FactoryMaster announce a new white paper:
What is MRP and how can it help my business?
What is MRP?
MRP is an abbreviation of Material Requirements Planning and is the definition given to a process that calculates the Material and Production needs of a business in order for it to achieve its customers’ requirements. It allows organisations to monitor material and product levels, helping them to plan purchasing, manufacturing and delivery schedules. The aim of MRP is to provide a snapshot of the purchasing and manufacturing requirements of a business at a single moment in time regardless of whether they have a simple single level BOM (Bill of Material) or a very complex multi-level BOM.
Based on the information available, following an MRP run, MRP will suggest actions necessary in order to meet the customer’s requirements and provide the justification for these suggestions. It is important to understand that this is designed as a decision making aid and not a decision maker, the information supplied by an MRP system will only be as accurate as the information entered. The final decision on purchasing and manufacturing should always be reviewed by a competent authorised person.
Whilst virtually all MRP systems are computerised although the concept does not insist on this, it is possible (though labour intensive) for an MRP system to be implemented manually.
Do you really need an MRP system?
Many businesses operate on a ‘dragons tail’ approach to purchasing and manufacturing; for every Sales Order that is received they create the associated actions like order material, components, raise works orders, etc. MRP will consolidate all these activities to raise the minimum number of Purchase orders and works orders. This means having to raise fewer purchase orders for bigger quantities at better prices. Similarly, fewer Works Orders can be raised for larger or more economic batch sizes thus resulting in fewer machine set-ups thereby creating more capacity and improved efficiency.
Moreover, many companies still operate a largely manual process, non-integrated spread sheets or internally written mini-systems leading to duplication of effort and inaccuracies across all business processes – these styles of approach are rarely able to capture a true snapshot, at a single point in time, of all the necessary information (current stock levels, current outstanding Purchase Orders and Works Orders and all implications down through a BOM tree).
Benefits of an MRP solution
- Ensure Purchase Orders and Works Orders are raised in time to meet demand
- Reduce the cost of holding stock
- Increase productivity of Direct Labour
- Reduce Lead times
- Reduce need for crisis management and enable the focus to be shifted to Process Control
- Ultimately ensure customers’ delivery requirements are met
MRP vs ERP vs Accounts systems
Many ERP (Enterprise Resource Planning) systems have been created as an addition to an Accounts system (by adding some CRM and basic Manufacturing elements). Other systems have evolved from thoroughbred Manufacturing MRP systems. Do not feel that you have to buy 1 system that encompasses Accounts, Manufacturing MRP, and CRM – you may well achieve better results for less money by buying the ‘best of breed’ for each of those areas.
To summarise:
MRP is a process of calculating the material and production needs of a business in order for it to fulfil customer requirements. When used properly it can be a great decision making aid, providing answers to questions such as what items are needed, how many of them are needed, the dates they are required by and when they must be ordered by from Suppliers or Shop Floor.
Implementing MRP software can bring extensive benefits to your business and is proven to provide a great return on investment (ROI) when implemented correctly - often within 6 months. In making your decision as to which software you should implement, make sure that the software has been built to meet your needs, rather than being an application bent to fit. Begin your search by identifying how you would like to benefit from a new MRP system and bear these goals in mind throughout the searching process and beyond.
If you would like to discuss your MRP needs or if you have a question, please feel free to contact us via the webform or simply give us a call on 024 7699 8661