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With the help of information retrieved from the bill of materials, master schedule and inventory records file, the MRP system indicates the total requirement for raw materials, parts and components, and subassemblies against each period on the planning sphere. At first, MRP processing determines gross material requirements, then deducts the inventory in hand, and adds it back to the safety stock, for the computation of net requirements.
The MRP outputs can be in the form of primary reports as well as secondary reports. There are three kinds of primary reports, viz. planned order schedules, order releases and changes to planned orders. Planned order schedules delineate the quantity as well as timing of future material orders. Order releases give authorizations on orders to be made. Changes to planned orders may include revisions or cancellations of the time frame or quantity. On the other hand, secondary reports of MRP can also be of three kinds, viz. performance control reports, planning reports and exception reports. Performance control reports are used to keep a track of problems, such as delivery dates and stock outs that have been missed out, in order to assess system performance. Planning reports are used to forecast future inventory requirements. Exception reports are used to divert the attention of managers toward key issues such as late orders, excessive scrap rates, etc. Though working on a backward direction from the production plan to get a finished product to understand the component requirements appears a simple process, it can indeed be extremely complex, particularly in the event of raw materials being used for a variety of different products. Matters can become further complicated in product design, order quantities and production schedule. The significance of computer power is apparent when the number of material schedules that need to be tracked is considered.
Understanding MRP II
During the 80s era, the MRP technology was enhanced to formulate a new approach, known as MRP (Manufacturing Resource Planning) II that encompassed techniques to facilitate providing valid production schedules that further enables better planning and control of other resources. Often the areas of finance, marketing and human resources get affected by any improvements in customer delivery commitments, HR management projections and cash flow projects. The invention of MRP II has not replaced MRP, or is an improved version of MRP, but it does expand the scope of production resource planning and engages other functional areas, such as finance, marketing, purchase, HR and engineering, in the planning stage of an organization. In MRP II, the functional areas are inputs to the master production schedule. With this, MRP generates material requirements through which production managers plan the capacity. MRP II systems generally consist of simulation capabilities for the managers to be able to assess alternate options.
