What is MRP?

MRP – What is it?

Material Requirements Planning, or MRP, is a sophisticated scheduling and inventory management system that helps manufacturers calculate the required inventory levels for their operation based on the total material demand within the ERP system. The goal of MRP is to eliminate the guesswork associated with inventory levels and to time-phase material receipts to ensure that both work order production and sales order fulfillment occur on time. MRP has the additional benefit of reducing inventory carrying costs. Advanced manufacturing ERP products, such as ALERE, can save both planners and purchasers significant time by generating purchase and work orders required to fulfill the calculated inventory demand. MRP is as close to a digital crystal ball as you can get for your organization.

How it works

In ALERE, the MRP planning process begins with the ERP system aggregating all demand-side documents within the system. These documents include: Sales Orders, Work Orders, Transfer Orders, Intercompany Transfer Orders, and Service Tickets. The system then examines the current quantity of in-stock inventory, the need-by date of each order, the work and service ticket material lists, individual item configurations, and the bill of materials for each item.

Utilizing the user-defined planning interval, or bucket in some systems, the MRP process works backward from each item’s need by dates to calculate exactly when each material must be available, accounting for manufacturing lead times and supplier delivery schedules. The process then produces recommendations and several reports showing the amount of material, both on hand and required, during the defined planning interval. Planning and procurement managers can then utilize the information and recommendations to plan production and shipping schedules in accordance with the projected inventory flow.

How MRP Benefits an Organization’s Inventory Management

Organizations that implement MRP experience a significant fundamental shift in how they manage their inventory. Instead of maintaining expensive safety stock across hundreds or thousands of different parts, companies can maintain leaner inventories while still meeting sales and production demands. This targeted approach can significantly reduce inventory carrying costs, drastically reduce waste from obsolete materials, free up valuable warehouse space, and provide substantially more accurate available-to-promise dates. Companies often see inventory reductions of 20-40% while simultaneously improving their ability to fulfill customer orders on time.

Perhaps the greatest advantage of ALERE’s MRP system lies in some of its ancillary functions, such as the ability to assist procurement and production managers in generating purchase orders and work orders to fulfill the demand. Rather than simply generating a list of materials, subassemblies, and finished goods that require corresponding fulfillment orders, MRP can create these orders from the planning run using the exact quantities, need-by dates, and lead times for each item. This automation reduces the administrative burden on staff while virtually eliminating the costly mistakes that occur when orders are placed too late or too early. The result is a smoother production flow, better relationships with suppliers who receive consistent and predictable orders, and the ability to respond quickly to changes in customer demand without the panic of expedited shipping costs or production delays.

Want to know more?

Contact TIW to discuss how ALERE’s MRP system can finally bring your inventory into line and save you money.