Business Development

What Is Materials Requirement Planning And Why Is It Important For Supply Chain Management?

Published on: February 22, 2023

Last Updated on: May 14, 2024

Materials Requirement Planning

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If you’re responsible for procuring your organization’s goods and services, you’re no stranger to the care and thought that goes into forecasting demand so that there’s no shortfall or over-ordering of vital inventory.

This, of course, is where MRP software comes in.

What Is Materials Requirement Planning?

“Materials requirement planning” is the art of accounting for a supply chain’s lead times and creating material plans and production plans that are informed by this. In order to deliver orders to your clients on time, you’ll want to do your utmost to eliminate the chances of supply chain issues.

MRP answers three basic questions:

  1. What is needed?
  2. How much of it is needed?
  3. When do we need it?

It informs how your organization proceeds with regard to inventory, purchasing, and sales. You’ll input the bill of materials, which is a list of all the raw materials, components, and assemblies required for production. The MRP software will then make estimations based on this list.

Why Does It Matter?

Good materials requirement planning keeps the inventory flowing as it should be, at all times. It’s important to balance the supply and demand of your raw materials so that you never have too much or too little.

It means you can create a master production schedule which the materials requirement planning system will use to determine the amount of time and labor that should go into the production of your goods.

A good MRP system also alerts you to any delay before it becomes a bigger problem. The system calculates whether you have the raw materials required to meet your current orders and sends your team an automatic alert if you don’t. It can make alternative recommendations to help you solve the problem, too.

The efficiency of an MRP system’s automation is its main benefit. It frees up time that would otherwise be spent manually doing the work yourself, and it’s often more accurate than human input.

The Pros And Cons

Businesses can also make use of enterprise resources planning (ERP), a system developed later than MRP that builds upon it, as a concept. An ERP system looks at the enterprise holistically and offers advanced assistance in relation to financials and sales order management as well as customer relationships.

If you decide to use MRP alone, there are several pros and cons to be mindful of.

Materials requirement planning excels when it comes to making sure the materials you need are available when you need them, reducing customer lead times, and increasing your workforce’s productivity and manufacturing efficiency.

The cons include its heavy reliance on the accuracy of data and the frequent lack of flexibility in the production schedule. If you find yourself struggling in either of these departments, it may be time to think about an ERP system.

Whatever you choose to do, the odds are that your MRP or ERP system can be improved to help you stay in control of supply and demand.

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Arnab Dey

Arnab is a passionate blogger. He shares sentient blogs on topics like current affairs, business, lifestyle, health, etc. To get more of his contributions, follow Smart Business Daily.

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