Material Resource Planning

Material Resource Planning, or MRPClosed Material requirements planning (MRP) is a production planning, scheduling, and inventory control system used to manage manufacturing processes., is the process of translating a production schedule for an end product to a set of time-based requirements for all of the sub-assemblies and parts needed to make that set of finished goods. MRP should be used as a decision support system that provides suggested orders. Planners make any required modifications to the suggested orders and then finalize them. I.e., MRP is used to suggest a schedule of what parts should be available, and when, to satisfy part demand.

It is a powerful tool, but misuse can be costly due to excess or lack of inventory to meet demands. To avoid misuse, a deep understanding of MRP is recommended in order to make and validate decisions, since MRP cannot account for all possible factors, such as limited warehouse space or manpower shortage.

MRP calculates material requirements and schedules based on the following factors:

  • Demand - the need for a part. This includes Scheduled Work Orders (WO), Sales Orders, Dependencies, Allocations, etc.

  • Supply - the amount of inventory available. This includes inventory on hand, Released WO, Scheduled WO, or scheduled inventory to meet the demand.

  • Part Lead Time - the time it takes to convert the materiel into the product in Demand.

  • Safety Lead Time - a buffer, measured in days, that is required between the planned supply deliveries and the demand.

  • Order Lot Size Horizon or Order Period - the number of days forward that MRP uses to calculate materiel requirements.

  • Order Multiplier - every order must be a multiple of this number; MRP will use this number when calculating how much to order.

  • Order Minimum - the minimum number of parts to order.

  • Safety Stock - the minimum amount of inventory to keep available to minimize risk. For more information, see Manage Part Safety Stock.

Calculating Projected Inventory

MRP calculates the projected inventory by looking at what's currently in stock (Inventory), any vendor purchase orders or work orders (Supply), minus sales orders (Demand). Or, as a formula: Projected Inventory = Inventory + Supply - Demand. Often, this is done manually on an MRP table. Your firm may be using the following table, or something similar:

Example MRP table

With this, based on upcoming demand, along with some other variables (like a safety stock or order multiplier), you can calculate when you will need to increase supply to ensure that your part supply meets your client demands. For a single purchased part, like a screw, with clearly indicated values, creating an MRP chart is easy as seen in the following example:

Screw A has the following characteristics:

  • Inventory: There are 35 in inventory today

  • Demand: There is an upcoming order for 50 pars to be shipped in 5 days

Based on these values, the MRP will suggest that you have 15 parts supplied to inventory within 5 days. Here it is on an MRP table:

But there can be other factors at play, like safety stock, or safety lead time. Take the following example including these two factors:

Part A has the following characteristics:

  • Inventory: There are 12 in inventory today

  • Demand: There is an upcoming order for 57 parts to be shipped in 5 days

  • Safety Lead Time: To ensure that there are no delays, orders should be ready for shipment 1 day ahead of the customer requested delivery date

  • Safety Stock: Due to the nature of the part, it is recommended that at least 40 be in inventory at any time

Represented on the MRP table:

As you can see, the MRP will suggest that you need 28 parts on day 1, to satisfy the safety stock requirements, and a total of 85 parts supplied to inventory by day 5. Our planner has decided that we can carry the load for the full 85 parts on day 1, thus avoiding having to setup production again for this part. Here it is on an MRP table:

Note: Because of the calculation used, a value of 0 on Projected Inventory signifies that there are 40 items in stock to satisfy the safety stock requirements.

However, for manufactured parts with multiple levels, each one with differing lead times, safety stocks, and order multipliers, automated systems will simplify the process and ensure that you do not run out of parts as seen in the following example:

Part A10001 has the following characteristics:

  • BOM: To make one Part A10001, you need:

    • 3 Part H2000 (Inventory = 15, Safety Lead Time = 3, Order Minimum = 25, Order Multiplier = 25, Safety Stock = 15)

    • 3 Part H3000 (Inventory = 20, Safety Lead Time = 1, Order Minimum = 25, Order Multiplier = 25, Safety Stock = 10)

    • 3 Part H4000 (Inventory = 14, Safety Lead Time = 0, Order Minimum = 20, Order Multiplier = 20, Safety Stock = 10)

    • 1 Part PC1001 (Inventory = 0, Safety Lead Time = 2, Order Minimum = 2, Order Multiplier = 2, Safety Stock = 0)

    • 1 Part PC1002 (Inventory = 0, Safety Lead Time = 3, Order Minimum = 2, Order Multiplier = 2, Safety Stock = 0)

    • 3 Part SP1000 (Inventory = 0, Safety Lead Time = 4, Order Minimum = 4, Order Multiplier = 4, Safety Stock = 0)

  • Inventory: There are 0 in inventory today

  • Demand: There is an upcoming order for 12 parts to be shipped in 8 days

  • Safety Lead Time: To ensure there are no delays, orders should be ready for shipment 1 day ahead of the customer requested delivery date

  • Order Multiplier: The part is ready in groups of 1

  • Order Minimum: The minimum order quantity is 1

  • Safety Stock: Due to the nature of the part, there should be 0 in inventory if there are no upcoming orders

Based on these values, you will need 7 MRP charts. One for each part on the BOMClosed A bill of material, or BOM, is a list of parts required to build another part.. In the MRP table below, the parts have been added with the order amount placed on the latest possible order dates:

Notes

  • Part H2000, H3000 and H4000: Because of the order multiplier, the supply was higher than the demand to ensure the supply meets or exceeds the demand.

  • Part H4000: Since there were 14 parts in inventory, with a safety stock requirement of 10, 40 parts were manufactured to meet or exceed the safety stock.

  • Part SP1000: The part is required 5 days before Part A10001 demand date, i.e. 3 days from now.

The planner may update the suggested supply orders based on the plant capabilities. For example, it may be more reasonable to spread the supply values more evenly across the week.

Manually performing this process for every part on your shop floor can be difficult and lead to human error. OnRamp comes with a built-in MRP module that will calculate your upcoming supply needs based on inputted demand. As mentioned before, while the OnRamp MRP module will calculate the part requirements for you, a competent planner should always review the results to modify, combine, or delete any orders, as required, before approval.

MRP in OnRamp

In OnRamp, the Production > Planning > Materials Requirement Planning (MRP) folder contains the screens required to access any part planning. Most of the work will be done on the Review MRP Schedule by Part [S1214] screen, where you can:

  • Run the MRP for all the parts in OnRamp

  • View the MRP schedule for each part

  • View the MRP schedule for each part in the parent part bill of materials

  • View the part settings relevant to schedule planning

  • View the part inventory

  • View part sales orders

Anticipating Late Deliveries

By using Review MRP Schedule by Part [S1214] and the Projected Customer Lates [R4630] report, you can anticipate potential discrepancies between Demand and Supply.

The Projected Customer Lates report displays the Total Order quantity, as well as the Quantity that will be on hand by the specified date, and the Projected Quantity on that date, with a negative number meaning there will be a shortage. This projected quantity is also visible under the Projected column of the Review MRP Schedule by Part [S1214] screen.