MRP: your inventory replenishment messiah
The organization of your production resources is a major challenge, one that's not easy to pin down, and an asset for the logistics function. Exactly how many units do you need? When do you need them?
Fortunately, all these questions are now answered by the MRP method. What is MRP? How does MRP work? We explain it all in this article!
What is the MRP method?
The MRP method: definition
Material requirement planning (MRP) is a production and inventory management method. It forecasts the use of products in stock, based on technical and commercial data.
In simple terms, it's a software program that enables you to forecast and calculate the quantities of materials you need for your production. It also lets you know when you'll need them, and what quantities you'll need to purchase or replenish.
Since the 1970s, the MRP method has undergone a number of evolutions (MRP II, ERP).
MRP data types
For the MRP method to work properly, you need to integrate the following input data into the system:
- Bill of materials. This is the list of materials required to produce one unit of finished product. It includes raw materials, quantities and production processes. The omission of a component in the finished product tree, or the introduction of a false coefficient in the BOM file, can distort the results of the net requirements calculation, and can lead to stock-outs or even delays .
- The inventory book. It details all stock-related information (waiting times, cancelled orders, available inventory, etc.). It is useful when you want to know what raw materials are available on a given date.
- Master production plan. It shows how many items will be produced and over what period.
💡Please note: data must be accurate and regularly updated to reflect changes in demand. Pay particular attention to planning data (minimum and maximum stock levels, lead times, safety stock, etc.).
The following output data must also be taken into account:
- The recommended master production plan. It allows you to plan the dates linked to the production process (start and end of period), the quantities and the list of materials.
- Recommended purchasing program. This provides you with information on the exact dates on which you will receive your materials or forecast orders so that they can be coordinated with the master production plan.
In short, the MRP system enables you to acquire the materials you need to maintain a minimum stock level, in order to supply the production site by maintaining efficient planning of manufacturing, purchasing and material delivery activities.
The 4 main functions of the MRP method
Net requirements calculation
Calculate your net raw material or component requirements using output data (master production schedule).
First, the method enables you to calculate gross requirements (using the bill of materials), then net requirements (using stocks and work-in-progress).
Calculation of capacity requirements
By associating the different ranges of operations, you can calculate the labor costs and production resources required to meet your needs.
Long-term planning
Present sales data (forecast sales, orders) and technical data (routings, workstations) to optimize workflows and production capacities, and thus achieve your objectives.
🛠Ganacos, for example, is aflexible, collaborative planning and decision-support software package that supports your S&OP processon a daily basis. Thanks to intelligent logistics management functions, customizable alert thresholds warn you when your stock levels are low. These data are centralized and linked with your sales data, enabling you to plan your production more precisely. What's more? You benefit from an intuitive net requirement calculation module for more informed decision-making.
Information system
Thanks to its automation, you can manage production orders and control product production.
To find out more, click here:
What are the advantages of the MRP method?
Availability of raw materials
By adopting the MRP method, you can know the quantity of raw materials available upstream, and thus organize the management of your production projects and resources more efficiently.
Meeting delivery deadlines
By coordinating your teams and taking stock of your production management situation, you'll be in a better position to make the right decisions, and above all to meet your deadlines.
Respecting deadlines over the long term promises to improve both your customer satisfaction and your brand image.
Keeping stock levels low
Of course, you're free to choose your own economical order quantity or stock level as long as you meet demand and avoid excessive storage costs or material wastage.
By keeping inventories low, you can guarantee enough materials to keep production going, while saving money at the same time. The MRP method enables you to keep stock levels low enough to avoid losses.
Manufacturing activity planning
Keep track of your manufacturing activities in real time, just like a logistics dashboard. By following the various steps, you can optimally organize your logistics activities. Based on deadlines and priorities, and the start dates of operations displayed on the software, you can organize your workload and meet your objectives.
Cost reduction
In the long term, it's highly likely that a virtuous circle will take shape, leading to a reduction in your costs (higher storage costs, lower manufacturing logistics costs, reduced inventory, less wastage, etc.).
Indeed, if you manage your raw material inventories and delivery times with an iron fist, it's obvious that you'll not only achieve better yields, but also a significant reduction in your costs.
What are the disadvantages of the MRP method?
Requires a sufficiently skilled workforce
Given the rather technical nature of the MRP method, which involves processing specific data and indicators, you can't have it done by just anyone.
A word of advice: appoint an expert to your team who knows how to use this method perfectly, so that you can summarize it in a way that can be understood by your various agents.
Unsuitable for over-customized products
MRP is a complex system that works best with stable BOMs. This is because requirements are not calculated solely on the basis of the final reference BOM. This would mean having to reproduce a new bill of materials for each customized request.
Do you use the MRP method? Are you satisfied? What tips do you have for optimizing your production and inventories? Tell us in the comments!
Article translated from French