Implement Effective Material Requirements Planning Activities

Material Requirements Planning is a computer-based control system which assists in inventory control and production planning. MRP focuses on both the control of inventory and the scheduling of production. It is a control system for materials that tries to maintain enough inventory levels to ensure materials’ availability when needed. This planning and control system can be applied where there are a variety of items with complex bills. MRP is not suited for continuous processes or job shops which are linked tightly. The objective of an MRP is to carry out the following tasks simultaneously.

1. Maintaining the least possible inventory level
2. Ensuring that components, materials, and products, are available for productions planned for delivery to customers.

III. Planning the activities of manufacturing, activities of purchase and schedule of delivery.

The best setting suited for MRP is a manufacturing environment where the demand for components and sub-assemblies depends on the external item’s demand. The end items have an independent demand. Conversely, the demand for the components and raw materials needed to manufacture the end items depend on their demand.  The differences between the dependent and independent demands are helpful in the classification of the items in the inventory and in coming up with systems which can manage the items within each demand classification. MRP systems’ development is focused on dealing with the dependent demand items.

A list of business operating characteristics that are best aligned with MRP (where MRP is most effective)

Bill of Materials (BOM)

BOM is the complete list of materials needed for production. For manufacturing companies to be able to produce anything, they must make a consistent follow-up for a product after product. Without BOM, manufacturing companies are only aware that they need to create a product, but they will be unable to list everything they need. In such cases, their employees will have trouble understanding the product. Therefore, BOM’s basic function is to describe what a product is made of. Essentially all manufacturing planning systems have a solid foundation which extensively uses BOM.

Role of Bill of Materials in MRP I

1. Helps in the purchase of raw materials
2. Assists in coming up with the expected cost of material products
3. Helpful in accurately planning material requirements when coupled with information about the stock.
4. Can act as a Master Production Schedule when combined with sales forecast to get an overview of the items that are to be sold and purchased.

MRP II

1. Supports the functions of MRP I
2. Makes the purchase of items simpler by creating a plan of when to place orders for the on-time arrival of items.
3. Helps in planning to a great level of detail when the production routing is known. It provides details of all the resources required for manufacturing.
4. Assists in making an accurate estimation of the products, the machine and labor costs.

It is almost impossible to manage and plan a manufacturing company efficiently without bills that are clear or materials that are up to date.

Master Production Schedule

An MPS is a production plan for individual items in a period and has such things as the required staff, inventory, and production, among others. It is most often than not linked to manufacturing, where the plan shows when and how much each product will be demanded. It optimizes production by acting as a quantifier for critical processes, parts, and any resource. As a result of this, it identifies any bottlenecks and anticipates the needed and completed items. Most of the manufacturing activity is driven by MPS, which requires that it is viable and accurate to positively influence an organization’s profits. MPS translates the customers’ demands into a build plan of orders in a component scheduling environment and helps avoid any shortages, increased expenditures, last-minute schedules and poor resource allocation. Leveraging MPS, organizations can consolidate planned parts, forecast the BOM level and production schedules.

Inventory Records – includes stock in hand & safety stock

Lead Time – Time to deliver an order

Capacity Planning -Ascertain the adequate capacity

Purchasing/Procurement – Materials due from Suppliers

Shop Floor Control – Orders produced must be on time.

Business Processes Aligned with MRP

Purchasing

The purchasing process is well aligned with MRP and can be used effectively for optimal purchases. MRP helps determine the estimated number of items required as inputs for the final product. When customers demand the end product more, then more raw materials will be required during production. Therefore, MRP helps in determining how many items should be purchased, the items in hand and those committed to manufacturing.

Production

The process of production is closely linked to the purchase process since one depends on the other. For production to take place, individual items for end product need to be available. MRP comes in during the determination of the number or amount of products that need to be produced. The number of items produced must be neither too much nor too low. Customers should not miss the product availability when they need it. On the other hand, if too many products are produced, then more storage is needed increasing the cost.

Sales

It is imperative to be aware of the prospective customer demands and when they require the products, To maximize the sales in a manufacturing company. This way, the company will be ready to satisfy the customer demands while being careful not to produce too much when the demand is projected to reduce. MRP helps to this extent because it can determine the demands, allowing the sales process to change effectively.

A list of operating characteristics that render MRP ineffective or undesirable (when should a client not implement MRP).

Operating characteristics that render MRP ineffective

Although the use of MRP is superior to hand calculations and vast spreadsheets, it is not without challenges and drawbacks. The most significant issue with MRP is the integrity of data. The data used by MRP may have errors or be outdated, leading to erroneous output, which can cost the organization some money. The inventory and BOM data should be carefully screened. Errors are usually reported to come from input and shipping, cycle-count adjustments, waste, reporting, and production. Pull systems and barcode scanning may be used to minimize the errors.

MRP systems can be erroneous when companies have facilities in different locations in a country. For instance, the MRP system could show that there is a lot of raw materials available for production when in the real sense, the materials are on the other side of the country. MRP cannot account for the power of the staff in such situations because it may create capacity issues.

The lead times can throw MRP systems off track. The lead times of the products may change depending on the dependent items. One assumption of MRP is the lead time is always the same for every product.

Five selected items from your list of 15 expected improvements, along with descriptions of how a companion ERP (Enterprise Resource Planning) system might be used to link certain functional areas or operational activities to achieve and maximize each expected improvement effectively. This requires, for each of the five items, a minimum of two paragraphs that:

Benefits of implementing MRP

1. MRP can reduce the stored inventory of a company.
2. MRP systems can reduce the shortages of components.
3. MRP reduces the overall costs of manufacturing and, therefore, the purchase cost.
4. MRP achieves accurate scheduling, which improves a company’s productivity by reducing lead time.
5. Customers are better guaranteed high-quality products and services when an organization is leveraging MRP systems.
6. Helps in preventing shortages and scheduling mishaps.
7. Increases the efficiency of the production resources location.
8. Provides an effective cost control which has more accurate estimates of delivery dates and material requirements
9. Provides an effective means of communication with the sales force for planning.
10. Determines the usage of inventory through backflushing.
11. Helps in allocating the production time for the product.
12. Evaluates the capacity requirements that are generated by a master schedule.
13. Helps in keeping track of material requirements.
14. Ensuring that components, materials, and products, are available for production, which is planned for delivery to customers.
15. Planning the activities of manufacturing, activities of purchase and schedule of delivery.

Identify the functional area(s) that are favorably affected by the benefit.

Selected benefits

Ensuring that components, materials, and products, are available for production planned for delivery to customers

Functional areas affected by the benefit

Production

Delivery

Purchases

Storekeeping

Shipping

Describe ERP data elements (types of information) that serve as inputs and outputs of the ERP and MRP systems.

ERP data elements that server as inputs

Customer orders – this is the information received from the customers about their expected purchases, regular patterns of ordering and one-offs.

Bill of Materials – A structured file of a product which details the amounts of raw materials, assemblies, and items that are needed for the end products.

Inventory records – refers to the details about the raw materials and completed products which have already been ordered or that are on hand.

Outputs

Purchase orders – refers to the purchasing schedule the has the MRP recommends which includes the orders given to suppliers to send materials. Purchasing order has a schedule with detail quantities, and dates meet the MPS.

Planning the activities of manufacturing, activities of purchase and schedule of delivery

Functional areas affected by the benefit

Production

Delivery

Purchases

Storekeeping

Shipping

ERP inputs

Bill of Materials – A structured file of a product which details the amounts of raw materials, assemblies, and items that are needed for the end products.

Inventory records – refers to the details about the raw materials and completed products which have already been ordered or that are on hand.

Outputs

Purchase orders – refers to the purchasing schedule the MRP recommends, which includes the orders given to suppliers to send materials. Purchasing order has a schedule with detailed quantities and dates to meet the MPS

Material plans – shows the details of the raw materials, components, dates, assembly items and quantities required to produce the end product.

Achieves accurate scheduling, which improves the productivity of a company by reducing the lead-time

Functional areas affected by the benefit

Production

Delivery

Purchases

Storekeeping

ERP inputs

MPS – is a production plan for individual items in a period and has such things as the necessary staff, inventory, and production, among others. It is most often than not linked to manufacturing, where the plan shows when and how much each product will be demanded.

Forecast demand – A marketplace prediction about how much demand will be for a produced product or service.

ERP outputs

Work orders – Shows in detail the work that is needed for the production of end products, including information about the responsible departments for every part, necessary materials, and the dates.

Reduces the stored inventory of a company

Functional areas affected by the benefit

Production

Delivery

Purchases

Storekeeping

ERP inputs

MPS – is a production plan for individual items in a period and has such things as the necessary staff, inventory, and production, among others. It is most often than not linked to manufacturing, where the plan shows when and how much each product will be demanded.

Forecast demand – A marketplace prediction about how much demand will be for a produced product or service.

Bill of Materials – A structured file of a product which details the amounts of raw materials, assemblies, and items that are needed for the end products.

ERP outputs

Reports – MRP systems can produce primary and secondary reports to include information about the Material plan, work orders, and purchase orders.

A summary of your thoughts on MRP.

MRP focuses on both the control of inventory and the scheduling of production. It is a control system for materials that try to maintain enough inventory levels to ensure materials’ availability when needed. This planning and control system can be applied where there are various items with complex bills. MRP is not suited for continuous processes or job shops which are linked tightly. This tool has numerous advantages and should be implemented by every manufacturing company.

 References

Gallego, G. (2012). Production Management. Material Requirements Planning. Retrieved  from http://www.columbia.edu/~gmg2/4000/pdf/lect_06.pdf

MRPeasy. (2016). The Use of BoM (Bill of Materials) in Manufacturing. Retrieved from                      http://manufacturing-software-blog.mrpeasy.com/2016/10/27/bill-of-materials/

OptiProERP. (2018). Inventory Management 101 – The Master Production Schedule (MPS) Explained. Retrieved from https://www.optiproerp.com/blog/inventory- management-101-master-production-schedule-mps-explained/

Smartsheet. (2018). Not Just for Manufacturing, Material Requirements Planning (MRP) Is Indispensable for Any Business

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Week 4 – Assignment: Implement Effective Material Requirements Planning Activities

Instructions

As a consultant working in the area of business analysis, you are expected to make recommendations to clients regarding the optimization of business operations, including production, material control, quality, and delivery.  In order to convey a sense of professionalism, self-efficacy, and value to the client, you have decided to create a detailed report that outlines the key components of MRP to recommend or caution against the installation of an MRP system.

Since your services are rewarded primarily by the effective launch of MRP within the client’s organization, you want to define certain business characteristics that are likely to undermine or block the effective application of MRP so that you will recognize and avoid consulting agreements that carry a high risk of failure.  Knowing in advance what these undesirable characteristics are puts you in a position to adjust your promise to deliver accurately or withdraw your name from the list of potential vendors for the client.

Include the following in your report:

• A list of business operating characteristics that are best aligned with MRP (where MRP is most effective).
• A list of operating characteristics that render MRP ineffective or undesirable (when should a client not implement MRP).
• Benefits of implementing or improving MRP in an organization (list at least 15 key areas of expected improvement, such as reduced lead times).
• Five selected items from your list of 15 expected improvements, along with descriptions about how a companion ERP (Enterprise Resource Planning) system might be used to link certain functional areas or operational activities to achieve and maximize each expected improvement effectively.  This requires, for each of the five items, a minimum of two paragraphs that:
  • Identify the functional area(s) that are favorably affected by the benefit.
  • Describe ERP data elements (types of information) that serve as inputs and outputs of the ERP and MRP systems.
  • Provide a real-world example that clearly reveals how the chosen improvement item influenced each functional area in one or more of these five key scorecard categories: Safety, Quality, Delivery, Cost, and Employee Morale.

• A summary of your thoughts on MRP.

Length: 5-7 pages, not including assignment coversheet, title page, and reference page(s).  Use topic section headings for each criterion listed above.

Your response should demonstrate thoughtful consideration of the ideas and concepts presented in the course by providing new thoughts and insights relating directly to this topic.  Your response should also reflect professional business writing and current APA standards. Be sure to adhere to Northcentral University’s Academic Integrity Policy.