Material requirements planning

Material requirements planning (MRP) is a production planning, scheduling, and inventory control system used to manage manufacturing processes. Most MRP systems are software-based, but it is possible to conduct MRP by hand as well.
An MRP system is intended to simultaneously meet three objectives:
Prior to MRP, and before computers dominated industry, reorder point (ROP)/reorder-quantity (ROQ) type methods like EOQ (economic order quantity) had been used in manufacturing and inventory management.
MRP was computerized by the aero engine makers Rolls-Royce and General Electric in the early 1950s but not commercialized by them. It was then 'reinvented' to supply the Polaris program and then, in 1964, as a response to the Toyota Manufacturing Program, Joseph Orlicky developed material requirements planning (MRP). The first company to use MRP was Black & Decker in 1964, with Dick Alban as project leader. Orlicky's 1975 book Material Requirements Planning has the subtitle The New Way of Life in Production and Inventory Management. By 1975, MRP was implemented in 700 companies. This number had grown to about 8,000 by 1981.
In 1983, Oliver Wight developed MRP into manufacturing resource planning (MRP II). In the 1980s, Joe Orlicky's MRP evolved into Oliver Wight's manufacturing resource planning (MRP II) which brings master scheduling, rough-cut capacity planning, capacity requirements planning, S&OP in 1983 and other concepts to classical MRP. By 1989, about one third of the software industry was MRP II software sold to American industry ($1.2 billion worth of software).
Independent demand is demand originating outside the plant or production system, while dependent demand is demand for components. The bill of materials (BOM) specifies the relationship between the end product (independent demand) and the components (dependent demand). MRP takes as input the information contained in the BOM.
The basic functions of an MRP system include: inventory control, bill of material processing, and elementary scheduling. MRP helps organizations to maintain low inventory levels. It is used to plan manufacturing, purchasing and delivering activities.
"Manufacturing organizations, whatever their products, face the same daily practical problem - that customers want products to be available in a shorter time than it takes to make them. This means that some level of planning is required."
Companies need to control the types and quantities of materials they purchase, plan which products are to be produced and in what quantities and ensure that they are able to meet current and future customer demand, all at the lowest possible cost. Making a bad decision in any of these areas will make the company lose money. A few examples are given below:
MRP is a tool to deal with these problems. It provides answers for several questions:
MRP can be applied both to items that are purchased from outside suppliers and to sub-assemblies, produced internally, that are components of more complex items. An important point is that MRP is not cost driven: it does not seek to minimise cost. Instead, it is stockout driven: it will order just enough to avoid stockouts (using the lot size rule for each item) and order as late as possible.
The data that must be considered include:
There are two outputs and a variety of messages/reports:
Messages and reports:
Source:
In 2011, the third edition of "Orlicky's Materials Requirements Planning" introduced a new type of MRP called "demand driven MRP" (DDMRP). The new edition of the book was written, not by Orlicky himself (he died in 1986) but by Carol Ptak and Chad Smith at the invitation of McGraw Hill to update Orlicky's work.
Demand driven MRP is a multi-echelon formal planning and execution technique with five distinct components:
These five components work together to attempt to dampen, if not eliminate, the nervousness of traditional MRP systems and the bullwhip effect in complex and challenging environments. The Demand Driven Institute claims the following: In utilizing these approaches, planners will no longer have to try to respond to every single message for every single part that is off by even one day. This approach provides real information about those parts that are truly at risk of negatively impacting the planned availability of inventory. DDMRP sorts the significant few items that require attention from the many parts that are being managed. Under the DDMRP approach, consultants selling it claim that fewer planners can make better decisions more quickly. That means companies will be better able to leverage their working and human capital as well as the huge investments they have made in information technology. One down-side, however, is that DDMRP cannot run on the majority of MRPII/ERP systems in use today.
It is claimed by the companies selling it that DDMRP has been successfully applied to a variety of environments including CTO (configure to order), MTS (make to stock), MTO (make to order) and ETO (engineer to order) although detailed studies are rare. The methodology is applied differently in each environments but the five step process remains the same. DDMRP leverages knowledge from theory of constraints (TOC), traditional MRP & DRP, Six Sigma and lean. It is effectively an amalgam of MRP for planning, and kanban techniques for execution (across multi-echelon supply chains) which means that it has the strengths of both but also the weaknesses of both, so it remains a niche solution. The problems with MRP (as listed above) also apply to DDMRP. Additional references are included below.