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. 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?
A Quick History Lesson of MRP and MRP II Systems
The first MRP system was made in 1964 and most were software database applications. In the first initial adaptation, MRP stands for Materials Requirements Planning. Many large industries adopted this method like automotive, appliances, hardware, etc. By the 1980s, there were over 7500 companies utilizing MRP. These systems could track overall manufacturing planning such as production scheduling, inventory management of raw materials and products, with minor proposal and purchasing additions.
By the early 1980s, MRP II was available and currently stands for Manufacturing Resource Planning. The added features helped close the loop and help manage and entire manufacturing company.
MRP + Additional Closed Loop Features = MRP II
MRP II is an all-inclusive software system to this day. It ties many of the cross-functional areas of a business from manufacturing scheduling to Bill of Materials (BOM) to inventory, plus materials planning. However, both systems have since evolved even more to become a component of Enterprise Resource Planning (ERP).
Benefits of MRP for Process Manufacturers
Especially for those businesses with complex production plans, a reliable MRP system 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 this type of ERP environment, MRP can provide planning managers with an understanding of how to make the right business decisions – not just spit out a list of what to purchase next.
If you’re interested in learning more about the MRP capabilities within Deacom ERP, contact us today.