MAF651 SEMINAR 1 MRP REPORT

MMATERIAL
REQUIREMENT
RPPLANNING
WRITTEN BY SYAMIMIE, JAZMINA, ATRAH, NELTI

MAF651
SEMINAR IN MANAGEMENT ACCOUNTING

MATERIAL
REQUIREMENT PLANNING

PREPARED BY: STUDENT NUMBER
NAME
ANAZ SYAMIMIE BINTI AZMAN 2019891638
JAZMINA NAJWA BINTI ZAKARIA 2019853938
NUR ATRAH BINTI MAT SAID 2019888272
NELTI NUR SYAFIQA BINTI SUHAIMI 2019825328

CLASS: AC220 6A
PREPARED FOR:

MADAM ROKIAH BINTI MUDA

TABLE OF

contents

1 Introduction 6 MRP Output
2 History of MRP 7 Benefits and
3 Scope of MRP
4 Application Process of Limitation of MRP

MRP 8 Application in
Industry
5 MRP Input
9 Conclusion

10 References

Material
Requirement

Planning

Introduction Definition and Objective
of MRP

MRP stands for material requirements planning. It
is basically a material planning and management
system using a software. MRP is designed to
assist manufacturers in inventory and production
management. MRP works as a decision-tool which
used to manage logistics process and placing
order for items of dependent demand to make a
finished product. MRP system used to manage
inventory in a company efficiently by ensuring the
right quantities of materials are available when
needed and schedule the delivery process.

In MRP system, there are three primary objectives that the software seeks to provide. Firstly,
to organize manufacturing, delivery schedules and purchasing activities. MRP can provide
information that is available for the production process. But if there is not enough inventory
available, MRP will generate production orders. So, manager can use this information to
schedule labour to make the overall process without over staffing in production line.
Secondly, to sustain the lowest raw materials and finished product levels in store. MRP
enables inventory manager to reduce the level of components part and raw inventory in
store. So, this allows manufacturing operation to effectively manage their inventory level
and reduce the cost. Thirdly, to ensure that raw materials are readily available for
production and products for delivery to consumers by planning the materials and inventory
based on actual demand. We will know the exactly amount of material needed in store. So,
this is to maintain the production to meet the product demand.

1

History of
MRP

The MRP inventory system's establishment
and continuous innovation had a long-term
impact that can still be seen today

Inventory was recorded by hand until computer-engineered
systems became common in the commercial sector. In the early
1950s, the use of MRP systems dates to World War II when the
United States government used programs to organize the
logistics of its military resources. MRP start to implement in
United State computerized by aero-engine makers associated
with General Electric and Rolls Royce. Before MRP became
commercialized, it was reinvented to use the Polaris program.
In 1964, IBM’s engineer Joseph Orlicky develops and formalized
MRP planning in response to the Toyota Manufacturing
program. MRP was released to specific individual businesses
which being used firstly by Black & Decker. In 1970, MRP
received a major boost from the educational efforts of the
American Production and Inventory Control Society or also
known as (APICS). Over 700 company have implemented MRP
as their inventory management system. Therefore, APICS has
become the main source of MRP education and certification
which has been continuously updated to be made more
efficient for businesses including several different models. In
1980’s. Oliver Wight has made a development from MRP I to
MRP II. MRP II is a planning and controlling method that
integrates the material requirements planning of MRP with all
elements related to manufacturing such as personnel, facilities,
and capital. In 1990’s, due to the competitiveness of the MRP I
and MRP II systems did not provide enough function, thus ERP
has been established. ERP is a software that shares information
and integrates all areas of the company.

2

SCOPE OF
MRP

MRP solves some issues within any
manufacturing process.

1.What materials to buy?
2.How much material to buy?
3.And when to buy the materials?
MRP includes knowing the material
that is needed for the productions by
calculating the number of materials
which is the quantities needed for the
productions and identifying the other
materials needed.

3

APPLICATION
PROCESSES
OF MRP

The MRP process can be broken down into four major steps :

The first step of the MRP process The third step is scheduling
is identifying customer demand production. Using the master
and the requirements needed to production schedule, the
meet it, which starts with system determine how much
inputting customer orders and time and labor are required to
sales forecasts. Using the bill of complete each step of each
materials required for production, build and when they need to
MRP then disassembles demand happen so that the
into the individual components production can occur without
and raw materials needed to delay. The production
complete the build while schedule also identify what
accounting for any required sub- machinery and workstation
assemblies. are needed for each step to
generates the appropriate
Second step is checking work orders, purchase order
inventory and allocating and transfer orders, if the
resources. You can see both what build requires sub-assemblies
items you have in stock and the system takes into account
where they are by using the MRP how much the time taken and
to check demand against schedules them accordingly.
inventory and allocating
resources accordingly. This is "The last step is identifying
especially important if you have issues and making
inventory in multiple locations. recommendation. Because
This also allows you to view the the MRP links raw materials to
item status, to see items that work orders and customer
have already been assigned to orders. It can automatically
another build as well as items alert your team when items
there that are in transit or on are delayed and make
order but are not yet physically in recommendations for existing
the warehouse. The MRP then orders. Automatically moving
move inventory to the production in or out
appropriate locations and performing what if analysis
recommends reorders. and generating assumption
plans to complete the
required builds.

4

For an MRP system to work efficiently, each input must be MRP
accurate and updated. How well your MRP system works
depends on the quality of the data you provide it. Here are Inputs
some of the inputs an MRP depends on :

DEMAND

Including sales forecasts and customer orders. When working with
predicted demand, a system that is integrated with an enterprise-
wide ERP system allows forecasting using historical sales vs. just
sales forecasts.

Bill of materials (BOM)

Keeping a single updated version of the bill of materials is essential
for accurate supply forecasting and planning. A system that’s
integrated into the enterprise-wide inventory management system
avoids version control issues and building against outdated bills,
which results in reworks and increased waste.

Inventory

It is essential to have a real time view of inventory across the
organization to understand what items you have on hand and which
are enrolled or have purchased orders issued where the inventory
status are.

Master production schedule

The master production schedule takes all build requirements and
plans machinery usage, labor and workstations to account for all
outstanding work orders to be completed.

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From the provided inputs that have been discussed earlier, MRP
systems will calculate based on its 3 main questions in MRP scopes,
which are what materials are needed, how much is needed to
complete the build and when in the process they are needed.

MRP Hence, from the information, business is able to execute in just-in-
time (JIT) production, and also manage to schedule for production
Outputs based on the material availability. Therefore, business can minimize
inventory levels and it carrying cost as the inventories are not stored
in the warehouse for future production but it arrives as needed.
Besides, they also manage to move materials through the workflow
process without delay.

Other than that, MRP output also includes three primary reports
and three secondary reports. Each of these reports will be discussed
briefly below.

Primary reports includes:
1. Planned order schedule, which outline the quantity and timing
of future material orders so that it can be received at the
beginning of the period under consideration, but this order has
not yet been placed and will be places in the future.
2.Order release, which is to authorize orders to be made to ensure
that the item ordered is received when needed.
3.Changes to planned orders report or order rescheduling, which
is in this report, it might include for cancellations of open orders
because of changes in master schedule or revision of the
quantity or time frame as there is changes in due dates for open
order. This might happen in the case of unexpected situations.

While for secondary reports, it consists of:
1. Performance control reports, which are used to track problems
like missed delivery dates and stock outs in order to evaluate
system performance.
2.Planning report, which it can be used in forecasting future
inventory requirements.
3. Exception reports which call managers’ attention to major
problems like late orders, errors or excessive scrap rates.

6

If the companies are planning on So, if a component to an assembly
implementing MRP software in is not available when planned,
their business, they need to have a MRP can reschedule all other
clear picture of all the advantages components for the same
and disadvantages of these kinds assembly to a later date while
of systems. While the core premise rescheduling shop priority so that
of each solution might be similar, it can prevent delays in
the pros and cons of different production cycle and increase
systems can vary. production yield.

Hence, the benefits of utilizing MRP system also have its own
MRP systems is that MRP systems drawbacks. One of it is that MRP
allows to plan and schedule cannot define the production
production efficiently as it will build timeline and materials
make sure that the materials required if data is not accounted
move through the work order as the effective operation and
quickly and fulfil customer orders efficiency of an MRP system
on time, or in other words, to depends on the integrity of the
ensure that materials and files and records of relevant data.
components are available when Lack of record integrity is the
they are needed. So that it can major reason for failure of MRP
improves customer satisfaction by system.
reducing customer lead times.
Benefits Besides, inventory levels are also Next is that MRP relies upon
optimized while associated costs accurate input information as
are minimized. MRP system must have an
accurate master production
and Next, an MRP system that is schedule, good lead-time
Limitation integrated across an organization estimates and current inventory
of Material eliminates manual processes. records in order to function
Requirement This means that an MRP system effectively and produce useful
Planning automates many clerical tasks information. If it is not updated,
related to data entry and the problem could range from
communication. For example, missing parts and excessive order
tools such as barcode scanners quantities to schedule delays and
can be used in conjunction with missed delivery dates.
MRP software to eliminate pen-
and-paper inventory management And lastly, another potential
methods. This also will increase
manufacturing efficiency as drawback associated with MRP is
material tracking becomes much
easier and this will ensure that that system can be difficult, time
economic order quantity is
achieved for all lot orders. consuming and costly to

implement as which is why it

requires substantial investment of

time and capital to provide proper

training for end-users in order to

And lastly is that MRP system get maximum out of the system.
helps to understand all the
components that go into each Other than that, to make MRP
sub-assembly. For example, when
builds are complex and require system effective, an organization
multiple sub-assemblies within
the work order, it’s easy to must have effective
miscalculate timing.
communication system,

motivated personnel, right

leadership and an effective

computer system.

7

APPLICATION
IN INDUSTRY:

How BMW implement material requirement planning?

We are considering BMW as an example of one of manufacturing company
that has successfully foster material requirement planning (MRP).

BMW is one of the largest cars manufactures in the world with the
updated technology sophisticated manufacturing plants. BMW apply the
same standard of excellence by using service-oriented architecture to its
internal processes that the automaker uses on material requirement system.
BMW also use customer-oriented production system which is a desire and
order make by customer. So, BMW have used a material requirement planning
(MRP) systems to identify the different list of raw material component parts
assemblies and sub-assemblies that require for each level of production of
these specific car orders.

BMW apply this material requirement planning in their operation. So
how does BMW apply the system throughout their daily operation? Firstly,
BMW use mySAP automotive software as their material requirement planning
(MRP) system, the software shares the same function as material requirement
planning (MRP) system where it is used to procure or produce the required
material quantities on time for in-house purpose or to fulfil customer demands
so BMW integrates the information and system throughout their operation
which the software helps to obtain the customer production orders for BMW
planning system. The orders involve the components necessary to
manufacture every car model, so for example BMW X5 car model has lots of
parts included in the car list materials, so the system produced the delivery
time frame for every component to match BMW assembly line production and
preparation test organizing policy the software ensure the purchase of
inventory is being delivered to them at the right time when needed to meet
demands for a specific car model.

So as one of the largest Car manufactures using material requirement
planning (MRP) system helped significantly to their operation which give
greater benefit to BMW. The software used are easy to integrate as they are
effectively combining important aspects of BMW operation including supply
chain management for that lifecycle management and business management.
Other than that, it helps to improve BMW performance by make sure material
move the work order quickly and helps to fulfil customer orders on time in
short word more time saving and less cost of ownership which that can
remove the necessity for the expensive interfaces or troubleshoot caused by
other information system. Hence the software gives fully maximization of
efficiency which helps BMW to optimize profit opportunity to handle and limit
their expenses. It also will enhance quality and speed up time of delivery so by
all that it will lead to increase in sales that allow BMW to predict and cope to
the market demands determine new business trend and exploit new ways to
increase market share and profits.

8

CONCLUSION

Material requirement planning In addition, organizations that use a

(MRP) is a computer-based material requirement planning (MRP)

production planning and inventory system need to spend considerable effort

control systems which useful for the on installing necessary equipment

company to evaluate their inventory (computers), training personnel,

control and material planning modifying the software to serve their

issues. Material requirement specific needs. validating testing, and

planning (MRP) is the part of eliminating possible errors, and

enterprise resource planning (ERP) maintaining the software. The time

that deals specifically with the required for planning and implementing

control and management of an MRP system is generally very long.

manufacturing inventories and the Data entry and tile maintenance requires

products produced by those considerable inputs in the form of

inventories. While material training and education of the personnel.

requirement planning (MRP) has Dependence on forecast values and

universally applicable elements, its estimated lead-time can sometimes be

ultimate success is intimately misleading Despite all these facts,

related to some important aspects material requirement planning (MRP) is

of your overall manufacturing based on the fact that the demand for

operations, which must be carefully materials, parts, and components

analyzed. But it causes high costs depends on the demand for an end

and technical complexities in product. With the advent of such

implementation. systems, production efficiency could be

greatly improved, and this is a main

reason why this system has been

developed and been use mostly by lots of

company nowadays.

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REFERENCES

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MRP processing. Tutorial. (2021, January 13). Retrieved January 2, 2022, from
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blog.mrpeasy.com/advantages-disadvantages-using-mrp-system/

Material Requirements Planning (MRP). Corporate Finance Institute. (2021, February 22). Retrieved January
2, 2022, from https://corporatefinanceinstitute.com/resources/knowledge/other/material-requirements-
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Scribd. (n.d.). BMW Group: Building efficient material requirements planning with SOA. Scribd. Retrieved
January 2, 2022, from https://www.scribd.com/document/179946230/Bmw

Naushii Khan Follow. (n.d.). Material requirement planning. SlideShare. Retrieved January 2, 2022, from
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