PPIC Tasks-Planning Raw Material Inventory With MRP Systems

Sometime ago I have written an article about PPIC that is PPIC Definition and Job desk, so in this advanced article, I will review PPIC's job of planning raw material inventory with the Requirement Planning Material system (MRP). Please read more about the following article.

Planning of raw materials supply with MRP (Material Requirement Planning) system

The definition of Material Requirement Planning (MRP) is a systematic technique or procedure to determine the quantity and time in the process of controlling the needs of raw materials to other components of interrelated requests. 

The MRP is a way to determine the number of parts, components, and materials needed to produce a product. The MRP provides all-time schedule information clearly to regulate when and how many materials, parts, and components must be ordered for production process purposes.

The main purpose of Material Requirement Planning (MRP)

The MRP system has a purpose to design a system that is capable of generating all information to support the right action either in the form of order cancellation, remaking the order, or rescheduling. This action is also a holding to purchase material production needs.

The MRP system has 4 main features:

• The MRP can determine the need at the right time when a job will be completed (material must be available) to meet the product demand from customers scheduled based on the MPS that have been planned.
• The MRP determines the minimum needs of each item, by determining the precise scheduling system of the required items.
• MRP determines the execution of the goods order plan, by indicating when the booking or cancellation of an order of goods must be made.
• MRP determines the rescheduling or cancellation of an order of goods on a planned schedule. If the existing capacity is not able to fulfill the scheduled order at the desired time, then the MRP system can indicate to implement the rescheduling plan (if possible) order by determining the priority of the realistic order. In case of rescheduling, this order is still not possible to fulfill customer orders, then the cancellation of an order must be done immediately.

Benefits of Material Requirement Planning (MRP)

Some of the benefits of the MRP system include:

• Improved service and customer satisfaction.
• Increased utilization of facilities and labor.
• Better inventory planning and scheduling.
• A quicker response to the changes and shifts that occur in the market.
• Inventory levels can be lowered without compromising service to consumers.

The role of Material Requirement Planning (MRP)

The MRP system's role in the production planning and scheduling process is to determine the need and schedule for the manufacture of components and Subassy (quantity, type, and specifications) or material purchases to meet the pre-defined production needs through the MPS (Master Production Scheduling).

So, in other words, the MRP system uses MPS to project the need for the component types (spare parts). Joint planning between the MPS and the MRP reflects the company's strategy in terms of providing the best service to customers, inventory level, production level, number of employees, and so on.

Combined planning is intended to meet the total needs of all products using all available resources. Therefore, without the combined planning accurately then all the activities of the company will be very erroneous and wrong.

Input and Output Material Requirement Planning (MRP)

There are 3 types of inputs needed in the MRP system:

• The Master production schedule is called the MPS, a production plan describing the relationship between the quantity of each desired final product type with the timing of completion.
• Product structure Record And Bill of Material, the relationship between the product And its constituent components. The information provided for each of these components consists of the type of component, the amount required, and the stacking rate. Then order components from other vendors and uncertain forecast items.
• Inventory Status (inventory Master File or Inventory Status Record), which describes the circumstances of each component or material in stock, relating to the number of supplies held at each period (on-hand inventory), the number of items ordered and when will come (on order Inventory) and lead times of each material ordered.

Material Requirement Planning (MRP) process

The following are the basic steps for the preparation of the Material Requirement Planning (MRP) process as quoted from Nasution,1992, as follow:

• Netting (NET need), which is the process of calculating the net needs for each period during planning.
• Lotting (order quantity), which is the process of determining the size of the optimal number of orders for an item or item, based on the net needs produced.
• Offsetting (booking plan), which aims to determine the number of orders produced by the lotting process. The determination of the plan when this booking is obtained by reducing when the net needs are to be available with the lead times of the order goods.
• Exploding, which is the process of calculating gross needs for a lower level in a product structure, and is based on the booking plan.

The output from Material Requirement Planning (MRP)

The Output of the MRP system also reflects the capabilities and characteristics of the MRP:

• Planned Order Schedule is the determination of the number of material needs as well as the order time for the future.
• The order Release report is useful for buyers who will be used to negotiate with suppliers, and also useful for production managers, who will be used to control the production process.
• Changes to planning Orders is what reflects the cancellation of orders, reduction of orders, changing the number of orders.
• The performance report is a view that shows how much the system works, concerning the stock vacancy and other sizes.

Factors affecting the Material Requirement Planning (MRP) system

5 main factors affect the level of difficulty in Material Requirement Planning (MRP), among others:

1. Product Structure

Complex product structures can cause MRP processes such as Netting, Lotting, Offsetting, and repeated Exploding, which are done one by one from top to bottom based on its level in a product structure. 

These difficulties are often found in the process of Lot sizing, where Lot Size determination at a lower level requires a very difficult technique (multi-level lot-sizing technique)

2. Lot Sizing

In an MRP process, there are various determinations of lot-sizing techniques that are applied, because this lotting process is one of the basic things that are important in a system of material needs plan. 

The use and selection of the appropriate lot sizing techniques according to the company's situation will be very helpful and influence the effectiveness of the material needs a plan so that it can obtain more satisfactory results.

Until now, experts have developed many techniques for fixing a lot of sizes. Until now lot size techniques can be divided into 4 large parts, namely:

• The technique lot size for one level with infinite capacity.
• Technique lot size one level with limited capacity.
• Technique lot size lots of levels with infinite capacity.
• Techniques lot size lots of levels with limited capacity.

If viewed from the approach of problem-solving, there are two types of approaches, namely level by level and period by period approach. It seems obvious in this case that a lot-sizing technique is still in the developmental team, especially for multi-level cases.

3. Lead Time

The assembling process in the production line cannot be performed if the required items in the production process are not available on the assembly when required. 

The process needs to be taken into account that the network problem is done based on the critical path, the earliest time, or the latest time, or an item can be completed. 

The important issue of this problem is not just a matter of determining lot size at every level, but it is necessary to consider the problem of lead time and its network.

4. Changing Needs

One of the advantages of the MRP compared with other techniques is to be able to design a system that is sensitive to change, both the change from outside and within the company itself. This sensitivity will not cause problems. 

There is a change in the need of the final product not only affects the needs of the desired, but also the time of the reservation.

5. Common Components

A common component intended in this case is the components required by more than one parent. These common components can cause difficulty in the process of planning material needs especially in the process of netting and lot sizing. These difficulties will be more pronounced when these common components are at different levels.

That is  an article on the task PPIC-planning raw material inventory with MRP system. Hopefully, this article is useful and can add to your insight and knowledge.

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