Hundreds of thousands of manufacturing companies use varying types of manufacturing ERP software for production and inventory control. These manufacturing businesses stay profitable by being able to maintain their demand as well as establish priorities in their current processes. In order to accomplish this, business owners had to ask themselves:
Enter material resource planning, or MRP, which enables manufacturers to take greater control over the manufacturing process and overall supply chain management.
Manufacturing resource planning (MRP), also known as material requirements planning systems or MRP II software, helps streamline the manufacturing process through production planning, scheduling, and inventory control. Known as a leading type of manufacturing software, MRP systems allow manufacturers to plan and calculate material requirements, coordinate personnel and machine workloads, and optimally plan purchasing to meet customer demands.
MRP also aids in inventory and production schedules to produce products and complete manufacturing jobs. An MRP system determines which assemblies must be built, what materials must be purchased, and the order in which to build products to meet customer due dates.
Through the use of material planning tools, MRP works by taking inputs of material costs, material availability, expected demand, forecasting demand, staffing ability, and machinery capacity–all to ensure your business can satisfy the market as well as your own production goals.
MRP software can work for all types of companies in the manufacturing industry, including in make-to-order, engineer-to-order, and a discrete manufacturing process.
Material requirements planning enables manufacturers to control the manufacturing process and overall business processes. MRP systems can create purchase requisitions and initial production requisitions for the purpose of accelerating the manufacturing production process. By determining the raw materials, components, and subassemblies needed, MRP will crosscheck that data with the best time to assemble the finished goods given the current demand and bill of materials.
In short, an MRP system determines:
The MRP process can be divided into a number of steps:
MRP systems in manufacturing environments help decrease inventory through more efficient scheduling, purchase planning, and demand forecasting. MRP will focus on what materials are required to complete manufacturing jobs and when they need to be sourced. This is helpful to minimize stock-outs and reduce excess stock.
One of MRP’s most critical inputs is the bill of materials, or BOM. The BOM is a detailed list of needed raw materials, components, and assemblies in order to manufacture a product. Bill of materials are usually created via order entry systems, reading current inventory levels, and viewing master production schedules.
Bill of materials includes hierarchical lists that have a top-level that represents the finished product and sub-assemblies below it. BOMs can also have two levels of assembly. One example could be a clock that includes the internal clock-works as well as the outer casing.
MRP usage in manufacturing, primarily via a clear and understood bill of materials process, will help you complete each manufacturing job while eliminating waste in materials and better coordinate machine usage and labor.
Material requirement planning can be thought of as a manufacturing management system. The shift between MRP I and MRP II was when MRP started to provide additional functionality for manufacturing that include finances, demand forecasting, and machine/labor capacity planning. This allows MRP systems to offer an increasing number of benefits to it’s users, which include:
Enterprise resource planning, or ERP, is a direct descendant of material resource planning. When MRP II began to include more components of the entire organization (such as equipment maintenance scheduling, accounting and financial planning, and demand forecasting), ERP stepped in to include project management, staffing capabilities, and more.
ERP systems are historically and commonly used by manufacturing and distribution companies–however, the term has expanded to apply to any organization from any industry that is looking to use data from customer demand to help manage staffing and inventory levels.
Today, many software companies may use the terms interchangeably. MRP has expanded to encompass much more than materials, but the core functionality remains unchanged: identify the needed materials, the quantity required, and when they are needed.