What is a Material Planning System and How Does It Work?
Running out of essential materials can slow down production, and lead to missed sales and disappointed customers – but that’s where Material Requirements Planning (MRP) software comes in! MRP helps businesses streamline their manufacturing and inventory management system by accurately forecasting material needs based on current orders and production schedules. By automating the planning process, MRP ensures that you always have the right amount of stock at the right time—preventing overstocking and stockouts. Let’s get into the ins and outs of MRP software, and why it should become a big part of your overall material planning system.
What is MRP Materials Requirements Planning?
We define MRP (Material Requirements Planning), as a system that helps businesses manage the materials and components needed for manufacturing. At its core, MRP ensures that the right materials are available at the right time to meet production schedules and fulfil customer orders. By using data from sales forecasts, current inventory levels, and production timelines, MRP software calculates exactly what materials are needed, when they’re needed, and in what quantity.
The MRP requirements process allows businesses to plan their production efficiently, avoiding issues like overstocking or running out of essential components. Essentially, MRP helps streamline the entire manufacturing process, improving productivity, reducing waste, minimising costs, and ensuring timely product delivery to customers.
Why Is MRP Important?
MRP Material Requirement Planning is important because it helps businesses ensure that they have the right materials at the right time. Without MRP or a material planning system in place, companies risk either overstocking, which ties up valuable resources, or running out of materials, leading to production delays and missed customer orders. MRP software takes the guesswork out of inventory and production planning by using accurate data from customer orders, sales forecasts, and inventory levels. It also enables better scheduling and coordination across departments, ensuring that production stays on track. Ultimately, material requirements planning MRP software is a critical tool for businesses that want to stay competitive, keep customers happy, and run their operations smoothly and profitably.
How Does MRP Software Work?
What are MPRS to a busy company? It’s a simple yet effective way to organise and streamline the production process. Here’s a step-by-step guide to explain how MRP software operates:
- Gathering Information from the Bill of Materials (BOM)
The process starts with a comprehensive list of all the raw materials, components, and assemblies required to manufacture a product. The MRP software pulls this information to understand exactly what is needed for production. - Checking Inventory Levels
Next, the software checks your current inventory to see what materials are already in stock. If enough materials are available, they are allocated for upcoming production, ensuring that nothing is overlooked. - Reviewing the Master Production Schedule (MPS)
The MPS provides a timeline for production, detailing when each product needs to be made based on customer orders or forecasts. The material planning system cross-checks this schedule to determine when materials will be required, ensuring that production is aligned with customer demand. - Calculating Material Needs
After comparing the inventory and production schedule, the system calculates the exact quantities of materials needed and determines when they should be ordered or produced (to avoid overstocking or shortages). - Generating Purchase Orders and Production Orders
Based on the material requirements and timelines, MRP generates purchase orders for materials that need to be bought and production orders for items that need to be manufactured, ensuring that the materials arrive just in time for production. - Tracking and Adjusting
Throughout the production process, MRP software tracks material usage and production progress. If there are any changes, like delays or order modifications, the system automatically adjusts the production schedule and material requirements, keeping everything on track.
The Benefits of Implementing a Material Planning System for Your Business
Implementing a material planning system is a gamechanger (just like Tall Emu’s customer portal software)! By taking the guesswork out of inventory and production planning, MRP can deliver significant benefits that impact every aspect of the manufacturing process. Here’s why integrating MRP software could be the best decision for your business:
- Optimised Manufacturing Workflow
One of the biggest advantages of MRP is that it creates a more efficient and organised manufacturing workflow by coordinating material availability with production schedules for a more predictable and reliable workflow that keeps production on track. - Reduces Production Times, Delays, and Losses
MRP helps minimise production delays by ensuring materials are ordered and received just in time for manufacturing. This just-in-time inventory approach not only reduces excess stock but also ensures production isn’t held up due to material shortages. - Better Inventory Management
A material planning system provides a clear picture of what inventory you have on hand, what’s needed, and when it’s required, ensuring you always have the right materials ready for production, improving overall efficiency. - Accurate Forecasting and Planning
With MRP material requirement planning, businesses can more accurately predict future material needs based on sales forecasts, customer orders, and historical data. This means smarter decision-making when it comes to ordering materials and planning production runs. - Enhanced Collaboration Across Teams
With MRP software, from start to finish everyone has access to the same real-time data, which helps teams coordinate more effectively and fosters better collaboration between different departments like purchasing, production, and sales. - Cost Savings
Implementing MRP can lead to significant cost savings by reducing waste, avoiding excess inventory, and optimising resource use. These savings add up over time, improving profitability. - Improved Customer Satisfaction
By ensuring timely production and delivery, a material planning system will help businesses meet customer deadlines more consistently, providing you with repeat business, positive reviews, and a stronger market reputation.
Streamline Your Production Process with MRP!
MRP software integrates all aspects of production and inventory management, helping businesses like yours plan efficiently, avoid costly delays, and ensure smooth production workflows.
However, you can get more out of MRP by complementing with CRM (customer Relationship) software. Together they can bridge the gap between customer demand and production planning. Your CRM will be able to share data with the MRP software to ensure that production and actual demand aligns. Integrating CRM and MRP systems also fosters better collaboration between sales and production teams. Sales teams have real-time visibility into stock levels and production timelines through the CRM, allowing them to set realistic expectations with customers regarding product availability and delivery times. Meanwhile, production teams can use customer order data to prioritise manufacturing and materials procurement.
With these benefits, it’s easy to see why a material planning system really is an essential tool for businesses. To see how Tall Emu sales CRM can work with your MRP systems to amplify your manufacturing efforts, get in touch today for a free trial.