When running a manufacturing firm, one of the most critical activities that take place on a daily basis is the manufacturing process and is the center of other activities. The kind of management that goes into the manufacturing processes will determine how efficiently the firm runs. Material Requirements Planning (MRP) is what makes this efficiency possible. This is the essense of an MRP system defintion.
MRP System & MRP II – Relation To ERP
Material Requirements Planning (MRP) can be described as the system that has been put in place to enable a business to manage its inventory levels. Inventory in a manufacturing business is made of the materials that go into the manufacturing process.
The manufacturing process goes through a number of steps, and each step will require different inventory items. As such, with MRP systems, which is usually software, a business is able to ensure that there is adequate stock for the next immediate manufacturing process and ensure smooth flow.
Manufacturing Resource Planning (MRP II) on the other hand, encompasses more than MRP. This is because it goes further to include all of the resources that go into the manufacturing process. The management of information systems, product planning and resource allocation are all encompassed within MRP II. It is designed to define operation planning in units, and financial planning in dollars. Simply put, MRP II gives the amount of products that the company manufactures and the costs that such manufacturing will incur.
More on What is an MRP Systems
Enterprise Resource Planning (ERP) integrates the functions of all the departments and systems of an enterprise, bringing everything under one umbrella system. ERP goes beyond MRP and MRP II, transcending the corporate boundary to incorporate systems of partners and suppliers as well. Because of such intricacies, ERP implementation can cost millions to develop and may take a number of years before it is complete.
As such, depending on the size and growth of a manufacturing enterprise, one, two or all three systems may be developed to ensure smooth running of the business processes of a firm. A small manufacturing firm with a small-sized staff will only need MRP system, while a firm with several departments will require MRP II. ERP is implemented for large manufacturing firms that have a number of branches carrying out similar or varied activities.
The Importance of MRP System
The big idea behind MRP system is to allow a manufacturing company to have all its required processes taking place smoothly while keeping low inventory levels. This means that the only inventory that should be in stock is that which is being used for the ongoing process and that of the immediate next step of the process. This therefore means that efficiency is guaranteed, since running costs are kept at a minimum.
Another advantage of the MRP system is that the company is able to purchase adequate amounts of inventory items. Accuracy of purchase amounts has a direct effect on the company’s ability to meet its obligations to clients. Purchasing fewer items will mean that there will be shortage, and the time that it will take to correct this will be costly, especially when deadlines have been set.
On the other hand, a company may purchase excess items. These will ultimately have to be stored, which would mean that the money used to purchase them will be committed in stocks, thus it will not be generating more revenue. This may also end up becoming a loss if it is never used again.
MRP system also enables the company to time its processes adequately. Companies always operate on deadlines, trying to generate the most in the least amount of time. Proper timing is critical to ensure that each process begins and ends on time. Without MRP system in place, companies would not be able to meet deadlines.
Preparation to Implement MRP System
MRP system implementation should be done as a project, with a committee in place to see it through. The process should be broken down into phases which should also include milestones. These will allow all those concerned to be actively involved and ensure the success of the same. Milestones will give a clear indication of the progress that has been taken toward full implementation of the MRP system.
The first phase should include an audit of the entire MRP system. This should take about two days, where members of the committee are given a chance to have an outline of the whole system and how it will work.
During the second phase, the committee should identify the weak points of the company that the MRP system should improve. An outline for the training requirements needed by the staff for the MRP system implementation should also be determined. Responsibilities should also be assigned for different roles of the MRP system implementation.
Manpower requirement should be outlined in phase three, with cost estimates being presented to the management for approval. A pilot project should also be defined at this point that will give an accurate view of what to expect in the long-term.
In phase four, the pilot implementation should be set in motion. The MRP system implementation schedule should have priorities highlighted, thus bringing about more detailed roles and assignments for the committee members. At this point, the MRP system training for staff should begin.
During the fifth phase, the pilot project will come to a close and the results and observations from the same should be presented. Recommendations can be put forward on how to fine tune procedures for the actual project. The MRP system implementation project should also be looked at again to include anything that may not have been considered at the start.
Phase six will be the implementation of the entire MRP system project in the company that will see the business process transformed. The level of success will be highly dependent on whether the training that was carried out was adequate to bring staff members up to speed with the changes. It will also be dependent upon the commitment of management. Once all these phases have been given the attention required, the MRP system will now bring the company the desired results.
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