Material Requirements Planning (MRP) 101

Any business that deals with production, manufacturing, and distribution understands that MRP is a key component in operating efficiently and successfully. MRP software was one of the earliest forms of integrated IT technology to aid in production processes. Over the years, the software has evolved and improved immensely and is included within many ERP solutions. In today’s Softengine Blog, learn about what exactly MRP is, how it works to help with manufacturing efforts, and the benefits to be gained from the process.

MRP stands for Material Requirements Planning and it is a system that aids in inventory management and manufacturing practices. The goal of MRP is to increase productivity for finished goods and inventory items by developing requirements for the components and raw materials that comprise the finished product.

How exactly does MRP work?

MRP software uses supply, demand, in stock inventory, and historical sales data to create specific suggestions about best practices for producing and purchasing items. Along with the scheduling suggestions, MRP uses key inventory information to ensure that all production processes run without error. There are four main steps that an MRP completes:

1. Estimating Demand and Required Materials: To begin the planning process, MRP solutions begin with estimating demand for products based on previous sales data. If the product being estimated is something that needs to be produced instead of bought, the MRP will consult the Bill of Materials (BOM) in order to ensure there are enough components to complete production. The Bill of Materials is a list of components and raw materials that comprise an inventory item that a company produces. By automatically estimating customer demand, MRP provides intelligent suggestions on what to buy and when to buy.

2. Checking Demand Compared to Inventory: Once the demand is estimated in step one, the MRP checks this forecast compared to what inventory products are on-hand. Once this is completed, the MRP allocates the inventory exactly where it needs to go based on the Bill of Materials.

3. Scheduling for Production: Once the forecasts and inventory requirements are completed and allocated, the MRP will calculate the amount of time, labor, and resources required to complete production. This enables businesses to see when their product can be completed and even set specific deadlines based on the demand forecasts.

4. Monitoring and Issuing for Production: Now that the key steps of MRP have been completed and the project specifics are satisfied, the business can now put out an issue for production. Monitoring for delays, supply chain issues, and more are critical for high demand products, and many MRPs will notify users when there is a problem that arises during production.

Overall, businesses can gain immense insight into the production planning and distribution process when utilizing MRP. With visibility and automation configured into every step, the end result is priceless information about inventory stock levels, components and raw materials management, and issue to production control and deadlines. MRP is integrated into many different ERP solutions, such as SAP Business One. SAP Business One is the leading ERP for small to midsize enterprises and designed with complete integration between departments, real-time insights and visibility, and MRP capabilities, SAP Business One satisfies production concerns and a multitude of others.

For further information about Production Planning and MRP integrated in SAP Business One, check out our website for specific benefits for the Manufacturing Industry: https://softengine.com/industry/manufacturing/

For more information about the other capabilities and benefits SAP Business One offers, contact one of our Softengine specialists at info@softengine.com.

Resources

1. https://www.sap.com/insights/what-is-mrp.html
2. https://www.investopedia.com/terms/m/mrp.asp