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.
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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.
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What’s the History?
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: