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Material requirements planning and its benefits: An expert’s guide

14 Oct, 2022 | Manufacturing

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Manufacturing processes are complicated, but the aim of a well-managed factory is to have its orders ready for delivery to its customers on time in the right quantities. And for that to happen as efficiently as possible, the raw materials needed to assemble these products have to be in the factory, in the right quantities, ready to use on the production line when they’re needed. Factors that have to be taken into account for this include the quantity of each raw material needed for the finished product. There has to be enough to keep the assembly line going, but not too much to incur costly, unnecessary storage. It is also important to know when to order these raw materials. Some will take longer to get to the factory than others, and each needs to be on hand when it’s needed. Getting this right can be a difficult balancing act and requires a lot of complex calculations, especially for large-scale operations.

In today’s competitive marketplace, a system has to be in place to work all these complexities out, a system that ensures the assembly line is running at full speed with minimal waste. That system is called material requirements planning (MRP), and MRP software can make your business run more smoothly.      

 

What exactly is material requirements planning software?

MRP software is a digital solution that solves the complex equations that go into deciding what inventory to have in stock when, and makes sure they’re on hand when they’re needed in the production line.

The considerations a manufacturer has to take into account when managing their inventory are

  • What raw materials are needed for their products?
  • What quantity of each is required for current orders of the product?
  • When will each of the raw materials be needed on the production line?

MRP software takes all this data and works out the manufacturer’s inventory needs. On the surface, this may seem to be a simple ordering exercise, but when you’re dealing with a large-scale operation it’s anything but.

 

How material requirements planning works

Material requirements planning operates in four basic areas of the production process. These areas are

1.  Ordering the component’s raw materials

The first step in any production process is to acquire the components in the quantities needed, and for that to happen, a list has to be compiled. This list is logically called a bill of materials (BOM).

MRP software can put a BOM together from information it’s given about these components, customer orders, and data on customer demands. Factors like seasonality, price, and competition can also be taken into consideration when MRP is computing a BOM.

MRP software is only as accurate as the data that’s put into it. So it’s important to keep the system up to date with any changes in the production line or orders.

2. Keeping track of inventory levels

MRP software has oversight on inventory that’s already in the manufacturer’s storage and will take that into account when compiling the BOM. This way, if items are already in stock, they won’t need to be reordered. Likewise, if only some of a needed item is already at the factory, the BOM will only reflect the additional quantities that are needed. The MRP software, then, keeps your outlay to a minimum and ensures that the best use is made of your storage facility.

3. Initiating the production

Once all the necessary raw materials are in place, it’s time to kickstart the production process. MRP software helps in this area  by getting together what’s called a master production schedule. Better known as an MPS, it determines the time and manpower required to finish each step of the operation. An MPS will also take into account the machinery and equipment needed.

4. Optimizing the process

Because MRP software is synchronized with the inventory, the system knows when problems in the production line come up. If there’s a delay in getting component parts from a supplier, for instance, the production manager can be alerted and be able to do something about it.

 

Advantages of material requirements planning

You should now have a good idea of what MRP software is, how it works, and how helpful it can be to manufacturing. To summarize its benefits:

  • With MRP software, you only buy the inventory you need when you need it. In addition to keeping your outlay to a minimum up front, it means having less chance of being stuck with items you won’t need in storage.
  • MRP software can give alerts to possible production delays by letting it be known when there’s a problem with the delivery or stock of raw materials and component parts. Similarly, by keeping track of the MPS, the software can raise an alarm when something goes wrong with the production line. All this leads to a manufacturer being able to meet its contractual obligations and deliver the items it’s produced on time in the most cost-effective way. And that can only lead to happy customers and more orders.
  • The master production schedule (MPS) also results in optimized production schedules, shortening lead time. An improvement like that will not only make your customers happy, it will put a big smile on your face, too.
  • When it comes to a complex manufacturing process that has several steps, MPS can be especially helpful. The central challenge with multipart manufacturing is to make sure that there’s minimal downtime between the stages, to make sure that the line of production runs consistently and as smoothly and cost-effectively as possible. MRP software can do this by calculating the length of time each stage takes and making sure the component parts in the required quantities are on hand for each one.
  • Another helpful aspect of MRP software is its programmed ability to reorder stock. It does this by issuing purchase orders when it detects that the level of an item or part needed in the manufacturing process is running low in storage. It has the ability to know this, of course, because it knows how much of a particular item the production process needs to keep it going at its optimum pace.

 

DEAR Systems for material requirements planning

DEAR Systems’ MRP software has everything outlined above and more. An easy-to-use cloud-based system, it will create a detailed BOM to start your production cycle off with everything you need, send out purchase orders if a change in the manufacturing process has created a shortage, and configure a calendar for working days and operational hours in your factory so that all your resources are used in their most effective way.

Plus with DEAR Scheduler, you’ll be able to visualize your production process in the form of a Gantt chart. This helpful tool illustrates aspects of the production process as easily readable, differently colored horizontal lines. Gantt charts show the progress of the production line at a glance and highlight areas where some parts of the process are codependent.

To find out more about DEAR Systems’ MRP and how it can help your manufacturing business, call one of our experts for a free consultation today.

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