What is Material Requirements Planning (MRP)?
MRP (material requirements planning) is a system that automates the production, inventory and scheduling processes for manufacturing companies. MRP systems enable production planners to match supply and demand efficiently by forecasting the amount and type of product needed for future projects while also tracking the number of materials needed for current ones.
The practice was popularized by Joseph Orlicky in his 1975 book, Material Requirements Planning (MRP): The New Way of Life in Production and Inventory Management. He developed his MRP principles while working for IBM because he theorized that computers could work faster and more efficiently than manual processes. Dr. Orlicky’s MRP solution caught on immediately and is still used and modified today in systems like MRP II (manufacturing resource planning) and DRP (distribution resource planning).
MRP creates a synchronized flow of materials, components and parts in an ordered system that is in line with a production timeline. Essentially, MRP software takes the master production schedule and converts it into a detailed outline that helps users purchase the components and raw materials they need confidently. It also combines and tracks different variables including purchase orders, material, due dates and expedited orders.
MRP Systems: Features & Benefits
Material requirements planning systems improve important manufacturing processes by minimizing lead times, optimizing inventory levels and maximizing service levels, all of which increase business efficiency. Since MRP was adopted, it has streamlined materials planning by providing manufacturers with helpful tools like:
- Inventory Assistance: MRP seamlessly organizes the inventory process by ensuring that inventory levels are high enough for production to move smoothly, but low enough to reduce overhead costs.
- Forecasting: Forecasting helps manufacturing businesses by giving them insight on when to maintain and order needed materials, which helps them save and spend money when necessary.
- Accurate Planning and Scheduling: MRP systems help production managers accurately create reliable production schedules, allowing them to plan ahead and stay prepared for new projects down the line.
MRP vs. ERP
Oftentimes, MRP and ERP are used interchangeably or used as catch-all terms to describe similar actions and functions within a software system. And while they do share some similarities, both systems are fundamentally different from one another.
ERP, which stands for Enterprise Resource Planning, is an integrated management system used for a variety of processes and operations. It keeps all of a business’ workflow data in one central space, ensuring positive data quality and continued data integrity.
The biggest difference between MRP and ERP is that material requirements planning (MRP) functions as an a la carte, single-function manufacturing system that focuses on inventory levels, while ERP is an integrated system that supports several modules, applications and integrations throughout an organization.
Other differences include:
- Costs: ERP tends to be more expensive than MRP because it performs more functions, integrates with other systems and can be used to resolve several pain points across a business, not just ones that are specific to manufacturing.
- User Type: MRP is generally used for manufacturing operations, so only manufacturers would need to access it. Since ERP can be used throughout an entire business, it needs to be accessible to users of all types of skill sets and job duties.
- Scope: As mentioned before, MRP is solely for inventory and manufacturing. It simply doesn’t offer the same features that ERP does, so its scope is significantly smaller.
Why Material Requirements Planning Falls Short
Because MRP only covers a small part of a business’ day-to-day operations, it can eventually create more work for its users. While using MRP is superior to using a homegrown or out-of-date technology, there are moments where it fails to meet what is required of it, specifically when it comes to data.
MRP is only successful if inventory and bill of materials (BOM) changes are up to date. Unfortunately, keeping this data current can be an uphill battle, especially if a company works with outside vendors. Data integrity is crucial for things to run smoothly in a manufacturing setting. When data isn’t up to date or contains errors throughout, it can lead to inaccurate reports that end up costing a business time and money. To avoid this issue, manufacturers are tasked with carefully screening inventory and BOM data, but, if any errors slide through the cracks, it can be devastating to a production timeline.
The Solution – Transition to ERP Software
Luckily, there is a solution to the MRP problem – switching to ERP software. Like we said above, ERP is a single solution that supports an entire company and addresses all of its business needs. ERP is wide-reaching, scalable, and, often, self-checking against duplicate or incorrect data. According to Yury Rachitsky, CEO of LuxeDecor, companies report that the biggest benefits of their ERP system are “increased efficiency, integrated information, more customized reports, higher-quality customer service, and more secure data.”
Additionally, ERP allows businesses to fold their MRP system in with the rest of their operations, which saves time and money and eliminates the potential for redundant information or software. As companies grow, it’s important for them to reduce the amount of technology that they rely on. When it’s time to find a new software to transition to, however, it can be a little difficult to know what to look for to ensure that there’s as little down-time in production as possible.
If your company is struggling to find an ERP software, WorkWise can help. WorkWise is a leading developer of Enterprise Resource Planning (ERP) software solutions. From shop floor to delivery, WorkWise’s ERP software solutions give you complete visibility into your manufacturing processes to help streamline operations, improve efficiencies, manage complexity and grow your business. To learn more about how we can help you transition to ERP software, schedule a demo.