Developed in the early 1970s by IBM, MRP, Material Requirements Planning, was created to assist companies in inventory control and production scheduling.
Independent demand is any demand generated outside the system, while dependent demand is for components that make up the final products of independent demand. The fundamental idea of MRP is that the production necessary to meet dependent demand must be programmed in such a way that the link with production meeting independent demand remains explicit. MRP is thus a system that calculates the materials and components needed to manufacture a given product. It consists of three main steps: taking an inventory of available materials and components, identifying which additional ones are needed, and then scheduling production or purchasing.
MRP helps to ensure that adequate inventory is available for the production process at exactly the right time and at the lowest possible cost. In this way, MRP improves the efficiency, flexibility, and profitability of manufacturing operations. It makes factory employees more productive, improves product quality, and minimizes material and labor costs. MRP also helps manufacturers respond more quickly to increased demand for their products by avoiding production delays and stockouts—that can result in customer loss—thereby contributing to the company’s revenue growth.
MRP is a push production system, in that it calculates what programming is needed to produce based on demand. As a production control system, it is used to coordinate internal and external factory orders, i.e., to coordinate purchase orders and requisitions. It uses information from the bill of materials (BOM), inventory data, and the master production schedule to calculate the materials needed and when they will be needed during the manufacturing process.
In time, issues with MRP were observed, such as the unfeasibility of MRP scheduling capacity, inaccuracy of lead time estimation, and system nervousness, which occurs when a small change in the master production plan results in a major change in the release of planned orders. To address these and other issues MRP II was developed.
MRP II integrates additional data, such as financial and employee needs, and produces an integrated information system significantly more advanced than MRP I. The system is designed to centralize, integrate, and process information for effective decision making in programming, design engineering, inventory management, and cost control in manufacturing.
For all intents and purposes, MRP II has effectively replaced MRP I. Most MRP II systems provide all the functionality of an MRP I system, in addition to offering master production scheduling, BOM and inventory tracking, and functionality in logistics, marketing and finance.
Both MRP I and MRP II are seen as precursors to Enterprise Resource Planning (ERP), which is a process by which a company, usually a manufacturer, manages and integrates the important parts of its business.
MRP II can transform the manufacturing process, providing countless benefits. No matter the sector of your company or the size of your business, it will help you simplify activities, enabling you to achieve your business goals quickly and safely.