People who have come of age working with Enterprise Resource Planning (ERP) systems may be a little confused by Materials Resource Planning (MRP) software. MRP overlaps with ERP, but is functionally different across many dimensions. Although MRP is an older technology, it is often included with the dominant ERP solution set or offered as an add-on module, causing further confusion. MRP is distinct from ERP, offering manufacturing greater depth in supply inventory management than what is usually available in basic ERPs. We thought it would be worth taking a moment to clear things up and discuss how MRP can work for your business.
What is MRP and How Does It Work?
MRP software deals with the materials needed for manufacturing processes. These can be parts or raw materials. The MRP solution enables manufacturing managers to plan for production runs by estimating required quantities of raw materials and scheduling their deliveries. Used the right way, MRP software drives improvements in productivity because it avoids situations where operations cannot proceed due to lack of materials. It also reduces the likelihood that a manufacturer will over-order and tie up cash in raw materials inventories.
An MRP application should answer three core manufacturing questions: What do we need? How much? And, when? The software then works back from the finished goods production plan. To take a relatable example, if you’re making cars, you‘ll need four tires for each vehicle you build. MRP will work back from your estimated car production and set up orders for tires that meet the expected number of cars rolling off the assembly line. If you’re making 1,000 cars a day starting in four weeks, MRP will facilitate the delivery of 4,000 tires a day, commencing at that time.
That may seem obvious, but in reality, the manufacturing of even relatively simple items can create some pretty complicated materials requirements. An MRP solution may also track labor and offer information feedback loops that allow managers to change input requirements as facts change on the factory floor.
The bill of materials (BOM) forms the basis for MRP functions. A BOM is an exhaustive list of components, raw materials and sub-assemblies needed to produce a finished product. For a car, the BOM could have thousands of separate supply inputs. The MRP parses the materials on the BOM and drives the process of procuring the right materials at the right time.
How MRP Helps Modern Manufacturers
An MRP solution, such as the one available for Acumatica cloud ERP, is able to generate time-phased manufacturing and purchasing plans that drive optimal inventory availability. Procurement and materials handling logistics is tied to sales forecast and production plans—all of which are inter-connected through the ERP core. MRP also connects with accounting, finance, logistics operations and more through API-based integration.
The net effect of all of this is to reduce inventory, which improves cash flow, while bolstering customer relationships. You also avoid shortages, which are problematic from a production and customer standpoint, but also negative in financial terms.
MRPs offer more depth of features for supply management than is usually available in a basic ERP solution or even a dedicated ERP manufacturing management module. We can help you figure out if MRP is the right fit for your manufacturing business. We’ve worked with many manufacturers on the decision to get MRP. Contact us for a free consultation and MRP demo.