The principles was that a company should purchase and produce according to its needs, not more, not less.
There are 2 basic requirements:
- Independent needs: Come from outside such as customer orders, spare parts orders, retailers or wholesalers. Those needs must be forecasted by the supply chain organisation.
- Dependant needs: Are generated by independent needs and so could be and must be calculated.
MRP I(manufacturing requirements planning) was an important planning tool in the 1970s, but the disadvantage lied in the fact that there was no feedback loop between outputs and inputs. In the early 1990s, the basic MRP I system evolved into the so called MRP II system or Manufacturing Resource Planning which took into account upstream and downstream elements of the business firm, in order to be a complete manufacturing planning system.
Here is the general MRP II flowchart:
The continuous feedback loop is the key element, from the capacity matching (required capacity versus available capacity) at all level and the manufacturing loop all over the process (ShopFloor -> MRP -> MPS -> S&OP).
Let’s now define the main MRP II components:
- Sales & Operations Plan (S&OP): This is the sales plan and related operations to achieve it in the next 16 months defining for each month the stocking plan and the manufacturing plan to match the sales demand. The S&OP is build on aggregated demand with aggregated product families.
- Master Production Schedule (MPS): From S&OP is derived the MPS, e.g. the weekly quantity to produce for each product over a time horizon that is the double of the longest manufacturing item.
- Material Requirement Planning (MRP): The MPS items, e.g the finished products, are exploded trough their Bill of Materials (BoM) in order to calculate the dependent needs for the components and raw materials.
- Shopfloor Management: The goal is the launch the job orders and purchase orders on the appropriate shopfloor, and the control their completeness versus planned order. Here we are on a day to day control.