8 Signs that You Need a New MRP System

By Sheldon Needle

Manufacturing resource planning (MRP II) is defined by APICS as a method for the effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units, financial planning in dollars, and has a simulation capability to answer "what-if" questions and extension of closed-loop MRP.

This is not exclusively a software function, but a marriage of people skills, dedication to data base accuracy, and computer resources. It is a total company management concept for using human resources more productively.

If you are a small to medium sized job shop that is mostly or all custom manufacturing and order most materials to the job you are probably not a candidate for true MRP or can use a very basic form of MRP with min –max values.

However if you make standard or configured products which involve a bill of materials, you probably can benefit from a MRP system. This is simply because it is extremely difficult to project ordering requirements for all components for a finished part considering on hand and expected orders using a spreadsheet and then communicating that information to purchasing and production planners in an efficient way.

Master Production Schedule
There must be a MPS created from the system in order to be considered MRP. MPS is the necessary production plan of finished items based on customer orders (intermediate and finished orders), forecasted orders and available inventory.

MRP software must support creating internal work orders to make necessary raw materials/components to meet the customer orders or forecast in addition to outside workorders.

Here are the typical gaps that indicate the need for MRP.

1. Excessive paper passing between company departments which don’t communicate, or integrate, well for purposes of planning and sharing data on inventory materials or components to meet customer demand.
2. Company has difficulty in computing an “available to promise” date for customer orders or order are frequently shipped past the promise date.
3. Physical inventory counts frequently don’t match computer counts due late paperwork or poor management of the parts or materials warehouse.
4. Company cost of sales and gross profit are not accurate due to poor cost accounting for cost of materials, labor or overhead.
5. Bills of material are not accurate or out of date
6. Production resources are not used optimally , machines are left idle or labor runs excessive overtime or downtime.
7. Rush orders often create chaos on the shop floor due to unavailable materials or equipment.
8. Company has to carry excessive amounts of parts for a safety cushion due to poor inventory control

All these items to point to a company which has a serious need to upgrade their support systems in order to say on top of such areas as general business planning, contract management, tools management, machine efficiencies, engineering change control, shop floor data collection, sales analysis and forecasting and finite scheduling.

Summary
The heart of any manufacturing operation involves managing inventory efficiently to meet customer demand, minimize inventory to conserve cash, and pass needed data to management so it can see a complete closed loop cycle from sales orders, production orders, shop floor control, shipping, cash collection and inventory replenishment.

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