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Material Requirements Planning

Material requirements planning (MRP) is a process used by manufacturers to ensure sufficient materials and components are available for production. MRP takes inventory of what is on hand and identifies gaps, then buys or makes remaining items. The central document is the bill of materials, which lists all items needed to make a product. MRP was later expanded into manufacturing resource planning (MRP II) and then enterprise resource planning (ERP) software to integrate business processes across departments and industries. Inventory management and logistics also play important roles in supply chain management, such as ensuring adequate supply from raw materials to finished goods while minimizing costs and coordinating demand planning with inventory levels.

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31 views2 pages

Material Requirements Planning

Material requirements planning (MRP) is a process used by manufacturers to ensure sufficient materials and components are available for production. MRP takes inventory of what is on hand and identifies gaps, then buys or makes remaining items. The central document is the bill of materials, which lists all items needed to make a product. MRP was later expanded into manufacturing resource planning (MRP II) and then enterprise resource planning (ERP) software to integrate business processes across departments and industries. Inventory management and logistics also play important roles in supply chain management, such as ensuring adequate supply from raw materials to finished goods while minimizing costs and coordinating demand planning with inventory levels.

Uploaded by

NEEPA
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Material requirements planning (MRP) is a process dating back to the '60s

that most manufacturers use to ensure sufficient materials and components


(such as subassemblies) are available for use in the manufacturing process
by taking inventory of what's on hand, identifying gaps and buying or making
the remaining items. The central document in both MRP and production
planning is the bill of materials (BOM), a complete list of the items needed to
make a product.

MRP is sometimes done as part of manufacturing resource planning (MRP II)


which broadens the MRP concept to other departments such as HR and
finance. MRP and MRP II were the predecessors of enterprise resource
planning (ERP) software, which is designed to integrate the major business
processes of companies in any industry.

Two complex processes play important roles in most of the major steps of
SCM: inventory management and logistics. Inventory management
consists of various techniques and formulas for ensuring adequate supply --
from raw materials in a manufacturing plant, perhaps managed in an MRP
system, to packaged goods in a retail store -- for the least expenditure of time
and resources. Manufacturers are faced with a variety of inventory
management issues, many of which involve coordinating demand planning
with inventory at both ends of the production process. For example,
sometimes material requirements planning leads to more inventory, especially
when the system is first implemented and the manufacturer must work to
synchronize MRP parameters with the inventory already on hand.

Logistics is everything having to do with transporting and storing goods from


the start of the supply chain, with delivery of parts and materials to
manufacturers, to delivery of finished products to stores or direct to
consumers and even beyond for product servicing, return and recycling -- a
process called reverse logistics. Inventory management is threaded
throughout the logistics process.

Procurement, sometimes called sourcing, is the process of finding suppliers


for goods, managing those relationships, and acquiring the goods
economically -- along with all the communication, such as sending out
requests for bids, and paperwork, including purchase orders, invoices, etc. It
is a major component of supply chain management, given how much is
bought and sold at all points along the chain. Most players in the supply chain
-- suppliers, manufacturers, distributors and retailers -- have dedicated
procurement staff.

Strategic sourcing is an elevated and more sophisticated type of procurement


that aims to optimize a company's sourcing process by taking advantage of its
consolidated purchasing power and align it with overall business goals.

Supplier relationship management (SRM), in contrast, addresses sourcing


issues by focusing on the suppliers the company deems most critical to
success and systematically strengthening relationships with them while
fostering optimal performance.

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