Explain MRP I – Materials Requirements Planning

MRP I – Materials Requirements Planning

For a manufacturing company to produce end items, the availability of sufficient production capacity must be coordinated with the availability of all raw materials and purchased items from which the end items are to be produced. In other words, there is a the availability of dependent demand items from which the products are made one approach to manage the availability of dependent-demand items is to keep a high stock of all the items that might be needed to produce the end item. However, this approach is costly due to the excessive inventory of components, fabricated parts and sub assemblies to ensure high service, level.

An alternative approach to managing dependent demand items is to plan for procurement of specific components that will be required, to produce the required quantities of the end products as per the production schedule indicated by the master production schedule. Such a technique is known as Materials Requirements Planning technique.

MRP I is a computer based in which the given Master Production Schedule is divided into the required amounts of raw materials, parts and sub assemblies, needed to produce the end items in such time period (weeks / months) mentioned in the schedule. The gross requirement of these materials is reduced to net requirements by taking into account those materials that are in inventory or on order. Henceforth, a schedule of orders is developed for purchased materials based on the knowledge of the lead times for procurement of those materials.

Objectives of MRP I

1. To improve customer service by meeting delivery schedules promised and shortening delivery lead times.
2. To reduce inventory costs by reducing inventory levels.
3. To improve plant operating efficiency by better use of productive resources.
4. To act as a planning as well as a controlling system over the production operations and procurement of materials.

Since MRP is a computer based system, it was possible to expand the system into a manufacturing planning and control system, by providing information for planning and controlling both the material and capacity required to manufacture the products. Hence, MRP serves as a key component in an information system for planning and controlling production operations and procurement of materials. MRP I, when extended to include feedback from and control of vendor orders and production operations, it is called “Closed-loop MRP” which helps managers achieve effective manufacturing control.