Almost every product requires physical materials, even services or solutions that don’t include a final physical deliverable. Any type of resource, component or supply needed to produce a particular product is considered a material. Material requirements planning (MRP) is a method for gaining greater control over internal logistics and turning it to the company’s advantage.
Overview: What is material requirements planning?
At its simplest, MRP is an integrated logistics plan that encompasses supply chain, storage and availability for particular processes within the scope of the company’s operations. Modern strategies typically include digital integration and software solutions to provide a unified and accessible interface for multiple users. Even the most basic materials requirement plan should include provisions for the logistical timing, storage, transport and access to materials.
3 benefits of MRP
There are several top-level benefits to implementing an effective material requirements planning for companies, particularly those that have significant supply and logistical concerns.
1. Opportunity for better deals
One of the most obvious and immediate benefits of proactive supply chain management is being able to buy when the price is low. Establishing a larger strategic framework allows companies to better choose when and what materials to retain in surplus.
2. Greater operational efficiency
Another of the primary benefits of a MRP is to increase operational efficiency by reducing non-value added processes, particularly unnecessary movement of materials or delay in acquisition. This one type of strategic plan can make a massive difference in efficiency for growing manufacturers.
3. Reducing variability
Materials requirements planning will play an essential part in any lean manufacturing environment. Inventory control and logistics integration not only streamlines operations, but also reduces variability on the macro and micro levels.
Why is material requirements planning important to understand?
It’s easy to go too far or not far enough with a MRP. That’s why it’s important to set clear goals, scope and framework before developing a strategy.
Research is king
Data drives almost every aspect of the modern business world. The information-heavy and complex nature of inventory and supply chain management means it is very dependent on accurate and complete information. Business leaders must understand that good data science practices are essential for getting fundamental data.
The challenges of change
An integrated and comprehensive logistics system always brings a greater level of integration between different people, departments or processes. This is a good thing for the long-term goal of a unified and streamlined work environment. However, it can also cause some friction and complications in the short-term.
Growing digital pressure
The internet is fast, reliable and evolving for businesses, which means it should play a part in any serious MRP solutions. There are always exceptions, but embracing software solutions and integrated management tools can lead to many more opportunities for greater efficiency.
An industry example of MRP
A vehicle repair and body shop has struggled to match growing demand for their services due to continued supply and inventory problems. The company’s owners decide to investigate and create a MRP policy to improve internal efficiency and customer experience at the same time. The primary goal is to ensure prompt service times for more types of repair jobs with a secondary goal of reducing waste from expired products in surplus. During the initial research stage, the investigating team examined all bill of materials (BoM) and inventory data for each station or process. This was compared to real usage and practical logistics with real-time observation as well. The team also assesses the amount of available storage space, long-term supply use trends and possible demands for new service offerings at the location. Armed with this information, the company is ready to make several logistical improvements. This includes changing the ratio of lubricants and cleaning solutions to make room to stock up on supplies that run out more often. It also includes provisions for buying extra products when prices dip below set thresholds.
3 best practices when thinking about material requirements planning
One of the hardest parts of growing as a leader is learning how to embrace new strategies and ideas without letting them overwhelm everything else. That’s why it’s always a good idea to get a grasp on some basic best practices before you start.
1. Remember the customer
It’s easy to lose sight of your real objectives when you start going lean. No matter what type of planning you are developing, it should always revolve around the needs of the customer and the delivery of the finished product or solution.
2. Know your needs
Don’t guess your materials needs or use numbers from last year. Companies need real, accurate and consistent information about their inventory, operations and personnel. Without this the MRP will not provide the value it could.
3. Consult your people
Talking to workers and taking the time to truly learn about each activity in each process can inspire innovations that transform the workplace. Leaders are wasting a valuable resource if they don’t bring team members onboard the process.
Frequently Asked Questions (FAQ) about MRP
What are the main inputs in MRP?
There are three main inputs into material requirements planning: bill of materials, inventory status file and the master production schedule.
What is the purpose of material requirements planning?
Even though it has manifold benefits, a MRP is designed to improve the efficiency of a company’s operations and the consumer experience.
What are the defining characteristics of MRP?
A MRP is characterized by its company-wide scope and vertical integration that covers everything from scissors to supply chains.
Supply for success
Managing supplies is one of the most fundamental principles of business management, so it’s one that many leaders think they mastered long ago and have since moved on. Every leader has more to learn about logistics and inventory management and there’s always room for improvement. Supplying your company for success means going the extra mile to understand and plan for your resource needs.