What is Material Requirements Planning (MRP)?
Material Requirements Planning is an inventory management system that helps businesses plan, track, schedule, and monitor their manufacturing processes and material usage more efficiently.
MRPs typically have 3 main goals:
Assure that production always has access to the required materials and components.
Keep the lowest material and component levels possible while still adhering to the first rule.
Create an appropriate manufacturing schedule and plan.
Companies use an MRP to estimate what materials are needed, how much is needed for a specific job, and when delivery can be promised. If implemented properly, MRPs reduce operational costs and increase efficiency while decreasing the need for larger inventories.
An MRP is a tool used by manufacturers to accurately track resources, establish production schedules/deadlines, and monitor resource usage and output.
All MRPs work backward from a Bill of Materials (BOM) and develop the resource requirements needed to create the end product.
Material requirements planning addresses 3 key questions: WHAT, HOW MUCH, AND WHEN?
MRPs increase efficiency and productivity while reducing inventory costs.
How Does an MRP Work?
A helpful way to understand an MRP is to think of it as a backward-moving system. MRPs start with a completed product production plan and convert it to a list of the subassemblies, components, and raw materials needed to manufacture the final product. All while adhering to an established schedule.
We can map this out by looking at the WHAT, HOW MUCH, and WHEN of any production. At the core, every MRP addresses these 3 questions.
What materials are needed?
How much material is needed?
When is the material needed?
The 4 Steps of an MRP
Transforming the above three questions into actionable items requires 4 basic steps.
Estimate the required materials: The first task is to determine the material demand of the project. Material Requirements Planning involves overlooking the proposed bill of materials which outlines the raw components needed for the end product.
Find the materials: Next, the MRP needs to find the materials for the end product. To do this, it will take a hard look at what’s already in inventory and check which materials are needed. Resources are then allocated to the appropriate departments to ensure that all projects possess the materials they require.
Establish the production schedule: After finding the materials, the next step is to calculate an appropriate deadline. How much time and labor are needed to complete the project and end product.
Monitor the process: Finally, the last step is to monitor the process. If any delays or material problems occur, a good MRP system will track all components and provide opportunities to reallocate resources accordingly.
MRP Advantages and Disadvantages
Ensure that you have the right materials, supplies, and components when you need them for every job.
Decreased need for high inventories.
Increase in operational efficiency and productivity.
Shorter lead times.
Rise in customer satisfaction.
One of the leading advantages of an MRP system is the assurance that you have the right materials when you need them. Having the right materials at the right time means that you don’t need to hold onto large inventories or stockpile resources. This improves operational efficiency and productivity which enables businesses to decrease lead times and increase customer satisfaction.
The modern MRP has quite a few advantages, but that doesn’t mean there aren’t any disadvantages either.
Plans can be rigid and unforgiving when it comes to production schedules.
Gathered data needs to be accurate or it won’t work.
MRP systems can often be difficult and expensive to implement
The most common problem with an MRP system can lead to a decrease in flexibility. Creating a comprehensive plan that optimizes production schedules is great but how responsive and flexible can manufacturers be when things don’t go according to plan?
Similarly, MRPs rely on gathering accurate and precise information. If the information is wrong, the system will make an ineffective plan.
And finally, MRPs can be expensive. While traditionally not as expensive as an ERP (Enterprise Resource Planning), MRPs are expensive nonetheless. This means that despite the sure benefits, manufacturers need to weigh this against the cost of the system.
MRP vs. ERP
On the surface, it may seem that an MRP and an ERP do pretty much the same thing. And although they share a few of the same qualities, they are far from the same.
As we’ve said, Material Requirements Planning is an excellent tool for manufacturers to manage inventory, capacity planning, and scheduling. ERPs on the other hand, take this approach even further and allow manufacturers to take greater control of their operations through automation of back-office business functions.
Let’s take a brief look at the main responsibilities of the modern MRP and ERP.
Inventory management, supply chain management, production scheduling, and resource allocation.
Inventory management, supply chain management, production scheduling, resource allocation, accounting, manufacturing operations, customer management, quality management, and processes strategies.
We can see that the scope of responsibilities is much larger for the ERP, pretty much performing all of the duties of the MRP and then some. But MRPs still have a place within modern manufacturing.
It should be noted that ERPs do not replace MRPs. Although ERPs often have material requirements planning functions built into their long list of duties, standalone MRPs are still useful for manufacturers that don’t yet need the complex capabilities of an ERP.
Traditionally, Material Requirements Planning systems have been used by smaller businesses where the main concern is manufacturing operations. Larger businesses with a variety of users from various departments opt for the more comprehensive ERP system.
Determining which system is most useful to you will highly depend on your operation and needs.
Get the Most Out of Your MRP and ERP
Whether using an MRP or an ERP, did you know you can boost the capabilities of your operation and workforce with work instruction software? By connecting your business platform with work instruction software, you gain greater control of every process on your shop floor while also gaining valuable information from every action and interaction.
Process information and production data are sent back and forth between the two systems to gain the most valuable data possible, prompting ERPs and MRPs to undergo significant Industry 5.0 innovation.