MRP System Information Processing

After the collection of requisite data from the bills of material, the inventory records file and the master production schedule, the data is entered into a computer program where it is processed, and the production and inventory requirements are generated. MRP system uses information from product structure file and lead-time information to develop purchase and production schedule for the component, so that the materials are available exactly when they are required in the production process.

Explosion

The first step in the MRP information processing is that of explosion, in which end product is disassembled into components required for its production. It starts with the time when the product is required and then proceeds backward to determine each production or purchasing activity that is necessary to make each higher-level item in the product structure chart. Explosion uses the information from MPS and BOM to generate the sequence followed to produce the end product.

Netting

The next step in MRP information processing is to develop a materials requirement plan for each item in the BOM file for each time bucket. The system first identifies the gross product requirements from the master production schedule. It then calculates the net product requirements by subtracting the available units of the item and the quantity on order from gross product requirement.

Net Requirement = Gross Requirement - On hand space inventory - Quantity on order

In case both on-hand inventory and quantity on order are zero, then the net requirement is equal to the gross requirement.

Offsetting

The system then uses the information obtained from explosion and netting process to determine planned order releases, i.e. the quantities to be ordered (either internally through production or from an external supplier) so that the materials arrive just when they are needed. The planned order releases for the finished product or component becomes the gross product requirement for items at the next lower level in the product structure chart. In case of product described the planned order release of 10 units of product P₁ on day 4 means that on day 4, the gross requirements for products P₃ and P₄ are 10 and 30 respectively.    

The final step in information processing is the consolidation of material requirements. Production organizations that produce multiple products generally have common material requirements for two or more products. These material requirements are consolidated to form a single master material requirements plan to take advantage of benefits of economies of scale and discounts for bulk purchases.                 

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