Good morning to all of

u.
presented by:-Lishma Soni
Nancy
Parveen jain
Ravesh
Divya.
MATERIAL REQUIREMANT
PLANNING(MRP)
• MRP is a technique of determining the
requirement for raw material
components,& spare parts etc required for
manufacturing products. if delievery date
of product is known then everything can
be planned very easily like time required
or quality of material required etc.
Material requirement planning is
a system used for planning the
future requirement of
dependent demand items.this
planning is done on three
inputs:-
Inputs in MRP.

• No. of items already in the inventory

(inventory status).
• No. of finished goods to be produced in
the near future using these items.
• No.of units of the item required for
manufacturing a single unit of the finished
product.
Inputs of MRP

• BILL OF MATERIAL
• MASTER PRODUCTION SCHEDULE.
• INVENTORY STATUS.
BILL OF MATERIAL.

• Bill of material is a document which tells

us about an item’s product
structure,showing the sequence in which
components are assembled & their
required numbers.it also contain detailes
about the workstations at which the items
is assembled.
Master production schedule.

• An aggregate production plan tells us how

many units of a product have to be
manufactured in the coming 6-18months
on a weekly or monthly basis.
Inventory status.
• It tells us about the status of the inventory of an
items at present,or in a given interval of time in
the coming future.this includes scheduled
receipts of units of items in the interval of time
as a result of orders placed in the recent past to
suppliers.the inventory status files also contain
details about the suppliers of the items,the lead
time taken by him to supply the item,& the size
of each order to be placed to him.
Outputs in MRP

• Planned orders report

• Orders release report
• Order changes report
Planned order report

• This report gives information about

planned orders to be released on some
future date during a given interval of time.
it is helpful in preparing for the funds
required for the payments to the suppliers
in the future according to the dates &
order sizes.
Order release report

• This report gives the information about

planned orders to be released on the
present date.it helps the purchse manager
to release purchase order to the suppliers.
Order change report

• Open order are those which have been

placed in the past,& the suppliers of the
items is preparing for these suppliers to be
made to the company.during the lead time
the MPS of the company may fluctuate.
 BENEFITS
• Appropriate use of material so that less
wastage is incurred.
• Availability of material at right time.
• Optimum utilization of working capital.
• More efficiency,more productivity.
• No delay in the delievery of products.
• Efficient working of production.
• Saving in the form of time & money.
• Minimize the cost of production.
• Continues flow of control.
 Seasonal Inventory
 Decoupling Inventory
 Cyclic Inventory
 Pipe line Inventory
 Safety Stock
• Seasonal Inventory:- Organizations
carry inventory to meet fluctuations in
demand arising out of seasonality. In
order to meet the demand, inventory build
up happens during non-peak periods.

• Decoupling Inventory:- Manufacturing

systems typically involve a series of
production and assembly workstations.
One way to simplify the production
planning and control problem is to
decouple successive stages using
inventory at some intermediate points.
• Cyclic Inventory:- It is customary for
organizations to order inventory in repeated cycles
and consume them over time. Each cycle begins
with replenishment and ends with complete
depletion of the inventory.

• Pipeline Inventory:- It pertains to the level of

inventory that organizations carry in the long run
due to non-zero lead time for order, transport and
receipt of material from the suppliers.

• Safety Stock:- Organizations also have

additional investment in inventory to buffer
against uncertainties in demand and supply of raw
There are several costs associated with
inventory planning and control. These
costs could be classified under three
broad categories.

 Inventory Carrying Cost

 Cost Of Ordering
 Cost Of Shortages
• Inventory Carrying Cost:- ICC includes cost of
stores and warehousing and administrative costs.
The other ICC includes insurance costs, cost of
obsolescence, damages and wastage. The
components of ICC exert considerable pressure on
an organization to keep inventory to low levels.

• Cost Of Ordering:- Organizations perform a series

of tasks related to ordering material. These includes
search and identification of appropriate sources of
supply, price negotiation, contracting and purchase
order generation, follow-up and receipt of material.
All these involve manpower, resources and time that
could be classified under cost of ordering.

• Cost of Shortages:- Despite careful planning, it is

likely that organizations run out of stock. It also
introduces additional costs arising out of pushing
Let us consider a situation in which the demand
for an item is continuous and is known with
certainty. Since demand is known, we exclude
the possibility of having shortages. Better
inventory control requires that we answer the
“how much” and “when” questions by balancing
the total costs of carrying inventory and
ordering.

TC(Q)= Q Cc D C0
2 Q
Organizations employ some methods to
manage and control inventory.
– Continuous Review (Q) System
– The Periodic Review (P) System

• Continuous Review (Q) System

Organizations widely use a continuous
review system called a two-bin system. In
operation, the available inventory is stocked
in two bins, first in a smaller bin and the
balance in a larger bin. As the material in
consumed, the larger bin is emptied first. As
soon as the larger bin is empty, an order is
placed with a supplier for a predetermined
• The Periodic Review (P) System
An alternative model for inventory
control, known as periodic review system,
operates differently from the Q system. In
a periodic review system, the inventory
level in the system is reviewed at fixed
intervals of time. Therefore, these
systems are also known as fixed order
interval systems.
In P system, the two
decisions “when” and “how much” are
made in a different fashion compared to
Managing inventory is an issue pertaining to
a large no and variety of items.
Organizations, therefore, devise suitable
ways of categorising the items and adopt
mechanisms that have variable levels of
control on the different categories of items.
ABC Classification :- The ABC classification
of inventories is based on the cost (or
value) of items consumed. Very high value
items are “A” class items and may require
tighter control. Medium value items are
• On the basis of unit cost of the item(XYZ classification)
a) High unit cost (X Class item)
b) Medium unit cost (Y Class item)
c) Low unit cost (Z Class item)
• On the basis of movement of inventory(FSN classification)
a) Fast moving
b) Slow moving
c) Non-moving
• On the basis of criticality of items(VED classification)
a) Vital
b) Essential
c) Desirable
• On the basis of sources of supply
a) Imported
b) Indigenous( National suppliers)