MRP system: what it is and what it can bring to your company

By Ivanna Nösel
Published: 1/19/21
definition backgroundMRP system: what it is and what it can bring to your company

MRP is a planning and scheduling system for all the materials and processes needed to carry out production. It allows you to manage production planning and inventory control in such a way that no element is ever missing for the flow of your business processes.

Throughout this article, we will not only explain what an MRP system is but also some of the advantages of what it can offer your company. Discover its importance and usefulness.

What is an MRP system?

MRP: meaning

The Material Requirements Planning system, better known as MRP, is a tool that serves to control inventories and materials needed at each moment of production. In this way, you will always have all the supplies you need for the operation of your company.

Subsequently, it has evolved to the level of Manufacturing Requirements Planning, or MRP II. The main difference is that the latter is designed to be integrated into the digital system that the company already has. This enables you to receive information from other tools, allowing decision making to be more complete.

These MRP systems can be included within an ERP-software (Enterprise Resource Planning) or be independent programs. Manufacturing companies with greater material requirements in its use are those who tend to use it as a high-value independent program.

MRP’s objectives

An MRP system has for objectives to:

  • allow your company to have the greatest number of materials available so they can be used for the production process
  • have almost complete availability of your products so that customers can access them at any time
  • have advanced planning and scheduling of processes, knowing which ones can be put into operation immediately.

How does an MRP work?

The MRP system works by supporting different phases of your company's operation. Its aim is to optimize most of the processes based on the lead-times of a supply-chain. It enables an increase in profitability.

1. Production process

The MRP system helps you make decisions in your production process, giving you specific information and estimating solutions.

For its most complete use, you must enter data on the master production plan and your available inventory. The tool processes this information by answering questions about the product:

  • What type of product is more suitable?
  • How many products can and should be made?
  • When can you have them?

The MRP II system also provides information about the resources needed to start the productive activity.

mrp©MRPEasy

2. Automation process

Another basic action is the automation of some phases of the production process. This will speed up the achievement of results. What to do:

  1. Always update the capacity level of your inventory and warehouse at all times. If any product goes out for production or comes in at any time, the system records it without having to do it manually.
  2. Send purchase orders if necessary. If any product essential to production fails, you can issue a purchase order to replace it.
  3. If any product is missing, the entire process can be delayed. In this case, the system alerts the team, the customer, and the suppliers themselves so that everyone is aware of what is happening.

3. Financial aspects of the process

A plus of the MRP system is that it also manages the financial information of the production process and the material required. These actions are based on generating financial and accounting reports, creating invoices, and keeping a list of all your costs.

The difference between MRP and ERP

It is important to first have a basic understanding of Enterprise Resource Planning (or ERP) to better understand the differences with MRP. Let's look at the details.

Comprehensiveness

MRP works as standalone software, while ERP-system is integrated. ERP can connect smoothly with other software modules and systems, making it a modular network. MRP can be connected to some systems, but the process is more complicated and less common.

Development segments

While MRP focuses only on the manufacturing aspect of the business, the scope of the Enterprise resource planning system is much broader. ERP modules are designed to provide complete enterprise control.

Company size

Due to its comprehensive and sprawling modules, an ERP-system is best suited for large enterprises also because it is more scalable. An MRP, on the other hand, can be used for companies of all categories. If the company does not need to integrate an MRP module with several other processes, it can use it regardless of its size.

The cost factor

Budget is often a delimiting factor. It is important to note that ERP solutions are usually much more expensive than MRP systems. However, the benefits of ERP systems often justify the higher cost because they offer a tremendous variety of features.

Advantages of using an MRP in your company

  • You get better inventory management and/or a list of materials. This will allow you a better organization and a much faster production. Therefore, you will have many more products to offer to the public.
  • Better capacity planning and production schedule to avoid mistakes and automate business processes.
  • Having all your production materials organized allows you to consume much less. Thus, you reduce unnecessary expenses and generate savings for the company.
  • The production chain will be working at maximum performance. A good organization is basic for all parts of the chain to coordinate and work in the best way.
  • More agility in your production and manufacturing because the system is ahead of many of the material needs.

So, don't hesitate and choose the manufacturing software that best suits your company's needs.

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