An overview of MRP

Essay by onionUniversity, Bachelor's June 2004

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MRP is a computer-based information system designed to handle ordering and scheduling of dependent-demand inventories (eg raw materials, component parts, and subassemblies). A production plan for a specified number of finished products is translated into requirements for component parts and raw materials working backward form the due date, using lead times and other information to determine when and how much to order. Hence, requirements for end items generate requirements for lower-level components, which are broken down by planning periods (eg, weeks) so that ordering, fabrication, and assembly can be scheduled for timely completion of end items while inventory levels are kept reasonably low.

Material requirements planning is as much a philosophy as it is a technique, and as much an approach to scheduling as it is to inventory control.

Historically, ordering and scheduling of assembled products suffered from two difficulties. One was the enormous task of setting up schedules, keeping track of large numbers of parts and components, and coping with schedule and order changes.

The other was a lack of differentiation between independent demand and dependent demand. All too often, techniques designed for independent-demand items were used to handle assembled items, which resulted in excessive inventories. Consequently, inventory planning and scheduling presented major problems for manufacturers.

In the 1970s, manufacturers began to recognize the importance of the distinction between independent- and dependent-demand items and to approach these two categories in different ways. Much of the burden of record keeping and determining material requirements in many firms has now been transferred to computers, using techniques such as MRP. A great deal of the credit for publicizing MRP and educating potential user about MRP goes to Joseph Orlicky, George Plossl, Olver Wight, and the American Production and Inventory Control Society.

MRP begins with a schedule for finished goods that...