MRP method: the messiah of your inventory replenishment
The organisation of your production resources is a major challenge, one that is not easy to identify, and an asset for the logistics function. Exactly how many units do you need? When do you need to schedule them?
Fortunately, all these questions that managers ask have finally been answered thanks to the MRP method. What is the MRP method? How does MRP work? We explain it all in this article!
What is the MRP method?
The MRP method: definition
Material requirement planning (MRP) is a production and inventory management method. It forecasts the schedule for using products in stock, based on technical and commercial data.
In simple terms, it is a software programme that allows you to forecast and calculate the quantities of materials you need for your production. It also lets you know when you'll need them, and what quantities you've purchased or need to replenish.
Since the 1970s, the MRP method has undergone a number of changes (MRP II, ERP).
Types of data in the MRP method
For the MRP method to work properly, the following input data must be included in the system:
- The bill of materials. This is the list of materials required to produce one unit of finished product. It includes the raw materials, their quantities and the production processes. Forgetting to include a component in the finished product tree, or entering the wrong coefficient in the bill of materials file, can distort the results of the net requirements calculation and can cause stock shortages or even delays .
- The stock ledger. It contains all the information relating to stock (waiting times, cancelled orders, available inventory, etc.). It is useful when you want to know what raw materials are available on a given date.
- Master production plan. This shows how many items will be produced and over what period.
💡 Please note: the data must be accurate and regularly modified in line with changes in demand. Pay particular attention to planning data (minimum and maximum stock, lead times, safety stock, etc.).
The following output data should also be taken into account:
- The recommended master production plan. This allows you to plan the dates linked to the production process (start and end of period), the quantities and the list of materials.
- The recommended purchasing programme. This provides you with information on the exact dates for receiving your materials or forecasting orders so that they can be coordinated with the master production plan.
In short, the MRP system enables you to acquire the materials you need to maintain a minimum stock level, in order to supply the production site by maintaining efficient planning of manufacturing, purchasing and material delivery activities.
The 4 main functions of the MRP method
Calculation of net requirements
Calculate your net raw material or component requirements using output data (master production schedule).
Firstly, the method allows you to calculate gross requirements (using the bill of materials) and then net requirements (using stocks and work in progress).
Calculating capacity requirements
By combining the different ranges of operations, you can calculate the labour costs and production resources required to meet your needs.
Long-term planning
Present commercial data (forecast sales, orders) and technical data (ranges of operations, workstations) to optimise workflows and production capacity and achieve your objectives.
🛠Ganacos, for example, is aflexible, collaborative planning and decision-support software package that helps you manage your S&OP process ona day-to-day basis. Thanks to its intelligent logistics management functions, customisable alert thresholds warn you when your stock levels are low. This data is centralised and linked with your sales data, so you can plan your production more accurately. What's more? You can take advantage of an intuitive net requirement calculation module to make more informed decisions.
Information system
Thanks to its automation, you can manage production orders and monitor product production.
To find out more, click here:
What are the advantages of the MRP method?
Availability of raw materials
By adopting the MRP method, you can be aware of the quantity of raw materials available upstream and thus organise the management of your production projects and resources more effectively.
Meeting delivery deadlines
By coordinating your teams and being aware of your production management situation, you'll be in a better position to make the right decisions, and above all to meet the deadlines you've set.
Respecting deadlines over the long term promises to improve your customer satisfaction and your brand image.
Keeping stock levels low
Of course, you're free to choose your own economical order quantity or stock level as long as you meet demand and avoid excessive storage costs or wasted materials.
By keeping stocks low, you can ensure that you have enough materials to continue production while making savings. The MRP method enables you to keep stock levels low enough to avoid losses.
Planning manufacturing activities
Keep track of your manufacturing activities in real time, just like a logistics dashboard. By following the different stages, you can optimally organise your logistics activities. Based on deadlines and priorities, and the start dates of operations displayed on the software, you can organise your workload and meet your objectives.
Cost reduction
In the long term, it is highly likely that a virtuous circle will take shape, leading to a reduction in your costs (additional storage costs, reduction in manufacturing logistics costs, reduction in stocks, reduction in wastage, etc.).
In fact, if you manage your raw materials stocks and delivery times with an iron fist, it's clear that you'll not only achieve better yields, but also a significant reduction in your costs.
What are the disadvantages of the MRP method?
Requires a sufficiently skilled workforce
Given the fairly technical nature of the MRP method, which involves processing specific data and indicators, you can't have it done by just anyone.
A word of advice: appoint an expert from your team who knows how to use this method perfectly, so that you can summarise it in a way that your various agents can understand.
Does not adapt well to over-customised products
MRP is a complex system that works best for stable bills of materials. This is because requirements are not calculated solely on the basis of the final reference BOM. This would mean reproducing a new bill of materials for each customised request.
Do you use the MRP method? Are you satisfied with it? What are your tips for optimising your production and stocks? Tell us in the comments!
Article translated from French