Material requirements planning (MRP) is a scientific way and computer based planning inventory designed to assist production managers

in scheduling and placing orders for dependent demand items and organize manufacturing processes. Definition MRP is product oriented computerized technique aimed at minimizing inventory and maintaining delivery schedules. Material requirements planning (MRP) is a production planning and inventory control system used to manage manufacturing processes. Most MRP systems are software-based, while it is possible to conduct MRP by hand as well. History/ Evolution 1940s and 1950s: First MRP systems Use of Mainframe computers to explode information from a bill of materials for a certain finished product into a production and purchasing plan for components 1980s: MRP II (manufacturing resources planning) is the next generation of MRP to create a new approach. In this system planning process functions are incorporated with marketing, finance, accounting, engineering, and human resources. Better planning and control over inventory through valid production schedules The improvement in Customer delivery commitments, cash flow projections, and personnel management projections helps to improve the other areas like marketing, finance and personnel management. We cannot say the MRP II is replaced or improved version of MRP but it increases the scope of production resource planning and also the involvement of other functional areas of an organization in the planning. Main difference is MRP II is all of the functional areas of firm (i.e. Marketing, finance, HR) have input into the master production schedule. It always uses simulation capabilities so managers can evaluate various available options.

ERP (Enterprise resources planning) is another related concept which links computer technology to the other functional areas of whole business enterprise. The process of MRP is backward process and starts from a production plan for finished goods and on the basis of this develop requirements for the raw materials and other components required for final production. We can divide it into 2 steps 1. Schedule of finished goods and its production 2. Schedule of requirements for raw materials, other components, and the subassemblies to produce final product (Finished Goods) at specified time. Simply MRP is the answer of following 3 questions 1. What is needed?

2. How much is needed? 3. When is it needed?" Three basic components to make up material requirements planning
1.

Is to make sure that all products and materials are all in line.

2. Company needs to keep tabs on is making sure they have very low inventory. 3. Planning the manufacturing scheme. Should know exact production place and where

shipped to. Importance Lack of MRP leads toIll planned purchasing Unwanted emergency Increase workload of purchase dept. receiving stores & primary inward inspection

To analyze inventory requirements and break it into planning periods to complete production timely To maintain or reduce inventory levels and related carrying costs Proper Implementation and utilization to plan capacity needs and allocate production time Factors affecting on materials planning External factors National economy Price trends Credit policy Direct and indirect taxes Foreign exchange regulation Import policy International market Business cycle Internal factors Corporate objectives Technology Market demand and supply Procurement lead time Rejection rates Working capital management Inventory norms Storage facilities Nearness to sources of supply

Communication system Management policy towards stocking Buyer seller relationship Corporate financial position and image Objectives Ensure materials are available for production and products are available for delivery to customers. Maintain the lowest possible level of inventory. Plan manufacturing activities, delivery schedules and purchasing activities. Functions Inventory control Bill of material processing Elementary scheduling To maintain low inventory levels To plan manufacturing, purchasing and delivering activities Scope Purchase Management Techniques of Materials Planning For direct materials High Value 1. Bills of Materials/ explosion chart 2. MRP 3. Inventory control Low Value 1. Inventory control For Indirect Materials

Past consumption analysis technique Exponential smoothening Inventory control Benefits or Advantages of MRP Helps to minimize inventory levels and the associated carrying costs, Helps to track material requirements, Helps to determine the most economical lot sizes for orders, Helps to compute quantities needed as safety stock, Helps to allocate production time among various products, and plan for future capacity needs To maintain right balance between Demand and Supply

Limitations and Disadvantages of MRP Time consuming Costly to implement Information output of MRP system is totally depends on the information input. Accurate bills of materials, part numbers, and inventory records is required MRP relies upon accurate input information Not 100% accurate or perfect and can create serious problem if going to occur any error in system. It may alter all numbers and data. Inconsistent manpower also act as limitation here

Serious problem may arise if small organization fails to maintain good inventory record Effective and efficient function possible only if an accurate master production schedule (MPS), good lead time, and current inventory records maintained, otherwise it can lead to serious problem Complex and time consuming system Also it has been observed that many employees resist implementing MRP. MRP Information Input Three main sources Bill of materials Master schedule Inventory records file