The Benefits of Materials Requirements Planning

3/22/21 12:00 AM

Materials Requirements Planning in Manufacturing has many benefits

Planning is essential to ensure that your manufacturing operation is running efficiently. If your production plan is not accurate or feasible, you will be unable to meet your customer demands and will lose revenue.

One important aspect that comes with planning your production is ensuring that you have enough material to make the products. Without raw materials being transported through the supply chain adequately, you will encounter complications within your production, be unable to fulfill customer orders, or have potential inventory issues.

However, the solution is not to keep a lot of inventory for those materials on hand as it can be extremely expensive to store them in a warehouse. This is why Material Requirements Planning (MRP) was developed. It allows manufacturers to manage their orders and materials by having an efficient materials planning strategy that allows them to keep up with growing demands.

What is MRP?

MRP (Material Requirements Planning) is an automated process that compares the demand for materials and finished goods to the on-hand and planned supply to generate jobs and/or purchase orders to satisfy unmet demands.

When a demand signal, such as a Sales Order comes in, MRP will look at the Bill of Material (BOM) of the finished good and determine how much raw materials and components are required to produce the item, and when these are needed. A Bill of Material refers to the list of raw materials and other components as well as the steps required to produce a finished good.

In more recent years, MRPII (Manufacturing Resource Planning) was developed as an extension of traditional MRP (now MRPI). MRPII goes a step further by ensuring that materials arrive on time based on the available capacity required for production. If you do not have a feasible and accurate production schedule that takes into consideration your scheduling constraints and resource capacity, you may run into the problem of purchasing your materials too early and have to pay high costs to hold them in inventory before production can actually begin.

There are many benefits that come with having MRP as part of your production planning process.

Benefits of Materials Requirements Planning (MRP)

The benefits of materials requirements planning include the following:

  • Inventory Levels - MRP enables inventory managers to be able to reduce the level of component parts and raw materials inventory. MRP systems work backward from production scheduling, in which it determines the amount of inventory needed to meet overall production demand. As inventory-associated costs are one of the highest incurred in manufacturing, MRP allows manufacturing operations to effectively manage their inventory levels and reduce costs. 
  • Purchasing Planning - This portion of the software pertains to what inventory is needed in order to meet demand. Any information pertaining to how much material is needed in order to meet product demand will help managers plan for any future facilities expansion. By planning your materials and inventory based on your actual demand, you will know exactly the amount of materials you need to store. 
  • Production Planning - The production of finished goods is dependent on the availability of raw materials and component parts. MRP is used to ensure that enough materials are produced or purchased based on the available quantity on hand. In cases where there is a shortage in inventory, production managers can shift production to items that have enough materials on hand to begin.
  • Work Scheduling - MRP systems are able to provide a concise visual representation of inventory that is available for the production process. If there is not enough inventory available for produced materials and components, MRP will generate production orders. Managers can then use this information to schedule labor to meet the needs of the overall process without over-staffing the production line.
  • Customer Service Improved - By reducing costs that would typically be used to hold excess inventory and ensuring that materials will be available on time for production, MRP will help manufacturing facilities improve their customer satisfaction. Customers are more likely to purchase again from a vendor when they receive a product of high quality in a timely manner, all while paying the lowest amount possible. 
  • Saves Times - Having an integrated production planning and scheduling system that can perform MRP will save time. MRP systems are automated which means that the system will generate production orders or purchase orders based on the inventory levels to supply demand. In addition, all team members have access to the latest data in real-time which eliminates time wasted updating each other on changes made to the production.

MRP and Advanced Planning and Scheduling

Implementing an MRP system can be extremely beneficial to your production facility. There are many benefits that come from using an MRP software within a manufacturing operation. However, the software is not enough by itself. A common practice among manufacturers is to use an Advanced Planning and Scheduling (APS) system that has MRP functionality to enhance their production.

In PlanetTogether, MRP can be used to generate jobs and/or purchase orders when inventory levels fall below a certain point. When demand for an item is entered in PlanetTogether and MRP is generated, it will first look at the on-hand quantity. If there is not enough on-hand inventory to supply the demand, MRP will generate a job (to produce more of the item) or create a purchase order to buy more of that item. 

With PlanetTogether, I have actually been able to reduce the On-Hand quantity of Raw Materials significantly. Although I tend to cut it close at times, 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. I have had to occasionally rush materials due to a rush in unplanned orders and resulting Raw Material demand, but I have those networks set up so it was not a big deal.


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.


PlanetTogether's 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!

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Topics: Material Requirement Planning


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