Process for Calculating Material Requirements Planning (MPR)

The scheduling, production planning, and inventory management systems that are employed by corporate organizations to oversee their manufacturing operations can be referred to as material requirement planning. Planning for material resources makes ensuring there are sufficient stocks for the products to provide their items. Additionally, it makes sure that the business maintains the lowest possible material and product levels for delivery to its customers (Ashby, Leat & Hudson-Smith, 2012). As a result, it aids in scheduling production tasks like purchases and delivery windows.

There are several factors or pieces of information that must be taken into account for material resource planning to be successful. These are; the needed time when the inventory is required to meet the demand, the shelf life of the stored materials and inventory status record. Also, bill of materials that contains details of inventory, their components as well as sub-assembly, that are necessary to make the end product will have to be prepared. The bill of material specifies the relationship between the end product which is an independent demand and the components that are referred to as dependent materials. When an organization purchases little or not enough materials, it might not be in a position to meet its demand obligation and supply the product in time.

There is also need to have planning data for material requirement planning to work efficiently. Planning data involves the restraint and direction needed to produce the end item.

Material requirement planning answers the questions of what items are needed. How many are needed? And when they are needed? This essay will use an example of product A that is made up of materials B and C where D is also comprised of D and E. C is made up of F and E.

Bill of material

It is also known as product structure. It is a list of materials, sub-assemblies, subcomponents, as well as intermediate assemblies. It can be sued to define the products as they are designed, ordered or built. Bill of material for preparing product A

Requirement plan

Demand management

Demand management is defined as a technique that is used to forecast the demand, plan for the demand of product and services as well as manage them. There are two levels of demand management, the macro level demand management that focuses on the economic part and the micro level that focuses on individual organizations (Heisig, 2012). There are about four components of demand management that are demand planning, communicating demand, influencing demand and prioritizing demand.

i. Demand planning

Demand planning is a technique that is used to reliably predict the demand for the products in the market. It applies statistics on sales, customer contracts as well as intercompany standings; the forecast is shared with stakeholders to discuss it further. The major steps of demand planning are; Searching for historical data about the demand for the said product Using these data to create statistics and on demand of the product Collaborating with consumers to know their needs as far as the market is concerned. Managing the forecasts before making it official Together with shareholders, a consensus is building about the forecast. The next step is about securing constrained on forecast then confirming with customers. Lastly, re-examine the data and adjust it accordingly. The number of product A that will be needed in the market will have to be planned well so that there is no loss and through wastage and storage.

ii. Communicating demand

This involves sharing information about the demand with other departments in the organization. It should be in a structure that will ensure that the information is not taken for granted. The feedback system is created to get replies so that in case there is another action that is needed to be taken; it will be done as fast as possible (Milne, Wang, Yen & Fordyce, 2012). The sales department will have to communicate with forecast team to establish all that is required as far as this demand is concerned.

iii. Influencing demand

The organization can also influence demand using various factors. This can be by use of pricing policy. In this case, an organization will lower their price to encourage consumers to demand more products or services from them. Also, demand can be influenced using promotions and road shows to make consumers aware of product and service features. This will make entice customers to buy their product or service in large quantity as they have forecast. Also, demand can be influenced using a package bundle where buy a product or service will come with a gift or a free product service. Demand can also be influenced by advertisement as well as direct sales to customers. All these increases customer awareness on the product and entice them to buy more.

For example, the organization will have to determine the number of units of product A that a customer needs to buy to get a gift or one product free.

iv. Prioritizing demand

This involves optimizing the demand across the products of the organization. The organization will establish the profit they want, sales revenue and customer service. It also involves making the judgment on what actions to take.

The priority will be given to the product that is expected to generate more revenues from the market.

Master planning

Master production planning involves planning for an individual product that the organization needs to produce every time and comprises the labor required; inventory needed and other things that are needed for a successful production. It quantifies the processes, the parts needed and other resources that will optimize the production. Master planning will give information concerning production, purchasing, and information management (Jodlbauer & Reitner, 2012). Also, it enables the organization to make legitimate delivery obligations to customers.

Master planning turns the customer demands into a major plan. It will help avoid shortages, the costly expenditure as well a last minute scheduling. The demand for product A will be used to make a proper plan on the number of components of B, C, D, E and F will be needed every time a production has to take place. The organization will take the data concerning demand in the market then optimizes it, after that, they will budget for all that is needed for the production process including material, labor, and other related costs.

All departments will have to communicate with each other for the implementation of the material requirement planning. Communication is a significant factor in the supply chain. It needs collaboration with stakeholders that is both customers and suppliers. The communication will create more ideas needed for the successful material planning (Tayur, Ganeshan & Magazine, 2012). The information from the market will be brought to the organization by the sales team the forecasting group will then use this information to budget for the future market needs.

For effective communication, prioritize on stakeholders and suppliers. The organization will have to assess how supportive the shareholders are. There is need to frequently meet the stakeholders as well as suppliers. Communication from the customer should also be considered as it is important in material planning. The management should always offer options in their communication. The least of options should be accessible to the stakeholders. These will make stakeholders to feel valuable to the organization and then do all they can to support it.

In conclusion, Material Requirements Planning (MPR) Calculation Process involves all the process that is required in the production process as they directly or indirectly affect the materials availability. The demand in the market is critical for this process. Management will have to integrate demand management in the process for it to be efficient and effective. Communication between departments must be done properly so that there is a free flow of ideas on how to better manage the resources needed for production. Bill of materials must also be prepared as it gives the detailed information of all that is required in material planning.

Reference

Ashby, A., Leat, M., & Hudson-Smith, M. (2012). Making connections: a review of supply chain management and sustainability literature. Supply Chain Management: An International Journal, 17(5), 497-516.

Heisig, G. (2012). Planning stability in material requirements planning systems (Vol. 515). Springer Science & Business Media.

Jodlbauer, H., & Reitner, S. (2012). Material and capacity requirements planning with dynamic lead times. International Journal of Production Research, 50(16), 4477-4492.

Milne, R. J., Wang, C. T., Yen, C. A., & Fordyce, K. (2012). Optimized material requirements planning for semiconductor manufacturing. Journal of the Operational Research Society, 63(11), 1566-1577.

Tayur, S., Ganeshan, R., & Magazine, M. (Eds.). (2012). Quantitative models for supply chain management (Vol. 17). Springer Science & Business Media.