What is Manufacturing Resource Planning – MRP II

MANUFACTURING RESOURCE PLANNING (MRP II)

Introduction
Till the early sixties, reorder point (ROP) systems was used by many manufacturing organizations. In this system the component stocks were reordered whenever stock fell to a pre-defined reorder level. Components were often ordered when not actually needed, and because of which ROP systems resulted in very high inventory levels.
In the sixties, customers became demanding, competition became tougher and the interest rates began to increase. This made organizations to realize the necessity to develop a much better response to the customer needs. At the same time the increase in interest rates made money tied up in inventory into a serious financial burden for manufacturing organizations.

In this period, computers were brought into planning and production systems. As a result, several new manufacturing systems were developed. They were.
• Material requirements planning systems.
• Heavily reliant on computers and most frequently applied to batch or mass production.

Comprising of:
• Material requirements planning (MRP or MRP I).
• Closed loop material requirements planning (Closed Loop MRP).
• Manufacturing resource planning (MRP II).

•Just-in-time (JIT).

• Optimized Production Technology / Theory of Constraints (OPT/TOC)
• Project control
• Evolution of Manufacturing Resource Planning (MRP II)

Closed Loop MRP System
In an open loop MRP system the plans are sent to buyers and production personnel but it is not possible to get feedback. As a result of which the adjustments could not be made to plans in order to keep schedules valid.
For example, it assumed that infinite capacity was available, and that suppliers always delivered correctly and on time. And when there is a change in sales demand it will take excessive amount of re-planning.
Also, much of the demands from other sources are left out of the system and shortages become inevitable. Material requirements planning generates valid schedule that follow logically from the demand. But after planned orders are launched, some of the planning factors may begin to stray off course.

Some of the examples that cause problem because of using MRP systems are shown below:
· Lead time estimates differ if: machine breaks down, deliveries are delayed, goods are damaged, power fails etc.
· If the system plans for 1000 of a component but 200 fail a quality inspection, this shows that the orders are arrived on time but there will be a shortage of material.
· The demand that drives material requirements planning consists of both forecast orders and actual customer orders. The forecasts may turn out to be wrong and customers may change their actual orders, for example, by asking for earlier or later delivery. This throws out all component orders.

In summary, ‘open loop’ material requirements planning could result in some or all of these problems:

Uncontrollable costs.
Late deliveries to customers.
Late deliveries from suppliers.
Unplanned overtime/offloading.
High work-in-progress levels.
Mismatched inventories.
Over- or under-utilized resources.
Disruptions on the shop floor.
Many full-time expeditors.
Customer complaints.
High ‘past dues’.
Long queues.

This is clearly not a list that any manufacturing organization could regard as acceptable.Something had to change, and so open loop MRP evolved into closed loop MRP.