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Procurement Management: Prepared By: Chandini Suranadh

The document discusses Materials Requirement Planning (MRP) and Just-In-Time (JIT) inventory management systems. MRP is a software-based system that helps manage manufacturing processes by calculating material requirements and scheduling orders, while JIT focuses on reducing waste and improving efficiency by receiving materials only as needed. Both systems aim to optimize production planning, inventory control, and supplier relationships to enhance overall operational performance.

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9 views25 pages

Procurement Management: Prepared By: Chandini Suranadh

The document discusses Materials Requirement Planning (MRP) and Just-In-Time (JIT) inventory management systems. MRP is a software-based system that helps manage manufacturing processes by calculating material requirements and scheduling orders, while JIT focuses on reducing waste and improving efficiency by receiving materials only as needed. Both systems aim to optimize production planning, inventory control, and supplier relationships to enhance overall operational performance.

Uploaded by

arjunanoopa
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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PROCUREMENT MANAGEMENT

PREPARED BY:
CHANDINI SURANADH
UNIT-2
MATERIALS REQUIREMENT PLANNING AND JUST - IN - TIME

MATERIALS REQUIREMENT PLANNING (MRP)

A. MATERIAL REQUIREMENTS PLANNING (MRP) IS A PRODUCTION PLANNING, SCHEDULING,


AND INVENTORY CONTROL SYSTEM USED TO MANAGE MANUFACTURING PROCESSES.

B. MATERIAL REQUIREMENTS PLANNING (MRP) IS A PRODUCTION PLANNING AND INVENTORY


CONTROL SYSTEM

C. MRP SYSTEMS ARE SOFTWARE-BASED.


 A MATERIALS REQUIREMENT PLANNING (MRP) INFORMATION SYSTEM IS A SALES
FORECAST- BASED SYSTEM.

 MRP IS USED TO SCHEDULE, ORDER AND TRACK RECORDS OF RAW MATERIAL,


COMPONENTS REQUIRED AND MANAGES DELIVERIES AND QUANTITIES, HELPFUL IN
SYSTEMATIC PRODUCTION PLANNING.
A COMPUTERIZED SYSTEM FOR,
1. MANAGING DEPENDENT-DEMAND INVENTORY

2. CALCULATE THE DEMAND FOR ITEMS

3. SCHEDULING REPLENISHMENT ORDERS

4. MEETING ALL THE REQUIREMENTS

5. TIME PHASED PRIORITY-PLANNING TECHNIQUE

6. CALCULATES MATERIAL REQUIREMENTS

7. SCHEDULES SUPPLY TO MEET DEMAND

8. SOPHISTICATED COMPUTER-GENERATED CALCULATION.


QUANTIFYING PROCUREMENTS AND PRODUCTION REQUIREMENTS,

1) WHAT ARE WE GOING TO MAKE?


2) WHAT DOES IT TAKE TO MAKE IT?
3) WHAT HAVE WE GOT?
4) WHAT DO WE HAVE TO GET?

THESE INTER-RELATIONSHIPS ARE GENERATED FROM THE MASTER PRODUCTION SCHEDULE,


THE INVENTORY RECORDS AND THE BILL OF MATERIAL.
MRP IS A TOOL THAT PROVIDES ANSWER FOR SEVERAL QUESTIONS:

1. WHAT MATERIAL IS REQUIRED?

2. HOW MANY ARE REQUIRED?

3. WHEN ARE THEY REQUIRED?


A. DEPENDENT DEMAND - DEMAND FOR ITEMS THAT ARE SUB-ASSEMBLIES, PARTS OR
RAW MATERIALS TO BE USED IN THE PRODUCTION OF FINISHED GOODS.

B. INDEPENDENT DEMAND - FINISHED PRODUCTS


BASIC CHARACTERISTICS OF MRP

1. MRP. CALCULATE THE DEMAND FOR COMPONENTS, SUBASSEMBLIES, RAW-


MATERIALS, SPARE PARTS.

2. MRP HELPS IN SYSTEMATIC PLANNING

3. MRP TAKES INTO ACCOUNT THE LEAD TIME REQUIRED FOR ORDERS.

4. MRP HELPS IN PURCHASE ORDERS PLANNING AND TRACKING


5. MRP IS HELPFUL IN PREPARING PRODUCTION SCHEDULES

6. MRP ENSURES MATERIALS ARE AVAILABLE FOR PRODUCTION AND PRODUCTS ARE
AVAILABLE FOR DELIVERY TO CUSTOMERS.

7. MRP MAINTAINS THE LOWEST POSSIBLE MATERIAL AND PRODUCT LEVELS IN STORE.

8. MRP IS HELPFUL IN PLANNING MANUFACTURINGACTIVITIES, DELIVERY SCHEDULES


AND PURCHASING ACTIVITIES.
MRP INPUTS

➤ MASTER PRODUCTION SCHEDULE

IT IS A TIME-PHASED PLAN SPECIFYING HOW MANY AND WHEN THE FIRM PLANS TO BUILD
EACH END ITEM

a. IT TELLS WHAT IS TO BE PRODUCED


b. WHEN THEY ARE NEEDED
c. IN WHAT QUANTITIES.
MRP INPUTS

• MRP PROCESSING

• MASTER PRODUCTION SCHEDULE

• BILL OF MATERIALS
MRP-OUTPUTS

ORDER RELEASE (IT GIVES CLEAR IDEA ABOUT THE AMOUNT AND TIMING OF FUTURE
ORDERS)

 PRIORITY REPORTS INFORMATION REGARDING WHICH ORDERS SHOULD BE GIVEN


PRIORITY.
 INVENTORY REPORTS: THIS REPORT IS HELPFUL IN ASSESSING THE MATERIALS
REQUIREMENT.
 PLANNING REPORTS: REPORTS SUCH AS INACTIVE ITEMS, ACTUAL LEAD TIMES, LATE
ORDERS, ETC.
MRP OUTPUTS

1. ORDER SCHEDULES

2. PRODUCTION PLANNING REPORTS

3. MRP SOFTWARE

4. INVENTORY REPORTS

5. INVENTORY RECORDS

6. PERFORMANCE REPORTS
JUST IN TIME

JUST-IN-TIME WAS INVENTED BY TAIICHI OHNO OF TOYOTA MOTOR COMPANY IN JAPAN SHORTLY
AFTER WORLD WAR II.
IT IS A MANAGEMENT PROVIDING THE RIGHT ITEMS OF THE RIGHT QUALITY AND QUANTITY AT
THE RIGHT PLACE AND AT THE RIGHT TIME.

JIT IS NOT MERELY AN INVENTORY REDUCTION PROGRAMME, BUT THE ORGANIZATION OPERATES
MORE EFFICIENTLY AND WITH MINIMUM RESOURCES.
JUST IN TIME

JIT IS AN INVENTORY STRATEGY IN WHICH COMPANIES INCREASE EFFICIENCY AND DECREASE


WASTE BY RECEIVING MATERIALS ONLY AS THEY ARE NEEDED IN THE PRODUCTION PROCESS,
THEREBY REDUCING INVENTORY COSTS.

JIT IS ELIMINATING WASTE.


THE SUCCESS OF JUST-IN-TIME (JIT) ON THE PRODUCTION FLOOR IN REDUCING COSTS.

 COST REDUCTION

 QUALITY IMPROVEMENT

 INCREASED EXPOSURE TO TECHNOLOGY

 DELIVERY IMPROVEMENTS

 RELIABILITY IMPROVEMENTS

 ENHANCING RESPONSIVENESS
JIT IS MORE THAN AN INVENTORY SYSTEM. IT IS AN OPERATIONAL PHILOSOPHY WHICH
INCLUDES:

➤ SHORT LEAD TIME

➤ A MAINTENANCE IMPROVEMENT SYSTEM.

➤ A QUALITY IMPROVEMENT SYSTEM.

➤ A PRODUCTIVITY IMPROVEMENT SYSTEM.

➤ MINIMUM INVENTORY-LEVEL

➤ CLOSELY COUPLED FLOW-LINES


APPLICATIONS OF JUST IN TIME

➤ INVENTORY REDUCTION AS A TOOL FOR IMPROVEMENT, IS DIRECTLY RELATED WITH COST.


COSTS ARE REDUCED GREATLY, IF INVENTORY IS REDUCED.

➤ WASTE REDUCTION
• IF ANY ACTIVITY THAT INCREASES COST BUT DOES NOT ADD VALUE TO ANY PROCESS IN AN
ORGANISATION IS CALLED WASTE.
• ELIMINATE WASTE OF LABOR, MATERIAL OR EQUIPMENT. JIT ADVOCATES ZERO WASTE IN
ORGANISATION.

➤ SUPPLIER RELATIONSHIPS
THERE MUST BE GOOD RELATIONSHIP WITH SUPPLIERS. ITS HELPS IN GETTING RAW MATERIAL
SUPPLY EXACTLY WHEN REQUIRED.
➤ MINIMUM BATCH SIZES

THE BATCH SIZES MUST BE KEPT AS SMALL AS POSSIBLE. THE DEFECTS CAN BE OBSERVED
EASILY IN SMALL BATCHES.

➤ MINIMUM MOVEMENTS

• THE MOVEMENTS MUST BE KEPT LOW IN PRODUCTION PLANTS.


• THE COMPUTERIZED EQUIPMENT ARE VERY MUCH HE ENHANCING RESPONSIVENESS
HELPFUL IN MINIMISING THE MOVEMENTS IN THE PLANTS.
➤ TOTAL QUALITY ASSURANCE

• THE PRODUCTION DEPARTMENT MUST CONTROL ALL THE PROCESSES TIME TO TIME TO
CONTROL THE VARIATION IN THE PRODUCTION OUTPUT IN TERMS OF QUALITY.
• PROPER TRAINING IS VERY IMPORTANT IN THE TOTAL QUALITY ASSURANCE.

➤ PREVENTIVE MAINTENANCE

• THE INSPECTION AFTER THE ACCIDENT IS USELESS.


• PREVENTIVE MAINTENANCE IS NEEDED TO REDUCE VARIATION IN THE PROCESS. THIS
REQUIRES A REGULAR AND COMPLETE EXAMINATION OF ALL THE PROCESSES ON A REGULAR
BASIS.
•

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