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What is MRP?

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October 26, 2022

MRP stands for material requirements planning. It is a software system that integrates supply management and inventory and is aimed at businesses of all sizes. Organisations use MRP software to estimate the necessary amounts of raw materials required for production, to optimise and manage inventory levels and to schedule things like deliveries and production.

 

What is the history of MRP?

 

MRP as material requirements planning was actually the earliest integrated IT system designed to improve business productivity by leveraging the capabilities of software and computing. The earliest MRP systems for inventory management came into being during the 1940s and 50s. These used mainframe computers to extract information from the bill of materials for specific final products and use them to create a purchasing and production plan. Gradually, MRP systems grew to incorporate information feedback loops. This enabled production managers to make changes and updates to the system as required.

The subsequent iteration of MRP, known as manufacturing resources planning (MRP II), incorporated things like finance, marketing, engineering, human resources and accounting into the process of planning. In the 1990s, a new concept emerged that expanded on MRP – this new approach would be known as Enterprise Resource Planning (ERP). ERP uses advanced computing technology to unify various disparate functional operations across the entirety of a business enterprise into a single, centralised location.

 

How does MRP work?

 

MRP enables manufacturers and businesses to determine what is required, and in what quantities. It also enables them to define when materials will be required. It works backwards from a production plan for completed goods.

MRP takes a plan and converts it into a summary of requirements. This list covers the parts, subassemblies and the necessary raw materials for the production of a finished product within a determined schedule. With MRP, manufacturers are able to truly grasp inventory needs while keeping supply and demand in balance.

Through the use of MRP, managers can ascertain their needs in terms of both supplies and labour, improving the efficiency of their production by entering information into the MRP scheme. That data can include:

 

  • MPS (Master Production Schedule), including quantities required for demand and deadlines.
  • Item Name/Nomenclature (sometimes referred to as Level “0) on BOM.
  • ISF (Inventory Status File) dictating the amounts of materials in stock and on order from suppliers.
  • Shelf Life of materials in storage.
  • Planning data, including factors like labour and machine standards, routing, quality/testing standards and techniques for lot sizing.
  • BOM (Bills of Materials) to detail the required material and components for the production of each product.

 

How does MRP figure in manufacturing?

 

Manufacturers are responsible for managing the types of materials they buy and in what quantities. This is done in the most strategic and cost-effective way possible in order to meet customer demand both now and in the future. With MRP, companies have a powerful tool to maintain the necessary quantities of inventory to enable manufacturers to optimise the alignment of their production alongside the peaks and troughs of demand.

The MRP process is as follows:

 

  • The system predicts demand and material requirements. This is done by determining customer demands and running it through the bill of materials, breaking down broad demands into specific requirements of components and raw materials.
  • The system allocates the inventory of materials so that everything is put precisely where it is needed.
  • The system schedules production, calculating time and labour requirements for the completion of manufacturing and generating a timeline.
  • The system monitors the ongoing process, sending out automatic alerts to managers when delays occur and recommending backup plans to ensure build deadlines are met.

 

Sage 200 with the Sicon Manufacturing Suite is a very powerful modern solution for MRP. Aimed at businesses that want to control, monitor and simplify their systems, it provides a singular view of manufacturing data that integrates seamlessly with Sage 200. It can also be unified with other Sicon solutions as required for a comprehensive platform to manage warehousing, production and sales in real time.

 

What are the advantages of MRP?

 

MRP brings a number of benefits to company operations:

 

  • Components and materials can be made available when they are required.
  • Inventory levels can be kept at a functional minimum, keeping associated costs dow.n
  • Customer lead times can be reduced.
  • Manufacturing efficiency is greatly improved.
  • Labour productivity is increased.

 

MRP vs ERP

 

ERP is an evolution of MRP. Whilst the latter is focused on the resources in an organisation, ERP unites all the disparate facets of that enterprise into a single platform, covering areas like finance, managing sales orders, human resources and customer relationship management.

You can deploy MRP as a standalone application or as a component of an ERP system. With ERP, you have a solution that covers all your business needs – resource scheduling is just a part of that. This decreases things like redundant information and brings in practical elements like security at the user level.

There are many benefits to ERP systems, including:

 

  • Efficiency gains
  • Custom reports
  • Integrated data
  • Higher-quality customer service

 

What are the primary inputs of MRP?

 

There are three fundamental inputs of an MRP system. They are the Inventory Status File (ISF), the Master Production Schedule (MPS) and the Bill of Materials (BOM).

 

How is MRP helpful for business?

 

MRP gives you a tool to ensure components and materials are available at the point when they are needed. Inventory is kept at optimal levels, the efficiency of manufacturing is enhanced and customer satisfaction is boosted organically.

 

What are the main outputs of MRP?

 

Using the requisite inputs, the MRP determines material requirements by identifying what is needed and in what quantities to finish a build. It also pinpoints when in the build processes certain materials will be needed to help with scheduling.

The result is that businesses can utilise just-in-time production, scheduling and executing production on the basis of the availability of materials. This keeps inventory levels to a minimum and enables seamless, efficient movement of materials through each stage of the process of manufacturing.

 

Conclusion

 

MRP is a software-based integrated management system for inventory and supplies, used by companies to estimate quantities of raw materials and components to schedule manufacturing. Information from the Master Production Schedule, Inventory Status File and the Bill of Materials enables the MRP to calculate the materials needed, the quantities of materials and when they will be required in the production process.

Through this process, manufacturers can manage production with greater ease and utilise materials and labour more efficiently.

 

Why choose Eventura to deliver your MRP/ERP project?

 

Eventura has been providing robust business solutions to countless organizations for over two decades, and specialise in helping manufacturers. We are ERP experts and can identify all of your business needs, and deliver a comprehensive ERP solution that works for you.

As Sage 200 Partners and NetSuite Solution Providers, we can help you identify which solution will fit your business needs the best. Our expert team of business analysts, developers, consultants, technicians and support staff can guide you through your entire project, from initial scoping through to implementation and on-going support.

We’re also managed IT service providers meaning we can help you identify your entire IT infrastructure requirements from day one. If you would like to speak to one of our ERP experts, you can request a free call back here.

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