Basic Concepts of Materials Requirements Planning (MRP)

6/30/21 12:00 AM

Material requirements planning ensures that materials are on hand

In manufacturing, it is essential to develop a plan for which materials will be required for production to ensure that you have what you need to begin the production process. Material Requirements Planning (MRP) refers to the process that translates master schedule requirements for finished goods into time-phased requirements for raw materials, components, parts, and sub-assemblies.

While the master schedule designates the quantity and need dates of the end items, material requirements planning generate a production plan that indicates the timing and quantities of all materials required to produce those end items.

The main goal of MRP is to answer three basic questions:

  • What is needed?
  • How much is needed?
  • When is it needed?

While MRP can seem like a simple process, it can become quite complex when you have multiple different end items that use the same sub-components that are required at different times. This is why most manufacturers choose to use a planning software that has MRP capabilities so that they can efficiently manage materials and make it easier for project managers to purchase and organize materials. 

Through adequate materials requirements planning (MRP), the need for manual materials planning is eliminated and the system is able to successfully carry out an efficient strategy. MRP has become a vital component in allowing manufacturers to keep up with a consistently growing demand and improve their overall manufacturing operations. While Material Requirements Planning has many advantages, it is important to understand some basic concepts associated with it. Therefore, within this blog, we will discuss the basic concepts of materials requirements planning (MRP).

 

Basic Concepts of MRP (Material Requirements Planning)

Before implementing the software, taking a look at the basic concepts is a must. Here are some of the basic concepts of materials requirements planning (MRP):

  • Lead Time - In manufacturing, lead time refers to the time that elapses between the start of production and the completion of a product. Lead time is used during MRP to determine the need date of materials and sub-components when exploding requirements from the bill of materials. Lead time is examined closely within manufacturing and supply chain management as many companies want to reduce the amount of time that it takes to deliver products to the market. As such, it is preferable to minimize the manufacturing lead time to prevent needing to purchase materials far in advance. Furthermore, manufacturing facilities should also consider finding suppliers that can help reduce the procurement lead time, which will help reduce the overall lead time and allow them to deliver their items to customers faster. 
  • Lumpy Demand - Lumpy demand signals are synonymous with variations in demand and signify that demand for items can vary substantially from one period to another and can be interspersed with periods where there is no demand at all. MRP plays a large role in dealing with lumpy demand-driven inventory situations which is usually not the case with classical inventory models that assume continuous demand. While this may appear counterintuitive, MRP systems allow manufacturers to better handle items with lumpy signal patterns.
  • Time Phasing - In manufacturing, time phasing signifies delaying the release of materials and components until they are needed for production. Typically, the master production schedule looks at demand for items within a certain time period then MRP determines the quantity and timing of each material. If there is insufficient inventory, time phasing will require that a replenishment order be set to arrive on the date needed by the demand. If there is sufficient inventory available, the materials will be released to the shop floor when production is set to begin. Time phasing offsets the lead time it takes to acquire or make the item to ensure that there is sufficient time to purchase or build the material required.

A software that can easily aid with the concepts of materials requirements planning (MRP) is PlanetTogether’s Advanced Planning and Scheduling Software (APS). PlanetTogether APS is a visual production planning software that allows manufacturers to easily view their production process as a whole by concurrently planning and scheduling production. 

This software has MRP capability that takes demand information from your ERP system and converts it into a production plan by using the Bill of Material (BOM) of the finished good to determine how much raw materials and components are required to produce the item.

 

I have actually been able to reduce on-hand Raw Materials significantly, and it’s interesting. The observation is that I tend to cut it too close, but somehow we never run out! Folks have been used to over-buying to “be safe” for so long, that following the Inventory Plan (MRP) makes people nervous, but again, I never have run out, so I stand on that. I have had to rush in materials due to a surge in unplanned orders resulting in raw material demand, but I have those networks set up, so no biggie.

CHUCK DIPIETRO, DIRECTOR OF PROCUREMENT & PLANNING, BEMA INCORPORATED

 

Some of the common benefits of using PlanetTogether's MRP are (1) the simplicity of a "single-click" process than plans materials and resources in a cohesive system, (2) the speed of the MRP process performed by PlanetTogether, and (3) the plan that results from planning material and capacity together, rather than creating an infinite capacity material plan in an ERP system and then planning finite capacity in PlanetTogether. 

Advanced Planning and Scheduling (APS) Software

Advanced Planning and Scheduling Softwares have become a must for modern-day manufacturing operations as customer demand for increased product assortment, fast delivery, and downward cost pressures become prevalent. These systems help planners save time while providing greater agility in updating ever-changing priorities, production schedules, and inventory plans. APS Systems can be quickly integrated with an ERP/MRP software to fill the gaps where these systems lack planning and scheduling flexibility, accuracy, and efficiency.

With PlanetTogether APS you can:

  • Create optimized schedules that balance production efficiency and delivery performance
  • Maximize throughput on bottleneck resources to increase revenue
  • Synchronize supply with demand to reduce inventories
  • Provide company-wide visibility to resource capacity
  • Enable scenario data-driven decision making

The implementation of an Advanced Planning and Scheduling (APS) Software will take your manufacturing operations to the next level of production efficiency by taking advantage of the operational data you already possess in your ERP system. APS is a step in the right direction of efficiency and lean manufacturing production enhancement. Try out a free trial or demo!

Related Lean Video

 APS Resources

Topics: materials planning

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