How does MRP work?
MRP, MRP II, and ERP start with the master production schedule (MPS), which defines current and future (forecasted) resource requirements based on current and forecasted customer orders. Completing these orders is the goal; the MPS merely provides production targets toward reaching that goal. Everything else in these planning systems work from the MPS, through the bills of materials (BOMs) for the products in the customer orders, and backwards through time. The result is a set of purchasing and manufacturing orders with start and due dates, and a list of the minimum quantities of inventory to satisfy the MPS. This information tells the enterprise when to order new materials, when to start making products from those materials, and when to distribute the finished products to end customers.
There are two important questions to ask here. How much of an item is needed? When is an item needed to complete a specified number of units, in a specified period of time? The MRP process involves the following steps: • Develop a master production schedule for the end item (this is the output of the aggregate / production planning). The MPS is adjusted accordingly, as follows: • Determine the gross requirements for a particular item. • Determine the net requirements and when orders will be released for fabrication or subassembly. Net Requirements = Total Requirements – Available Inventory Net Requirements = (Gross Requirements + Allocations) – (On Hand) + Scheduled Receipts • Create schedules identifying the specific parts and materials required to produce the end items. The bill of materials will be useful here. • Determines the exact numbers needed. • Determines the dates when orders for those materials should be released, based on lead times.
