Material Requirement Planning (MRP) is an inventory management system designed to manage manufacturing business processes. The main aim of MRP is to maintain optimum inventory levels that are essential to keep the manufacturing process running. The objectives of an MRP system are – Verifying that materials are accessible for production and the manufactured products are available for delivery. Retain the lowest level of stock possible. Creating and preparing delivery schedules, purchasing, and manufacturing activities.
Material requirement planning works best for manufacturing companies with assembly lines or utilization of multiple parts to create their products. Companies use MRP software that helps in increased profitability, improved productivity, and decreased lead time and cash flows because the tool ensures effective inventory management.
For MRP to perform efficiently, essential material must be ready for production. Insufficient amounts of materials lead to production delays and customer dissatisfaction. While the inventory levels must be sufficient, they must not be in excess in case the planned product fails to meet projected sales numbers. All the manufacturing aspects must be pre-planned, and management approved. The entire manufacturing process and the products required for production must be planned out.
Companies must strive for striking a balance between inventory and product demand. Missed deadlines and production delays must be avoided by ordering materials at the right time. MRP enables manufacturers to map out production schedules and to determine the materials required for particular products. MRP can be done manually, but an MRP system can save companies a substantial amount of time and money. MRP software makes the planning process simple, ensures on-time product deliveries, and facilitates inventory management. MRP system consists of the following things:
Master Production Schedule
This is a master schedule that plans every aspect of the company such as staffing, inventory, and production. The master schedule provides vital information to the top management for proper output, planning, and purchasing. The ultimate goal of this schedule is forecasting and business planning to provide an accurate view of current orders and processes to the management.
Product Structure Records
Product structure records also known as Bill of Materials contain necessary information regarding part numbers, quantity preassembly, descriptions, quantity per end item, lead times, and all the essential information on every item in the warehouse required for production.
Inventory Status Records
Inventory status records kept the current status of all the inventory of the company including existing stock and ordered and scheduled receipts. It is crucial to keep these records up-to-date and accurate with inventory receipt.