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Basic concepts of MRP (Material Requirements Planning)

Following are the basic concept of MRP:

  • Independent vs. Dependent demand
  • Lumpy demand
  • Lead time
  • Common use items
  • Time phasing

MRP Material Requirements Planning

Independent vs. Dependent demand

  • Independent Demand: An inventory of an item is said to be falling into the category of independent demand when the demand for such an item is not dependent upon the demand for another item. Finished goods Items, which are ordered by External Customers or manufactured for stock and sale, are called independent demand items.
  • Dependent Demand: If the demand for inventory of an item is dependent upon another item, such demands are categorized as dependant demand. Raw materials and component inventories are dependent upon the demand for Finished Goods and hence can be called as Dependant demand inventories.

Lumpy Demand

Manufacturing is often done intermittently in lots or models of one or the other kind. The components or parts of a finished product are only required during the manufacturing of the product. Therefore, there could be huge demands for inventory occasionally and none at other times, which makes the demand ‘lumpy’. When the demand comes in large gaps, it is called lumpy demand. MRP plays a great role in dealing with lumpy demand-driven inventory situations.

Lead Time

The amount of time that elapses between when a process starts and when it is completed. Lead time is examined closely in manufacturing, supply chain management and project management, as companies want to reduce the amount of time it takes to deliver products to the market. In business, lead time minimization is normally preferred.

Common Use Items

In case of manufacturing of products, one raw material is generally used to manufacture more than one type of component. For instance, finished product X is to be manufactured and for which component A is needed, which further requires component B, component B requiring other three components of which C needs D and D needs E, which could be a raw material. The end item E is also needed to produce N, S and T, and therefore, E manufactures two varied components of the finished product X. The MRP is responsible for collecting these common use items from varied products to influence economies in ordering raw materials and manufacturing components.

Time Phasing

This signifies adding time schedule to material inventory position by recording and storing details on either planning periods or particular dates, with which the relevant quantities are linked. These details could be expanded by incorporating data on demand and availability of materials.

 

 

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