Material requirements planning: How to use MRP for smarter manufacturing

An efficient manufacturing process is crucial for a growing business. Material requirements planning, or MRP for short, is a solution that helps businesses manage all aspects of their manufacturing processes, from inventory projections to purchase and work orders.

MRP systems help companies reduce lead times, improve overall production, and can help to reduce overall inventory costs. You’ll have better supply chain visibility and increased decision-making skills by implementing an MRP, making the program truly work for you.

How material requirements planning (MRP) systems work

High-level MRP systems work by analyzing several aspects of the manufacturing process, such as demand forecasts, inventory levels, and materials needed. They also generate a report that lists the necessities for manufacturing financial success, such as the raw materials required. Management can determine the labor needed from these reports, ultimately helping to make better decisions.

MRP solutions help businesses keep materials on hand and ensure they’ll be available when needed, reducing customer lead times and increasing customer satisfaction.

Implementing an MRP system

Putting MRP systems in place for your business requires careful planning and execution, but by following the proper steps, you can ensure the success of your business’s manufacturing timeline.

Steps to properly implement an MRP system include:

1. Identify the pain points within your manufacturing processes, like supply chain visibility or inventory management.
2. Ensure all input data, like product information and customer data, is up-to-date and correct.
3. Migrate existing data to the MPR system.
4. Configure the MRP solution to match your business needs and test thoroughly before fully rolling out to identify any pain points.
5. Train users on the MRP program, covering functionality and troubleshooting.
6. Phase the MRP solution, regularly reviewing and refining system processes.

MRP inputs: Data for planning

In order for MRP systems to be accurate and beneficial, accurate data needs to be fed to them to populate reliable production plans and purchase orders. Those inputs are:

• Master Production Schedule (MPS) is the overarching record that tells the MRP what products will be produced, the quantity needed, and the target product delivery dates. This is similar to a master data sheet.
• Bill of Materials (BOM) defines the components and subassemblies of a product, the quantities needed, and the time to obtain or produce each part. Essentially, the bill of materials in product manufacturing is the ingredient list of the larger product.
• Inventory records are needed to tell the MRP what is currently in stock and what will need to be ordered. This tracks the stock levels of raw materials, work-in-process inventory, and finished goods. It also keeps track of outstanding purchase orders and their expected arrival times.
• Historical data and market trends are needed to help the MRP discover demand forecasts.
• Lead times are a required input to tell the MRP the time needed to either obtain or make a product.
• Safety stock levels are the absolute minimum number of raw materials needed in inventory as a buffer.

MRP outputs: Insights for production

Using the inputs from above, the MRP solution can output several critical pieces of information to streamline manufacturing processes.

• Purchase orders give detailed information on the quantity, timing, and suppliers needed for raw materials to make the final product.
• Work orders provide specific information on production tasks and due dates for everyone from operations to work center staff.
• Planned order releases provide the detailed timing of production to meet product demand.
• Inventory projections give up-to-date visibility into inventory levels, usage, and potential shortages or excesses.

Key MRP processes and techniques

The MRP process is essential to identifying & tracking accurate business information. There are several techniques at work to help identify necessary information:

• Exploding: Breaking down finished products into components to determine exactly how much of what is needed.
• Netting: Calculate the net requirements by subtracting the inventory from gross requirements.
• Offsetting: Helps calculate the optimal timing for purchase orders and other necessities.
• Pegging: The material requirements planning process will trace the demand for the product to its raw components.

Advanced MRP methods

While basic MRP solutions are a span starting point, there are more advanced MRP methods that can provide even more insight for a business:

• MRP II (Manufacturing Resource Planning) looks beyond just the manufacturing aspect and into a business's financial planning and marketing functions, similar to an ERP solution.
• Closed-loop MRP is a more advanced MRP solution that incorporates real-time feedback for improved accuracy and dynamic adjustments.
• Capacity Requirements Planning (CRP) focuses less on the materials side of manufacturing and more on operations management to ensure production goals are met.

Material requirements planning vs. ERP: What are the differences?

While MRP and ERP are both software systems that help manage business operations and critical functions, they are designed differently to perform separate functions.

MRP specifically focuses on material management and manufacturing. This can include purchasing, inventory management, and customer order management. While MRP systems can be utilized across different business types, they are best suited for businesses that specialize in manufacturing.

On the other hand, ERP solutions help businesses centrally manage their core functions, including human resources, sales, finances, and customer management. ERP solutions are suitable for all kinds of businesses and can even be tailored to specific industries like retail or healthcare.

You don’t have to choose between one solution or the other—businesses can integrate MRP and ERP software solutions to gain a comprehensive view of your operations. A robust ERP system, like Intuit Enterprise Suite, gives you the power to handle your complex operations with one solution.

Boost productivity and enhance profitability

An MRP solution can help your business manage different types of inventory and production processes more efficiently.

Looking to streamline your manufacturing processes? You can leverage Intuit Enterprise Suite alongside an MRP solution for workforce automation planning and scheduling.

Material requirements planning FAQ

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