Material requirements planning (MRP) is a computer-based system for production planning, scheduling, and inventory management that is widely used in manufacturing to improve productivity. MRP speeds up the process of identifying and managing materials needed for production, the volume or quantity, and the time of delivery, as all supplies must be available within the set production schedule. As such, MRP is a technique of supply chain management.
Modern MRP systems use advanced software technologies to optimize and enhance manufacturing processes, enabling managers to see the big picture of production. MRP systems help provide accurate estimates of materials, schedule delivery of products, track inventory in-store, and monitor orders and purchases.
Bill of materials (BOM)
The most important aspect in the MRP is the bill of materials (BOM). The BOM is a comprehensive list of materials, components, sub-assemblies, and the amount of labor needed to manufacture a product. It contains essential data such as the names of the product and materials, schedules of production and delivery, quantities of supplies, inventory status, machinery and equipment, quality and testing standards, and other details.
MRP emphasizes the accuracy of information on demand, inventory, and production to:
Determine the product to be manufactured and the volume needed to meet demand
List raw materials required and their quantities
Ensure that the purchase of raw materials and the delivery of products are within their established schedules
Identify the relationships of all materials and the end product
Benefits of MRP
By integrating applications to automate the manufacturing process, MRP software:
Ensures the availability of raw materials for production and the product for delivery
Keeps at the lowest level the volume of raw materials and products in the inventory
Reduces inventory costs and risks of stock-outs, optimizes labor and equipment, and increases customer satisfactionSimplifies the managing of production activities, delivery schedules, and purchasing of materials
Improves manufacturing efficiency by aligning production with fluctuating demand
Modern MRP has expanded its scope by incorporating other facets of the business to organize product information, simplify production planning and purchasing, and provide feedback and updates on specific products. Called manufacturing resource planning (MRP II), it combines data from engineering, human resources, finance, accounting, marketing, and other moving parts of the business to improve upon earlier generations of MRP systems.