RESOURCE REQUIREMENT PLANNING
SYSTEMS – DETAILED NOTES
⭐ INTRODUCTION
Resource Requirement Planning systems help in:
Planning materials, machines, and manpower
Ensuring right resources at right time
These systems are computer-based decision tools
Used to:
Avoid shortages
Reduce inventory
Improve production efficiency
Evolution:
MRP → MRP-II → ERP → SAP
⭐ 1. MRP-I (Material Requirement
Planning)
Meaning
MRP-I is a system used to calculate material requirements based on production plan
Focuses only on materials (raw materials, components)
Key Inputs
Master Production Schedule (MPS)
Bill of Materials (BOM)
Inventory records
Functions
Determines:
What materials are required
How much quantity is needed
When they are needed
Generates:
Purchase orders
Production orders
Advantages
Reduces inventory cost
Avoids stockouts
Improves production planning
Limitations
Ignores capacity constraints
Assumes data is accurate
Not suitable for dynamic environments
⭐ 2. MRP-II (Manufacturing Resource
Planning)
Meaning
Extension of MRP-I
Covers entire manufacturing resources
Includes
Materials
Machines
Labor
Finance
Functions
Capacity planning
Production scheduling
Financial planning
Shop floor control
Advantages
Better coordination
Integrates different departments
Improves decision-making
Difference from MRP-I
MRP-I → Only materials
MRP-II → All resources
⭐ 3. ERP (Enterprise Resource Planning)
Meaning
Integrated system managing all business functions
Includes
Production
Finance
HR
Sales
Inventory
Features
Centralized database
Real-time information
Cross-functional integration
Advantages
Better coordination
Real-time decision making
Improved efficiency
⭐ 4. SAP (System Applications and
Products)
Meaning
A popular ERP software used globally
Functions
Automates:
Production planning
Inventory
Finance
HR
Benefits
Standardized processes
Real-time data access
Better control and reporting
⭐ AGGREGATE PLANNING
Meaning
Medium-term planning (3–12 months)
Balances:
Demand
Production capacity
Decisions
Production level
Workforce size
Inventory level
Strategies
Level strategy (constant production)
Chase strategy (match demand)
Mixed strategy
👉 Example:
Increasing workforce during high demand
⭐ MASTER PRODUCTION SCHEDULE
(MPS)
Meaning
Detailed plan of:
What to produce
How much
When
Features
Based on demand forecasts
Converts aggregate plan into specific schedule
Example
Produce 500 units in Week 1
Produce 700 units in Week 2
⭐ MRP SYSTEM STRUCTURE
Main Components
1. Inputs
MPS (what to produce)
BOM (components required)
Inventory records (stock available)
2. Processing
Calculates:
Net requirements
Order quantities
Timing
3. Outputs
Purchase orders
Production schedules
Inventory reports
📊 Diagram (DRAW IN EXAM)
MPS + BOM + Inventory Records
↓
MRP Processing
↓
Output: Orders + Schedules
⭐ MRP CALCULATIONS (VERY
IMPORTANT)
Basic Terms
Gross Requirement (GR) → Total demand
Inventory (OH) → Available stock
Net Requirement (NR) → Required quantity
Lead Time → Time to receive materials
Formula
👉 Net Requirement = Gross Requirement – Available Inventory
❓ Example
Gross Requirement = 100 units
Inventory = 40 units
👉 Net Requirement = 100 – 40 = 60 units
⭐ LOGIC OF MRP COMPUTER
PROGRAM
Step 1: Input Data
MPS
BOM
Inventory
Step 2: Explosion Process
Break down product into components
👉 Example:
Car → engine, wheels, body
Step 3: Netting
Calculate net requirement
Subtract inventory
Step 4: Lot Sizing
Decide order quantity
Step 5: Time Phasing
Schedule orders based on lead time
Step 6: Output Generation
Purchase orders
Production schedules
⭐ EXAMPLE (COMPLETE FLOW)
👉 Product A requires:
2 units of B
3 units of C
Demand for A = 50
Then:
B required = 100
C required = 150
⭐ ADVANTAGES OF MRP SYSTEM
Reduces inventory levels
Improves production efficiency
Ensures timely availability of materials
Better coordination between departments
⭐ LIMITATIONS
Requires accurate data
Complex to implement
Expensive software systems
Not flexible for sudden changes