MRP – You hear it on the production floor, in management offices, and thrown around in conversations throughout the building, but do you truly understand what it is?
No matter your department or level, every employee of a manufacturing company should understand what Material Requirements Planning (MRP) is and how it impacts the bottom line. Plus, it’ll make you sound smarter in lunch conversations!
Put simply, a strong MRP system helps to manage the supply and demand of a product. It answers three critical questions for all production managers:
What materials are needed?
How much is needed?
When is it needed by?
Especially for those businesses with complex production plans, a reliable MRP helps to ensure the right amount of materials are available, for the right products, at the right time. For example, it’s not uncommon for process manufacturers to produce a single product that requires ingredients from 4 or 5 different vendors. They all have their own unique availability and shipping timeframes. Without a strong understanding and management of those details, a facility can be left with too much or too little inventory. These companies find themselves with:
- Material waste
- Production holds
- Schedule delays
- Missed delivery dates
- Product shortages
Most of the time it is up to the decisions made by the purchasing and production MRP users to avoid these situations but they are constantly faced with concerns of data integrity. Trying to manually maintain spreadsheets or juggle disparate software systems, all points to the lack of a central data source to deliver consistency throughout the entire organization. Throw on top of that the vulnerability of human error and you easily make the most seasoned of production managers cringe.
An effective MRP structure is one that is native component of a comprehensive ERP platform.
In a cohesive ERP environment, MRP can provide managers with an understanding of how to make the right business decisions – not just spit out a list of what to purchase next.