What Is MRP
MRP or Material Requirements Planning is defied as a process that calculates the Material and Production needs of a business in order for it to achieve its customers’ requirements. Usually software based, it allows organisations to monitor material and product levels, helping them to plan purchasing, manufacturing and delivery schedules.
It encompasses quoting and estimating, sales orders, product costing, production planning, shop floor documents, recording of production, advanced stock control, purchasing of materials used in manufacturing, purchasing of all other product including spares. It may offer forecasting of demand, inventory planning, and a production planning board. All this is integrated with financials.
Put simply an MRP or ERP system is a means of holding most of the information that you use in your business on a day to day basis. It enables you to plan what has to be done, when it has to be done, and to inform you of any issues which need to be addressed.
The terms MRP and ERP mean Materials Requirements Planning and Enterprise Resource Planning respectively and refer to the fact that the systems offer, as a minimum, planning of materials based on your finished product requirements. ERP systems typically offer additional functions such as scheduling, advanced inventory planning, customer relationship management and supplier relationship management. The purpose of these functions is to enhance the flow of materials and information between your suppliers, you, and your customers.
A business firm can have plans and set timelines for production designed to help ensure that the finished product is delivered to the customer on time as agreed. Materials requirements planning is most often used when planning the smaller tasks necessary to bring about a final finished product. This step is important when planning a business process because it ensures that the materials needed in each step of the process are available when the time comes to execute the step.
Poor material planning can cause a product delivery to be late, apart from it can also cause additional costs like the extra labour needed to finish the job after materials are re-ordered. Ordering materials in a rush can also have extra processing or shipping costs from the vendor. Software MRP can make it easier for a manager to accurately record and track inventory changes. A manager using materials resource planning can also assign available materials to planned tasks and track which materials need to be ordered for planned tasks.
Advantages to using a material resource planning system include more on-time order deliveries, reduced costs due to materials shortages, and reduced stored inventory of excess materials from the production process.
Disadvantages to using MRP include cost, training employee and the training cost, and operator error.
Software programs for materials resource planning are generally more beneficial for large businesses than small ones. For small operations with little inventory, using an MRP can add extra work for employees and cost. This would mean they would need training to use the system. Setting up these programs costs money, and the cost of the extra electronics needed to run an MRP can also be greater than the benefits for a small company.