Material Requirements Planning
It’s Time to Fire Excel: MRP Software Has You Covered
Before we dive in, let’s run through a quick scenario: You run a factory that builds car parts and you find yourself at the beginning of another fiscal year. Last year went well but not as smoothly as you would have liked. You may have found yourself shuffling through multiple documents and spreadsheets while trying to figure out what was needed to get your products built and delivered on time. Maybe you were cross-referencing like a maniac while juggling an endless list of dates and figures until you threw your hands in the air, just like in those infomercials, and collapsed upon your desk as you bargained with the unforgiving sky:
Okay, that might be a little over-dramatic, but running a manufacturing operation really does come with its own set of complications other businesses may not experience. Whereas other companies can often solve problems through strategy adjustments, manufacturing takes it one step further, adding in the reality that you could run out of the materials needed in order to build the product. Conversely, poor planning or inaccurate assessment of your warehouse could lead to over-ordering and spending money on things you don’t need in lieu of things you do.
If that sounds like your life, don’t worry – there are software platforms out there just waiting to step in and help you out.
Enter Material Requirements Planning software.
MRP software is designed to help users manage the production process and inventory levels by analyzing the previous production cycle and applying the results to the next. By using historic data, an MRP platform can set a timeline that accurately reflects when and how businesses can expect to meet deadlines; all the while staying on top of warehouse inventory levels.
Managing a manufacturing operation might be an MRP platform’s one objective, but that doesn’t mean it’s methods are just as singular. Just as your production process is multi-faceted, so too are the tools you can use to keep it running smoothly.
Material Requirements Planning: Exactly What It Sounds Like
Unlike business intelligence and koala bears, MRP’s name describes exactly what it is; software that handles material requirement planning. However, ‘material requirements planning’ is not just what these platforms do, it’s also how they go about doing it.
Inventory Control
One of the factors all manufacturing operations have to keep a close eye on is the inventory level of both independent and dependent demand.
- Independent demand refers to the quantity of finished products you need to produce
- Dependent demand refers to the quantity of materials needed in order to complete a production cycle
This is where inventory records come into play. When it’s time to place dependent demand item orders, an MRP platform will assess your current inventory levels and subtract that amount from the quantity needed for your production cycle. This ensures you don’t overstock and waste space in your warehouse that could be better allocated, as well as making sure you don’t spend money on unnecessary materials.
Bill of Materials
A bill of materials (BoM) is a list of everything you’ll need in order to get from ‘square one’ to the finished product, and can range from raw materials to component parts and subassemblies. What your BoM brings to the table is a detailed account of the dependent demand items needed per unit of finished product and the quantity you’ll need of each of those items. The goal here is to become as efficient as possible by keeping both independent and dependent demand stock levels as low as possible, safeguarding against over-stocking and overproducing at the same time.
Scheduling
MRP software easily covers the ‘what’ and the ‘how much’ but it doesn’t stop there; it will also take care of the ‘when’. The master schedule is exactly what it sounds like: a itinerary that projects when each stage of production will be completed, ending with the finished product. Additionally, order schedules will warn you when you should start thinking about replenishing stock levels by looking at data sets collected by your MRP platform. Based on previous time frames and how long it took your operation to deplete your inventory in the past, MRP software can predict when it would be prudent to re-stock your warehouse in the future.
There Is Definitely A Better Way
Accurately evaluating what materials are needed to make your product, the quantity needed to meet delivery quotas and when you need those materials delivered to you in order to meet deadlines is a constant and enormously important task that can truly decide the health and future of your business. It can be a lot to handle manually, and while it’s entirely possible to do so, it’s not recommended. The software world is full of MRP platforms designed to make running a manufacturing operation as smooth as possible, so take advantage and breathe a little easier.
If you’re ready to take a look at some MRP software, check out our Top 10 Material Requirements Planning Software Report to read up on the leaders of the segment.
Photo courtesy of Pexels user David Herault
