INTRODUCTION

Production is the transformation of one set of resources into a second set. In order to describe the constraints and opportunities for production, different methods have been developed through the years both in the practical engineering context and from an academic point of view (Grubbström, 1995). For the multi-level, multi-stage production-inventory system, an analysis applying the combined methodology of input-output analysis and the place transform has proven to be useful. 

In practice, the managerial information system dealing with multi-level, multi-stage production-inventory systems is referred to as Material Requirements Planning (MRP). Here, product complexity as well as lead times are essential ingredients. In this research we allow these terms to be used in a synonymous way both for the theoretical analysis and as a name for the corresponding practical information system. 

In a multi-level manufacturing system finished products, subassemblies, components, raw materials, etc., (items), are distinguished. MRP reduces a master production schedule of finished products into a time-phased suggested schedule of requirements of intermediate items to be manufactured and purchased, based on the estimated external demand for finished products. This “parts explosion” determining requirements from higher levels down to lower levels (upstream to downstream) traces the product structures.

Material Requirements Planning (MRP) is a computer-based inventory management system designed to assist production managers in scheduling and placing orders for dependent demand items. Dependent demand items are components of finished goods—such as raw materials, component parts, and subassemblies—for which the amount of inventory needed depends on the level of production of the final product. For example, in a plant that manufactures bicycles; dependent demand inventory items might include aluminium, tires, seats, and derailleurs. 

The first MRP systems of inventory management evolved in the 1940s and 1950s. They used mainframe computers to explode information from a bill of materials for a certain finished product into a production and purchasing plan for components. Before long, MRP was expanded to include information feedback loops so that production personnel could change and update the inputs into the system as needed. The next generation of MRP, known as manufacturing resources planning or MRP II, also incorporated marketing, finance, accounting, engineering, and human resources aspects into the planning process. A related concept that expands on MRP is enterprise resources planning (ERP), which uses computer technology to link the various functional areas across an entire business enterprise. 

MRP works backward from a production plan for finished goods to develop requirements for components and raw materials. "MRP begins with a schedule for finished goods that is converted into a schedule of requirements for the subassemblies, component parts, and raw materials needed to produce the finished items in the specified time frame," William J. Stevenson wrote in his book Production/Operations Management. MRP breaks down inventory requirements into planning periods so that production can be completed in a timely manner while inventory levels—and related carrying costs—are kept to a minimum. Theoretically, it is often asserted that, when implemented and used properly, MRP can help production manager’s plan for capacity needs and allocate production time. However, it is also argued that MRP systems can be time consuming and costly to implement, which may put them out of range for some small businesses. In addition, the information that comes out of an MRP system is only as good as the information that goes into it. 

TABLE OF CONTENTS

CHAPTER ONE: INTRODUCTION

CHAPTER TWO: 

LITERATURE REVIEW

 

CHAPTER THREE: 

RESEARCH METHODOLOGY