Manufacturing requires the right balance of many factors. One of the most important is inventory management—the materials and components needed for the manufacturing process. The more efficiently a company handles its material requirements, the more profit it will find.
To this end, the manufacturing industry developed material requirements planning (MRP I) to improve inventory management efficiency. Also known as an MRP system, it’s become a standard supply planning tool that helps product-based manufacturing businesses. The Material requirements planning method was the base for the development of Manufacturing Resource Planning (MRP II).
What Is Material Requirements Planning?
Material requirements planning is a digitally-operated method of managing inventory. When used properly, an MRP system improves production process efficiency through accurate estimation of required materials and just-in-time delivery.
Material requirements planning helps manufacturers keep low production inventory levels because they’re controlling the manufacturing, purchasing and delivery activities. Before the advent of computers, production planning was all done by hand, using calculations for reorder quantity and reorder point.
While these calculations helped with purchase orders and balance supply against demand, the formulas were quite time consuming. These days, you can efficiently manage material requirements planning with project management software. ProjectManager has online Gantt charts that help you match inventory to demand. Try ProjectManager for free today!
What Are the Benefits of Material Requirements Planning?
Using an MRP system keeps the raw materials and components for your product available when you need them, while minimizing inventory levels. This reduces costs associated with stocking materials and ensures your company always has what they need on hand.
Material requirements planning also helps with managing inventory more efficiently while reducing customer lead times. All this, of course, leads to an improvement of your production process. These factors all contribute to increased profits and customer satisfaction. However, that doesn’t mean using an MRP system is all rosy.
You need good data to get good results. Without good data, you’re going to miscalculate—and that can have devastating impacts on the business. Plus, using computer-based platforms that run MRP systems can be expensive to implement.
Key Elements of Material Requirements Planning
In order for a material requirements planning system to operate, there are three essential elements of material requirements planning. To better understand them, let’s take a look at each:
- MRP Information Sources: There are four key information sources that MRP systems use to make its calculations. These sources include production schedules, material specs, production cycle times and supplier lead times. Use these four data streams to adjust projection machinery and production process flows.
- Case Studies: Use research for greater business intelligence. Think about customer demand, inventory requirements, sales forecasts and other supply chain management considerations. This, in conjunction with feedback from other companies, can fill gaps in the MRP’s information sources. Then, the executives of the business must provide the right resources to apply the results of their research.
- Unavoidable Problems: Some issues won’t go away with automation and research. There are technical and operational problems that you can only solve by adequate training, support and information sharing. Once the master production schedule and material specs are decided on, labor must conform to these constraints before proceeding.
What Data Does an MRP System Need
The data needed for MRP systems include the following:
- End items: the product to produce
- Quantity: how many pieces to manufacture
- Shelf life: time that you warehouse a product
- Production inventory records: materials available for use, work in process and completed
- Production planning data: restraints and directions for labor, machine standards, testing, etc.
- Bill of materials: A list of all the raw materials and components required to manufacture a product.
What are the Key Inputs?
The key inputs for an MRP system are as follows:
- Master Production Schedule: The production schedule for all products that a company will produce over a set period of time. You estimate this by looking over customer orders and demand forecasts.
- Inventory Status File: Real-time inventory management data lets managers know what’s on hand and the general status of their inventory.
- Bill of Materials: A list of raw materials, components and assemblies you need to make, manufacture or repair the product.
How to Create a Material Requirements Plan
To make a materials requirements plan, you must answer these three questions:
- What is needed?
- How much is needed?
- When is it needed?
Steps to Create a Material Requirements Plan
A materials requirement plan works backwards from the production plan for the finished product. To start, create a list of requirements for your manufacturing process, including components and raw materials. To get this data, follow these four steps:
- Estimate Demand and Materials: Start by figuring out the customer demand for your product and what materials you need to meet it. Once you’ve estimated demand, make a list of the materials you need to manufacture your product, based on production planning estimates.
- Allocate Resources: Next, look at your inventory levels and compare the estimated demand against what you already have in stock. Using a material requirements plan will help you distribute those resources to where they’re needed in the manufacturing process.
- Production Scheduling: Now, you need to calculate the amount of time and labor needed to manufacture the products to meet the customer demand. This means creating a master production schedule.
- Monitor Process: Finally, you need to monitor the manufacturing process and ensure it follows the plan you have in place. If any issues arise, your MRP system should alert you that there is a delay, and in some cases, offer a contingency plan to get your production schedule back on track.
How ProjectManager Makes MRP Simple
Project management software can offer you the tools to monitor and track material requirements to make sure your supply is always in balance with demand. ProjectManager is a cloud-based software that provides managers with rich data to give them greater insight into their production process.
Create Production Plans on Gantt Charts
To organize your resources and timeline, use ProjectManager’s Gantt chart to create your production schedule. You can set up tasks, assign them, link dependent tasks and set milestones.
Ensure Your Resources are Properly Allocated
To manage your resources, use the workload chart. It’s color-coded to show you how much work you have assigned to your team members. Then, from the workload chart, you can reallocate the assignments to balance your labor force and keep everyone productive.
Monitor and Track Your Production Cycle
In terms of monitoring your production and resources, ProjectManager has two tools. The real-time dashboard collects live data and automatically makes calculations, which are displayed in easy-to-read charts and graphs. For more detail, use filterable one-click reports to show just the data you’re interested in. Then share them to keep stakeholders updated on progress.
An MRP system isn’t for everyone, especially if you can use ProjectManager. Our award-winning software helps you plan, monitor and report on production while managing resources to keep inventory low and meet demand. Kanban boards offer visibility into production so you can allocate resources to keep teams working at capacity. Try ProjectManager free today.