Manufacturing Resource Planning (MRP II)

Decision Support Tools

Manufacturing Resource Planning (MRP II)

This is a development that seeks to address some of the shortcomings of MRP. It includes all of the elements of MRP, it:

is based around the Bill of Materials,
uses a Master Production Schedule (MPS) as its starting point and
uses the three steps of Explosion, Netting and Offsetting to create the initial schedule.

However MRP II includes the following four major developments from MRP:

1. Feedback

MRP II includes feedback from the shop floor on how the work has progressed, to all levels of the schedule so that the next run can be updated on a regular basis. For this reason it is sometimes called 'Closed Loop MRP'.

2. Resource Scheduling

There is a scheduling capability within the heart of the system that concentrates on the resources, i.e. the plant and equipment required to convert the raw materials into finished goods. For this reason the initials `MRP' now mean Manufacturing Resources Planning. The advantages of this development are that detailed plans can be put to the shop floor and can be reported on by operation, which offers much tighter control over the plant. Moreover loading by resource means that capacity is taken into account. The difficulty is that capacity is only considered after the MRP schedule has been prepared. It may turn out that insufficient time was allowed within the MRP schedule for the individual operations to be completed.

3. Batching Rules

Batching rules can be incorporated, indeed they have to be if resource scheduling is to take place. Most software packages offer a variety of batching rules. Three of the more important are 'Lot for Lot', 'EBQ' and 'Part Period Cover'.

'Lot for Lot' means batches that match the orders. Therefore if a company is planning to make 10 of Product A followed by 20 of Product B, then the batches throughout the process will match this requirement. If both A and B require two of a certain sub assembly then that will be made in quantities of 20 of A and 40 of B. It is the batching implicitly followed in basic MRP.
'EBQ' stands for Economic Batch Quantity . The batch size is calculated by a formula that minimises the cost through balancing the set up cost against the cost of stock.
'Part Period Cover' means making batches whose size cover a fixed period of demand. A policy of making a weeks requirement in one batch is an example.

4. Software extension programmes

A number of other software programmes are included in the MRP II suite. Some of these are further designed to help the scheduling procedure. The most important is Rough Cut Capacity Planning (RCCP), an initial attempt to match the order load to the capacity available, by calculating (using a number of simplifying assumptions) the load per resource. Overloads are identified and orders can be moved to achieve a balance. This has been described as "knocking the mountains (the overloads) into the valleys (periods of underload)".

Other additions are designed to extend the application of the MRP II package. For example it may include an option for entering and invoicing sales orders (Sales Order Processing). Another common extension is into stock recording and a third into cost accounting. A full MRP II implementation can therefore act as an integrated database for the company.

Data accuracy

This last development means that the company must put great emphasis on data accuracy. Errors in recording in one part of the system will result in problems for all the users. The suppliers of such systems encourage users to aim for accuracy of between 95% and 98%.