SAS/OR Examples
MRP Application Example--Introduction and Overview
Contents | Solution | SAS Program
Material Requirements Planning (MRP) is designed to assist manufacturers in inventory and production management. Using MRP helps ensure that materials will be available in sufficient quantity and at the proper time for production to occur, without incurring excess costs by having the materials on hand too early. MRP assists in generating and (as needed) revising production plans to meet expected demands and replenishment plans to assure the timely availability of raw materials and all levels of product components.
MRP begins by compiling a Bill of Materials (BOM) for each end product or component of interest. This is a listing of the components and quantities that are needed to manufacture the end product or component. Theoretically, the compilation of BOMs continues recursively, enumerating the subcomponents that are needed to manufacture each component, until only raw materials appear in the generated BOMs. In practice, a manufacturer may prefer to extend the BOM enumeration for only a specified number of levels and to assume that components and/or raw materials beneath that level are available on demand.
Next, MRP requires information on the lead times associated with each manufacturing or assembly procedure that is required to produce the components and end products. Lead time is the time required to assemble or manufacture the needed components into the end product (or higher-level component), and thus is the time elapsed between the point at which all needed components are present and the end of assembly or manufacturing. These lead times may be compiled per unit of each component/product or may be based on predetermined batch sizes.
MRP combines the BOMs, the lead times, and estimates of demand for end products to generate the Master Production Schedule, which details a schedule of assembly and production that enables the manufacturer to meet the estimated demand. This schedule addresses only the final level of assembly or production (resulting in end products), and includes both the timing and quantities of production. The Master Production Schedule serves as the basis for all further output information from MRP.
Using the Master Production Schedule as a starting point, it is a conceptually simple (but computationally demanding) task to combine it with the data on lead times and BOMs to derive a schedule of component (and possibly raw materials) requirements, through as many levels of assembly and production as the manufacturer chooses. This schedule can account for such factors as work-in-progress, current inventory of and pending orders for materials and components, and direct demand for components as service items. Using this schedule of requirements, the manufacturer must determine a material replenishment strategy that satisfies these requirements. A wide variety of ordering rules and heuristics can be incorporated into computer-based MRP models.
In addition to the material requirements, other useful data can be generated from the Master Production Schedule. These include the projected inventory levels for any end product, the projected schedule for any assembly or production process, and the projected utilization of capacity for a particular production operation. Any of this information should aid in evaluating current or potential materials replenishment strategies.
Computers are instrumental in any real-world implementation of MRP, due to the large amount of data processing required to generate initial material requirements. Additionally, it's probable that the entire analysis will have to be repeated several times in response to changing conditions (for example, changes in demand, manufacturing processes, or material supply). This makes the need for computers even clearer.
This example illustrates the use of SAS/OR software (specifically, PROC CPM and PROC GANTT) in a SAS/AF application that performs Material Requirements Planning for a hypothetical clothing manufacturer. A small number of data steps and relatively simple procedure calls from SAS/OR, Base SAS, and SAS/GRAPH accomplish all the computational work needed to support this application. The few simplifying assumptions made to limit the scope of this sample application could in practice be relaxed to make the application useful in a more complex and more realistic MRP setting. This application could also serve as an MRP module in a broader production and inventory control system.
References
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Peterson, R., and Silver, E., Decision Systems for Inventory Management and Production Planning, John Wiley & Sons, 1979, pp. 459-474.