Material requirements planning (MRP) is a system used to plan production, inventory needs, and product delivery to increase profits. MRP software simplifies the process and can be adapted to any manufacturing environment. Successful planning ensures high profit margins, increased productivity, and satisfied customers. MRP benefits include reduced shortages, inventory levels and costs, shorter delivery times, and improved quality control.
Material requirements planning (MRP) is a system for increasing profits through better planning of production lead times, inventory needs and the final delivery of products. The system is typically used as a software application, but can also be successfully implemented using pencil and paper. MRP software is regularly updated to meet the changing needs of different businesses and industries.
The three objectives of a material requirements planning system are to maintain the minimum inventory required to adequately meet the requirements of the job; ensure that finished products can be produced and delivered in a timely manner; and to efficiently plan purchasing, production and delivery without interruptions or accidents. Failure to execute in any of these three areas will negatively affect the outcome of the entire project. Tracking each of the phases and implementing solutions quickly is essential to the success of MRP.
The material requirements planning concept was developed in the 1960s and refined and improved in the early 1970s. By 1975, it was so successful that it had been implemented in about 150 companies in Europe and the United States. By 1981, approximately 8,000 companies had adopted the MRP methodology. Less than a decade later, in 1989, approximately one-third of all software sales in America were based on MRP.
MRP’s popularity is largely due to its simplicity, both in concept and execution. The basic principles are to plan labour, production and inventory to consistently meet delivery schedules with adequate but not excessive inventory and streamlined production schedules. This requires a complex analysis of material requirements and ideal production planning to meet delivery schedules. Successful planning in these areas ensures high profit margins, increased productivity and satisfied customers.
When manufacturing and manufacturing operations receive a new order, managers in different departments scramble to determine how quickly and how profitably the job can be completed. Material requirements planning encourages these decision makers to first answer three key questions: What is the deadline for delivery? How many units are needed? What materials are needed to produce the finished product?
MRP software simplifies the process and can be adapted to any type of manufacturing or production environment. Develop a plan based on information entered into the system regarding the key factors for efficient production and project profitability. The software program then develops a production plan based on bills of materials, inventory status, master production schedules, open orders, and sales forecasts.
Companies can benefit in many ways other than material requirements planning systems. These benefits include reductions in shortages, inventory levels, inventory and purchase costs; shorter delivery times; and less extraordinary. Improved shipping times, higher levels of customer satisfaction, increased production and better quality control are also common results of MRP influences.
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