MRP, which stands for materials requirement planning, is an automated system that revolves around production planning and inventory management. Essentially, this software system focuses on two aspects of a business: resources and customers. This is why it is regarded as an important system software for companies, especially ones that are in the manufacturing and fabrication industry.
Most material requirement planning systems are automated, but the concept behind it can actually be conducted by hand. Nonetheless, using an MRP software is undoubtedly more effective than manual MRP – simply because automation is what makes an efficient materials requirement planning system.
A Brief History and Background of Materials Requirement Planning
MRP first came into the manufacturing scene a little less than six decades ago. It was created by Joseph Orlicky in response to the Toyota Manufacturing Program back in 1964. In that same year, the very first company to use MRP was Black & Decker. This initiative though quickly rose to fame as it was implemented by 700 companies by 1975 and 8,000 organizations by 1981.
In 1983, the MRP system was further developed by Oliver Wight which gave birth to MRP II. Soon enough, additional features were added in the system, paving the way for the development of another system called enterprise resource planning (ERP).
Not to be confused with MRP, ERP focuses on key business functions that are beyond the realm of supply and demand. Although both systems have the same root, they do take on different challenges and problems that an enterprise face. This is why MRP was merely used by businesses that are in the manufacturing or fabrication scene. However, company owners soon found the system useful even across different fields and industries. And this is why it is now implemented by large corporations and SMEs alike for supply chain purposes.
The Benefits of Using Materials Requirement Planning
In a simple sense, the focus of MRP revolves around managing manufacturing operations and functions. Bearing tools for production planning and inventory management, the entire system serves as a platform that simplifies the planning process in manufacturing.
Through this system, business owners and managers are given better control in handling supply chain demands through accurate scheduling and sound purchasing decisions. Aside from the obvious fact that it helps with efficient inventory management and scheduled product delivery, it does benefit companies in other ways.
The MRP system is capable of using inputted data to calculate expenditures involved in manufacturing as well as forecast sales depending on the amount of inventory. As it gives reliable and accurate computations, manufacturers are given an easier time in setting a reasonable price for their goods.
There are many factors that result in the loss of inventory. Having a digital software such as MRP can reduce the risks of inventory shrinkages as it minimizes human error and inaccurate data input. Also, it gives managers a helpful hand in monitoring inventory and detecting signs of shrinkage early.
The MRP system does not just revolve around planning and forecasting as it also gives real-time reports about stock lot count, stock movements, serial numbers, shipments, and many more. This makes it a little less difficult to monitor and track inventory as it ships, preventing common problems that involve order fulfillment like delay or loss of shipments.
One of the most complex tasks in manufacturing is putting together a reliable production schedule that considers the complicated nature of the supply and demand chain. With the help of an MRP system, plotting schedules become a lot easier since it streamlines the amount of inventory and the status of manufacturing operations in real-time. Additionally, it stores and disseminates information to different departments involved in manufacturing, making it a lot less difficult to create a schedule that works for everyone.
Common Mistakes in Materials Requirement Planning
Undoubtedly, the MRP system presents a more superior method of inventory management and production planning than a system of manual integration of spreadsheets and hand calculations. However, the system is not entirely flawless as there are instances wherein it misinterprets and miscalculates data due to misuse. With that said, let’s take a look at the most common mistakes manufacturers make in materials requirement planning and how it should be avoided.
In general, the MRP is nothing but a tool that simplifies certain functions involving production and manufacturing. This means that the system by itself offers optimization and efficiency, but it does have certain limitations.
The entire system relies on the data that is inputted into it. Thus, inaccurate input of data can possibly lead the system astray. This will result in inaccurate forecasts, calculations, and other pressing concerns. With that said, it’s vital that you monitor the accuracy of data, records, and information before feeding them to the system.
The MRP system is a reliable platform that streamlines monitoring and tracking of inventory. However, failure to adopt an automated supporting system like barcoding undermines the purpose of MRP itself. This is because not having a barcode system in place leaves you to hand count and record the number of goods stored in your warehouse, which defeats the objective of using an automated MRP system.
It’s important to remember that the MRP system focuses on the manufacturing process that involves your company, and not that of your suppliers’. Thus, it cannot monitor excess or shortages in supplier shipments without the help of a label system. This is exactly why it’s a must that you require your suppliers to provide advance shipping notifications (ASN). In this way, you’ll be able to monitor the status and amount of resources you’re supposed to receive.
The MRP system relies on data. Hence, the key to maximizing the use of the platform is constant and accurate data input. With that said, you must never neglect to record and input even the slightest information changes in the system. This will not just let you streamline manufacturing processes better, but will also yield accurate results.
The required lead time actually changes based on the product. However, the MRP system always assumes that the lead time stays the same. Without fixing or correcting this, the platform will most likely yield inaccurate forecasts without considering changes in supply and production quantity.
Keep in mind that the MRP system is just like any other automated software. Since it relies on gathered data and collected information to perform tasks, its biggest enemy is data inaccuracy. Without taking precautionary measures to ensure data integrity, the entire system will eventually collapse. Thus, it’s only right to be mindful of the data you input within the MRP system to be able to use it to its fullest.