Think of MRP as a giant filing cabinet that organizes your inventory and materials in one centralized place. MRP systems are manufacturing tools that help you manage and replenish items as needed to complete production jobs.
Not sure how to implement MRP for your manufacturing practices? We’ve got you covered. This article maps out everything MRP, from an overview and benefits to top features, best practices and software examples.
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Table of Contents
What Is MRP?
Material requirements planning (MRP) is a solution that helps you establish inventory item requirements to develop effective product production plans from start to finish.
This solution allows you to manage bill of materials (BOM), estimates, purchase planning and more in one centralized hub to streamline manufacturing operations, from collecting orders to producing merchandise and distributing them to consumers.
Brief History
Before the MRP system debuted, people maintained inventory by hand with pencil and paper.
General Electric and Rolls Royce crafted the first computerized MRP system in the early 1950s to streamline inventory management. Black & Decker was the first business to use commercialized MRP software in 1964.
In 1975, more than 700 companies used MRP systems. Today, an MRP system continuously receives upgrades to maintain inventory, manage manufacturing protocols and help other business departments.
MRP vs. ERP
ERP and MRP may sound similar on the surface, but these systems are as different as night and day.
MRP focuses on manufacturing tasks and can integrate with other solutions, such as customer relationship management (CRM), accounting and inventory management. You can also consider MRP as an ERP module, but most MRP systems are standalone.
ERP software is a suite of different modules that serve all of a company’s departments, from accounting and marketing to manufacturing and HR.
How It Works
We can break down how an MRP system works into four comprehensive steps:
- Estimate Required Materials: Use the master production schedule to gauge product demand and required objects to craft the merchandise from bill of materials (BOMs) and work orders.
- Distribute Stock Items: Leverage an MRP system to ascertain available stock and incoming deliveries. This software can help you make extra orders to meet your demand if significant gaps exist.
- Schedule Production: Assess required production time, labor, machinery and production stations for each step in creating and finishing a product.
- Supervise Processes: Govern workflows and receive notifications for delayed orders.
Primary Benefits
MRP systems have several advantages, from managing inventory items and saving time to building customer relationships.
Control Inventory
Avoid raw material shortages or overstocking to save time and money.
Let’s say you own a men’s and women’s jean factory and keep fabrics, threads, dyes and other materials in your facilities. You could have a high demand for bleach-white jeans in the spring and summer.
However, white jeans drop in demand after Labor Day (since fashion believes white after this holiday is obsolete). Your MRP can help you buy the proper inventory amounts without wasting money or buying too little and exposing yourself to shortages.
Align Purchases With Schedules
Plan for items according to your production schedule needs.
You plan to sell thousands of black leather jeans in the fall months to accentuate autumn, and Halloween looks. However, if you wait until the last minute, you may not have enough leather and other materials to create your forecasted jeans.
MRP solutions can help you plan for buying items in manageable chunks or all at once before you need them or they sell out.
Enhance Resource Distribution
Allocating the ideal resources — i.e., employees, machinery, tools, materials and so on — for each job requires careful planning. Luckily, an MRP system offers practical resource management tools to assign the best duties to the right workers to increase production.
For example, most workers are good at managing different machines during jean production. However, a few workers could also excel in loading finished products onto delivery trucks.
You can delegate outbound truck-loading to those employees who succeed while the other workers focus on the main factory floor tasks to expedite production speed.
Save Time
Allocating resources, automating inventory replenishment plans and planning production schedules saves time and money.
When you have the right resources diligently working on getting products out of warehouses to clients, you save time and diminish human errors. You also gain suitable tools for creating specific merchandise quantities.
Strengthen Customer Relationships
Boosting on-time deliveries with effective workflows ensures strong customer relationships.
When you create your jeans and deliver them to the right vendors and clients promptly, more people will want to buy your pants. Happy clients will rave about your jeans to their family, friends and social media followers, which increases orders and profitability.
Disadvantages
Everything has pros and cons, even MRP systems. Here are three disadvantages of implementing an MRP system:
- Relies Too Much on Data Accuracy: You need accurate data to initiate ideal inventory replenishment, purchasing and workflow plans. Not inputting the correct data could cause insufficient funds or wrong stock quantities.
- Expensive Implementations: Similar to ERP, implementing MRP systems can be costly in terms of money and time. You need time to migrate all existing data and allow for hidden or additional costs.
- Has Customization Restrictions: Some software vendors enable you to customize programs to align with your current needs. Some MRP providers don’t have this option, or customizations are finite with little wiggle room.
Key Features
Here’s a rundown of the best features to have in MRP systems.
BOM
Supervise and manage BOMs to review assembly methods, raw materials and more to create and fulfill client orders.
For example, you may have an order for your white, leather and maroon-colored jeans. Your BOMs will tell you how much fabric is needed and the type of materials required to complete the order.
Forecasting/Estimation
Customers have diverse needs and wants. These requirements affect product and service demand across several timeframes. Forecasting and estimation tools can improve your projections for certain quarters, months or seasons.
You can determine how many jean styles to sell in different intervals and compare forecasted against actual profits for enhanced production to avoid unsold merchandise.
Inventory Management
Managing inventory is an essential MRP function. You can understand on-hand stock with real-time data, make appropriate refill protocols and find items quickly.
If you don’t have enough fabrics for your jeans during the holiday season, your production run could fall short of your expectations, disappointing many consumers.
Purchase Planning
Understand what items are needed to complete a project and craft appropriate spending plans.
You may try jeans with hints of wool or fleece for a winter look. However, you want to buy enough materials and store them in a safe place.
You can effectively plan out how much wool you’ll need for each pair of jeans and sensibly buy your materials as required.
Customer Relationship Management (CRM)
Producing customers with the right services and products should always be your priority. CRM tools allow you to maintain customer communications with client portals and collaboration tools to improve customer relationships.
Let’s say you want customer insight for a few jean designs. You can set up a customer portal or use social media to post a poll with four ideal methods. Clients can voice their opinions so you can understand what they’re looking for in a new pair of pants.
Warehouse Management
Maintaining warehouse facilities lets you know where you keep stock items, finished products, prototypes, rejects and so on. A warehouse management system (WMS) tool helps you maintain picking, packing, order shipping and inventory.
An ideal WMS system can help you manage your jean operations across one or several facilities. Ensure your products’ movement along your supply chain pipeline in real time and catch any bottlenecks before they transform into significant issues.
Best Practices
After covering MRP system benefits, limitations and top features, here’s a brief rundown of best practices when finding and implementing this solution.
Find a Solution That Matches Your Business Needs
How do you find an MRP system that best aligns with your company’s and industry’s goals?
We offer our nine-step Lean Selection Methodology that streamlines the software buying process from start to finish. Here’s a quick overview of each step:
- Establish: Take an internal survey of why you need new software for your practices.
- Collaborate: Assemble an internal software selection team with a project manager, internal and external stakeholders, end users, department leaders and more.
- Define: Meet with your team from the previous step to develop a requirements list.
- Distribute: Compare your modules list with several vendors and shortlist the ones that are the best match.
- Justify: Discuss these questions with your selection committee: Do we need new software? Do we need add-on modules for our current system? Or do we end the software hunt here?
- Prove: Ask potential vendors for use cases, demos or proofs-of-concept (POCs) to showcase what their products can do.
- Rank: Review and organize software providers based on their demo scores and total cost of ownership (TCO). You should have two to three picks that best meet your needs.
- Negotiate: Review and discuss terms and agreements with your top-rated software provider. Seek supplemental legal counsel if a contract seems sketchy. Repeat this step if you can’t reach a compromise with this provider.
- Sign: Shake hands, sign the contract and establish an implementation plan for your MRP system.
Integrate Your MRP With Other Systems
If you have other software, such as CRM, ERP, supply chain management and so on, find an MRP system that can integrate with your existing programs.
Centralizing your solutions into one hub offers better navigation instead of simultaneously opening multiple windows.
You may also run into an MRP that aligns with your company size and industry needs but may lack certain features. If the system merges with your other solutions, you have fewer worries.
Know Your Limits
You don’t want to bite off more than you can chew.
In other words, MRP systems could estimate how many products you could craft in a particular duration. For example, this solution could recommend developing one million pairs of jeans at the end of 30 days.
However, crafting one million pairs of jeans sounds unrealistic if you’re a mid-sized company with one or two locations,
Know your capacity limits, and don’t overdo things, even if your MRP says you should.
MRP System Examples
What is an MRP system article without examples? Here’s a brief rundown of the best MRP solutions in the market.
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SYSPRO
This on-premise and cloud-based system helps manufacturers and distributors concentrate on inventory management, manufacturing operations management, lot traceability, production management and more.
SYSPRO serves all business sizes and operates on Linux and Windows applications.
A preview of SYSPRO’s interface.
Features
- Order Management: Perform automatic order-to-delivery operations. Use the sales order add-on tool to gain complete production visibility and conduct order processing and fulfillment.
- Lot Traceability and Serial Tracking: Trace products from original worksites to final destinations with real-time transparency.
- Inventory Management: Use customizations and automated KPI supervision to obtain inventory investment and service balance.
- Product Formula Changes: Supervise controls to verify if merchandise receives consistent operations, ideal formulas and requirements for engineering change controls, BOMs, WIPs and factory tools.
- Workflow and Approval: Allocate merchandise design protocols and confirm when new and revised goods advance through necessary tests and approval standards before client distribution.
Limitations
- Has a poor user interface.
- Doesn’t offer forms for purchase orders, invoices or sale orders.
- Difficult to pull and run custom reports without IT support.
Acumatica
Centralize transactions and receive real-time financial updates across manufacturing and other company departments.
This MRP system serves all company sizes and offers cloud and on-premise deployment options. Acumatica also runs on Linux, Mac and Windows platforms.
A preview of Acumatica’s work order tools. Source
Features
- General Ledger: Manage all business expenses and purchases in one centralized system. Develop financial, income and balance sheet statements. Organize and filter reports by department or product for better insights.
- Accounts Payable: Access prepayment capabilities to supervise requests and apply for real-time early invoice payments. Structure general ledgers by main accounts and subaccounts.
- Accounts Receivable: Craft and deliver invoices for owed fees. This tool accepts PCI-compliant credit card transactions and processes refunds, voided transactions and manual charges.
- Currency Management: Determine gains and losses from foreign currency transactions and develop auto-reversing open document entries. This feature also adheres to the FASB 52 regulations.
- Tax Management: Assess and calculate sales, withholdings, VATs, reverse VAT and use taxes. Use tax zones or categories for automatic ciphers. You can also manually revise numbers in the system.
Limitations
- Has system bugs.
- Has long implementation times.
- Lacks adequate support resources.
Sage X3
This MRP system gathers data from numerous workflows to strengthen productivity. You can use automation tools in between sales, financial management and other processes to diminish manual data entry times.
Sage X3 caters to all company sizes, operates on Windows, Linux and Max systems, and offers cloud and on-premise deployment.
An example of Sage X3’s manufacturing tools.
Features
- Purchasing: Govern supplier quality, evaluate product serial numbers, consider RFQs and determine reorder point suggestions.
- BOM Planning: Revise BOM or products as needed. Supervise products across manufacturing, sales, subcontracting and other stages.
- Sales Management: Execute automatic transactions across numerous worksites. Apply several prices and discounts while simultaneously managing sales quotes and shipment preparations.
- Shop Floor Control: Evaluate direct and indirect labor by tracking actual and elapsed time utilized on specific responsibilities. Break time entry, attendance and other vital labor factor ensure time is well-spent.
- Quality Control: Administer expiration dates, quality control record creations and serial numbers. Mark stock items as accepted, rejected or inspected to avoid sending wrong objects to consumers. You can also conduct re-inspections and sampling management.
Limitations
- Has challenging navigation for desktop-to-web migrations.
- HR module lacks robust features.
- Lacks back order entry support for sales order forms.
MRPEasy
MRPEasy is a cloud-based system for small and mid-sized organizations. This program streamlines the MRP process with all-in-one manufacturing, inventory tracking, production planning and BOM analytical capabilities.
This program operates on Windows, Mac and Linux platforms.
A preview of MRPEasy’s manufacturing order tools.
Features
- Manufacturing: Access a centralized dashboard to monitor stock, procurement, production planning, product plans and CRM. Manage BOMs and routing to determine production fees and time.
- Inventory Tracking: Review available, booked, safety and future stock items. Assort inventory according to part numbers, units of measurement, selling prices, storage locations and descriptions.
- Production Planning: Use color-coded warnings to suggest when materials, operations and work orders are late.
Develop manufacturing orders via three methods:
- CRM sales
- The production manager during the planning phase
- Semi-automatically when vital items meet inventory stock levels
- BOM Analytics: Maintain a database of BOM versions and revisions in the version control system. Publish new BOM versions for applicable co-worker accessibility.
- MES for Small Manufacturers: Track personal schedules in real time. Obtain a visual calendar and work order details, including attached files, part lists, stock locations and more.
Limitations
- Some features are too simple.
- Has finite dashboard customizations.
Dynamics 365 Business Central
Formerly known as Dynamics NAV, Dynamics 365 Business Central supports all company sizes and operates exclusively on Windows. This system has cloud and on-premise deployment.
This multi-faceted ERP suite governs inventory management, accounting and contact management workflows in one consolidated hub.
An example of Dynamics 365 Business Central’s interface.
Features
- Sales Order Management: Alter available quantities according to posted invoices. Draft prepayment invoices and oversee partial shipments.
- Analysis Reports: Help company decision-makers choose ideal options from in-depth information. Use customers, objects, vendors and other factors to review inventory turnovers, customer behaviors and other critical data.
- Requisition Management: Optimize inventory according to predicted demand, material availability and other parameters. Set minimum and maximum quantity levels to pinpoint manufacturing reorder points.
- Multi-site Functionality: Track inventory throughout all distribution centers, warehouses, showrooms and production facilities. Superintend stock items as they move to different locations and account for their value during transit.
- Contact Management: Enter and upkeep business contacts and prospects. Receive duplicate info notifications, allocate quotes or sales documents, categorize people related to specific clients and filter others according to profiling questions.
Limitations
- The interface looks outdated.
- Overall performance is sluggish and experiences glitches.
Next Steps
Leverage MRP systems to manage inventory, supervise BOMs, strengthen purchase planning and enhance customer relationships. You can also use MRP to manage warehouses and produce better estimates according to customer demand analyses.
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How has MRP made a difference in your manufacturing practices? Let us know in the comments.