MRP System

Material Requirements Planning (MRP) software is essentially a computer-based inventory management system that improves the productivity of a business by reducing inventory management errors and making data relating to stock easier to access. The system works by starting at a finished product and working backwards, converting that product into a list of assemblies, parts, and materials, along with an estimated schedule. This allows a business to instantly see realistic timeframes for producing a particular product, and understand what will need to be bought and manufactured to create that product.

Several features are key to what an MRP system does. This includes producing a bill of materials—essentially a complete list of the materials needed for a given product, complete with quantities, unit costs, total costs, and wastage. It also includes the ability to produce a master production schedule, which is a statement of planning that includes current capacity and predicted delivery times for materials or parts that need to be ordered. An MRP system should also be able to maintain records of inventory so that the immediate capacity to produce a particular product can be quickly checked.

An effective MRP benefits users by making the process of planning a production run more efficient and accurate. It allows a business to know—to a high level of detail—how long they can expect to take for a production run, what materials they will need, how much those materials will cost, how long the production run will take, and how much of the required materials are already in stock.

A typical MRP system focuses on several areas, including billing and inventory management. Indeed, some solutions will incorporate MRP and the aforementioned types of software into one system. Furthermore, others rely on interfacing with the relevant systems to get the data it needs and update those systems when needed.

When considering a new MRP solution, a business needs to factor in whether the feature set of a particular solution will meet its needs, and whether there is sufficient compatibility with existing systems if it is to work alongside them. The technical skill level of the employees using the software should also be considered, as well as the cost of training if needed. To be included in the MRP software category, a solution will usually include the following features:

• The ability to keep track of existing stock in the form of complete products, parts, and raw materials, making it easy to quickly determine the feasibility of meeting deadlines
• The functionality to automatically create a detailed Bill of Materials (BoM) that includes a detailed breakdown of the materials in a project, unit costs and projected times
• Being a company-wide system that can act as a single point of authority when it comes to information about stock and ongoing projects
• An ability to perform “what-if” scenarios to show different ways of doing things
• The ability to set up locations so that the software can distinguish between local materials and materials on the other side of the planet when dealing with global companies with many locations

What is Material Requirements Planning Software?

Material requirements planning software allows for the production process to become more efficient. It is a type of software used to keep track of things like current stock, production times, wastage, and unit costs so that an accurate Bill of Materials (BoM) can be quickly produced when needed. This cuts down a lot of time in the estimating and quoting process and reduces the possibility of errors, such as under-quoting a job or factoring in materials that aren’t available.

When set up correctly, MRP software can act as a single point of authority for available resources. This is especially crucial for large businesses with several locations where it would otherwise be very easy to accidentally double-book resources for different projects. Using this software, resources can essentially be locked out so that, until otherwise stated, those resources can’t be claimed for anything else. An MRP system can automatically output purchase orders, work orders, and reports, ensuring that the necessary materials and work are booked or ordered and that the relevant parties are kept apprised of the ongoing progress of a project.

MRP systems are an effective tool for businesses to make detailed and efficient plans for production runs or other projects, though they do rely on other areas of the business for their accuracy. For example, MRP software can only accurately plan a project if the information about what is in stock is kept accurate. When used in conjunction with inventory management software—or as part of a larger software suite that includes both—it can allow for many benefits. For example, reducing the amount of stored inventory, and the overall manufacturing costs, allows businesses to offer their customers lower prices or increase profit margins.

What are the benefits of material requirements planning software?

The benefits of material requirements planning systems are mostly centred around making the process of producing a product or service more efficient while reducing the associated costs. This is achieved through refining the margins of error in the estimation process so that the capacity and schedule of a company can be seen without having to dedicate a lot of time and labour to working things out manually. Some of the more specific advantages of MRP systems include:

• An assurance on the availability of materials and components: When used properly, an MRP system can give an organisation the peace of mind that comes with knowing that the materials for a given project will be available once the project begins. The centralisation of this information also ensures that resources are not booked for more than one project.
• Optimisation of inventory management: An MRP solution will either form part of the inventory management system or plug into an existing solution. This allows for the solution to provide real-time information when looking at stock levels and ensures that those stock levels are immediately and accurately updated when a project is booked in and the associated resources times have been allocated.
• Minimisation of inventory levels and costs associated with storage: Having a more accurate grasp of inventory management will allow an organisation to cut down its margin of error. This means the amount of stock that is needed can be reduced, in turn reducing the amount of financial commitment the company has to enter into without a specific return on the horizon. MRP also reduces the amount of work involved in keeping inventory records up to date.
• Reduced customer lead times: MRP solutions allow for a more accurate grasp of inventory and scheduling, and can help to reduce the lead times of the projects to the customer. This is partly down to more accurate organisation, but also because certain delays caused by things like having to order more stock are largely avoided.
• Increased labour productivity: Organisations using MRP systems generally enjoy more productive use of their time thanks to avoiding the aforementioned delays that can be caused by a lack of the right materials and resources. An organisation can also plan its schedule across multiple projects better. For example, if a company knows one project is waiting for certain materials to arrive, it can schedule around this, and divert those idle resources to other projects in the meantime.
• General improvement in overall customer satisfaction: All of the above—from reduced costs to shorter lead times—leads to a generally better experience for the customer, which in turn leads to better customer satisfaction.

What are the features of material requirements planning software?

The features of material requirements planning are focused on improving the efficiency of the manufacturing or service-providing process. The specific features may vary significantly from one solution to another, though the core features should be present in every MRP system. Here are some of the most common features of material requirements planning software:

• Cost reporting: Reporting the costs of a given project can be a surprisingly time-consuming aspect of business once a company reaches a certain size and complexity. What would previously have taken many hours of checking and cross-referencing spreadsheets can be done in just a few clicks using MRP software. Furthermore, the resultant costing will typically be more accurate than equivalent cost reporting done manually, as the only way for the software to make a mistake is with inaccurate data.
• Bill of materials: Producing a bill of materials is a critical part of production planning. It is a complete list of the raw materials, components, and assemblies needed for a project, complete with wastage numbers, unit costs, and the total cost of a given material. A bill of materials will be linked to a centralised data source, meaning the information will always be up to date.
• Production control: Having real-time data about what projects are in progress and what materials are earmarked for a particular job allows an organisation to make more informed decisions about the production process. Ideally, it allows an organisation to prevent delays altogether with detailed planning. In less ideal situations, it allows an organisation to make informed decisions about handling delays that crop up due to unforeseen circumstances and things out of the company’s control.
• Capacity planning: There is more to planning a production run or project than checking if there are sufficient supplies in the warehouse. Human resources are a vital aspect of any project, and knowing what resources are available at a given time is essential in knowing what capacity a company achieve. This also helps to prevent an organisation from over-extending itself and, in turn, disappointing customers by not meeting deadlines or producing an inferior product.
• Inventory control: Many MRP systems will provide an in-built ability to directly monitor stocks and inventory. This will grant an organisation the ability to compare a particular project with the available inventory in real time. This also allows for the ordering of new stock when needed, safe in the knowledge that the stock is needed at that time, and cutting down the time a project might be held up by the wait for ordered supplies.
• Sales analysis: Detailed records of past projects can allow for in-depth analysis of market trends, essentially allowing an organisation to more accurately forecast demand. Making accurate predictions about what products and services will be in higher demand allows an organisation to make more efficient use of their inventory, only ordering what they know they will need.
• Tool management: Materials, components, and labour are not the only things to account for when tallying up available resources. Tools are also an essential part of production and service providing, and no company has access to unlimited tools. With MRP systems, it is possible for an organisation to factor in their tools—particularly rare and specialist tools—to make sure that a given tool will be available when it is needed for a project.
• Warehouse management: Being able to manage inventory with a greater degree of precision will empower a business to make better use of its physical space. If less inventory needs to be stored thanks to more efficient inventory management, less space is needed to store that inventory, which can reduce costs or free up additional real estate for other things.

What should be considered when purchasing material requirements planning software?

When purchasing material requirements planning software, it is vital to consider the value proposition this software brings for the specific company. Some MRP systems will be better suited to smaller companies with single locations, whereas others will be more well-suited to larger organisations with several locations. For very small businesses, an MRP system may not be necessary at all. These software solutions can come in both locally deployed and Software-as-a-Service (SaaS) options, though the general shift towards SaaS in business as a whole remains true in this industry as much as anywhere. Here are some of the most important things to consider when looking to purchase an MRP system:

• What are the key features of the MRP? The first thing to consider with any key software acquisition or subscription is the features included with the package. The more features a software solution includes, the more it will cost. Therefore, it makes fiscal sense to consider whether a company might benefit from looking at a less expensive solution with fewer features or whether it is worth it to the company to spend more money to get a solution with more features. It’s also worth considering the ease with which a business can upgrade. If a company doesn’t need certain features now but will need them in the future, a smooth upgrade path will be necessary.
• What are the costs associated with the MRP? Naturally, once it is established that the feature set included with an MRP system covers everything a business needs, the next thing to consider is the price. This may affect the type of deployment, as locally deployed software tends to be more expensive upfront, whereas SaaS is more of a service than a software product and more immediately affordable. If the features the company needs are financially out of reach, it may be better to wait until those features can be afforded, as purchasing software that doesn’t meet the company’s needs will have limited benefits.
• Can the MRP help the business achieve its goals? The next thing to consider is whether the software in question will help the company reach its goals. Generally speaking, any kind of efficiency improvement will bring a company closer to its ultimate goals, but it’s important to establish that the potential MRP system will actually improve the company’s workflow and productivity.
• Is the MRP suitable for the size of the business? Some MRP systems are intended for larger businesses, such as ones that offer the ability to create distinct locations. This is important for larger businesses with multiple locations. Without it, a company could find itself in a situation where its MRP says it has the materials for a project, but it then turns out the materials are halfway around the world at another location. On the other hand, a small business with a single location does not need this kind of feature.
• Is the MRP compatible with other critical software? An MRP solution will need to work with other software solutions to do its job. The most obvious examples of this are inventory control software and billing. Many of the benefits that an MRP system brings will be negated if the software can’t adequately communicate with other relevant software solutions, so it’s crucial to ensure a potential MRP solution is compatible with any other software in use.
• Does the MRP make existing software obsolete or redundant? Following on from the last point, another thing to consider is if the MRP system in question might render any existing software unnecessary. A smaller company using a limited, locally deployed inventory management solution may be able to do away with that existing system entirely in favour of an MRP solution that handles those features.

What are the most relevant material requirements for planning software trends?

The most relevant material requirements planning software trends focus on further improving the efficiency of a production environment, as well as providing deeper insights into the operation of a business. The most relevant trends within the field of material requirements planning are listed here:

• Better supply chain resilience: As business becomes increasingly global, even at the level of small businesses, supply chains are becoming longer and more complex. One trend in MRP is the drive to make supply chains more resilient through MRP solutions being able to analyse potential disruptions and work around them automatically.
• Deeper and smarter data analysis: The amount of data available to modern businesses is growing, but what is done with that data is the tricky aspect MRP will look to deal with going forward. MRP solutions will likely see a drive to analyse and interpret the influx of data from the many sources (such as suppliers, logistics firms, etc.) as well as past sales data and information on things like wastage and production time, and use that data to provide valuable insights going forward.
• Self-reporting inventory: As much as an MRP system can improve the efficiency of a business’ production operation, human error is still a factor, and it’s one that MRP software developers are likely to attempt to eliminate through self-reporting inventory. From automated item picking to automatic logging of products leaving a warehouse, MRP solutions will look to remove all inaccuracy from the process, in turn making them more effective at what they do.