MRP as either Material Requirements Planning or Manufacturing Resource Planning (MRP II) is a methodology which has been around for nearly 30 years.
For a good reason, people ask, what are the advantages and what are the disadvantages of MRP or manufacturing ERP. Still, even though being one of the predominant ways of organizing inventory and production planning, it surely has its benefits and drawbacks.
As with any methodological approach to management, the key advantage is that by applying consistent discipline, you can get the benefits it is meant to deliver. And MRP certainly gives you much better results than acting randomly or trying to invent the wheel yourself, like many do.
The Advantages of MRP
The advantages of using MRP in manufacturing management and production planning come directly from the very nature of it:
- On time availability of the right materials required for production.
- Little, if any, excess inventory (our customers report that inventory reduced by 14% on average).
- Timely delivery of manufactured goods to your customers (increased by 17%).
- Optimal use of manufacturing resources (equipment downtime reduced 14%).
- Decrease in capital cost due to decreased inventory levels and optimal use of production resources.
- Collecting business data for analysis and better planning.
Bogus Disadvantage – Data Accuracy Risk
Much has been written about the drawbacks of MRP, one that gets mentioned a lot is that the lack of data accuracy can cause problems with your planning. Well, this is not specific to MRP. If you punch wrong numbers into your accounting system or the calculator, you simply get wrong results.
Inaccuracies happen everywhere. As to the data input error that might happen – unless you are an engineer-to-order manufacturer, consuming mostly unique parts, you probably have enough safety stock available. So that minor input errors will not have a significant impact on your inventory levels or on-time delivery.
Common drawbacks of MRP
First, let me say, MRP is an excellent methodology and there is nothing inherently wrong with it. As with every methodology and software, you need the persistence to implement it. First of all, you need to be sure, if this is the right thing for your company.
MRP is an excellent methodology in general, but it gives you the benefits only when applied under appropriate circumstances. So, these are not so much as disadvantages, but rather considerations to avoid failure:
- When talking about the Material Requirements Planning flavour of it, MRP is definitely suitable for make-to-stock manufacturers.
- Make-to-order and mixed-mode manufacturers also benefit from MRP, but only to the extent that (a) their production lots are medium to large and (b) the product does not vary much.
- When you are an engineer-to-order or a project based manufacturer, MRP is a valuable addition if (a) your product is quite complex, (b) with a longer production cycle, (c) and your CAD/CAM software can generate and export the product specifications to the MRP program.
- Otherwise, it may be enough to use a common-sense approach to ordering and manufacturing what is exactly needed, and MRP gives you just a framework of how to not miss the important bits.
- With MRP, you have to keep clean records and enter precise data. With the benefit of getting suggestions what, how much and when to buy or manufacture, comes the responsibility of keeping stock and production records
For the production planning to be correct, you need to record finished operations and manufacturing orders as soon as production gets completed. It’s up to you to judge if that is a too large price to pay for the benefits.
What are the alternatives to MRP?
There have been many alternative or complementary methodologies around since MRP was invented. Be it Theory of Constraints, Lean or Six Sigma. They all address the same problem from different angles, certainly bringing great results and complementing each other. Though, either of these does not change the basic requirement of keeping records, making decisions and using common sense. Considering this, MRP+MES (Manufacturing Execution System) software is very useful for keeping data in order.
One of the key complaints, especially for the un-devoted, is the seemingly sophisticated nature of MRP. Even if the concept may be straightforward, the implementation of MRP methodology into various packages has still left a lot to be desired in the simplicity-of-use department. This is why MRPeasy got developed – to make the implementation and use of the best-known manufacturing planning methodology as easy as possible.
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