Material requirement planning is essential for a company to run its manufacturing operations smoothly. Many companies still have no idea about this. But earlier countless manufacturing companies have adopted the MRP system to control production on the line.
Even now, they are doing so, while a majority of them are considering it seriously. A lot of companies in Bangladesh are seriously working on developing software that supports the MRP system. And, it’s a good thing.
Without a feasible production plan, it’ll be impossible for a company to meet customer demands. That is why the company will lose revenue. However, we’ll try to project the predominance of MRP in this article. Let’s begin.
What is Material Requirements Planning?
Material Requirements Planning (MRP) is an inventory management system used to estimate the materials needed for manufacturing products. This process is automated and operated these days digitally through computer-based platforms.
Nonetheless, it compares the material demands and finished goods with the existed supply to create purchase orders. The aim is to meet the customer demands. Earlier the inventory was planned by hand using methods like Reorder Point/Reorder Quantity.
The synthesis of old concepts and modern technology results in an efficient system, and it is excellent at both planning and control material flows and production.
Overall, it’s a system for planning and controlling inventory, scheduling, and production.
Material Requirements Planning Objectives
There are three objectives MRP software looks to provide;
- Ensuring the raw materials are available for manufacturing and delivery to customers.
- Maintain the minimum level of raw material and finished product in the store.
- Organize production, distribution schedule, and procurement activities.
Why is MRP Important?
The MRP system is designed for improved inventory management. It helps manufacturers to sustain low inventory levels by controlling production, purchasing, and delivery activities.
However, the primary goal is to ensure the materials and components are available when needed for production. There are more reasons why MRP is essential for a business;
- Minimize customer lead times to meet customer demand and satisfaction
- Minimize inventory cost
- Improve manufacturing efficiency
- Operative inventory management and optimization
- Increase labour productivity
- Improve overall customer satisfaction
How does MRP Works?
To simply put, the MRP system considers three things in the process;
- What is required?
- How much is required?
- When is it required?
With that in mind, MRP utilizes information from the bill of materials (BOM). The BOM is an ordered list of all materials and components needed for product manufacturing with their quantities.
In other words, the MRP system tries to figure out the materials and components required for specific products. It helps the manufacturers to get control of inventory supplies by balancing the demand and supply.
In the BOM list, the inventory materials are defined as either dependent demand or independent demand. The dependent demand items are the raw materials required to manufacture the finished product.
On the other hand, independent demand items are the finished good at the top of the order. Manufacturers consider the confirmed orders and observe market conditions to determine their amount.
In addition, they consider sales history and other indicators to generate a forecast. How many to produce is decided to meet customer demand on that basis.
Steps of Material Requirements Planning System
- Step 01: Calculating the materials needed to meet the customer demand is done through using BOM.
- Step 02: Checking demand against what you already have in inventory. Then, MRP distributes resources into the areas where it is needed.
- Step 03: Calculating the time and labour needed to complete the manufacturing process. This is to provide a specific deadline.
- Step 04: Monitoring the process for any potential issues. The MRP system can suggest supervisors in case of delays.
Material Requirements Planning in Manufacturing
As mentioned, the MRP system is crucial for efficient manufacturing operations. Manufacturers cannot think of meeting the customer demands without the raw materials and components on hand.
In the end, they can hardly respond to the rise and fall in demand by amending production. Moreover, MRP is also needed for further production, like assembly and packing, to run smoothly.
It removes the uncertainty over inventory and thus, reduces the time required to achieve it. Hence, an MRP system is necessary for both discrete manufacturing and process manufacturing.
Material Requirements Planning – Wrap Up!
The growing interest in the MRP system indicates the promise it has made. The potential of MRP for your organization depends on how it is implemented. You can trust a platform like PrismERP for accurate production planning, scheduling, and inventory control. Above all, the MRP system is worth it.