MRP simplifies inventory control and material-dependent services. It addresses inventory availability, reduced risk inventory levels, and forward planning. MRP is relevant to any concern relying on raw materials. It can be software-based or manual, and helps maintain a constant supply of critical materials while reducing inventory risk. It also aids in long-term planning and can alert operators to impending situations.
Material Requirement Planning (MRP) is a system intended to simplify inventory control and the provision of material-dependent services. MRP systems are most commonly found in large manufacturing environments, but are relevant to any concern that relies on a supply of raw materials and other related items. This process is designed to address three critical objectives: inventory availability, reduced risk inventory levels, and forward planning. Depending on the size and complexity of the industry involved, MRP functions can be software-based or implemented manually.
Most of the manufacturing and service supply industries are heavily dependent on an uninterrupted supply of raw materials, spare parts or finished products to function efficiently. An unforeseen delay in delivery of the smallest item can interrupt the production or service delivery of the larger or smaller company. Businesses that rely on a large inventory of materials of different origins are the most susceptible to these problems and require rigorous and forward-thinking inventory control to prevent them. The MRP process is one of the most efficient ways to exercise this level of control and is typically structured to address the three most important objectives in any supply chain.
Maintaining a constant supply of critical materials, the first goal, is often difficult for those with large inventories. Distant supply sources have their own operating realities and often cannot be relied upon to maintain uninterrupted supply trends. The MRP process enables this by using historical usage and supply data to calculate purchasing schemes to ensure optimal stock levels. In this way, the system creates inventory reserves to safely deal with unexpected supply delays, while incurring minimum inventory level penalties.
The second vital function performed by an MRP process is the reduction of inventory risk, a point closely associated with the availability of inventory. Excessive levels of inventory pose a great risk to businesses in terms of risks of loss and damage, increased insurance charges and unnecessary expenses. It is often all too easy to purchase excessive quantities of materials to cover supply reliability issues which, while solving short-term supply problems, simultaneously create unacceptable inventory level risks. An effective MRP process can minimize these risks by maintaining realistic but safe inventory levels.
The third benefit of implementing the MRP process is the forward planning and diagnostic functions typically possible with these systems. The process allows operators to create a clear historical record of supply and usage trends which can aid in long-term planning. Some systems can even alert operators to impending situations that require corrective action. The average MRP process is software-driven and most commonly database-driven. Manual systems are practical, however, for smaller businesses with less extensive inventory requirements.
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