What is Material Resource Planning (MRP)?
Manufacturing Resource Planning (MRP) is a system that tracks the material requirements of all processes in a company's production line. It considers many factors, including sales forecasts, inventory levels, materials prices, and supplier lead times to ensure no shortages or excesses. If something goes wrong with the MRP, it can hurt the entire production line.
The main benefit of using an MRP system is maintaining control over your factory’s material needs to keep everything running according to plan. A firm can be more effective at managing resources by knowing precisely what material each process needs - this will also help with cost planning.
What MRP does
The system typically works with an ERP to generate purchase orders, schedules production, and manages inventory for a manufacturing company. It typically considers many factors such as raw material lead times, work center lead times, production capacity utilization rates, and other constraints like safety stocks or customer service level targets.
MRP can help maintain materials at optimal levels by considering other factors like safety stock or customer service level targets. This allows manufacturers to avoid overproduction - one of the most common reasons companies experience poor cash flow in their supply chains.
MRP also helps companies with supplier and vendor relationships by streamlining the process of planning and executing production. Overall, MRP is a helpful system that can help companies adjust to market fluctuations and maintain optimum levels for inventory which will reduce costs and improve customer service- all while keeping margins!
Benefits of MRP
Material Requirement Planning is essential in the production and has the following benefits:
- Maintaining optimum levels for inventory to reduce costs and improve customer service
- Streamlining the process of planning and executing production
- Helps maintain materials at their optimal level by considering other factors like safety stock or customer service targets and raw material lead times, and work center lead time, capacity utilization rates. This helps manufacturers avoid overproduction - one of the most common reasons companies experience poor cash flow in their supply chains.
- Helps manage supplier and vendor relationships by streamlining processes
Overall, MRP is a helpful system that can help companies adjust to market fluctuations and maintain optimum levels for inventory which will reduce costs and improve customer service while maintaining margins.
Material Requirements Planning Steps
Demand and material estimation: the system forecasts future demand and calculates materials needed to meet that demand.
Availability of material: this step includes the availability of raw material, work center capacity, and production scheduling constraints like safety stock or customer service level targets.
Creating purchase orders: these are made according to your inventory needs and supplier lead times, which is another factor users need to note.
Monitoring the process: MRP continuously monitors the production and purchase orders and compares them to forecasted demand.
When necessary, MRP will update your inventory needs and customer service level targets so you can meet these future demands.
At any step of the process, an exception report will be created for further analysis on how to solve the issue if a problem is detected.