Material Requirements Planning: Pros of Cons of MRP

A material requirements planning system (or MRP system) is an inventory management and production planning system. Engineer Joseph Orlicky developed MRP in the 1960s. Manufacturing companies make use of this production capacity planning system to ensure they always have enough inventory to build their end products (or finished goods) promptly.

MRP is different from enterprise resource planning (also known as an ERP system) and manufacturing resource planning (also known as MRP II), both of which focus on far more than inventory levels.

Material Requirements Planning, or MRP, can expedite and improve the manufacturing process in a variety of ways. Here are three key benefits to this manufacturing planning system:

1. 1. Inventory control: Material requirements planning provides you with a granular look at your inventory status and manufacturing activities as a whole. Once you iron out the time it takes to create your products and the materials you need to do so, you can plug these variables into the MRP planning process to avoid material shortages or surpluses.
2. 2. Greater profitability: Since MRP helps you order the exact amount of materials, it can also help you cut down on your overall costs and boost your profits. The process centers around meeting projected demand as precisely as possible rather than building too many or too few goods.
3. 3. Better workflows: MRP helps companies move away from building things just in time and toward a well-paced sense of optimization. The system can help you boost productivity even as it removes any rushed aspects to the manufacturing process.

There are several potential cons to using Material Requirements Planning (MRP) as a production management system in the manufacturing of goods. Consider these three downsides:

1. 1. Data inflexibility: MRP is only as good as its inputs. If you use the wrong data to calculate your metrics, you’ll achieve the wrong outputs, which can lead to costly inventory mistakes. You must ensure your company knows how many materials it needs and how long it takes to assemble them into final products prior to implementing this system.
2. 2. Many moving parts: MRP processes are complex machines—if one thing goes wrong, the entire system will hiccup at best and outright collapse on itself at worst. It’s crucial to stay on top of every aspect to keep the system running smoothly.
3. 3. Unpredictable sales conditions: Since the MRP system operates off of sales forecasts, an incorrect prediction occasionally leads to mismatched sales order quantities. But this is a general problem for material requirements planners, as no amount of predictive analysis can foresee every possible eventuality.

The MRP process requires you to audit workflows, build schedules, forecast sales, and much more to facilitate product manufacturing that runs smoothly from beginning to end. Here are five basic steps to implementing this production process:

1. 1. Build a master schedule. You’ll need a master production schedule to calculate lead times for building your products. Once you have this control system in place, you can order all the goods you need to meet demand with the shipping and labor time factored in as well.
2. 2. Create a bill of materials. A bill of materials is a long list of everything you need to build final products. Raw materials become sub-assemblies that become finished goods. This is the key set of data that you’ll input into the MRP system. You’ll achieve maximum efficiency by factoring in all the goods you need, and the time it takes to assemble them.
3. 3. Identify customer demand. Create sales forecasts to project out the demand for your products. MRP aims to have the precise quantity of necessary goods at all times. Be sure to consider your own internal or dependent demand (raw materials for sub-assemblies and finished products) and external or independent demand (customer orders for the end items themselves).
4. 4. Introduce automation. Automate your material requirements planning process to expedite your operations management even further. There are quite a few types of MRP software products available to ensure you can computerize all the calculations and scheduling.
5. 5. Run and replenish the system. Take the projected demand you expect to face and calculate out the time and goods necessary to meet that demand. Order the precise amount you need with enough time to build everything to order. The goal of the MRP process is to get final products out the door at the same time you’re getting your new inventory stockouts. This allows production to never stop without ever having too many or too few goods in factories.

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