Material Requirements Planning

Material requirements planning (MRP) is a planning alternative that calculates requirements for parts using information from master scheduling, manufacturing structures, and inventory data. The calculation is based on the existing inventory balance, and all sources of material supply and demand such as shop orders, customer orders, purchase orders, production schedules, shop order by-product supply and distribution orders. Planning methods controlling the planning data are entered for a part.

The purpose of MRP is to calculate the demand for parts in a phased manner based on information such as shop orders, customer orders, and part structures, to ensure that the demand is met. MRP results in order proposals for the parts that need to be manufactured and purchased.  Order recommendations are calculated using the appropriate lead time offset and lot sizing rules, considering both values when the parts need to be available and in specific quantities. MRP also generates suggestions for re-planning existing shop orders and purchase orders as well as recommendations to best meet the demand with new shop orders, production schedules, purchase requisitions, and supplier schedules. MRP will also consider by products as supplies, if it was set and defined as a supply in MRP in product structure and shop orders.

MRP starts by calculating the lowest level on which the parts exist in the structures. A part that is not a component of another structure, but is only a parent part, has the lowest level, zero (0). Zero-level parts are usually sales parts. A part that is a component of a parent part is at level one, a sub component of a component is at level two, and so on. This level coding is necessary for accurate MRP, estimates, and calculations of product families and product codes. Before the MRP calculation takes place, existing unreleased supply orders (such as purchase requisitions, shop proposals, production schedules, supplier schedules) which were created by MRP in a previous run of MRP are deleted. Action messages are generated for each part to draw the planners' attention to parts requiring actions such as rescheduling supply orders.

Phases of MRP calculation

1. Remove previous MRP calculation results.
2. Snapshot of static planning data. This also includes inventory quantity on-hand.
3. Snapshot of supply and demand information.
4. Main MRP process. Parts are processed by low level code, which consists of:

• LOOP PER PART UNTIL NO MORE PARTS

a) Calculate the time-phased safety stock adjusted gross requirement.

b) Balance the planned demands against inventory quantity on-hand.

c) Balance the planned receipts against shortages. Create early and late order MRP part action messages.

d) Check if the alternate component excess on-hand can be used instead of the primary component.

e) Create new MRP planned receipts. If planned receipts do not cover the demand for a part. Generate SO and PO requisitions, production schedules and distribution orders.

f) Set the start time for the new MRP planned receipts. CRP calculations can be integrated. The calculated start time is the basis for breaking down the parts into their components and the creation of requirements for those components. The system multiplies the required quantity of the parent part by the Qty per Assembly for the component, along with its scrapping factor. The result is the required quantity of the component. The entire structure of the part is processed in this way.

g) Calculate the final projected on-hand development.

h) Generate more MRP part action messages..


• END LOOP

5. Generate supplier schedules.

MRP also supports the concept of multi-site planning through the use of planning networks with material transfers executed using distribution orders. Multi-site planning can be used when two or more sites interact in a single supply chain, and parts being distributed to a demand site from a supplying site. Multi-site planned parts are defined as supplied from an internal supplier corresponding to the supplying site. MRP can be run for an entire planning network consisting of two or more sites, with requirements for the multi-site parts organized into distribution requirements, and an order recommending the transfer of materials within the network. When MRP is run for a planning network, multi-site planned parts are considered within  the low level calculation, that is the site-to-site transfer representing a level within an overall multi-site structure.

MRP can plan components for a selected set of part(s). This is called selective MRP. Between MRP execution cycles, any changes in the supply/demand situation are not reflected in the MRP results until site MRP is run again. When there are such changes, if the planner is aware that the supply/demand situation of a certain part has changed and that the current MRP results should be recalculated, it can be done so by executing selective MRP for the part. The outcome is that the results for the part and its lower level assemblies and components are recalculated so that they reflect the actual changes in the supply/demand situation. The advantage is since selective MRP only deletes and regenerates results for the affected set of parts, the MRP results that were created for the larger set of parts remain unchanged and can be used by the planner.

When MRP is performed for a selected set of part(s), the independent demands and dependent demands which were created in the last MRP run will be considered as the demand for the part(s). MRP logic will then delete and recalculate the supplies and explode the results in to the lower structure levels.

Note: Independent demands that are coming from other higher level parts in the last MRP run may not reflect the real demand situations due to the fact that the demand supply situation may be different from the last MRP run. Therefore planners need to be aware about this fact and should take necessary actions in order to take correct results. For example, if there are lot more demand supply changes which may affect the selective MRP run, running a full site MRP and then running a selective MRP to plan a subset of parts is a safer approach.

Planners can perform MRP for certain low levels. All parts in the given low level code will be planned by MRP. Planners can take actions and re-plan demand and supplies based on MRP results for the level. The next level can be planned by running selective MRP for low level n..n+1 where n is the low level code for the first selective MRP run. Then run selective MRP for n..n+2 and so on. This incremental way of planning each level will enable the planner to focus more on each level and plan them in detail. After being satisfied with all the steps, the last step would be to run a full site MRP to balance supplies and demands for the entire site according to the manual planning adjustments performed during planning each level. It is not advisable to run selective MRP for level n and then level n+1 and so on since then the upper level (n) exploded demands are not correctly visible to the next level (n+1).

Note: It is advisable to perform selective MRP for low levels without any other selection criteria. For example, even though running selective MRP for low level code n..n+1 only for the product family PF1 will yield correct results, but the results might look confusing. Therefore the planner has to be cautious when analyzing the results as well.