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In every successful business, they were able to manage their inventory, production equipment, and other resources in the best way possible, thanks to the Material Resource Planning system implemented by the higher management. The more you think about the scale, the more difficult it will be for you to work without this system in place. In this article, we will know the definition of MRP and the steps involved. Here is everything you need to know about MRP or Material Resource Planning.
What Is MRP
As your business grows, challenges also arise. As you expand, your team also keeps growing, your scope becomes broader, and your business is now catering to a large number of customers instead of a few. At this point, you will need some intense approach that is far more effective than what you currently have. It is where strategic resource planning takes place. An MRP is a type of production planning and inventory control system that works to give you and your business when to restock and know when to order. This system works together with the information collected then gives you a better understanding of purchasing and shipping schedules.
Benefits of MRP
One of the main reasons why companies invest in MRP is not because it ensures purchase orders. It gives you accurate numbers and dates so you can minimize capital tied up in inventory and maximize your service levels. Same with other tools, material requirements planning must be maintained and be part of everyone who uses it. Do note that the settings on an item can make an impact on the result of bills of material, purchase, and transfer orders. The conclusion that MRP shows are only as beneficial as regards the information collected by the system.
However, with all the advantages of using an MRP, it also has a few drawbacks. Using this system can be costly. If you do not input the information in a timely manner, it can be hard and expensive when you decided to switch to a new system.
The success of MRP is solely base on a well-organized framework of calculations and well thought out process. MRP has three basic steps. The first step is identifying the quantity required for each company. It is essential to know what numbers are on hand, in an open purchase order, planned for manufacturing, existing orders, and the ones that are being forecasted.
The next step is running your calculations. You have to create suggestions for materials that you think are critical and items that need to be expedited and delayed. This is where the magic of MRP works. The algorithm in this system takes all the input and formulates a set of information based on the data given.
Implementing an MRP system in your company will surely help your business manage your resources in the best way possible. However, it is important that you understand the need of your business before getting this implemented in your day-to-day operations.