MRP Planning System

Before computers appeared in our lives, the control of the quantity of materials in the warehouses of enterprises was carried out manually, with the help of credit cards. However, such a method was unreliable, often mistakes occurred, inaccuracies in calculations, and the enterprise had to stand idle without resources, frustrating deadlines and losing profits. With the beginning of the automation of production, this process was greatly simplified by programmers. The MRP system was the best solution to the problem of warehouse control. Over time, the new method has spread throughout the world. Let's get acquainted with its features, advantages and main tasks.

History

For the first time, the concept of MRP (Material Requirements Planning) arose in the mid-fifties of the last century in the United States. According to the definition of one of the main developers, J. Orlisky, it is a logical sequence of procedures and requirements that must be consistent with the production schedule. Simply put, this is a method of managing production by drawing up plans, schedules for the supply of raw materials or components. Based on the theoretical concept, the MRP-planning system was developed.

Its area of application was the work with components, semi-finished products, materials and specific finished products. In the USSR this method began to be used only in the 1970s. With the advent of computer technology, the MRP system spread to the military-industrial sphere, and in the 1980s - to the commercial business. The method is necessary in the process of controlling orders and supplying resources with a large nomenclature. A vivid example can serve as large industrial enterprises (for example, machine-building products).

The only problem in the new method was considered by specialists to be the selection and development of information and software, software, and office equipment. It is typical for automated production and technological processes. In this regard, experts identify two types: computing and information systems MRP.

Objectives

Based on the area of possible application of this method, certain goals were formulated. The MRP system ensures the satisfaction of the enterprise's need for materials, components, and products for delivery to consumers. It allows you to exclude costs by maintaining a low level of stocks. In practice, the purpose of the concept is to plan production operations and procurement schedules.

Also MRP-system allows to determine the quantity and terms of production of final products and purchase of resources necessary for it in accordance with the production schedule.

Algorithm of actions

The cycle of work is determined by a certain sequence of actions. At the first stage, it is necessary to draw up an optimal production schedule for the planned period. This process is based on the analysis of the individual production program.

At the second stage, it is necessary to keep records of materials and components that are not involved in production, but are necessary for the fulfillment of a consumer order (for example, packaging, storage of products, etc.).

The next stage is unifying, since it requires the calculation of the total need for each kind of materials, components that will correspond to the composition of the final product.

And, finally, it is necessary to draw up a schedule of orders for resources. In the future, it is possible to make adjustments to orders formed before the time of planning. They are necessary in order to prevent untimely deliveries.

Conditions and approaches

For the operation of any system, certain conditions are necessary. The MRP system is no exception. The implementation of resource planning is possible with the use of effective mathematical methods of forecasting, the availability of computer technology, which allows you to quickly optimize tasks. And also planning and management of production and technological processes are necessary.

The MRP system dictates its choice regarding the type of demand for the enterprise's products. There are two types: independent and dependent. In the first case, the demand is formed by buyers independent of each other. It is an external economic factor, and therefore control is carried out according to a simple charting scheme.

The second type demonstrates the reverse side of economic relations. It is due to the use of the manufacturer of several components for the manufacture of goods. Consequently, the demand for each of them forms a certain relationship with the production plan of the final product. It is with this approach of calculating the volume of all types of raw materials that a system of the MRP class can be implemented.

Elements

This method of planning needs has a branched structure. Elements of the MRP system are divided into input and output data. They, in turn, include subcomponents that are in close informational and mathematical interrelation and provide qualitative forecasting and management of the production process.

Input data

The input data is presented by the production schedule, specifications and data on available stocks and open (i.e., uncompleted) orders. They play a key role in the implementation of the planning system.

The first subcomponent is formed with respect to independent demand. The system does not have automation tools for scheduling. Therefore, it is created manually in accordance with the features of consumption and financial plan. For simplicity, you can divide the production schedule into periods. The first one does not allow any changes, it requires an exact implementation. In the second period, adjustments are possible, but they must correspond to the plan of the main resources. The further the period is considered, the more dynamic the information appears.

A specification is a list or list of core resources or components for a single product unit. This helps to identify the shortage of materials and implement its compensation. It is also necessary to indicate the number of products and the lead time and delivery of the order. For uninterrupted production and to avoid errors, the process of tracking available raw materials and comparing them with early indicators should be continuous.

Accounting for specifications contributes to the correct calculation of the total resource requirements. This process is performed using the MRP algorithm. The production schedule makes it possible to accurately calculate the total demand for ready-made units of production and to generate data on the availability of stocks, agreeing the plan with the number of open orders.

Output

This category consists of primary and secondary reports that perform an auxiliary function in the system.

The first subcomponent, in turn, is represented by:

• Scheduled orders are a schedule broken down into periods (the time and size of the open order).
• Leave materials in production (the rest of the inventory is counted taking into account the amount of resource costs).
• Adjustments in planned orders in the form of changing the date, the volume of the order and its possible cancellation.

Secondary reports reflect the control over the fulfillment of orders in accordance with terms and volumes. They are aimed to show a deviation from the plan, help to calculate production costs. The same category includes planning reports (supply contracts and procurement commitments). Reports on special situations indicate inconsistencies and errors in reporting.

When using computer technology MRP-system acts as a program that displays the entire process in the form of a diagram.

Benefits

Like any phenomenon of reality, this method has its pros and cons. The undoubted advantages of the MRP system are:

• The ability to operate on consumption data is not in the context of past experience, but with a future orientation (planning, forecasting).
• Possibility to carry out minimum stocks of raw materials. This significantly saves the company's finances, its costs for renting space and hiring personnel.
• Increase in the speed of turnover of stocks.
• Streamlining production by monitoring the status of each type of resource, component. This quality allows you to clearly monitor the production process.
• Elimination of production delays due to a lack of necessary resources;
• Reducing the risk of underperformance of orders, as well as reducing the number of urgent work.
• Another significant advantage of MRP-system is the possibility of using its data for carrying out other logistic activities at the enterprise or in the supply chain.

disadvantages

The disadvantages of this method of planning include:

• The need for a large amount of accurate data and calculations.
• The MRP system has low flexibility, which significantly prevents timely response to external changes in production or supply of resources.
• Complexity of system management at the big stream of manufacture and congestion. This can entail a considerable number of failures, which depend not only on the human factor, but also on the malfunctions of the system itself.
• MRP during planning can not take into account limitations on capacity, volume and other production parameters. Therefore, sometimes logisticians face "unreasonable" calculations presented by the program.
• MRP-system requires expensive and long-term implementation.

MRP II

At the end of the last century, US analysts George Ploess, Oliver White, proposed a more advanced resource planning system, called the MRP II. Its main advantage is that it covers the operational and financial side of production, takes into account the technological capacities and assumes prompt adjustments to plans and schedules. The list of functions also extended to demand management, production process simulation according to warehouse benchmarks and performance evaluation. At the same time, the results are evaluated by the system in aggregate, which makes MRP II a more flexible planning in relation to external factors.

ERP

Despite considerable overcoming of the problems of production planning, MRP-system is imperfect system. It applies only to one type of logistic activity. Therefore, in the 1990s, the integration of operations and production, personnel management and financial management was carried out. The new system was called ERP (Enterprise Resource Planning). This concept is based on the idea of creating a single data store (or repository). Thus, the MRP system has become part of a larger system.

The advantage of this approach is the lack of the need to communicate information between the systems and the significant time and cost savings for personnel. Today ERP planning is relevant for large enterprises. A small and medium business adheres to the classic classic MRP-system.