Any manufacturer will tell you that getting materials on time is crucial within the supply chain. Missed delivery schedules for materials or incorrect amount of supplies could mean expensive disasters for production. To keep production on schedule and to ensure materials availability, manufacturers have developed a management approach called materials requirement planning (MRP).
Also known as a production planning and inventory management system, MRP is a demand-driven planning and scheduling system for ordering materials at the right time. It works best for manufacturers that use assembly lines or implements multiple stages in production processes. It’s also ideally suited for facilities that have a steady flow of demand that is not interrupted by drastic changes.
The requirements and advantages of an MRP
Companies use MRP software to track and organize data such as inventory levels and ensure that the required products and parts are available and accessible for product orders. When used to its full potential, an MRP system increases profitability, improves productivity, reduces cash flow and lead times, and optimizes inventory management. For this to happen, the following needs to be in place:
- Materials needed to meet production demands
- Consistent monitoring of inventory levels to keep levels low
- Management planning and approval of all aspects of the manufacturing process
Because of excellent demand forecasting and data accuracy, an MRP can bring the following advantages:
The objectives of an MRP
A manufacturer undertakes an MRP to create and plan delivery schedules, manufacturing activities, and purchasing activities that:
- Maintain the lowest amount of materials in the inventory
- Ensure materials are available for production
- Ensure that products are available for delivery
Simplified demand forecasting
Accurate forecasting is always based on data. With an MRP system that precisely gathers and processes demand-related data, a manufacturer can make better supply chain and purchasing decisions that shorten lead times, as well as increase the efficiency of this process by decreasing the number of forecasts.
Optimized inventory levels
By basing inventory consumption on sales demand, an MRP system enables manufacturers to limit materials inventory so that warehousing costs are minimized while still ensuring that materials are available when needed. This simplifies the production-to-delivery process, cuts delivery times, and improves the management of customer expectations.
A limited inventory can be ideal in a number of ways. For one, it simplifies the production-to-delivery process and decreases overheads. This is possible with an MRP system, since it bases inventory consumption on sales demand. Next, the bills of materials and production processes can be managed more efficiently, thereby cutting delivery times and helping manage customer expectations, ultimately improving customer service.
Agility to market changes
An MRP system empowers a manufacturer to be proactive and make adjustments to changes in the market. For instance, if a product is near the end of its cycle, this system can provide a model to deplete stock. Or if production of a new product is ready to start, inventory can be adjusted to it. Lastly, it allows the manufacturer to manage seasonal changes in demand.
MRPs ensure that a parts and materials shortage will not disrupt production processes or reduce output. This in turn can reduce some expenses that result from shortages, such as premium freight services.
Elimination of slow and error-ridden processes
An MRP system can also streamline the supply chain and warehousing elements of your operations by removing the need for spreadsheets and disparate databases. Efficiency is increased by avoiding having to resolve the inaccuracies involved in these processes and by doing away with “workarounds” that complicate and prolong processes.
Complex IT and data systems like an MRP have many advantages. However, an MRP is not a fix-all solution, and implementing it properly requires technical expertise. In this regard, let Spectrumwise be of service to you. We will provide the IT support to fully adopt the MRP to your operations. Call us today.