What is MRP in Supply chain management?

MRP is an abbreviation of Material Requirement Planning. As in its name, it manages the materials required for the production activity. It is an operation or System done by software to manage and optimise the production activity, especially in the manufacturing industry. MRP will Plan, Schedule, and Manage the Inventory during the manufacturing process. It calculates the materials and components needed to manufacture a product. It takes the data of inventory stocks, on-hand, and sometimes safety stock to figure the required materials for the upcoming product they are going to produce.

Initially, it starts to calculate the demand for the upcoming time period (or) the number of orders the company has from their customer, then it eliminates that with on-hand stocks in inventory, and later that MRP will finalise the exact number of products how much they are going to produce. For that production, they need additional parts to finish the product. So, if they need those additional parts, MRP software itself generates orders from their supplier automatically with its pre-programmed algorithm.

To simply say MRP will give you the answers to the following questions, which is vital for every manufacturing company.

•  What is needed?
•  How much is needed?
•  When be it will needed?

Why MRP is necessary?

• As we know, Human makes errors but machines won’t. In that way, having MRP on the Manufacturing floor will increase the manufacturing efficiency and also increase labour productivity.

• 
   It will reduce the inventory cost and optimise inventory space.

•  Reduce the customer lead time and improve overall customer satisfaction.

Some bad sides of MRP are

• Input to MRP should be accurate, but, that’s too hard in real-life situations.

 

•  MRP systems can often be difficult to maintain and use. Also, the capital cost is very high (Implementation cost).

 

• Lack of Flexibility.

The important things that you should know while learning about MRP are BOM, MPS, and ERP.

• The BOM (Bill of Materials) is a detailed hierarchal list of raw materials, components, assemblies, and sub-assemblies required to build, manufacture or repair a product. The MRP always works based on the BOM.

 

•  The MPS (Master Production Schedule) is the overall production plan for the manufacturing activity. Your master production schedule details how much needs to be produced within a certain period. MRP is one of the parts of the MPS.

 

•  The ERP (Enterprise Resource Planning) system is the same as the MPS and MRP but it takes care of every aspect or stage of the company or supply chain. This means it will manage financials, supply chain, operations, commerce, reporting, manufacturing, and human resource activities of the business.

 

 Posted by,

Lokesh Venkatachalam