MRP is at the forefront of many manufacturers operations and processes, but what does it actually mean and what are the benefits of using it? Firstly, there are in fact two different types of MRP, MRP 1 and MRP 2. MRP 1 stand’s for Material Resource Planning and MRP 2 stands for Manufacturing Resource Planning. The terms sound very similar but they do in fact relate to two different aspects all together.
– Material Resource Planning and its benefits. In essence, Material Resource Planning does precisely what it says on the tin. The logic behind the concept is to plan your material requirements based on a range of parameters and your demand. A common parameter that people use for stock items are reorder points. Using a reorder point means that if your stock levels fall below the amount stated, the MRP 1 will prompt you to raise a purchase order to replenish that item. The MRP 1 will also take into account work order and forecast requirements. This can be very useful if your forecast suggests you have a busy month ahead, as it will prompt you to purchase enough material to deal with the potential influx of orders. It is quite common that with lengths of extrusion and boxes of hardware, that you will have to purchase them in boxes or packs of a certain amount. So for example, your MRP 1 has to calculate that you require 80 washers to complete the jobs you have coming this month, but you are only able to purchase them in boxes of 100. The MRP 1 will take the minimum amount you can order and prompt you to purchase the quantity of 100. With it taking all that into consideration, what are the benefits of using it? First off, it gives you bargaining power with your suppliers. The fact that you are able to group materials and plan further ahead means that you can purchase in larger, but more precise quantities. This in itself will give you the power to demand improved item discounts and also save on delivery charges and admin time. With you being able to consider forecasts when you run your MRP 1, you are less likely to run out of stock items and therefore continue to meet your demand and get jobs out the door on time.
– Manufacturing Resource Planning and its benefits. Manufacturing Resource Planning, like its counterpart, is the concept of planning your manufacturing requirements based on a range of parameters and your demand. For items that are manufactured for stock, either because they are a commonly sold item or because they are a commonly used sub component, using a reorder point when running the MRP 2 will prompt you to raise a work order to manufacture some replenishment. The MRP 2 will also take into account your work order and forecast requirements. This side of the MRP 2 is commonly used if you are expecting an influx of orders. It may be that you have a item that’s demand is determined by the season, and so having enough of them sat on the shelf, waiting to be purchased is essential. As well as setting minimum reorder points, you can set limits to the maximum quantity you want sat on the shelves. For companies who are limited in terms of storage space, maintaining a restricted quantity of manufactured items is a must. The advantages and benefits to using MRP 2 are in theory, very similar to that of MRP 1. It gives you improves your chances of dealing with a predicted influx of purchases, and also enables you to save money by being able to nest jobs together in order to save time and improve material utilisation.
When searching for an MRP system, ensure you do look into its capabilities. You should expect such a system to accommodate both MRP 1 and MRP 2. Due to the points mentioned above, the ROI on an ERP system can largely be down to the use and effectiveness of the MRP capabilities within it.
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