s from the traditional age-old technique of inventory control, and the following can be cited as the broad stages in which MRP-I and MRP-II evolved.
30.2 Material requirement planning versus scientific inventory management Note as cited in the synopsis that scientific inventory management and MRP should not be categorized as the same. The distinction between them lies in the fact that MRP computes all the materials required for the production of a product, whereas inventory control attempts to keep the overall stock at a minimum, as further illustrated by Table 30.1.
30.3 Evolution of material requirement planning G
G
G
G
G
G
The first step of inventory planning was through computations of the material requirement. In view of high buildup of inventories and the inventory cost, several inventory control tools were put into use, as explained in Chapter 29, Scientific inventory control. The material calculations have been refined into inventory control integrated MRP, which was implemented through the use of computers to perform the requirement of planning calculations. As a fourth step, MRP system began to incorporate priority planning based on MPS. The fifth step was closed-loop MRP, which not only plans the priorities but also provides feedback information by tying together the various functions of production planning and control relating to capacity planning, inventory management, and shop floor control. The sixth step involves a linkup between closed-loop MRP to the financial system, termed MRP-II, as explained in detail in Chapter 31, Manufacturing resource planning (MRP II).
30.4 History of material requirement planning The actual development of MRP over the years can be traced as follows: G G G
G
1964—Developed by Joseph Orlicky for Toyota Manufacturing Program 1964—Black & Decker was the first to use MRP 1975—Joseph Orlicky published his book Material Requirements Planning By 1975, MRP was implemented in 700 companies and to about 8000 by 1981
Material requirement planning Chapter | 30
431
TABLE 30.1 Material requirement planning (MRP) versus scientific inventory management. S. no.
MRP
Scientific inventory management
1
MRP is basically a process of identifying and arranging the material required for production
Scientific inventory management is basically a material stock control process
2
MRP computes all the materials required for the production of a particular product
Scientific inventory management determines the available materials and procures the required quantities when they are needed, typically by the supply chain, to make sure that inventory levels are where they should be based on parameters
3
MRP is a function of the production planning and control system for determining and ensuring the availability of materials required for the manufacturing process
Scientific inventory management is a function of the material planning and control, which in several cases is under the function of the material control or the material procurement (purchase) department
4
In other words, MRP is a process for determining what activities need to be taken, including the materials, for the smooth flow of the manufacturing process
Scientific inventory management makes sure that the materials required for the manufacturing are made available at the right time of the right specifications, in the right quantity and not more. It attempts to keep the overall stock at a minimum, without creating any shortage
5
The bill of materials is the basic reference document
Inventory code book is the basic reference document
6
The materials are product oriented. That is, they are listed according to the breakdown of the end product into its components
The materials are specification oriented, that is, they are listed according their classifications based on standards and specifications
7
For example, the spring and the spring cup would be listed together, as they belong to the same subassembly
The spring would be listed under the category of general supplies, whereas the spring cup would be listed under the category of components
8
The item is distinguished whether it is a major or a miner item in the subassembly
The item would be distinguished whether is falls into A, B, or C category
432 G
G
Production Planning and Control
1983—Oliver Wight developed MRP into manufacturing resource planning (MRP-II), which brings master scheduling, rough-cut capacity planning, capacity requirements planning, and other concepts to classical MRP in 1983 By 1989, software on MRP-II was developed
30.5 Definitions on material requirement planning Material requirements planning (MRP) is a computer-based inventory management system designed to assist production managers in scheduling and placing orders for items of dependent demand. Dependent demand items are components of finished goods—such as raw materials, component parts and subassemblies—for which the amount of inventory needed depends on the level of production of the final product. . . .. http://www.inc.com/encyclopedia Material requirement planning (MRP) is a computer-based information system designed to translate production plan for a specified number of finished products into requirements for component parts and raw materials working backward from the due date, using lead times and other information to determine when and how much to order. . . .. http://mcu.edu.tw/ Material requirements planning (MRP) is a production planning, scheduling, and inventory control system used to manage manufacturing processes. An MRP system is intended to simultaneously meet three objectives: G
Ensure materials are available for production and products are available for delivery to customers.
G
Maintain the lowest possible material and product levels in store
G
Plan manufacturing activities, delivery schedules and purchasing activities. . . . https://en.wikipedia.org Material requirements planning (MRP) is a Computerized ordering and scheduling system for manufacturing and fabrication industries, it uses bill of materials data, inventory data, and master production schedule to project what material is required, when, and in what quantity. MRP phases orders for dependent-demand items (such as raw materials, components, parts) over a period to synchronize flow of materials and in-process inventories with production schedules. It also computes and tracks effect of hundreds of variables such as new orders, changes in various capacities, overloaded production centers,
Material requirement planning Chapter | 30
433
shortages, and delays by suppliers, and feeds financial data into the accounting system. http://www.businessdictionary.com Materials Requirement Planning is one of the first software based integrated information systems designed to improve productivity for businesses. A material requirement planning (MRP) information system is a sales forecast-based system used to schedule raw material deliveries and quantities, given assumptions of machine and labor units required to fulfill a sales forecast. . . .. . .. http://www.investopedia.com/ Material requirements planning (MRP) is a type of planning focused on the management of processes in manufacturing industries. MRP looks at the availability of materials for production and other related metrics. . . .. https://www.techopedia.com Material requirements planning . . . Time-phased material requirements calculated using the BOM and inventory data in order to satisfy the MPS. http://www.boydcoatings.com/html/mrp_ Material Requirements Planning (MRP) is a process that utilizes bill of material information, a master schedule, and current inventory information to calculate net requirements for materials. . . . https://docs.oracle.com
30.6 Objectives of material requirement planning G
G G
Ensure materials are available for production and that products are available for delivery to customers. Maintain the lowest possible material and product levels in store. Plan manufacturing activities, delivery schedules, and purchasing activities.
30.7 The five major elements of material requirement planning 1. An integrated business operating process that links strategic plans and business plans to sales plans and operations plans 2. A people-driven process that is supported by a computer system 3. A formal resource planning process that involves all functions within a company 4. Defined responsibilities and performance measurements for all functions in a company
434
Production Planning and Control
5. Communications among all functions in a company as well as communications among all divisions and sister companies
30.8 Independent demand and dependent demand Independent demand is demand originating outside the plant or production system, like the sales of the original equipment manufacturers designated as level 0. Dependent demand is the demand for components that make up products like subassemblies or component parts to be used in production of finished goods designated as level I. Once the independent demand is known, the dependent demand can be determined and is given by the bill of materials (BOM), as explained in Section 30.11. These items are said to have dependent demand, which is based on the production quantity of the end product.
30.9 Data needed for material requirement planning Wikipedia lists the following input data as necessary for planning the material planning and procurement: G
G G G G
G
The end item or the final product being created by the company and designated as level 0. The materials for these components designated as level 1. The quantities and the time at which these are required to meet demand. Shelf life of the stored materials. Inventory status records, records of total materials available for use, including those in stock (on hand) plus materials on order from suppliers. Planning data, which includes all the restraints and directions to produce the end items. This includes such items as G Routing, G Labor and machine standards G Quality and testing standards G Pull/push and work cell commands G Lot size details, whether fixed lot size, lot-for-lot size, or economic order quantity G Scrap percentages G Other inputs
30.10 Reports based on material requirement planning The website http://www.uoguelph.ca suggests the following optimal outputs of MRP: 1. Planned orders: Schedule indicating the amount and timing of replenishment orders to be released at a future time.
Material requirement planning Chapter | 30
435
Master production schedule Bill of materials
Inventory data
Daily production report CIPMS
Critical material report
Purchasing data
Purchasing indents
Work in progress data
Bottleneck reporting
FIGURE 30.1 Outputs of MRP. MRP, Material requirement planning.
2. Order releases: Authorization for the execution of planned orders. Also issue of order release notices to release planned orders. 3. Action notices: Notices to expedite, de-expedite, or cancel orders, or to change order quantities or due dates. 4. Priority reports: Information regarding which orders should be given priority. 5. Inventory status information. 6. Performance reports, such as inactive items, actual lead times, late orders, etc. 7. Change reports for the revision of due dates or order quantities, or cancellations of orders. Fig. 30.1 further illustrates the reports and other outputs of MRP.
30.11 Bill of materials As explained in Section 30.8, the BOM is a comprehensive list of the raw materials, sub-assemblies, intermediate assemblies, subcomponents, parts, and the quantities of each, which are required to build or manufacture an end product. BOM generally originates at the development or the design department and specifies the relationship between the end product (independent demand) and the components (dependent demand). The BOM is also called backflushing, as explained in Section 30.12. It is an essential requirement when an organization is using an MRP system, which is used to calculate the cost of a product, as well as to order parts from suppliers. It also gives an estimate of scrap that will occur during the production process. It can be said to be the recipe and shopping list for creating a final product.
436
Production Planning and Control
30.11.1 Bill of materials of a tramp oil remover As an illustration, the BOM for the manufacture of a tramp oil remover is given in Table 30.2. The tramp oil remover is a cost-effective gadget that can skim the tramp oil floating in cutting fluid sumps. It works on the principle that oil sticks onto the laminated wheels more than the water-based fluids. A specially laminated wheel with microgrooves turns slowly in the coolant tank so that the oil sticking to it gets raised to a higher level and scooped by wiper blades that bear against the wheel, into a separate container. Refer to Chapter 11, on cutting fluids in the book Maintenance Engineering and Management—Precepts and Practices by this author to make it easier to understand this gadget better. TABLE 30.2 Bill of materials. No.
Item
Specifications
Material
I
Chute assembly
1
Chute
Pressed component
MS oxidized
2
Wheel guide
Spot welded with chute
3
Fixing clamps
Spot welded with chute
3
Spacer bush
4
Screws
5
Nuts
II
Left side frame assembly (nonmotor side)
1
Frame
2
No. off 1 off 1 off 1 off
MS oxidized
2 off
MS oxidized
2 off
M5 3 40—CSK
MS—Zn Ptd.
2 off
M5
MS—Zn Ptd.
2 off
Pressed component
MS Oxidized
1 off
Screws
M3 3 6 CSK
MS—Zn Ptd.
2 off
3
Washers
M3
MS—Zn Ptd.
2 off
4
Nylon scraper
See below for details
Sub assy
1 off
III
Right side frame assembly (motor side)
1
Frame
Pressed component (symmetrically opposite to II-1, except with two extra holes for fixing motor base)
1 off MS oxidized
1 off
(Continued )
Material requirement planning Chapter | 30
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TABLE 30.2 (Continued) No.
Item
Specifications
Material
No. off
2
Motor
As per required specification
Purchased
1 off
3
Gear box
As per required specification
Purchased
1 off
4
Acrylic wheel
300 mm diameter,12 mm bore
5
Nut
M12 3 5 mm thick
MS—Zn Ptd.
1 off
6
Nut with grub hole
M12 3 8 mm thick
MS—Zn Ptd.
1 off
7
Condenser
0.15 mFd/K, 400 V grade
8
Connector
three leads in either side
Bakelite
1 off
9
Screw
M3 3 6 CSK
MS—Zn Ptd.
1 off
10
Mains cable
5 A, twin wire, 2 m
1 off
11
Plug
5 A two pin
1 off
12
Screws
M3 3 6 CSK (for earthing)
MS—Zn Ptd.
2 off
13
Washers
M3
MS—Zn Ptd.
2 off
14
Nylon scraper
See below for details
Sub assy
1 off
IV
Nylon scraper assembly (except IV-1 and 2, which are symmetrically opposite, the rest are identical for left and right scrapers)
2off (1 each)
1
Top holder
Pressed component
MS Oxidized
1 off
2
Bottom holder
Pressed component
MS Oxidized
1 off
3
Nylon strip
150 3 35—3 mm thick
4
Screws
M3 3 25CSK
MS—Zn Ptd.
3 off
5
Nuts
M3
MS—Zn Ptd.
3 off
6
Plastic cups
15 mm outside diameter
Plastic
3 off
7
Compression springs
Per specification
Spring steel
2 off
1 off
1 off
2 off
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Production Planning and Control
30.12 Benefits of material requirement planning 1. 2. 3. 4. 5.
It enables maintaining low levels of in-process inventories. It can track material requirements. It can evaluate capacity requirements. It is a means of allocating production time. It has the ability to easily determine inventory usage by backflushing, which refers to exploding an end item’s BOM to determine the quantities of the components that were used to make the item.
30.13 Drawbacks of material requirement planning 1. MRP relies very much on accurate forecasting and other input information. Without inventory records with correct and updated information, companies may encounter serious problems with the results of MRP. 2. Mistakes in MRP computation and maintenance of records would result in stock-outs in some cases and excessive order quantities in other cases. 3. Scheduled delivery dates would be missed. 4. MRP systems can be difficult, time consuming, and costly to implement. 5. Implementation of MRP may encounter resistance from employees when they are disciplined to maintain optimal MRP records.
30.14 Conclusion In this chapter, we have disntinguished between inventory control and MRP. In the next chapter, we shall distinguish between material requirement plannaing and manufacturing resourse planning. In general, material requitement planning is designated as MRP without a suffix, while manufacturing resource planning is designated as MRP-II. However, to avoid any confusion in the future chapters, we shall designate them as MRP-I and MRP-II, respectively.
Further reading 1. Eilon, S., 1962. Elements of Production Planning & Control, Macmillan, New York. 2. Kiran, D.R., 2017. Maintenance Engineering and Management—Precepts and Practices. BS Publications. 3. Kiran, D.R., 2016. Total Quality Management, An Integrated Approach. BS Publications. 4. Proceedings of the Workshop on Challenges in Production Planning and Control in the New Millennium, February 2000, IIPE and NIQR. 5. http://www.inc.com/encyclopedia/material-requirements-planning 6. http://www.uoguelph.ca 7. www.ifsworld.com
Material requirement planning Chapter | 30
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Criteria questions (The figures in the bracket provide a clue to the answer.) 1. Outline the material planning techniques available as to direct and indirect materials. (30.1) 2. Define material requirement planning (MRP). (30.1) 3. Distinguish between MRP versus scientific inventory management. (30.2) 4. What are the merits and demerits of MRP? (30.12, 30.13) 5. Outline the history and development of MRP. (30.4) 6. What are the objectives of MRP? (30.6) 7. Distinguish between independent demand and dependent demand. (30.8) 8. What are the inputs for MRP? (30.9) 9. What are the informal prerequisites of an MRP system? (30.9) 10. Outline the reports prepared based on MRP. (30.10) 11. Outline the outputs of MRP. (30.10) 12. Why do we balance the conflicting objectives of minimizing cost and maximizing service levels in inventory models? 13. What is bill of materials? How does it assist inventory planning? (30.11)