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What Data MRP System Includes and Excludes

May 1, 2010 by Shaun Snapp

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1. What This Article Covers

2. Introduction
3. What the MRP System Include
4. What the MRP System Does Not Include
5. Timings and Lead Times
6. The MRP System in SAP
7. MRP Settings
8. Conclusion
9. Interested in Accessing Our Supply Planning Research?
10. References
11. Repairing your MRP System
12. Software Ratings

What This Article Covers

What Data is Included in the MRP System?
What Data is Excluded from the MRP System?
Timings and Lead Times.
MRP System in SAP
MRP System Settings

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Introduction

When one thinks about its background, MRP was essentially SAP’s rst major
supply chain functionality. Before advanced planning, optimization, or other
material planning capabilities, there was the rst MRP in SAP ERP. Originally
developed in the 1960’s, MRP software was at one time sold as an independent
application. However, by the 1980’s it had migrated into ERP systems.

What the MRP System Include

I nd the easiest way to understand the MRP system is to list what is included in
the MRP calculation. MRP incorporates:

Sales Orders
Purchase Orders
Materials
Stock (there are many di erent types of stock, by only unrestricted and
valuated can be included in MRP) – Also, while optional, MRP should be
set to incorporate the stock in transit.
Material lead times
Components 

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Assemblies
Lot Size
Resources / Work Centers

The output is planned purchase orders and planned production orders.

What the MRP System Does Not Include

Just as useful is to understand what data a MRP system does not include.

Normal Stock Transfers: Notice that unlike APS systems or DRP, MRP does
not create stock transfers.
Inventory Balancing Stock Transfers: MRP is not rebalancing inventory to
meet future demand the way several supply planning methods do.
Prioritization: MRP does not understand priority. It only knows quantities
and dates, so if a higher priority customer places an order for the product
later than a lower priority customer, the lower priority customer gets the
inventory. However, many companies operate on the basis of customer
priority in addition to the need date, so this is where inventory is either
manually allocated, or allocation software comes into the equation.
Constraints: MRP does not know what is feasible, rather it works backward
from requirements and simply develops a plan based upon this. This is
one of the great limitations of MRP and is one of the main reasons that
constraint-based planning was developed and ourished in the late
1990’s.

Timings and Lead Times

Aside from all the related items (or objects) listed about, a bit part of what MRP
does is the arrangement of timings of objects.

To get an idea of how useful MRP is, imagine a material with 100 sub-
components, each with a di erent lead time. MRP uses all of these lead times,
the order date to calculate the planned production or planned procurement
order date. (the material BOM level is also known as the lower level code, with
each level in the BOM having a di erent low-level code.) On the other hand, the 

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degree to which the BOM is exploded is a setting in SAP ERP. The BOM does not
necessarily have to be exploded at all.

The MRP System in SAP

One of the common questions I receive regarding MRP is how it di ers from
heuristics, which is the next level up in complexity. I will restrict my discussion
here to MRP as it relates to supply planning within SAP (that is comparing MRP
in SAP ERP to the Network Heuristic in SNP).

The rst answer I give is that MRP has many fewer options than does the SNP
Network Heuristic. I will demonstrate this by going through all the options in
MRP and then compare them to the SNP Heuristic.

MRP Settings
1. Here is the rst choice, which is the processing key. This relates to
whether MRP will reprocess everything (called regenerative planning, or
just perform a net change).
2. The second option relates to whether purchase requisitions within the

planning horizon. If they are not created by the system, they can be

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created manually. One option here allows only planned orders to be

created outside the planning horizon.
3. The delivery schedule setting controls whether and how schedule lines
will be created.
4. The next setting relates to whether an MRP list should be created.
5. The planning mode setting controls whether the system re-explodes the
BOM after each run.
6. The scheduling setting controls how dates are determined for planned
orders and whether only a basic method will be used to determine the
dates of planned orders or whether a more sophisticated method
involving lead time scheduling and capacity planning will be used.

As you can see, these are basic options that have to do with
speci c detailed related to whether to reprocess all orders, how far out to create
procurement orders, etc..

Conclusion

Clearly, MRP is not going anywhere. Advanced planning and inventory

optimization are complimentary technologies that in the vast majority of cases
do not cover all of the products in the company inventory. In situations where
the planning situation is very simple, and there are few constraints, MRP is all
that is required.

Critics of MRP point out that it was originally designed for manufacturing, and
has been overly or misapplied to distribution. While this is certainly historically
accurate, MRP does a fair job with supply planning, if it not called on to do too
much. However, it is important to understand that MRP contains some
assumptions that are not true (as does advanced planning) and it has
particular limitations. I discuss the assumptions of MRP in my book “Supply
Planning with MRP, DRP and APS Software.“

What may be surprising to many is that MRP was initially developed in the
1960s and widely rolled out to at least large manufacturing rms by the 1970s.
At this time it was considered “leading edge.” Now it’s old hat and not many

academics publish papers on MRP concepts, as operations research and supply

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chain management has moved on to more advanced topics. However, a

surprising number of companies continue to have problems maintaining and
properly understanding their MRP systems. So as with other technologies, the
technology itself is secondary to its implementation and maintenance.

To learn about the history of MRP see this link.

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Discover Our Research Based Answers

References

SCM 250 PP/DS Training Manual

https://rockfordconsulting.com/the-rise-and-fall-of-mrp.htm

In addition to the book mentioned above, I cover MRP in depth in the following
book.

Repair MRP Book

Repairing your MRP System

What is the State of MRP?

MRP is in a sorry state in many companies. The author routinely goes into
companies where many of the important master data parameters are simply not
populated. This was not supposed to be the way it is over 40 years into the
introduction of MRP systems.

Getting Serious About MRP Improvement

Improving MRP means both looking to systematic ways to manage the values that
MRP needs, regardless of the MRP system used. It can also suggest evaluating what
system is being used for MRP and how much it is or is not enabling MRP to be 
efficiently used. Most consulting companies are interested in implementing MRP
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systems but have shown little interest in tuning MRP systems to work to meet their
potential.

The Most Common Procedure for Supply and Production

Planning?
While there are many alternatives to MRP, MRP, along with its outbound sister
method DRP, is still the most popular method of performing supply, production
planning, and deployment planning. In the experience of the author, almost every
company can benefit from an MRP “tune up.” Many of the techniques that the author
uses on real projects are explained in this book.

Chapters
Chapter 1: Introduction
Chapter 2: The Opportunities to Improve MRP
Chapter 3: Where Supply Planning Fits Within the Supply Chain
Chapter 4: MRP Versus MRP II
Chapter 5: MRP Explained
Chapter 6: Net Requirements and Pegging in MRP
Chapter 7: Where MRP is Applicable
Chapter 8: Specific Steps for Improving MRP
Chapter 9: Conclusion
Appendix A: Calculating MRP

Software Ratings: Supply Planning

Software Ratings
Brightwork Research & Analysis offers the following free supply planning software
analysis and ratings. See by clicking the image below:

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