For manufacturing businesses, life is a sea of acronyms and abbreviations. From CRM to EAM, things can get murky pretty quickly, especially when the functions of so many systems overlap. MRP software (also referred to by some as manufacturing ERP software) is one tool that many manufacturers and distributors opt to purchase, mainly because of its focus on efficiency and productivity within the manufacturing realm. Material requirements planning is a valuable component that, like many other software solutions, is available both as a standalone solution or as a part of a full-blown enterprise resource planning (ERP) suite.
In this guide, we will explore what exactly MRP is along with the pros and cons of opting for a standalone MRP solution. Many factors come into play when selecting software that’s right for you, so let’s go ahead and dive in.
What Does MRP Software Do?
The basic premise of MRP as a business strategy is that it’s a way of controlling and planning inventory in a manufacturing environment. The ultimate goal is to discover what materials are needed, how many are needed and when they are needed. Before material requirements planning software was created, this could be done by manually writing down and tracking information such as fluctuations in stock.
MRP software itself works to meet the requirements outlined by a strategy. Some businesses may still choose to record inventory levels and complete calculations using only a pencil and paper, but software works to reduce the likelihood of error and required manual labor. It’s highly recommended that if you can afford software to assist in the efficient completion of manufacturing runs or batches, you should take the leap. This is because there are so many moving pieces involved in material requirements planning.
At its core, MRP systems ensure that there is always enough raw material available to meet production demand. This can improve the likelihood that your business will be able to produce the correct amount of products efficiently. It’s also a great way to avoid spoilage, as it can help your company cut back on surplus resources that wait in limbo in your distribution center.
Spoilage is a huge concern for companies, with hundreds of thousands of dollars lost to wasted stock each year. In fact, a third of all the food produced globally is lost or wasted. With a reliable MRP system, you can reduce the costs associated with spoilage, warehousing and lead time slowdowns, all of which can contribute to significant savings. Ultimately, material requirements planning can help you run a tighter, leaner operation. Here are some of the main steps involved in MRP:
1. Developing quantity requirements
Material requirements planning software looks at how raw materials are allocated within a warehouse (on-hold for a specific purchase order, on-hand, committed to manufacturing, etc.) to determine how much of a resource is needed. This is a number that varies day by day and by distribution center. This is due to factors such as the shifting availability of raw components and changes in customer demand.
2. Calculating material order suggestions
Once you know how much raw material is tied up in current manufacturing processes and you’ve projected future need, your software will then use data and calculations to suggest the amount of material you should order. It’s important to note here that your material requirements planning software is at its best when it has the most up-to-date and accurate inventory data. If you don’t have a good system for tracking where materials are at in the manufacturing process, your MRP could potentially recommend unnecessary orders due to inaccurate data. Therefore, MRP is especially beneficial if you use a tracking tool such as RFID to see where materials are at in the manufacturing process.
3. Completing material orders
The last step is for the MRP software to create a list of specific materials needed to ensure the most efficient production. Again, this is based on factors such as projected purchase orders, current material inventory and the estimated amount of time it takes for a material to arrive. For example, if it takes two weeks for lumber to reach the distribution center and the center is projected to run out of the resource in three weeks, the software would suggest reordering of the lumber in a week.
The concept of MRP was first introduced by Joseph Orlicky more than 50 years ago before it became a type of software. Black & Decker quickly jumped onboard and began using the methodology for its manufacturing practices. The tactic continuously grew more popular, and by 1981 about 8,000 companies were using MRP.
Because of its vast influence, other variations of MRP were introduced to the technology sector. Oliver Wright developed manufacturing resource planning (MRP II) in 1983. He differentiated it from typical MRP by including more data and information on processes such as finance.
In the 1990s, ERP software was introduced as another variation of MRP. Enterprise resource planning includes more workflow processes than MRP and hosts a suite of solutions that are meant to help companies with a wide variety of automated tasks. Along with covering inventory and stock functions, it also extends to processes such as payroll management, staff acquisition, shipping and product costing.
What Are the Benefits of Standalone MRP?
High-quality MRP software is beneficial. Some enterprises have gone from completing about 70% of orders on time to hitting targets on about 90% of occasions. When applied skillfully, MRP improves customer service, increases direct labor productivity and reduces expenses. Deciding whether or not to go with a standalone MRP system is not a question of worth, but instead of what exactly you need from your software solution.
Even sophisticated solutions tend to need a substantial amount of manual input from users. The more accurate and timely your entry of critical data such as inventory levels, the more precise and beneficial your material requirements planning software can be. The software collects and captures data for more efficient logistics planning, product replenishment and inventory control.
All of these factors contribute to faster, more punctual orders and happier customers who come back again and again. If you haven’t yet acquired an ERP system, it might be worth considering a standalone MRP solution such as DTAILS or Access Manufacturing Management.
The simplicity and base functionality of MRP is a factor that is appealing to many companies, especially those that already have standalone accounting or CRM systems that they don’t want to fuss with as far as integration goes. If this is the case for your business, standalone MRP may be a great option for you.
The Best MRP Software
There is a range of MRP solutions available on the market today. Here are some of the best ones, as decided by our team of software analysts:
Fishbowl Inventory is an inventory solution available for deployment both on-site and through the cloud. It’s well-suited for small- and medium-sized businesses that are in the wholesale distribution, manufacturing and e-commerce sectors. The program offers integrations with vendors such as Xero and QuickBooks to provide users with accounting functionality. Other integrations that are offered to increase functionality include EDI, CRM, shipping, work order management, job shop floor control and bills of materials.
Fishbowl Inventory support is available via phone, email or chat. Online training resources are also accessible to customers who have questions about the system.
Asset Tracking: The solution enables users to conduct operations across multiple warehouses, monitor expiration dates, track shipments and automatically reorder materials. The quantity and location of each part are tracked to enable automatic reordering. Other aspects that are used to track products through this system include serial, lot, tag number and revision. A detailed warehouse map provides visualization of the location of physical products.
Integration: A range of integrations are available through this program. Some of the functionality that users can obtain through integrations include shipping, accounting, e-commerce, EDI, CRM and merchant services. The system’s integration with accounting tools such as Xero and QuickBooks connects accounting data to inventory information, which is updated in real time. With this connection, the system verifies whether or not data is accurate and alerts users in case information is duplicated. Additional integrations that are offered include Fishbowl Anywhere, Hosted Services, Go, Checkout and Time and Labor.
Order Management: The order management function records items when they are received at the warehouse and facilitates the picking, packing and shipping of products. It also tracks shipments from source to the final destination.
Reporting: Fishbowl Inventory offers various reporting plug-ins and tools that help with tasks such as creating barcodes and translating inventory/sales data into graphs and need forecasts. The reporting tools can identify gross sales by person and product through visualization of sales data. Additional reports such as inventory availability, accounting, advanced purchasing by sales order, bill of materials and sales are available as well.
Bills of Materials: This system manages a list of the materials and parts used in the manufacturing process. Some of the data it contains related to these items includes costs, part names and quantities. This feature can assist with disassembly, assembly, replacement, repair and other manufacturing duties.
Capacity Requirements Planning: Fishbowl Inventory includes supply and demand analysis, which concludes optimal production level to reduce spoilage and the overordering of materials.
NetSuite ERP is a cloud-based software solution that consolidates a range of business processes, such as financial management, inventory management and fulfillment. It’s suitable for companies of all sizes, and for those that operate on Mac, Windows or Linux platforms. Some of the industries that use this solution include education, advertising, consulting, financial services, energy, FMCG hospitality, healthcare, manufacturing, IT services, technology, logistics, transportation, retail and wholesale distribution.
Order Management: The order management function makes the process from sales quote to order fulfillment easier, alleviating manual bottlenecks and preventing errors. The order management feature is integrated with the finance, sales and fulfillment teams to provide visibility and speed up workflows as well.
Source Management: With the source management feature, you can sort and manage suppliers based on their past performance. It provides a portal to work with suppliers and to centralize purchases in real time, ensuring compliance. NetSuite ERP provides dynamic forecasting and operational planning capabilities that can reforecast in case of deviance.
Warehouse Management: With the warehouse management feature in NetSuite ERP, users can reduce cycle times and overhead costs and increase on-time delivery rates and inventory turns. Some of the specific capabilities included in this tool are task management, RFI barcode scanning, returning authorization receipt, cycle count planning and strategy definition for put-away and picking items.
Customization and Visibility: The system offers a centralized location for users to access information regarding orders, customers, inventory and items. The program also lets users create business rules and manage their own requirements through built-in automation functionality.
Material Requirements Planning: NetSuite ERP contains demand planning tools that check inventory and safety stock levels, maintain bills of materials, analyze supply, and review demand before generating orders. The program also provides multi-location planning functionality.
Reviews: 80/100 Price: $$$$$
Company Size Suitability: S M L
EnterpriseIQ is a manufacturing and ERP system that manages all factory operational processes. It’s available for deployment both on-premise and in the cloud, and offers modules for supply chain planning, manufacturing execution system and manufacturing management. The program contains a single database that cuts costs that users would typically need to pay to third-party integrators. Industries such as medical, manufacturing, automotive, food and beverage, aerospace, defense and plastics commonly utilize this solution.
Some of the specific capabilities included in this solution include sales and order management, financial management, material management, supply chain management, production management and customer relationship management. EnterpriseIQ has two facilities where it offers in-person training to its users. Internet and virtual courses are also available.
Project Management: The project management module offers functionality such as inventory, quoting, purchasing, preventative maintenance, time and attendance and product lifecycle management. Comprehensive project tracking capabilities are available through project templates and user-defined tasks. Projects can be managed from the time a quote is entered to the time a work order is marked as completed. The system includes labor assignment, project history, inventory management and a centralized reporting list for all project statuses, tasks and costs.
Forecasting: The solution gives users a look at current and projected orders and uses this information to measure how they impact past, present and future sales. Data mining functionality is also included in this program to track resources and materials while considering production requirements and customer inventory. The time-phased planning feature in this system is continuously updated with each MRP run and lets users look at forecasts by part, customer or plant. This tool is linked to shipping activity, which gives users access to shipping and sales information. This connectivity allows users to compare projected quantities and sales by customer, month, part or order.
Outsource Central: The Outsource Central module offers users control of different supply chain management tasks such as planning, setting up, shipping and tracking sub-contracted product statuses for items produced at outsource vendor locations. The system creates ship orders and work orders for products that are shipped to suppliers based on demand while considering the scrap percent of parts listed in the outsource bill of materials. With this program, users can track the status of goods sent to outsource vendors through inventory in-transit location information, ship orders and rejects. It also contains CTP, ATP and supplier-specific pricing.
Shipping Management: EnterpriseIQ streamlines both foreign and domestic shipping processes. It automates workflows such as picking tickets, receiving sales orders and capturing relevant data such as inventory location, shipment information and quantities. The program also creates advanced shipping notices (ASNs), which give customers access to information such as terms of payment, shipment information, destination and carton/weight measurements.
Customer Relationship Management: The CRM functionality in this system manages support interactions and contains information on calls, notes, meetings and tasks. It also provides drag-and-drop functionality for deploying email correspondence.
Labor Capacity Planning: This feature looks at how standard labor hours stack up to the labor hours required to stick to a schedule. This information can be analyzed by week, shift, or day and is based on aspects such as work orders and the labor schedule. Available labor can be calculated by qualifications, category and skill level.
Auxiliary Equipment Planning: EnterpriseIQ tracks the availability of equipment and detects conflicts of auxiliary equipment based on the bill of materials.
GMDH Streamline is an on-premise inventory and supply chain management program. Some of its specific features include sales forecasting, demand forecasting, inventory optimization, demand planning, inventory replenishment, inventory planning, material requirements planning, automatic stock replenishment and sales and operations planning. The system uses a time-series depreciation methodology to develop forecasts. It also provides GMDH Shell, which offers functions such as time series analysis, time series forecasting, neural network capabilities and predictive analysis.
Some of the industries that leverage this program include healthcare, transportation, FMCG and others. GMDH Streamline offers support through online video tutorials that convey information related to demand forecasting and planning, connecting data, revenue forecasting, inventory planning and replenishment. New users also have access to a user guide that provides documentation and tutorials meant to give insight into the system.
Forecast Mechanism and Approval System: The program contains analytical models that leverage data to develop forecasts. The forecast approval system enables users to manage different forecasts and allows users to mark SKUs with statuses such as Needs Attention, Approved and Unapproved. When a SKU is marked as Approved, it is locked so that further changes can not be made.
Order Planning: GMDH Streamline creates replenishment suggestions and the order plan. It also develops optimized order proposals for the purchasing system. The system supports a reordering point, maximum levels and minimum levels to adhere to the needs of material requirements planning. It also tracks target inventory levels while considering inventory investments.
Stock-out/Overstock Alerts: The program checks inventory levels and highlights any problems regarding excess or shortage of inventory. It also develops recommendations to help optimize inventory levels in addition to providing projected inventory level settings. With the system, users can mark exceptions including potential stock-outs, shortfall and excess stock.
KPI Reporting: KPIs can be tracked by item category, location and the item itself. The demand forecasting tab contains a repository of KPIs such as expected stock-out value, expected overstock value, inventory turnover, non-moving inventory value, gross margin, average days to sell, revenue forecasts and turn-earn margin. The reports tab contains reports on KPIs.
Material Requirements Planning: With this program, users can create a material requirements plan using the demand forecast of finished goods and the bill of materials. Once a product has been manufactured, the system sorts SKUs into finished items, materials and intermediate items (goods that are created during the manufacturing process and that are used to create a finished item.)
Demand Forecast: Using historical data, GMDH Streamline selects the best statistical model to anticipate future demand. It also allows users to manage, modify and reevaluate forecasts as needed.
Reviews: N/A/100 Price: $$$$$
Company Size Suitability: S M L
ERPAG is an ERP solution that is best suited for small- and medium-sized businesses that are looking for a cloud-based program. It’s available through a subscription-based pricing model and can be obtained through a Basic, Standard or Premium membership plan. Some of the capabilities of this system include sales, manufacturing, inventory, finance and purchasing. It also integrates with modules that provide security measures such as scripting and encryption. The program can manage multiple warehouses and supports transfers between them. It includes lot tracking, storage location and bins, inventory back-ordering, lot label printing, serial number tracking, shipment management, scanning, barcoding and return goods management.
ERPAG integrates with third-party vendors such as QuickBooks Online, Square, WooCommerce and Shopify. CSV import and export is supported in this program as well. As far as user assistance goes, the Standard and Premium packages include support for free. Some of the available resources include in-app help, video training materials and phone and email assistance.
Dropship Management: With this tool, users can connect dropshippers with specific product types while also setting a default dropshipper for different items. Emails can be automated through this tool so that received orders can be quickly sent to dropshippers to expedite the fulfillment process. The system tracks warehouse inventory by barcode, SKUs, serial number and lot to give users more visibility and control over inventory.
Service and Repair Management: Barcode scanning is included and can be attached to any standard device, allowing users to create standard barcodes in the UPC, EAN and EAN-13 formats. The system tracks quantity variation and captures data such as size, color and other variations. It also accounts for currency settings and taxes for different pricelists when inventory is spread across multiple warehouses.
Inventory Management: ERPAG updates inventory levels in a single location for operations across an organization. The program manages orders that come in through various sales channels, sends items to customers and looks for missing order items. Reporting functionality is also included and can group sort, filter and render charts instantly.
BOM: The system includes a multi-level bill of materials. It provides the ability to filter by sub-components, components and work operations. It also enables users to remove and add components to the BOM and provides multiple versions of the BOM.
Document Management: ERPAG includes an integrated document management system that stores projects, contracts, drawings and more within the program itself.
Work Order Management: The solution tracks labor, time and materials for manufacturing work orders. It measures information derived from work orders such as expected arrivals and missing parts. It offers item-level information to users from the missing parts report or the work orders directly. It also contains status tags that can send alerts when specific terms are met, prompting the generation of work orders.
Sales Management: The sales management feature in this system includes back-ordering, sales order recording, customer contact management, sales pipeline process, invoicing and reports for sales and customers. It also provides material planning, bills of materials, manufacturing cost tracking, shop floor reporting and expiry date management.
Purchasing: This function can perform tasks such as partial packing, purchase suggestions, shipment reporting and shipment planning.
Financial Management: The financial tool offers stock movement reports, invoicing, cashflow forecast, actual costing and order recording.
Reviews: N/A/100 Price: $$$$$
Company Size Suitability: S M L
What Are the Failures of Standalone MRP?
Standalone MRP is a great manufacturing solution, but it does have its downfalls, which you should keep in mind when looking at solutions. Although it can provide effective forecasting and planning technology, it is highly reliant on accurate input of data to generate these insights. Unlike a system such as ERP, which can automatically find and use data across business workflows, standalone MRP requires data to be entered manually. This is because it is a standalone system and by definition its data is siloed. Alternatively, your IT resources could integrate your material requirements planning with your other systems, but seamless integration is not guaranteed like it often is with ERP.
Another failure is its lack of business scope. MRP software is incredibly beneficial to the manufacturing process specifically. As a best-of-breed solution, its functions should be detailed and applicable. However, it won’t help you much in terms of other workflows such as finance and HR. This comes into play because the data that is generated within the program might need to be manually extracted in order to apply it to other processes.
What’s the Latest Trend in MRP?
Traditionally, MRP has had an issue with agility and has functioned best in a steady state environment. The problem with this is that customer demand can change extremely quickly. With MRP, there is a much greater emphasis on lead time efficiency as opposed to customer service, which can create significant logistical challenges. However, there is a new type of MRP called demand-driven MRP that is increasing in popularity for a couple of reasons.
Demand-driven MRP (DDMRP) helps businesses reduce their dependence on forecasting tools while also offering compatibility with mainstream ERP software, therefore offering a way for both systems to coexist. How demand-driven MRP works is that it combines actual demand (AD) process data with strategically positioned and managed points of stock (buffer stock) across the supply chain. This results in a reduction in supply and demand variability, therefore solving the bullwhip phenomenon.
The bullwhip phenomenon occurs when MRP planning policies lead to substantial or unpredictable shifts in inventory, even when customer demand has only changed by a small amount. It can lead to wild jumps between overstocking and understocking of an item as a business tries to balance customer demand with cost savings.
Demand-driven MRP is a great way to eliminate this effect because it helps companies build more closely to actual market requirements. It’s excellent for encouraging faster, more valuable decision-making processes while also making it easier to monitor, predict and respond to high levels of market volatility. DDMRP is an excellent development in the industry and could help to increase its attractiveness to businesses.
Material requirements planning is an effective way to streamline your manufacturing business. Its dedication to the industry means that it’s chock-full of features that directly apply to your company. As a standalone solution, it requires manual data entry to ensure that material forecasts are accurate. However, it can save you time and energy when trying to calculate resource needs.
MRP software is constantly evolving as technological needs change. DDMRP is an interesting development in the industry that may help boost MRP’s prominence over software that includes similar features, such as ERP. Although MRP is relatively old in the software world, its important role continues to exist because of its helpful features and its adaptability.
Do you think MRP has a role to play in our current technological ecosystem? Tell us why or why not in the comments!
Lindsey JenkinsMRP Software & What You Should Know About Material Requirements Planning
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