MRP or Material Requirement planning is a software tool commonly used to manage business operations. It can be considered as a business management support system that can be operated with the help of a computer. This will be used for proper planning of the material requirement. It will help us to find out the number of raw materials and manage a supply system of materials. It can also support us to plan product, schedule operations, and control inventory in a business,
MRP can be a useful tool for many business ventures including manufacturers including primary manufacturers of products. This will help them plan the material stock and plan inventory support. MRP otherwise can be considered a major support system for every manufacturing operation. MRP will benefit a manufacturing business by
1. Manage supply and demand
2. Manage inventory
3. Schedule operations
4. Ensure the timely delivery of products
Operation of MRP
> As its name indicates MRP finds out the raw materials required for each production activity. The components and their quantity can be defined using this tool. Thus MRP helps the business to plan raw material products in an efficient way by optimizing the use of materials and purchased goods.
> MRP also helps the business to plan the assembly of the components and subassemblies. It helps us to fix the assembling time of finished goods based on the demand.
> MRP operates based on three major criteria. It identifies which raw material is required, the quantity of the raw material required, and when the material is required.
> MRP prepares a plan of operation after identifying the material, quantity, and time of its use. The plan will be executed in a way to help the business to ensure timely manufacturing and timely completion.
Importance of MRP
Material Requirement Planning is something that offers support to assess the demand and requirement at the same time. Demand could be the demand for the end product and the requirement could be the requirement of material for manufacturing the end product or the material required for sub-assembly.
1. MRP can help you avoid
2. Avoid Excessive purchase of material
3. Avoid shortage of material
4. Wastage of money and resources
5. Shortage of end products
6. Allows uninterrupted production process
Without MRP you are more likely to experience the following hurdles:
1. Purchase unnecessary materials
2. Experience shortage of required materials
3. Overstocking of products
4. Running out of some products
5. Lack of proper production planning
How MRP works?
MRP works in five steps
1. Analyse requirement and meet demand
2. Inventory check for resource management
3. Production schedule management
4. Identify key issues
Analyze requirement and meet demand
MRP works in collaboration with inventory forecast support and other ERP features. This enables the MRP to calculate the actual demand. As the production should be based on demand, MRP can easily calculate and plan production once the demand is analyzed accurately.
This enables the MRP to examine the bill of materials and prepare the requirement details based on it. MRP will make use of sale order details and sales forecast reports also for effective analysis.
Inventory check for resource management
Inventory is the place where we stock every material and stock. So, proper management of this inventory can help the production and other aspects of the business. With the use of MRP, the user can check the materials in stock. It will also help the user to easily trace the material location. Many companies may have multiple inventories at different locations. Tracing the availability of the material at these inventories can be done with a click if we are depending on MRP support. MRP can hence plan the use of resources based on this result.
Production schedule management
The production schedule as we know decides the time required for completing the production activities and also the work stations where the production activities will be completed. This will also help us to plan the details of the labor hours, labor cost as well as material quantity required for the production process. MRP can guarantee efficient production support by ensuring uninterrupted production. As it compiles different activities including work order management and compiles purchase order and sale order, all activities get unified with
ERP support.
Identify key issues
MRP also offers you support by alerting you the issues like material shortage and work order-related issues. Raw material availability and the location and transportation-related issues can be traced from here.
MRP can also give you suggestions and ensure better support for the management of production and inventory management. IT helps you to analyze the problems in an easier way and manage all issues in a strategic way.
What are MRP inputs?
Now, let us have a look at MRP inputs and MRP outputs. As we all know, input quality decides the quality of the output given by any tool. Here, to ensure the best results from the use of MRP we have to focus on give accurate inputs. The inputs used by MRP for deriving the best result are,
Demand related input includes data including the sale forecast details
Bill of materials (BOM) related input includes materials required for the production of each item and the number of materials.
Inventory-related input should be accurate then only the MRP will be able to trace the materials and check availability. IT can support purchase and sales planning.
The master production schedule is another input method that can improve the performance of your MRP. It helps us to plan the requirement of machines, workstations, and the use of the labor force. The work hours required, pending works and other activities can be managed and calculated if the MPS input is accurate.
What are MRP outputs?
MRP outputs are the results that we get using the inputs given to the MRP. MRP helps us to calculate the materials required and the number of materials required. It also helps us to find out the production stage at which we require the input. The time required for the process and the expected outcome can also be predicted with the help of the MRP.
Completion of the work on time and an effective plan based on demand and material availability can be assured. IT also supports us to manage costs by effective inventory management and inventory check. It also supports us to plan material purchase time, purchase quantity, and sub-assemblies as well.