Material Requirements Planning (MRP)

Material requirements planning plays a major role in a lean manufacturing environment. Failure to have the necessary raw materials when required will result in lost production and potentially lost sales. Lack of control over the ordering of inventory will result in waste of inventory which leads to excess cost. The necessary elements towards a successful MRP are a solid forecast, accurate inventory and knowledge of production status.

Forecast

Keep this in mind; forecasts are never 100% accurate. Just watch the weather report one day. They may be very close for today and tomorrow, but by the time the seventh day of the forecast roles around, it has most likely changed. Production forecasts are no different.

If you are fortunate enough to receive a forecast from your customer, you have a good starting point. If not, you will have to create your own based on the methods you have available (trends, seasonal information, historical data, etc.). Your forecast can be daily, weekly, monthly, yearly or whatever other size bucket you choose. The smaller the window for your forecast, the more accurate it will be.

Roughly speaking, the forecast must be broken down into finished end items (referred to as a master production schedule or MPS in some facilities). This will drive your material requirements planning. Once the MPS is created, it is blown through your bills of material to generate the total # of each type of component required. There is software available that will do all this for you once it has been properly set up. The software will take into consideration the amount of inventory on hand as well as planned orders. This is why inventory accuracy is so important. If you are on a tight budget, a basic MRP can be set up in a program such as excel.

Accurate Inventory

As stated earlier, accurate inventory is an essential part of running a good MRP system. In order to maintain inventory accuracy, you will need a good cycle counting program. MRP will take into consideration any on hand inventory as well as allocated inventory. From here it will calculate the amount of components required based on your time frame (usually weekly buckets). Material requirements planning will also consider lead time for the components and show you when the parts should be ordered. You can probably see why inventory accuracy is so important, because without it, MRP will prompt you to order too many parts or too few parts. Either of these scenarios will lead to waste.

Production Status

Knowing the production status of the manufacturing area will enable key decisions to be made regarding MRP. If they are behind schedule and do not expect to catch up without weekend overtime, a decision could be made to delay the delivery of parts in order to avoid excess parts in the building. Conversely, if the production area is ahead of schedule, you may want to expedite material delivery in order to prevent unnecessary downtime.

Again, these are basic components of an MRP system. There are good systems available for a variety of price ranges, or a basic system can be made in a program like excel. Whichever way you decide to go, understand the importance of utilizing material requirements planning to ensure the proper components are available at the right time, to maintain steady production in your lean manufacturing environment.