MRP System Important terms

An MRP system has three major input components:

• Master Production Schedule (MPS):

 MPS is designed to meet the market demand (both the firm orders and forecasted demand) in the future in the taken planning horizon. MPS mainly depicts the detailed delivery schedule of the end products. However, orders for replacement components can also be included in it to make it more comprehensive.

• Bill of Materials (BOM): 

BOM represents the product structure. It encompasses information about all sub-components needed, their quantity, and their sequence of buildup in the end product. Information about the work centers performing buildup operations is also included in it.

• Inventory Status File:

The inventory status file keeps an up-to-date record of each item in the inventory. Information such as, item identification number, quantity on hand, safety stock level, quantity already allocated and the procurement lead time of each item is recorded in this file.

After getting input from these sources, MRP logic processes the available information and gives information about the following:

• Planned Orders Receipts: 

This is the order quantity of an item that is planned to be ordered so that it is received at the beginning of the period under consideration to meet the net requirements of that period. This order has not yet been placed and will be placed in the future.

• Planned Order Release: 

This is the order quantity of an item that is planned to be ordered and the planned time period for this order that will ensure that the item is received when needed. Planned order release is determined by offsetting the planned order receipt by procurement lead time of that item.

• Order Rescheduling: 

This highlights the need for any expediting, de-expediting, and cancellation of open orders etc. in case of unexpected situations.