Material resource planning

Material resource planning

A formal computerized approach to inventory planning, manufacturing scheduling, supplier scheduling, and overall corporate planning. The material requirements planning (MRP) system provides the user with information about timing (when to order) and quantity (how much to order), generates new orders, and reschedules existing orders as necessary to meet the changing requirements of customers and manufacturing. The system is driven by change and constantly recalculates material requirements based on actual forecast orders. It makes adjustments for possible problems prior to their occurrence, as opposed to traditional control systems which looked at more historical demand and reacted to existing problems. See Manufacturing engineering

The logic of the material requirements planning system is based on the principle of dependent demand, a term describing the direct relationship between demand for one item and demand for a higher-level assembly part or component. For example, the demand for the number of wheel assemblies on a bicycle is directly related to the number of bicycles planned for production; further, the demand for tires is directly dependent on the demand for wheel assemblies. In most manufacturing businesses, the bulk of the raw material and in-process inventories are subject to dependent demand. Dependent demand quantities are calculated, while independent demand items are forecast. Independent demand is unrelated to a higher-level item which the company manufactures or stocks. Generally, independent demand items are carried in finished goods inventory and subject to uncertain end customer demand. Spare parts or replacement requirements for a drill press are an example of an independent demand item.

By use of the computer, material requirements planning is able to manipulate massive amounts of data to keep schedules up to date and priorities in order. The technological advances in computing and processing power, the benefits of on-line capabilities, and reduction in computing cost make computerized manufacturing planning and control systems such as material requirements planning powerful tools in operating modern manufacturing systems productively. See Industrial engineering, Inventory control, Systems engineering