Material Requirement Planning (MRP) is a common term in the manufacturing industry, but what does it mean exactly? In short, material requirement planning is a production planning and inventory management system designed to manage manufacturing business processes. Its ultimate goal is to keep adequate inventory levels to ensure that the required materials are available as they are needed. The main objectives of material requirement planning include:
- Maintaining the lowest level of inventory possible
- Ensuring that materials are available for production and products are available for delivery
- Creating and planning delivery schedules, manufacturing activities, and purchasing activities
Who benefits from material requirement planning and how is it used?
Material requirement planning is beneficial to manufacturing companies who use assembly lines or require multiple parts to create their products. Many companies implement MRP software to track and organize their inventories, as well as to ensure that the required products and parts are in place when an order is made. When implemented and maintained properly, material requirement planning will increase profitability, reduce cash flow and lead times, improve productivity, and give companies the ability to be proactive in their inventory management efforts.
For more information on the best ways to use an MRP software in your organization, download our free whitepaper, “Leveraging a Demand-Driven Manufacturing Model to Enhance Profitability.”
In order for material requirement planning to work, the following three components must be present:
- All products and materials need to be in the warehouse and ready for production. Without the proper products and materials in place, production demands cannot be met, causing production delays and customer dissatisfaction.
- Inventory levels should be monitored consistently to make sure levels stay low.While companies need to be able to produce products as they are needed, they do not want to have excess in case the planned product fails to meet the sale expectations. By keeping up with supply and demand trends, companies will be able to maintain low inventory levels and reduce overhead costs.
- All aspects of the manufacturing process should be planned out and approved by management. Map out the manufacturing process and plan when production will occur for which products, as well as when they will be shipped out.
In order to maximize the money brought in, companies need to establish a good balance between inventory and product demand. Without the right balance, companies will incur unnecessary costs. Companies also need to ensure that materials are ordered at the right time in order to prevent production delays and missed deadlines. Material requirement planning will assist manufacturing companies to plan out the production schedule and determine when materials need to be ordered for which products.
While material requirement planning can be done by hand, MRP systems save companies a substantial amount of time and money. MRP software simplifies the planning process, facilitates inventory management, and ensures that products are delivered by planned deadlines. An MRP system consists of the following inputs: the master production schedule, the product structure records and the inventory status records.
- Master Production Schedule
This is the master of all schedules. It plans every aspect of the company, from staffing to production to inventory and more. It gives production, planning, purchasing and top management the information they need to plan and control all aspects of the manufacturing process. It ties together all forecasting and business planning with detailed operations to give management an accurate view of the current orders and processes.
- Product Structure Records(Bill of Materials)
The product structure records as more commonly known as the Bill of Materials. These records contain the necessary information on every item in the warehouse and the assembly required to produce each end item. Part numbers, descriptions, quantity per assembly, lead times and quantity per end item must be included in each record.
- Inventory Status Records
This contains the active status of all items in a company’s inventory, including inventory currently in the warehouse and scheduled receipts. It is critical that these records be kept up to date and accurate with each inventory receipt and withdrawal.
An MRP system can transform a company’s warehouse and operational procedures. SYSPRO Manufacturing is an MRP software solution designed to help companies who are interested in material requirement planning. SYSPRO Manufacturing can help manufacturers manage the balance between supply and demand, as well as provide a comprehensive analysis of a company’s inventory situation. Contact us today to learn how SYSPRO Manufacturing can reduce your inventory, increase your manufacturing productivity, and facilitate your company’s cash flow.