MRP and Master production schedule

Sample Solution

The Master Production Schedule (MPS) and Materials Requirement Planning (MRP) are both crucial components of production planning within the supply chain, but they operate at different levels and serve distinct purposes. Think of the MPS as the "what and when" of finished goods production, while the MRP details the "what materials are needed and when" to achieve that production.  

Here's a breakdown of their differences and applications:

Master Production Schedule (MPS)

• Definition: The MPS is a plan that specifies what finished products need to be produced, how many of each product are required, and when they need to be completed. It's a high-level plan that translates overall business goals and demand forecasts into a feasible production schedule for end items.  
• Focus: Finished goods (end products that are sold to customers).
• Time Horizon: Typically medium-term, ranging from a few weeks to several months, sometimes up to a year. It aligns production with anticipated demand.  
• Input: Primarily driven by:
  • Demand Forecasts: Predictions of future customer demand.  
  • Customer Orders: Confirmed orders from customers.  
  • Beginning Inventory: Current stock levels of finished goods.  
  • Production Capacity: Constraints and capabilities of the production resources (labor, machines).  
  • Business Goals: Strategic objectives of the company.
• Output: A schedule outlining the quantity of each finished product to be produced in specific time periods (e.g., weekly buckets).  
• Level of Detail: Aggregate level, focusing on end items rather than individual components.

Full Answer Section

• Application in the Supply Chain:
  • Production Planning: It forms the basis for all downstream production activities, ensuring that the manufacturing department knows what to produce and when to meet anticipated demand. For example, a bicycle manufacturer uses an MPS to plan the production of different bicycle models (mountain, road, hybrid) over the next three months, considering sales forecasts and existing orders.  
  • Sales and Operations Planning (S&OP): The MPS is a key output of the S&OP process, bridging the gap between sales/marketing plans and manufacturing capabilities. It allows sales to make realistic promises to customers regarding delivery times.  
  • Capacity Planning: By outlining the production load, the MPS helps identify potential bottlenecks in production capacity and allows for proactive adjustments.  
  • Order Promising: It provides information for customer service to quote realistic delivery dates for new orders.  
  • Coordination: It serves as a communication tool between different departments (sales, marketing, production, finance) to align activities with the overall production plan.  

Materials Requirement Planning (MRP)

• Definition: The MRP is a system that calculates the quantity of raw materials, components, and subassemblies required to produce the finished goods outlined in the MPS. It also determines when these materials need to be available to meet the production schedule.  
• Focus: Dependent demand items (materials and components needed to produce finished goods).
• Time Horizon: Shorter-term than the MPS, typically covering the lead times required to procure or produce the necessary materials.
• Input: Primarily driven by:
  • Master Production Schedule (MPS): The production plan for finished goods dictates the demand for component materials.  
  • Bill of Materials (BOM): A detailed list of all the raw materials, components, and subassemblies required to manufacture one unit of a finished product.  
  • Inventory Records: Information about the current on-hand inventory of all materials and components.  
  • Lead Times: The time required to procure or manufacture each material and component.  
• Output: Detailed schedules for:
  • Purchasing: When and how much of each raw material and purchased component needs to be ordered.
  • Manufacturing: When and how much of each manufactured component and subassembly needs to be produced.
• Level of Detail: Highly detailed, focusing on each individual material and component.
• Application in the Supply Chain:
  • Procurement: MRP generates purchase orders for raw materials and components, ensuring timely delivery to support the production schedule. For the bicycle manufacturer, the MRP would calculate the exact quantities of steel, tires, seats, chains, etc., needed and when they are required based on the MPS for finished bicycles.  
  • Inventory Management: It helps maintain optimal inventory levels by ordering materials only when they are needed, reducing holding costs and the risk of obsolescence.  
  • Production Scheduling (Component Level): MRP provides a schedule for the production of subassemblies and components within the manufacturing process.
  • Capacity Planning (Resource Level): By detailing the material and component requirements over time, MRP can indirectly help in planning the capacity needed at various production stages.  
  • Cost Control: By ensuring materials are available when needed and minimizing excess inventory, MRP contributes to cost efficiency.  

In essence:

The MPS answers the question: "What finished products do we need to make and when?"

The MRP answers the question: "What materials and components do we need to get and when, to make those finished products on time?"

The MPS is the input that drives the output of the MRP. They work in tandem to ensure that the right products are produced in the right quantities at the right time, supported by the necessary materials and components.