MATERIAL REQUIREMENT PLANNING (MRP - I)

MRP refers to the basic calculations used to determine components required from end
item requirements. It also refers to a broader information system that uses the dependence
relationship to plan and control manufacturing operations.
“Materials Requirement Planning (MRP) is a technique for determining the quantity and timing for
the acquisition of dependent demand items needed to satisfy master production schedule
requirements.”

Objectives of MRP
1. Inventory reduction: MRP determines how many components are required when they are
required in order to meet the master schedule. It helps to procure the materials/ components as
and when needed and thus avoid excessive build up of inventory.
2. Reduction in the manufacturing and delivery lead times: MRP identifies materials and
component quantities, timings when they are needed, availabilities and procurements and
actions required to meet delivery deadlines. MRP helps to avoid delays in production and
priorities production activities by putting due dates on customer job order.
3. Realistic delivery commitments: By using MRP, production can give marketing timely
information about likely delivery times to prospective customers.
4. Increased efficiency: MRP provides a close coordination among various work centres and
hence help to achieve uninterrupted flow of materials through the production line. This
increases the efficiency of production system.

MRP SYSTEM
The inputs to the MRP system are:
(1) A master production schedule,
(2) An inventory status file and
(3) Bill of materials (BOM).
Using these three information sources, the MRP processing logic (computer
programme) provides three kinds of information (output) for each product component: order
release requirements, order rescheduling and planned orders.
1. MASTER PRODUCTION SCHEDULE (MPS)
MPS is a series of time phased quantities for each item that a company produces, indicating how
many are to be produced and when. MPS is initially developed from firm customer orders or
from forecasts of demand before MRP system begins to operate. The MRP system whatever the
master schedule demands and translates MPS end items into specific component requirements.
Many systems make a simulated trial run to determine whether the proposed master can be
satisfied.
2. INVENTORY STATUS FILE
Every inventory item being planned must have an inventory status file which gives complete
and up to date information on the on-hand quantities, gross requirements, scheduled receipts
and planned order releases for an item. It also includes planning information such as lot sizes,
lead times, safety stock levels and scrap allowances.
3. BILL OF MATERIALS (BOM)
BOM identifies how each end product is manufactured, specifying all subcomponents items,
their sequence of build up, their quantity in each finished unit and the work centres performing
the build up sequence. This information is obtained from product design documents, workflow
analysis and other standard manufacturing information.

Outputs of MRP:
The outputs of any MRP System are:
a. Planned order schedule which is a plan of the quantity of each material to be ordered
in each time period. The order may be purchase order on the suppliers or production
orders for parts or sub-assemblies on production departments.
b. Changes in planned orders (reschedule notices).
c. "Recommended Purchasing Schedule". This lays out both the dates that the purchased
items should be received into the facility AND the dates that the Purchase orders, or
Blanket Order Release should occur to match the production schedules.
WHERE TO USE MRP :
MRP is the most useful scheduling technique for many industries engaged in
fabricating and assembling products like automobiles, tractor-trailer equipments, Rail
coaches, etc., It is especially suitable for situations where one or all of the following
conditions exists :
a) The final product is complex and made up of several levels of assemblies.
b) The final product is expensive.
c) The lead times for components and raw materials are relatively long.
d) The manufacturing cycle is long for the finished product.
e) Consolidation of requirements for several products is desirable so that economic lot sizes
are applicable.
 Manufacturing Resource Planning (MRP II)

It should be easy to see that all the MRP schedules are driven by the Master
Production Schedule (MPS). They all assume that the capacity to produce these items and
meet the MPS exists. Most systems implemented today are not the simple MRP systems that
we just discussed. But, they are

MRP II systems, which is defined as:

An integrated system which utilizes a set of decision rules to determine optimal shop
loading (when, how much, and priorities) to accomplish the MPS within the capacity of the
facility.

Integration means that MRP II links together all the high level planning of the
company (Marketing Plan, Financial Plan, and Production Plan) with the lower level systems
required to meet these plans (MRP, MPS, Shop Floor Control, Purchasing, Inventory, etc.)
This assures that all system elements are working toward the same goal of meeting customer
demand. The decision rules are ways in which the MRP II system trades off planned
production of one item for production of other items. An example of one of these decision
rules is the choice of lot sizing technique, such as: Lot-by-Lot or POQ ordering.

The MRP II system must assure that the production facility is capable of
accomplishing the MPS or all these plans can result in an inability to meet promised delivery
dates. This is performed in an iterative manner as depicted in Figure 5.
The company’s strategic plans for the future are translated into a MPS. MRP
schedules are constructed to support this MPS. The next step is to perform Capacity
Requirements Planning (CRP).

• This tells us what equipment, personnel, and materials we need to meet the MRP
schedules.
• If we do not have this capacity, then the MPS and possibly the strategic plans must be
revised.
• This process continues until our MRP schedules are consistent with the plant capacity.
• These schedules are then released to the departments that are responsible for
performing the production and/or purchasing operations.
• These production operations continuously feed back actual accomplishment
information to the MRP/MPS elements that allow the plans to be updated.
• This creates a truly closed loop manufacturing planning and execution system.

Manufacturing Resource Planning (MRP II)

Capacity Requirements Planning (CRP).
Master Production Schedule (MPS)
MRP II will:
 Identify WIP cost drivers,
 Insure proper Kanban size,
 Insure incoming materials availability,
 Prevent stockouts,
 Accommodate capacity constraints, and
 Track customer orders.
Enterprise resource planning (ERP) is the integrated management of main business
processes, often in real time and mediated by software and technology. ERP is usually
referred to as a category of business management software—typically a suite of
integrated applications—that an organization can use to collect, store, manage, and interpret
data from many business activities.

Before an ERP system, there are different databases of different departments which
they managed by their own. The employees of one department does not know about
anything about other department.

After ERP system, databases of different departments are managed by one system
called ERP system. It keep tracks of all the database within system. In this scenario,
employee of one department have information regarding the other departments.

Benefits of ERP :
 This system helps in improving integration.
 It is the flexible system.
 There are fewer errors in this system.
 This system improved speed and efficiency.
 There is a complete access to information.
 Lower total costs in complete supply chain.
 This system helps in Shortening the throughput times.
 There is sustained involvement and commitment of the top management.
Line of Balance (LOB)

Line of balance is a technique which is used to find out the state of completion of various
process stage of a product which has limited production volume at a given time

APPLICATION AREAS OF LOB

Some application areas where LOB can be applied are listed below:
• production of aircrafts
• production of missiles
• production of heavy machineries/equipments
• production of special equipments/machineries
• application software development projects which are having more or less similar modules
From the above examples, one can notice a unique feature of limited production volume
because of restricted demand.

INPUT TO LOB

The list of inputs to LOB is given below:

• Product structure (Process stages with lead times)
• Monthly production volume of the product
• Time of review
• Cumulative units of production at each process stage

STEPS OF LOB
The steps of LOB are listed below:
Step 1. Draw the process plan for producing one unit of the product using the pro duct
structure
Step 2. Construct a cumulative delivery schedule and corresponding graph.
Step 3. Construct LOB chart (Progress chart) by the side of the cumulative delivery schedule
graph for a given time period.
Step 4. For each process stage, find the status of completion.

Just-In-Time (JIT)
Introduction:
The Just-In-Time (JIT) manufacturing system is a planning system for manufacturing
processes that helps in achieving high-volume production using the minimal inventories.
The system eliminates the inventory of raw materials, work in progress, and finished
goods by making them available as and when required. The items are picked up by the
worker and fed directly into the production process. The finished goods are produced only at
the time they are required for sale.
The implementation of the JIT System requires complete transformation of methods
of designing products and services, assigning responsibilities to workers, and organizing
work. In this book, we shall go through the concepts of the JIT System, its advantages,
characteristics, and its contribution toward improving the productivity and profitability of a
firm.

Objectives of JIT:

The Concept of the JIT System:

The JIT concept states “nothing is produced until it is required.” According to the JIT system,
the finished goods are assembled just before they are sold, the sub assemblies are made just
before the products are assembled and the components are fabricated just before the sub-
assemblies are made. Here, the work-in-progress inventory is always kept at a low level, thus
reducing the production lead times. The firms should achieve and maintain high performance
levels in all their operational areas to facilitate the smooth flow of materials in the JIT
Systems.

The JIT System involves the active participation, involvement, and cooperation of all its
employees. The JIT manufacturing system is based on the concept of continuous
improvement, which includes the two mutually supporting components of people
involvement and total quality control.

People Involvement: The Human Resources Management component plays a vital role in
the implementation of the JIT manufacturing system. The successful implementation of a JIT
program requires teamwork, discipline, and supplier involvement.
Team Work: Team Work involves activities like suggestion programs, and quality circle
programs which enable employees to actively participate. Suggestion programs are conducted
to encourage the employees to their ideas on how to improve a process. In quality circles,
people working in similar types of operations meet at regular intervals and discuss ways to
improving the quality of their processes.
Supplier Involvement: Firms can allow suppliers to participate in design review and to
suggest new designs and methods for improving product quality or productivity. JIT firms
enter into contracts with their suppliers instead of inviting competitive bids from a set of
suppliers. The JIT firm can share its production plans and schedule with its suppliers so that
they can plan their business and capacity requirements before hand. Linear production
schedules relate to the development of production schedules with uniform workloads. The
suppliers should tailor their schedules to the JIT firm's needs as they contribute to the
improvement of the firm's manufacturing operations. The maintenance of linear production
schedules requires the identification and elimination of production bottlenecks, a balance in
the production system, and a reduction in set-up time.
Total Quality Control: A firm can produce high quality products only through the combined
efforts of all the departments including the purchase department, quality control department,
and personnel department. The concept of 'immediate customer' helps the firms to achieve the
required quality levels.
Concept of Immediate Customer: A JIT uses the concept of 'immediate customer' where
each worker in the firm considers the next worker who continues the production process as
the customer. Therefore, it is the responsibility of the worker to ensure that the product is
processed to meet specifications and quality requirements before passing it on to the next
worker.
Only items of acceptable quality are delivered to the immediate customer. In case a worker
delivers a defective item or an improperly finished item to his/her immediate customer, the
worker who identifies the defect is authorized to stop the process and take necessary actions
thereafter.
Continuous Improvement:
In a JIT System, firms adopt continuous improvement in quality and productivity by
identifying areas that require improvement. Problems are detected before they occur and are
solved in the minimum possible time, to ensure smooth flow of work. For manufacturing
operations, the percentage of scrap can be reduced by following better work methods and
training employees. A proper master production schedule and flexible workforce can be
developed to eliminate the capacity imbalances.

Advantages of JIT System

The advantages of JIT System to firms are
 Increased utilization of machinery and equipment,
 Reduced investment in inventory,
 Improvement in the quality of product or service,
  Reduction in space requirements of the firm,
 Reduction in production cycle time,
 Zero inventory storage and maintenance costs,
 Closer relationship with suppliers,
 Reduction in formal paper work, and
 Higher involvement of employees as they are responsible for producing good quality
goods.

Characteristics of JIT System:

The proper implementation of the JIT principles helps in producing products and services at
the quality and price demanded by customers. The following are the characteristics of a JIT
System:
Uniform Workstation Loads:
By using JIT system, firms can maintain uniform work-loads at the workstations.
Small Lot Sizes:
In a JIT Manufacturing system, firms maintain inventory in the smallest possible lot sizes.
This is done to reduce the cycle inventory, cut lead times, and achieve a uniform work load.
Smaller lots have a lower waiting time in the production process when compared to the larger
lots.
Closer Supplier Ties:
JIT firms should maintain long-term relationships with their suppliers as they are responsible
for providing the timely delivery of good quality inventory.
Maintenance of High Quality:
In the JIT system, quality control begins from the source where the workers are encouraged
to maintain the quality of work. The production process is stopped immediately when a
quality problem is identified and is continued only after the problem has been sorted out.
Quick and Economic Set Ups:
Generally, firms manufacture their products in large lots leading to lower number of machine
set ups. Firms using JIT system experience a larger number of set-ups as they produce in
small lots. JIT firms, therefore, need quick and inexpensive set-ups in order to minimize the
disadvantages of having more set ups. JIT firms engage specialists and consultants to train
their workers to reduce set-up times. The following is the procedure to reduce set-up times.
Preventive Maintenance:
In order to reduce the occurrence of defects, firms should carry out preventive maintenance.
In preventive maintenance, the parts that are likely to produce defects are replaced, rather
than the defects that arise during production being repaired. Workers are given the
responsibility of maintaining their machinery and equipment and are also trained to solve or
repair common problems.
The following are the important principles and actions that improve equipment maintenance.
 Design simple equipment and standardize replacement parts
 Collect information about the frequency and causes of failures of machines
 Replace worn out parts of equipment, after periodic checks
 Purchase all spare parts that are necessary during repair work
Kanban System :
Kanban, also spelt “kamban” in Japanese, translates to “Billboard” (“signboard” in
Chinese) that indicates “available capacity (to work)”.

Types of kanban systems

1. Production (P) Kanban: A P-kanban, when received, authorizes the workstation to

produce a fixed amount of products. The P-kanban is carried on the containers that are
associated with it.

2. Transportation (T) Kanban: A T-kanban authorizes the transportation of the full

container to the downstream workstation. The T-kanban is also carried on the containers that
are associated with the transportation to move through the loop again.

Important Rules for Kanban:

• A kanban should always be attached to goods.

• The number of kanban cards should be reduced for optimum efficiency.
• Always aim at sending products that are 100% defect free. If goods with defects are
sent to the next operation, it will lead to a lot of waste and reduce productivity.
• The quantity indicated at earlier processes by the kanban card guides the later
processes.
• Items should not be transported if a kanban is not attached to them.
• Only produce parts that are equal to the number of kanban present. Producing more
goods than the number of kanban may lead to waste of inventory.